This post is for the rich wanna-be-passive-angel-investors out there. If you haven’t heard of Angel Syndicates, you should read up on this new service that AngelList recently started offering in private beta: Angels Get Carry for Helping a Startup Raise Money with AngelList Syndicates (TechCrunch).
What’s Equity Crowdfunding?
Equity crowdfunding is fairly new. It’s similar to the crowdfunding you hear about on Kickstarter or Indiegogo, but instead of rewards, you get equity. As of now, only accredited investors (read: rich people) can participate in an equity crowdfunding round. Sites for equity crowdfunding include AngelList, Crowdfunder, Fundable, and many more.
Where Do You Do It?
IMPO, as of now, AngelList is the only site you need to look at if you’re looking to invest in high-growth tech startups. You’ll find most major startups and angel investors from the tech world listed on there. (There are also niché sites, for example, like Quirky that focus on inventions).
So… Angel Syndicates?
Even with equity crowdfunding, however, a new angel investor might have difficulty filtering through the noise and doing the due diligence. That’s where Angel Syndicates come in.
Passive angels can now back Angel Syndicates, which operates much like a VC fund, except there is no management fee. Carry is comparable, and as of now the standard is being set to 15% (compared to the normal 20% a VC takes). The lead angel of a syndicate also has to cover, with their own money, 10% of however much they’re raising for the syndicate (aka: more skin in the game than a VC fund manager).
As a backer, you commit $1,000 or more per deal for X number of deals with a specific angel syndicate. Any time that angel is making an investment, you’re *automatically brought in on that deal for the amount you specified. (*you technically have 72 hours to opt-out, which you can only do under special circumstances – conflict of interest, etc.)
Why I’m So Excited About This
AngelList Syndicates are a great way for new angel investors to start investing in tech startups because they can hedge their bet across a large number of startups, and they can do this without doing due diligence on hundreds of startups, rather do due diligence on a handful of credible angels who have syndicates.
Making it easier and less-riskier for non-savvy rich folks to invest in tech startups leads to more total money available for tech startups globally. More money available for tech startups makes it easier for founders to raise money, and therefor allows them to focus on growing their companies and spreading their innovations.
Top 10 AngelList Syndicates
My methodology is quite simple. There are only 268 Syndicates currently listed, only 10 of them have 10+ backers. If you’re actually going to back a syndicate, I urge you to do your own due diligence. However, relying on a due diligence of others who are putting their own skin in the game is a great place to start (#CrowdsourceEverything).
*Stats from morning of 10/3/2013 – this is going to get outdated real soon…
Kevin Rose – 335 backers for a total of $1,461,100
It’s interesting to note that his carry is listed as 0%, perhaps why he has so many backers. What he’s signaling: that he’s in it not to make money, but to make more funds available for startups.
Confirmed investments on AngelList: 42
Dave Morin – 211 backers for a total of $923,800
Confirmed investments on AngelList: 68
Jason Calacanis – 173 backers for a total of $719,600
Confirmed investments on AngelList: 42
Brad Feld (FG Angels) – 119 backers for a total of $224,401
While it’s currently listed as Brad Feld, this is going to be a Syndicate by FG Angels (part of the Foundry Group). Read more about this on Brad Feld’s blog post here. With plans to invest in over 50 startups by the end of 2014, this is going to be one of the most active syndicates early on.
Confirmed investments on AngelList: 27
Betaworks – 49 backers for a total of $241,500
Confirmed investments on AngelList: 75
MG Siegler – 33 backers for a total of $162,000
Another Syndicate w 0% carry (like Kevin Rose). Probably worth noting that both MG and Kevin are Partners at Google Ventures.
Confirmed investments on AngelList: 46
Elad Gil – 29 backers for a total of $79,000
Confirmed investments on AngelList: 26
Naval Ravikant – 26 backers for a total of $175,500
In case you didn’t know, Naval is the Founder & CEO of AngelList.
Confirmed investments on AngelList: 107
Tim Ferris – 24 backers for a total of $253,000
His next book: 4-Hour Angel Investing. Probably not.
Confirmed investments on AngelList: 30
Andrew Chen – 18 backers for a total of $43,000
Confirmed investments on AngelList: 6
Sundeep Ahuja – 10 backers for a total of $44,000
Confirmed investments on AngelList: 7
For more opinions on AngelList Syndicates, check out this PandoDaily article: AngelList syndicates are changing seed investing whether VCs like it or not.