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Confessions of a Syndicate Lead: The 2% of LPs That Keep Me Up at Night

We have thousands of what I would consider great LPs, yet I sometimes find myself focusing on the bad apple LPs. Why is that?

I guess the LPs that cause me problems or dissatisfaction take up significantly more headspace than those who are just flat out great to work with. When we have a great LP do something, I typically find myself saying to myself “wow, this person has been awesome to work with since being an LP in the syndicate”. And then I move one. 

Negative interactions with Limited Partners tend to have an outsized impact on my mindset and workflow. I find myself dwelling on these situations and frequently discussing them with colleagues, which can unintentionally cast a shadow over our current fundraising efforts or existing portfolio companies. While positive LP relationships greatly outnumber the challenging ones, the difficult situations consume disproportionate mental energy and time, creating a persistent distraction from other important work. 

Here’s some insight into being a syndicate lead and working with tons of different LPs (on a deal by deal basis)...

I meet tons of LPs and get to know them or their behavior over time. It’s hard to know them after an intro call or them joining the first deal, just like any other person. The interaction is typically quite limited, so things take longer to play out and truly get to know them.

Leading a syndicate with over 3,000 participating LPs, I've learned that while building strong relationships with every investor would be ideal, it's not feasible at this scale. The vast majority of our LPs are great partners who demonstrate sound judgment, engage thoughtfully, and conduct themselves with integrity. Even LPs who invest selectively – just a few deals annually – yet maintain professionalism and courtesy, are valuable members of our collective. These investors form the backbone of our syndicate, and I want to emphasize that this perspective on challenging situations shouldn't overshadow the numerous positive relationships we've built!

First, let’s explore a few reasons I would consider you a good to great LP in my syndicate:

• Easy to work with

• Actively (or somewhat actively) invest

• Can add value to companies in various ways

• Ask good questions (shows engaged)

• Provide sound feedback (both positive and negative on a company or our syndicate)

• Just generally knowledgeable in startups or the area they work FT in

• Also bring good deal flow connections to the table

• Don’t ask questions that are already clearly outlined in deal memo

• Are generally curious about startups and want to leverage syndicate leads as the access point to a few deals

• Are here to explore investment opps instead of being here just to snoop around

And now the bad LPs…

Let me be clear. Folks who pass on our deals or disagree with our investment rationale are not bad LPs. Bad LPs are the ones who I feel are unnecessarily rude, cause problems or flip flop decisions frequently that result in added action from syndicate leads.

Instead of explaining what I think bad LPs do, below are real world examples I can share.

Examples of LPs I consider Bad/tough to work with:

The Worst Thing an LP can do → One of our most serious concerns is the unauthorized sharing of confidential materials, such as deal memos or screenshots of investment details. Despite explicit confidentiality agreements that every LP signs, breaches have occurred. While these incidents have decreased significantly over time, they remain a critical issue. We've had to remove (and continue to remove) LPs from our syndicate after discovering they shared sensitive information, actions which directly compromised or cost us valuable deal allocations. These breaches not only violate our trust but can irreparably damage our relationships with portfolio companies and co-investors. Maintaining strict confidentiality is fundamental to our ability to access premium investment opportunities and uphold our fiduciary responsibilities

Syndicate leads need to have thick skin given the various LP feedback we get. See a few examples below:

• “wow I can pay carry & mgmt fees to buy common? And you want me to put in 5X your own commitment. Give me a break” 

• “This makes me laugh out loud - they are trying to copy what (competitive company 1), (competitive company 2) and a dozen others have already done. But they have no product, no revenue, and intend to take their fees out of the (sensitive business model point).” 

• Just last week, I had someone say something along the lines of our fees being ridiculous. That’s their opinion, and that is okay. However, I just feel like we are not going to be a good fit to explore future deals together.

Asking for more information, and telling me how to create a deal memo because you want to further evaluate before looking to invest your $500 check. 

Not $500k, 500 dollars. We don’t even allow anything under $1k. $1k checks just do not move the needle (we do accept them many times) therefore I cannot do special favors for checks that do not move the needle. If you cannot do $1k checks into a given deal, angel investing may not be the best place to allocate capital for you right now. 

Asking questions already clearly stated in the deal memo. 

