Financing: Key Documents
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The last few years
have seen a dramatic increase in the number of
angels who are investing as part of an investment syndicate, an
approach that allows them to collectively make larger and more frequent
investments. More experienced investors tend to prefer such
co-investment groups. These are large groups of angels, sometimes with
as many as 100 members, that operate through forums. There are today
about 30-40 of these alliances around the U.S. and more are forming.
They usually meet regularly, and deal origination and outside access to
the group is typically through one or more of its members. To retain
members' anonymity, many of these syndicates (also called angel
alliances) establish a storefront (or facade) for the general public.
Angel syndicates offer investors clear advantages:
Pooling money to invest in
larger deals otherwise out of reach
Leveraging and sharing of
network contacts and investment expertise (such as screening,
The ability to add more
investments to an existing portfolio
The ability to add further
follow-on rounds to
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.
Typically, a member of the group brings a
particular investment opportunity to the attention of the syndicate, on
the understanding that the member will invest in the deal. The deal is
then evaluated by the group in a venture forum.
Each member can decide
individually whether to participate in a particular deal that the
syndicate decides to undertake and how much he or she wants to be
involved in each investment they make. Once such a commitment is
obtained, the participating angels have to supply the funds within a
certain timeframe, usually thirty to sixty days, as needed. Larger and
more complicated syndicates often look for opportunities with broader
and deeper markets and higher minimum return requirements than simpler
In most cases, one member of the syndicate
acts as the lead angel, assuming a liaison role between the
and the syndicate. In other cases, an outsider with no financial
commitment to the group (known as an "archangel") is hired to perform
this function. These individuals may be responsible for performing due
diligence and coordinating the allotment of investment duties among
members. Syndicate deals tend to be more professional than the average
business angel deal.