I’ve been learning a lot about angel syndicates over the last few years.
Watching our team @ GoingVC Partners launch plenty of them.
And most recently, launching one myself: The Creator Syndicate
Here’s a bit of what I’ve picked up along the way.
What’s an SPV?
Important term to know if you want to play in the syndication game.
There’s a nice write-up on the VC Stack blog here, so I won’t spend any more keystrokes on this 🙂
SPVs are sort of like mini VC funds.
Here’s what I mean.
Syndicate leads need to raise capital from LPs. (Like a VC)
Then they pool that money into an SPV … Special Purpose Vehicle.
…and invest it all — via equity or debt or SAFE — into a single company.
As an investor in that syndicate:
You can expect to pay 20% of your gains to the syndicate lead IF the company has a positive outcome.
Oh by the way:
That 20%’s the same % carry as you see regular ‘ol VC funds charging their LPs.
Oh by the way (again):
Lots of SPVs don’t charge any management fee.
Which is actually completely different from a regular VC fund.
After all, there’s not really anything to manage once the SPV makes the investment.
Because the SPV back office provider (Carta, Sydecar, etc) handle it for the SPV manager.
Most LPs investing via syndicates are looking for brand name co-investors or other strong social proof when deciding to put in $$$.
As a syndicate lead:
Your conviction doesn’t count for much.
But optics do.
Brand names matter.
Logos matter.
Right or wrong, good or bad — it just is.
Building a syndication track record could one day help you raise a full blown VC fund.
Coelius Capital is a great example of this.
And if you look around a bit you’ll find many emerging managers who have taken the same path.
Syndicate leads can generate big returns, even if they’re not putting a ton of their own money to work.
Here’s how Angel List explains the financial leverage you get as a syndicate lead.
Time kills all deals.
But SPVs and syndicating and everything associated takes time.
Because as a syndicate lead you need to:
- get an allocation in the round
- form the SPV itself
- pitch the company or have them pitch to your LP base
- get commitments
- get wires into your SPV
- wire from the SPV to the company
You’re talking a good 30 days+ to get a deal done, end to end.
I hope you like dancing.
Thinking of leading a syndicate?
Just remember:
You’re trying to convince a founder to take “your” money.
While trying to help potential LPs understand how much allocation is available.
While convincing those LPs that this is an opportunity they should invest in.
All while the round is coming together in real time.
Fun stuff! 😉
