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Angel Syndicates

Angels who invest together are known as an investment syndicate, an approach that allows them to collectively, sometimes composed as many as 100 individuals, make larger and more frequent investments.

Another trend that has emerged is syndication among angel groups.

By combining their monetary investment potential, angel groups can attract the growing number of deals that require larger initial investment than any one group can provide These angel groups can raise combined investments equivalent to a venture capital fund.

The synergies from syndication extend beyond the screening phase, as the combined resources of these groups yield an overall more thorough investment process.

To retain members’ anonymity, many of these syndicates (also called angel alliances) establish a storefront (or facade) for the general public.

Angel syndicate advantages:

The advantages of an angel syndicate is that it allows angels to pool money to invest in larger deals otherwise out of reach

  • Diversification across multiple investments
  • Leverage/share network contacts and investment expertise (such as screening, due diligence, valuation, and monitoring)
  • Ability to add more investments to an existing portfolio
  • Ability to add follow-on rounds to existing investments

However, these syndicates also incur certain running costs and may not be appropriate for those investors who wish to have a large say and active involvement in their investments.

Angel syndicates are enjoying strong growth as angels are seeking increasing opportunities to spread the risk through pooling their money.

Not only is this good for investment-shy angels, it also benefits those companies seeking investments as syndicates are investing much higher amounts than stand-alone angel investors. According to a survey of Angel Capital Association members, the average pooled investment in 2008 was $281,000. Individual angel investment ranged from $10,000 to $200,000 per startup.