Startup Syndicates 101
A syndicate is a legal entity formed with the purpose of investing in a single startup. Unlike a fund, which invests in several companies chosen by a manager, investing in syndicates empowers you to choose the investments that make sense to you.
Spreading your dollars over many investments is a well-recognized way of managing the risk of your portfolio. But startups have minimum amounts for investments, which could keep you from having as much diversification as you’d like. Say startups do not accept investments of less than $25,000. If you have $50,000 dollars to invest, you are limited to just two investments. Instead, if you put $5,000 in 10 syndicates, you could allocate your money over more companies.
Syndicate members benefit from the experience of lead investors, who review hundreds of startups per year and confer with trusted colleagues. This collaboration helps investors screen out problem deals. Input from the angel network is especially important in early-stage companies where evaluation of the team is the major factor. While it’s always important to perform your own due diligence, investing alongside an experienced person can offer more resources for evaluating the transaction than doing it solo.
There’s a lot of ongoing paperwork involved when investing in early stage companies. Syndicates make investing in startups more convenient by removing a great deal of this burden.
If you’d like to participate in the innovation economy by investing in early-stage startups, syndicates could be a great way for you to deal with the risk and inconvenience involved. Please note that our syndicates are restricted to accredited investors only.