Syndicates let you invest in startup allocations shared by syndicate leads. Here’s how it works.
Tim decides to invest in a startup and asks for a $250k allocation in the company. He personally takes $25k of the allocation and shares the rest with other investors, charging a 20% carry on the remaining $200K. Tim’s capital and his co-investor’s capital is pooled into a $250K fund which invests in the startup.
12 investors like Tim Ferriss and Jeff Schox have already used Syndicates to raise over $3M for startups. Take a look.
What’s in it for investors?
Investing in Tim’s syndicate is like investing in a VC fund, except Tim is personally providing a much larger portion of the fund than VC’s typically do. And there’s no management fee.
Investors in the syndicate get the benefit of Tim’s early access to startups, ongoing governance and value-add. They get the benefit of the Tim’s experience in picking investments. They don’t have to pay management fees, so their incentives are aligned with Tim’s. And they can invest less than the startup’s minimum — the minimum to invest in the syndicate is usually set much lower.
What’s in it for Tim?
Tim is getting carry for his work, just like a VC. He gets leverage on his personal investments. And he can also make larger investments, which may bring major investor rights and access to startups with higher minimums.
What’s in it for the startup?
Startups get to tap Tim’s network so they get more capital with fewer meetings. They get the attention of an investor who is responsible for 5–10x more than she would have otherwise committed. They get an investor who has an incentive to commit early. And they get to raise money from up to 95 investors, without giving them control or the hassle of putting them all on the cap table.
Originally published at blog.angel.co on September 23, 2013.