David Cummings on Startups

Syndicating Angel Deals in Atlanta with AngelList

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David Cummings

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AngelList just launched their Syndicates offering and it’s a big deal. Angel investing is notoriously inefficient due to corralling hobbyist investors, extensive paperwork, and generally small dollar amounts. Syndicates works to change that and deliver some of the benefits of a venture fund with a larger amount of investments dollars, fewer investors to wrangle, and the speed and leadership of a lead investor.

Here are a few details on AngelList Syndicates:

  • Lead angels get a carry (part of the profits, if any, from doing the deals) and AngelList gets a carry (that’s how they make money as a company)
  • Money invested from lead angels in a deal often represents a much higher percent of the deal, and personal wealth, compared with venture capitalists investing from their own fund (e.g. the lead angels have much more skin in the game compared to VCs)
  • No management fees (management fees are money taken out of the fund to pay salaries, office space, etc. regardless of making a profit)
  • Open to accredited investors and qualified purchasers (it isn’t crowdfunding)

Overall, this has the potential to make lead angel investors much more meaningful and impactful with their time and effort.

From an Atlanta perspective, this is awesome. This provides the opportunity to bring together startup investors that don’t want to commit capital to a fund, and the requisite long term illiquidity, but still want the guidance, deal flow, and help that a lead investor provides. It’s win-win.

I’m looking forward to using it and seeing how it changes the market for angel and venture funding.

What else? What are your thoughts on syndicating angel deals with AngelList?

Comments

2 responses to “Syndicating Angel Deals in Atlanta with AngelList”

  1. brian trautschold (@BTrautschold) Avatar
    brian trautschold (@BTrautschold)

    I’m very interested to see how it plays out. Previously, the negatives (see: wrangling) have been prohibitive for dealing with angels for a company moving at pace.

    Personally, I think it will be fascinating and has a ton of potential – but fear ‘personal brands’ will dominate and eventually the act of leading and focusing on really helping the company/ delivering value will take a backseat to getting more popular logos on a profile.

    For our company, I would love to see ‘industry syndicates’ rise and sell (or win deals) based on their expertise, networks, past performance of impacting similar companies – a group of people who’ve built solutions for and sold into the enterprise/ SMB market funneling investment into a new phase of companies.

    Reply
  2. zackmansfield (@zackmansfield) Avatar
    zackmansfield (@zackmansfield)

    Good post David, i’ve been reading a ton and thinking about this all week. I wrote up more complete thoughts yesterday (hope it’s not poor form to link to the full post here: http://runwaytoexit.com/post/62833343427/angellist-syndicates-secondary-markets-and-the)

    The summary though is this:
    1. It’s completely disruptive and (I think) a net positive for entrepreneurs and actually for investors too.
    2. There will be a lot of pain as this works through the early days.
    3. It’s a total democratization of capital but in the near term the power will still be centralized in the biggest markets with the most developed networks
    4. there are opportunities in markets like Atlanta, the Triangle, etc for the people with the most well developed regional networks to serve as lead syndicators and drive financing/innovation/etc

    Hope to see more discussion on this as I truly do think it’s a transformational time

    Reply

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