For example, suppose an angel wants to invest $250K into a company. They personally invest $50K and ask 10 other investors to invest alongside them. They pool the investors into a fund which invests another $200K.
Syndicate leads earn carried interest on the additional capital that follows them. This increases their stake in your company's success.
Founders can control distribution and limit which investors see confidential info.
After privately closing funding from a syndicate led by Brendan Wallace, Clutter raised back-to-back rounds with Sequoia: a $9M Series A in October 2015 and a $20M Series B in April 2016.
You should discuss how much the syndicate will invest, on what terms, who should be able to invest, what information will be shared, and when you'd like to close.
Leads typically write a note to the syndicate investors about why they like the investment. They'll also share the terms of the investment.
The AngelList-affiliated funds are under NDA and are automatically invited to invest in all deals. Founders and leads can invite additional investors to the private deal environment.
Once documents are signed, AngelList collects funds and wires them to you. AngelList can close deals in as quickly as 72 hours.
Deals are only visible to individuals invited by the lead or the founder. Founders and leads work together to decide what level of distribution is appropriate. Most deals have fewer than 20 investors involved:
Leads share information about the company and round in order to explain the opportunity. You should discuss what information you feel comfortable sharing with your syndicate lead.
Ultra privacy-conscious founders can limit access to investors by gating sensitive information behind an additional layer of privacy (e.g. Docsend) or only permitting access to investors who are under NDA.
Syndicate investors are like LPs in a VC fund. They don't have information rights and aren't directly on your cap table. They fall into a few categories:
Other investors invited by the syndicate lead. They often have a personal relationship with the lead.
Investors with expertise relevant to the company. For example, a company making a drone camera may ask AngelList to invite investors with expertise in hardware, consumer marketing or video.
All investors are vetted by AngelList for accreditation and sophistication.
Most leads are operators who invest on a part-time basis. Many are current or former founders. Leads charge the syndicate investors a carry. This amplifies the lead's return on a successful investment.