We try to be thoughtful and work hard to put deal materials together to provide enough info to LPs to make investment decisions. When you don’t read anything and create additional work for me via questions already answered, that frustrates me. I typically will still answer via a copy and paste from the memo, but I feel it's not as respectful as an LP could be…and it's also important to read all info provided before making any investment decision. 

Jumping to conclusions about a lagging close. 

So many times I have LPs that come at me with an aggressive and what feels like a rude tone because they think a deal didn’t close, that indeed did. I realize the platforms can have a lag in reporting, so LPs are not necessarily kept up to date in real time, and I can understand the frustration there. So if an LP reaches out to check in on the status of a deal, I have no problem with that. It’s a valid question. But when they come at me in a rude and aggressive tone because they assume the deal hasn’t closed and say “this is ridiculous” or something like that, I consider that a bad/annoying LP. Most of these have either already closed or they don’t understand how secondary transactions work and the associated timelines (what we need to do behind the scenes). I guess my point here is just ask me before you assume we suck at our jobs and are lagging… especially when you don't have the transaction experience to understand how closing works and what needs to take place beforehand. Sorry to the many LPs who ask me this in a totally respectable manner, those are very much still welcomed and reasonable questions :)

LPs requesting their capital back that they committed and signed for mid deal. 

If this happens once I can understand (assuming there is a reason), but we are trying to manage capital committed with expected capital to come into a deal and relay that to a founder/company. When capital that has already been committed is requested back, I will give it back if we are in a position to do so, but it’s bad LP behavior in my opinion (assuming there’s been no change in deal information). Once you’ve committed, signed, and wired for a deal, you should consider that d-o-n-e. There are times where we’ve submitted an allocation amount to the company and during the 1 month ROFR period (before the deal closes) and LP will request their money back, in those scenarios I cannot give it back (unless we have a another LP that wants in) as we’ve already committed it to the company. This can cause friction with LPs because in this scenario, I am just not in a position to return the capital whereas if it was pre-submitting to the company, I would be able to. 

Closing Thoughts

Even though 98%+ of our LPs are absolutely great to work with, the problematic ones (probably like ~2%) are the ones that take up the majority of a syndicate lead's brain space. 

Everything above is just my take on being a syndicate lead and LP behavior, which does not mean I am right. Many times, I may be misreading LPs or perhaps overly sensitive, however I will end with a few thoughts and explanations on how I treat things at present.

1. I am more than happy to drop LPs that I feel are going to be problematic from the syndicate. Luckily we are in a healthy position where we do not rely on any single LP or deal or anything like that. I want to work with good LPs and the headspace created from bad LPs is not worth their capital. This is likely similar to founders and bad investors. I will be quick to drop LPs that I don’t think are the right fit for the syndicate.

   1. As an example, 2 weeks ago we were working on a deal where a colleague we like and work with frequently had a $100k LP for a deal we were running but also told me the LP can be annoying and hard to work with. I decided to not engage with them despite an $100k check.

2. On a more positive note → I truly value the LP relationships, and again while this focuses more on the negative LP interactions, the good LPs are incredible to work and collaborate with. I really appreciate the many folk who have been with the syndicate awhile or even those that are still in year 1 but have been a pleasure to work with. Without them, we are not getting deals done and hopefully sharing more big wins ahead :)

3. Being a syndicate lead is a long-term game. The first 5 years of doing this, I made $0 via management fees and had not launched our new paid product, Deal Sheet, so there was no repeatable income to support life’s expenses. It was an absolute grind to do on the side or to just burn money while building (which is exactly what I did). I’ve got a better feel today on how long of a game this is to see any meaningful monetary outcome, therefore if I’m going to be in this game for so long, it’s hyper important to do it with great partners. When I say great partners, that applies to everything from LPs, co-syndicators, scouts, founders, VCs etc.

If you enjoyed this article, feel free to view our prior issues on adjacent topics 

• The Ideal Angel Investor: Profiling 4,000+ SPV Limited Partners

• Why Your VC Portfolio May Seem to Be Failing (And Why That's Normal)

• Understanding GP Authority and LP Rights in SPVs

Last Money in is Powered by Sydecar

Sydecar empowers syndicate leads to manage their investments more effectively. Organize, manage, and engage your investor network effortlessly with Sydecar’s management and communication tools. Their platform also automates banking, compliance, contracts, tax, and reporting, freeing up syndicate leads to focus on securing deals and strengthening investor relations. Elevate your syndicate operations with Sydecar.

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✍️ Written by Zachary and Alex