Want to be on the next season of Investing With the Stars? Join their investing syndicates!
Startups are cropping up everywhere, and they’re all looking for one thing: Investors.
It’s easy to fantasize about investing in the next Facebook, watch it take off, go public, and your tiny share grows into a fortune.
But how do you know what startups deserve your hard-earned money?
Some people watch the market like a hawk and scour the news for hot new startups to pop up. They follow trades and trends, waiting for something important to emerge. And they recognize it when they see it.
But this isn’t the vast majority of us.
Chances are, you’re someone who wants to discover and invest in the next Google. But you’re managing your own portfolio. You’re traveling for work. You’re living life.
What most people secretly want is to have someone who can check out existing stocks and guide us in our decision-making process. Kind of like an investment superstar guide.
But where could we find a superstar like this?
In 2013, AngelList opened up a new method of investing that changed the game completely for angel investor wannabes: AngelList syndicates.
What’s a syndicate?
Quite simply: It’s a way to “jump into” an investment that someone else has set up. If they’re putting together a deal that you think will go big, you can contribute and share a piece of the pie.
Deals are presented by the “syndicate lead,” a.k.a. the head honcho who does all the research and presents things for everyone’s consideration. Your share can be as little as $1000 and as big as $10,000.
You don’t have to invest in any deal that you don’t want to. It’s a perfect opportunity for people looking to get into the foray of venture capital investment but may not have the time to research. If a big investment figure wants to go for something, you can toss money in and help them get there!
In theory, everyone wins from syndicates.
Even those big awesome investors making the big investment decisions. Having more income at hand helps their investing continue.
And who doesn’t like having a crowd of people voting with their money on what deal they prefer over another?
Yes, I said one deal over another. This is a big perk/drawback of AngelList syndicates in their current form: You’re allowed to invest in one deal at a time.
This isn’t all bad. You don’t want to be held responsible for bad calls your investor pro makes. It’s also a great opportunity to test your own instincts within the choices of your investor superstar.
It’s also not holding back the power of syndicates. In the first year syndicates were established, investors committed $5.6 million to ventures. That’s 12 deals—the new investors were ready to set the business world on fire!
But who are these investing superstars you can invest with? Turns out, it’s many people you may have seen in the news, and several power players flying under the radar!
Fans of Shark Tank may think of Barbara Corcoran when it comes to investing superstars, and with good reason. Corcoran is an incredibly accomplished real estate investor whose opinion is trusted in many circles. She writes columns and is well respected in her field.
But guess what? She started an AngelList syndicate! Her syndicate even takes pride in being especially “investor-friendly.”
There are dozens of people running syndicates on AngelList that may surprise you. They’re the superstars behind all the brands you love, and they’re all looking to invest in new ventures with you.
Just reading through the list of potential syndicate owners feels like a lesson in who’s who in the venture capital world.
Do you like to read articles on Mediabistro? You can invest alongside its founder Laurel Touby.
Are you a fan of The 4 Hour Workweek?
You can invest right alongside Tim Ferris, courtesy of his syndicate.
Ferris is actually tied to some prominent company names, including Facebook and Nextdoor. With his syndicate, he’s opening up the doors for more people to participate in his trademark venture-hunting.
But let us not forget Ashton Kutcher, famed Hollywood actor and famously successful angel investor. He doesn’t have a syndicate yet. But his big investments in Airbnb and Duolingo suggest that he may be out for more big fish. Who’s going to pay for that? We nominate syndicate investors!
If you’re feeling pretty secure about your portfolio, syndicates can also be a fun way to mix up your investment experience. Why not invest in a fun, Hollywood-themed stock if you have the means and opportunity?
The main risk of working with a syndicate is obvious: Your dream investor superstar may not make the right choices.
Just like any investment deal, a syndicate investment may not go well. Funding may not fully be provided, the startup may not be profitable, etc… We all know the song and dance.
Thankfully, AngelList can also back out of an investment at any time. The syndicates backed by AngelList use a concept called deal carry, an arrangement that leads to looser ties between investors and the company they’re investing in.
The ability to bail out of an investment at any time means that you may be tempted to opt out of any deal that looks sketchy. It might not be the right call! As an inexperienced investor, you may not be able to make that call precisely for yourself.
But that brings us to one of the most important things to consider…
Inexperienced investors, i.e. the people who contribute to them, are both the strongest and weakest part of syndicates.
They might make it easier for a Silicon Valley entrepreneur to fund his new dream venture.
But they may not have the experience and knowledge necessary to know the signs to look for in a good investment. Not as much as a seasoned venture capitalist, or someone directly participating on the ground in Silicon Valley.
AngelList knows this is true. In an article with Fast Company, the founder readily admitted that some companies are adjusting who can see them when they put out the call for investors on the site. If you’re not some company’s ideal investor, you might not ever hear about their fundraising rounds.
You may also not be able to see (and therefore learn from) the big firms on AngelList.
Sequoia Capital was cited as one venture capital firm that doesn’t show all of its acquisitions publicly. Again, if they don’t want you to see what they’re up to, you won’t be able to learn.
If you’re new to investing, take the time to learn the basics about venture capital, systems of investment, and your rights as the investor. AngelList has lots of resources for using their individual products. But that’s no substitute for getting an education all your own.
Finally, one frustrating aspect of AngelList syndicates is the limit of 99 investors per deal. If you see a deal and all the signs look positive, you may want to jump on it before it fills up!
AngelList allows new or fledgling investors to dip their toe into angel investing with syndicates.
Because let’s face it: If you’ve gone through the process to become an accredited investor on AngelList, you’re gonna be curious about it. It’s only natural—it’s built into the culture of the site itself!
But syndicates are well designed on their own merits. AngelList tweaked their structure so that 97 percent of all capital would be invested in an individual deal. They went all out to make sure these would be just as profitable, if not more, than seed funds.
Your dollars may also go to interesting startups that wouldn’t ordinarily be considered for angel investment firms.
When’s the last time you invested in a startup from the Midwest? Or the South? Or somewhere in Alaska?
Syndicates, with their crowdfunding-like structure and use of AngelList’s extensive search engine, could very well be the force that brings untouched regions to the startup spotlight.
A syndicate allows you to get up close and personal with the angel investing world, no matter how far from it you may be in real life. You’ll get to invest with Barbara and Tim, right into companies you really care about.
So to recap: We have a new form of investing that requires as little as $1,000, opportunities to learn about angel investment by doing, and the chance to be finance bros with startup founders (at least on the Internet).
What’s not to like about investing syndicates?
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