Create an AngelList syndicate now!

Hey folks, welcome back to investream. I'm punkarge and today we're going to get back to angel investing using AngelList syndicates and how carry in Angelist syndicates works. Coming up next, I did a video talking about how carry works in a fund and and I'm going to link to it in both the show notes as well as the cards above. I want to talk today about how Carry works with AngelList syndicates and why it's important for angel investors to consider using AngelList as a place to share their deals. The way carry is structured on AngelList, it incentivizes angel investors to share their deal flow. Now don't get me wrong, setting up an AngelList syndicate is not trivial. It does take work, it does take some thought, it does take effort, it does take some marketing. You got to go out there and you got to get people to get excited about the deal flow that you have access to and ask them to try and back your syndicate and, you know, perhaps put some money into some of your deals. It's a little easier than raising money for a fund, but it's still difficult. The nice thing is that people don't have to commit to investing in every single one of your deals. They can commit to backing your syndicate without putting any money in. And then over time, as you show deals that they like, they can decide to invest just the minimum amount on that deal. Now why is this good for a angel investor and somebody who's ready to start syndicating their deals? Well, it gives you leverage. That's the biggest thing. Leverage, you know, when used correctly can be really powerful. A lot of people don't use it very well and it leads to problems. But leverage used in the right way can multiply your earnings pretty rapidly. Now, when it comes to AngelList and Angel Investing, the way that you do it is you find a deal that you like, you take it to your syndicate, show it to your backers, put together a deal memo and, you know, share the deck and all that other stuff and then they can decide whether they want to back your deal and put money into it. Now let's run through some math on this. If you invest $1,000 into a startup at a million dollar valuation, that's great. Company might do well and get a acquired at a $10 million valuation. And let's just assume for simplicity's sake, there's no dilution along the way, you walk away with a nice 10x return. Not too bad. Let's take a syndicate as an example. You Go ahead and you invest your thousand dollars the way you normally would. Fantastic. That money's in. Wonderful. Now you go back to your syndicate and you say, all right, I'm raising $100,000 to put into this deal. And your significant backers come back and say, all right, this is wonderful, blah, blah, blah. And you get a whole bunch of folks to come in and collectively it comes out to $100,000. That money goes into the startup just like any other investment would. You invested $100,000 through the syndicate into the startup for at a million dollar valuation. The company sells for a 10 million dollar valuation. The no dilution and you walk away with a million dollars. Well, not you, but the syndicate does. Now the syndicate, let's take away the initial money that was invested out of the syndicate. $100,000. So you're left with a $900,000 gain or capital gain. What happens? Well, you as a syndicate lead will get a portion of that $900,000 just like AngelList will. So in most cases, angel list syndicates have a 20% carry. Generally 15% goes to the syndicate lead and 5% goes to Angelist. There are variations of that. Sometimes it's higher, sometimes it's lower, depending on kind of what's going on and what region you're in. But use 20% as kind of the benchmark. So what happens? All right, well, 20% of 900,000 is $180,000. That $180,000 comes into the syndicate as carry. 15% is what the syndicate lead gets and 5% is what AngelList gets. So you know, you get $135,000 as a syndicate lead and AngelList walks away with $45,000 for their work. You've now turned a thousand dollar investment into a hundred and forty five thousand dollars profit. Not too shabby, right? So you know, this is why AngelList syndicates are so powerful and why so many angel investors are doing syndicates. I think angellist is a wonderful tool not just for angel investors, but also for seed funds to use. You know, there are seed funds who will take pro rata that they have in a deal and they'll share that on AngelList. There are other funds that will invest through AngelList. They'll invest and they'll syndicate every deal that they do on AngelList. So you know, it gives them a lot of leverage and you know there's value to that. So that's kind of the power of angellist syndicates and why it's great for angel investors that have access to interesting deal flow. So I hope the video was helpful and useful, and I hope some of you would be interested in backing my syndicate. I'll leave a link to my syndicates in the description below. And if you're thinking about running a syndicate on Angellist, you know, feel free to get in touch. Love to hear what you're planning to do and how you're planning to do it. If you haven't yet subscribed to YouTube, the link is in my bio. Please head over there. Subscribe, and please be sure to hit the little bell so you get notifications of every episode that comes out. Thanks again for joining me and I'll see you again next time.