Chapter 11: 天使联合会 (Angel Syndicate)

At these sites, successful angel investors create an investment group, or syndicate, where they explain what they typically invest in, what they’ve already invested in (their track record), how much they typically invest per deal (typically $10,000 to $100,000), and how much in “carry” they will charge you on a successful exit. Carry is short for “carried interest,” and it’s defined as the share of profits that go to the fund manager—in this case called the syndicate lead.

On these platforms, the syndicate leads typically take a 15 percent carry and the platform itself takes another 5 percent, for a total of a 20 percent carry. This is exactly how venture capital firms charge their own investors, who are called limited partners (LPs), with one critical difference: fees.

With angel syndicates, you simply pay the carry. There are no fees other than some minor legal and filing fees (typically less than $10,000 per deal, spread out across the dozens of investors in a deal). Individual angels like you can sign up for a syndicate (like mine) and make a nonbinding pledge to invest a small dollar amount per deal. On my syndicate, the minimum is $1,000, but most syndicates set this number at $2,500 to weed out the more casual investors. When a syndicate lead shares a deal, each of the syndicate members gets a chance to evaluate the deal via an online profile for that startup that typically includes a pitch deck and why the syndicate lead is investing. A syndicate normally negotiates an allocation with the founder of the startup, typically $200,000 to $500,000 (or 10 to 50 percent of a seed round). If the syndicate can pull together enough investment interest, the deal is consummated. That’s why I advocate that new angels do ten small angel syndicates before they start doing direct investing. Beyond the very real chance of getting a positive return on your investment, if you do this hack, you will build your reputation, have a chance to prove your worth to founders, and jump-start your network—all for the bargain price of $25,000. That’s only 20 percent of the cost of an MBA and you can do it in a month!

Syndicates require very little paperwork and you can choose to invest without taking any meetings or doing any due diligence. The only thing you need be able to do is prove that you’re an accredited investor here in the United States and have your wire transfer clear.

Chapter 12: 天使联合会基础

I suggest looking for these basic characteristics:

  • A syndicate lead who has been investing for at least five years and has at least one notable, unicorn investment
  • A startup that is based in Silicon Valley
  • A startup that has at least two founders (with two, you have a backup in case one quits)
  • A startup that has a product or service that is already in the market (you’re not qualified to invest in startups that haven’t released their products—and frankly you don’t need to take this risk)
  • A startup that has either (a) six months of continuous user growth or (b) six months of revenue
  • A startup that has notable investors
  • A startup that, post-funding, will have eighteen months of cash remaining, commonly referred to as runway (ask the founder and syndicate lead how many months of runway they will have post-funding)

If you love taking risks and don’t mind being locked up for a decade, I could see you putting 10 to 20 percent of your bankroll into angel investing. If you can tolerate risk, but don’t love it, and you can handle being illiquid for a decade, I could see you putting 5 percent of your bankroll into angel investing. If you’re going to be a great angel investor, start at the small tables while you learn—there is no rush. Every year, billion-dollar companies are created, and that will continue for the rest of our lives

For all ten of the startups you select, you need to write a “deal memo” explaining why you’re investing, what you think the risks are, and what you think has to go right for the startup to return money on your investment.

Syndicates are your Dagobah, a place where you can learn from other angel masters without losing a limb or your head. Go ahead and ask the syndicate lead why they are investing, meet with the founders, and talk to their customers—learn how to hold a lightsaber without cutting your fingers off.