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For startups, equity financing comes in various shapes and sizes. The most common type is a traditional venture capital firm. However, there are other instruments and organizations that will fund startups in exchange for equity. A syndicate is a popular alternative to venture capital.
Today, we are going to show you the pros and cons of an angel syndicate platform. We hope you enjoy the post, and that if you are a founder or investor, you can use it to decide whether to join or not.
What is an Angel Syndicate?
We did explain in Angel Syndicates 101 that an angel syndicate is essentially a group of investors who agree to invest together in a specific project. A syndicate can be formed by angels or investees from any source; syndicates frequently include angels from more than one investment network. While no additional conditions are required, in order for the syndicate to be viable, all investors would typically reach a (non-legally binding) agreement on how the syndicate will operate.
In an angel syndicate platform, there has a professional who manages the network, screening potential investments and making recommendations to the group. Its structure varies, but typically the group will enter into a limited partnership agreement with the professional investor who manages the fund. A sidecar fund, a separate fund that invests alongside the main syndicate, may also be part of the group.
Angel Syndicates for Startups
An angel syndication network can be a great option for a startup looking for funding.
As a startup entrepreneur, you reliably understand that one of the most critical aspects of success is obtaining funding. While there are numerous options available, ranging from venture capitalists to crowdfunding, an angel syndication network is one you may have yet to consider.
As the words above, a group of angel investors who pool their resources to invest in startups is known as an angel syndication network. Therefore, this can be an excellent option for entrepreneurs seeking significant funding but unwilling to give up too much equity in their company.
To get the investment from an angel syndicate, startups should prepare not only their best model business, the expected products or services, but typically excellent pitching.
How an Angel Syndicate advantages your Startup
There are a few advantages when getting the fund from angel syndication networks:
First of all, they can give you access to a wider range of resources. Angels in a syndicate can come from dissimilar backgrounds and industries so they can provide valuable insights and advice.
Secondly, an angel syndication network can help you build relationships with potential investors. By working with a group of angels, you can get to know them better and build trust. This can make it easier to secure future funding from them.
Moreover, one of the most significant advantages of an angel syndication network is that it allows you to access more capital. When dealing with a single angel investor, they may only be able to invest a limited amount of money. However, by using a syndication network, you can access the resources of multiple investors at the same time. This can give your business the capital you need to scale up.
How an Angel Syndicate disadvantages your startups
Of course, even getting a ton of benefits from this platform, founders still attend to some of its drawbacks. One is that you’ll need to pitch your startup to a variety of people altogether concurrently, which be harder to get their acceptance and you should prepare more carefully.
Another disadvantage is that you may have to share a larger equity stake in your company with a syndicate than if you worked with a single angel investor.
How to find Angel syndicates
You can find angel syndicates via the internet. There are numerous platforms that connect entrepreneurs with angel investors, such as the Angel Capital Association, the Angel Investment Network, and AngelList. Strong referrals may also help your case with angel investors, so consider tapping into the power of your social media connections, particularly on LinkedIn.
In conclusion, angel syndicates play an important role in the world of venture capital. By pooling their resources, angel investors can access a wider range of investment opportunities and provide startups with more significant amounts of funding. Angel syndicates also provide valuable support to startups, including mentorship, strategic advice, and access to networks and resources.
As the world continues to evolve and new business models and technologies emerge, angel syndicates will continue to play a critical role in helping startups grow and succeed. For entrepreneurs, forming partnerships with angel syndicates can provide a valuable source of funding, mentorship, and support to help them achieve their goals.