Is the M8 Syndicate a good match for your startup?
Our main focus at M8 right now is growing our new angel syndicate on the Aussie Angels platform.
We want the syndicate to be inclusive, with a low minimum commitment for angel investors, no joining fee, and no obligation to invest in the deals we bring to the syndicate. It’s still early days (we launched in May) but it seems to be working so far: we’ve successfully closed allocations in several great startups.
If you’re a startup founder hoping to raise, you might be wondering: would the M8 Syndicate be a good source of capital for us? Here’s what we think you should consider:
How does pitching to the M8 Syndicate work?
At a high level, there are the following phases to gaining investment from M8 Syndicate:
- You complete our Pitch To Us form;
- We reach out to invite you to initially pitch to either Emily or myself, and we express interest;
- You then pitch to both Emily and myself, and we give you a yes, a no, or guidance on what it would take to get to a yes;
- You agree to offer us an allocation in your round, with an allocation agreement we’ll send you to e-sign. At the moment we’re interested in allocations up to AUD$100k in most deals.
- We go through a due diligence process with you and also write a deal note to explain the investment opportunity to our syndicate;
- We pitch you to our syndicate members, which involves making the deal note and your deck available to them online for a couple of weeks, inviting them to a live video founder Q&A call with you and us, and then drip-feeding them some latest updates from you during that time;
- If the syndicate commits enough to the deal to reach the minimum amount of AUD$50k, the deal proceeds (hopefully it goes past that and we’re able to fill it or even oversubscribe);
- The Aussie Angels platform gets all the angels to sign their paperwork, collects their funds, and transfers the investment amount to you.
There’s a bit more to the process…
How long does it all take?
Depending on how available Emily and I are, it might take a couple of weeks to get through the pitching in stage one and two. Make it through that phase and it takes us about five weeks from beginning due diligence to a startup receiving the funds, which may be a bit faster than many other syndicates.
However, we only have capacity to do a deal about once per month at present, and we’re lucky to have some great deal flow, so we usually have a queue of about three months’ worth of startups waiting for their deal to launch to our syndicate. Add the wait time in the queue to the due diligence and syndication process and it’s likely it may take four months from when you first pitch us to close the investment.
So in most cases at the same time you’re pitching us, you should be finding a lead investor, so when we’re able to put the deal to the syndicate you’ve agreed on deal terms with a lead investor, and then we see if we can help fill some of the round. We have capacity to fill up to about $100k.
What kind of startup is a good fit for a syndicate?
A syndicate operates differently to a VC fund. Think about a syndicate as a bit like a crowdfunding proposition, in that once Emily and I are convinced investing in your startup is a great idea, with your help we have to persuade the syndicate members that it is a great deal too — they don’t automatically follow our recommendations, and they all have the right to invest/not-invest in the deals we bring them.
The startups most likely to be successful with a syndicate in general:
- Confident and engaging founders with a relevant track record
- Startups targeting a customer/problem that has broad appeal (vs a highly specialist/technical niche)
- The round already has a committed lead investor, with an agreed valuation and terms
- The startup already has a little customer/revenue traction
The startups which interest us at M8 Ventures must also be:
- Making the world a better place
- Building a company that develops world-class technology products
- Not focusing on the extraction or defence industries
- Not encouraging speculation, addiction, self-harm or harm to others
- Diversity represented in the leadership team (defined as employees owning equity or with significant ESOP) and board (if you have a board)
What’s the first step?
You can make sure you’re across our radar by completing the questions at https://m8.ventures/startups before you get in touch.
FAQs
Q: What’s involved in the due diligence process?
A: We’ll want to review all the company information you have available, some of which you may have to create if it doesn’t already exist (but other investors will require them too) including company constitution, shareholders agreement, term sheet for the deal, employment contracts, copies of any patents or trademarks, cap table, financial statements and financial forecast. The best way to share this is to copy it to a set of folders and subfolders in a Google Drive or similar, and then build a quick index page for it all in Notion or similar.
We’ll want a list of customers and beta testers with their contact information and anything you’d like to tell us about them before we complete a 10min customer interview with a number of them. Here’s an example of the questions we’ll typically ask. We won’t share customers’ individual answers outside of M8 Ventures (or with you, sorry).
We’ll write a deal note and submit that, along with the term sheet, shareholders agreement and constitution to Aussie Angels and their AFSL provider, who will need to sign off on them (as they’re legally obliged to do).
Q: What’s involved in the deal note drafting process?
A: We’ll take the lead in drafting a 1,000+ word deal note document that summarises the information we’ve received in our meetings with you, the customer interviews and some information we may ask permission to share, from the documents in your deal room.
While we’ll take the lead and ‘own’ writing the deal note’s content, you can usually expect several requests for further information to back up all the claims in the deal note.
Aussie Angels, their AFSL provider and M8 Ventures may each ask for further information and amendments to the deal note to ensure everything in the deal note is factual, with references to company information or third party sources such as research papers, industry databases such as Crunchbase, or previous industry news coverage. Sorry, but we’re legally bound to.
We’ll need a clean copy of your logo as a PNG for the deal note, and we may have other graphic requests, such as changes to your deck or a video walkthrough of your software.
Q: What can we expect during the deal being live on the syndicate website?
A: We’ll launch the deal note on a syndicate web page which is visible only to registered syndicate members (though we can screenshot it for you, or you can join our syndicate if you qualify as a sophisticated/wholesale investor). We’ll send out an initial email to the syndicate members to invite them to read the deal and ask any questions they might have of us. At that point until the deal-closing date, syndicate members can express their interest in investing in the deal, and tell us how much they want to invest.
We’ll coordinate with you to schedule a Founder Q&A video call with you (and any cofounders) during the second or third week of the deal being live on the platform. These Q&As give syndicate members a chance to meet you ‘in person’ and ask any questions they have live. One of us will interview you, using some questions we’ve written and sent you in advance, so you can prepare — you won’t be required to pitch your startup on the call. Calls typically run for 45–60mins, and we’ll record it and make it available to syndicate members who can’t make the call.
We’ll continue to encourage our syndicate members to express their interest in investing for another week or two following the call, and during this time it’s very important to keep sending us updates, big and small, that we can share with investors, to keep you top-of-mind. Hires or advisors you’ve signed on, customers you’ve signed or begun negotiations with, changes you’ve made to your product or business model. We’ll keep you in touch with how the deal is going, and the level of interest from syndicate members.
A deal closes and investment commitments are binding on syndicate members if the amount committed is a minimum of AUD$50k. Hopefully, we get to the full allocation or oversubscribe. If we look like oversubscribing, we’ll ask you to allow us a little more in the round and if that’s not possible, we’ll pro rata our syndicate members as needed.
Q: Do I end up with many individual syndicate members as shareholders or SAFE holders on my cap table?
A: No, Aussie Angels on behalf of the syndicate is a single entity on your cap table.
Q: Do I have to offer M8 Syndicate a board seat, observer status, pro rata or information rights?
A: We don’t need/want a board seat or board observer rights. We’d appreciate information rights and pro rata rights but they’re not non-negotiable.
