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.

Deal Sheet Free Trial. Start your 7 day trial here!

Deal Sheet provides accredited investors: 

1. Access to some of the best startup opportunities across the VC syndicate ecosystem (est. 150-200 deals on Deal Sheet per year) and 

2. All Deal Sheet deals come at discounted carry – all opportunities on Deal Sheet are listed at 10% carry (versus 20% standard) with select opportunities (at our discretion) at 0% carry. 

Try the free trial today here!

Why Syndicate Leads Don't Survive

Starting a venture capital syndicate seems straightforward in theory: find promising startups, secure allocations, bring in limited partners (LPs)/investors, and close the deal. Yet many aspiring syndicate leads stumble and fail at an alarming pace before they ever truly establish themselves. The path from occasional deal syndicator to respected venture capital syndicator includes challenges that derail even the most enthusiastic and well-connected individuals.

In this post, we’ll explore the primary reasons syndicate leads fail to cross the chasm from interested amateur to established player in the venture syndicate ecosystem.

1. Insufficient Quality of Deal Flow

The foundation of any successful syndicate is access to high-quality investment opportunities. Let’s be real, without this you have nothing. Many syndicate leads discover that the allocations they're able to secure simply don't meet the standards their LPs expect. As the ecosystem has heated up, so has the bar for what is considered a top tier deal worth investing in from LPs. This is further compounded by the lack of distributions and very recent muscle memory, which has scarred some LPs from investing in certain stages or sectors. 

This problem manifests in several ways:

• Second-tier deals: You're only getting access to rounds that tier-one investors have passed on or for whatever reason were unable to secure.

• Too early without signal: Sometimes syndicate leads are very excited about a founder or an idea, but if there is not enough external validation (founder track record, co-investors), the general LP base may not buy into your enthusiasm. Rather, depending on your LP base and your track record, there may need to be external validation you can point to. This is tough for syndicate leads, but something we deal with frequently and can be a roadblock to getting a deal done.

• Unfavorable terms: The allocations you secure come with less attractive terms than what typical institutional investors receive. Note: even when we try to run deals that we think make sense but are uncapped or something unfavorable like that, it presents massive challenges in getting these deals done. 

• Limited allocation size: You're unable to secure a meaningful allocation size therefore the economics of running an SPV don't make sense.

As one former syndicate lead put it: "I spent six months building relationships with founders, only to discover that by the time they were willing to give me allocation, they were mainly looking for tourists to fill out their cap table at a premium valuation."

When LPs consistently see mediocre deals coming from a syndicate lead, they quickly lose interest. Your credibility as an investor depends on your ability to access quality opportunities that others cannot, and without this fundamental value proposition, your syndicate cannot thrive, and possibly not survive.

2. The Cold Start Problem

Perhaps the most common stumbling block for new syndicate leads is the classic cold start problem when you have no or limited network. To close an SPV, you need a critical mass of LPs (in some cases you just need one large one, but most syndicate leads do not operate this way) willing to invest. But without a track record of successful deals or many existing LP relationships, attracting those LPs in the earliest days proves difficult.

This chicken-and-egg dilemma forces many would-be syndicate leads to rely solely on friends and family for their first few deals. Unfortunately, this approach often fails to generate sufficient capital to meet minimum allocation requirements. This was certainly the case for me in my first few shots at syndicating deals. I had a few friends and friends of friends to share deals with; however, it frequently was not enough to put together an SPV in the early days.

The cold start problem is particularly brutal because:

• Founders want (high) certainty that you can fill your allocation i.e. you do not want to let them down.

• LPs want certainty that you have access to quality deals

• You need both of these things to happen simultaneously

When a syndicate lead can't overcome this initial hurdle, they often find themselves in an awkward position of having secured an allocation but lacking the capital to fulfill it. This can damage relationships with founders and/or sideline the syndicate lead very early because failing stings and they do not want to find themselves in this position again.

I imagine that this is the #1 reason people go from excited to syndicate deals to quitting very early on.

3. Early Failure Trauma

The psychological impact of an early SPV failure should not be underestimated. Many promising syndicate leads walk away from the business after a single (or a few) unsuccessful attempts because the experience is so painful.

Failing to close an SPV creates two distinct types of disappointment:

Letting down founders: When you've promised a founder that you can bring capital to their round but fail to deliver, you've potentially harmed their fundraising momentum and damaged your relationship. The embarrassment of this outcome can be intense. This is not easy for some to get over.

Disappointing LPs: On the flip side, if you've convinced LPs to commit to a deal that ultimately falls through or performs poorly, you may feel you've betrayed their trust and potentially damaged valuable personal relationships.

Either scenario creates significant emotional barriers to trying again. The venture world is small, and reputational concerns loom large. Rather than risk repeated failure, many aspiring syndicate leads simply move on to other pursuits.

4. VCs-Turned-Syndicate Leads: When Good Deal Flow & LP Interest Isn't Enough

VCs who launch syndicates often start with 2 critical advantages: established deal flow and a network of LPs eager to invest alongside them. On paper, these well-connected investors have the perfect foundation for a successful syndicate. Their reputation and previous work grants them access to promising deals, while their existing relationships with limited partners (and maybe social presence) provide a ready pool of capital. 

However, many discover that managing numerous small-check writers creates an administrative burden. Unlike their funds with standardized processes and dedicated back-office support, syndicates require continuous investor communication, individualized reporting, and constant relationship management across dozens or even hundreds/thousands of LPs. For VCs accustomed to dealing with a smaller number of LPs writing six or seven-figure checks, the shift to coordinating $10K-50K investments from numerous individuals becomes unexpectedly time-consuming and operationally complex. Frankly, this can be “annoying” when your smallest LPs consistently have the most requests. 

Funny enough, just this week I met a guy who falls into this category. He has a great portfolio, his own fund, and a very strong personal brand i.e. everything you need to operate a syndicate. He did a bunch of deals successfully but realized the individual LP burden and expectations outweighed the actual syndicate and therefore he stopped running SPVs.

This is likely the case for many qualified syndicate leads where they abandon the model despite their deal-sourcing advantages. When a former Venture Fund investor needs to spend hours answering individual investor questions, providing company updates, chasing wire transfers, or explaining deal mechanics to novice angels, the opportunity cost becomes untenable. The economics simply don't justify the effort—particularly when their attention could be directed toward their primary fund activities. 

5. Insufficient or lack of Dedication

Running a successful syndicate is a significant time commitment that many underestimate. I think lots of (good) folks come in thinking as long as you have good deal flow and a few friends who would invest in your deals the rest will come together itself. Those who approach it as a casual side project rarely build sustainable momentum.

There are several critical activities that syndicate leads that want to be successful must prioritize:

• Securing allocations: Building relationships with founders and other investors requires consistent effort over months or years. This isn't something you can do effectively in spare moments between other commitments. This is really a never ending game of consistently trying to grow your network i.e. deal flow channels with the best people around you.

• Growing and nurturing the LP base: Finding potential LPs, educating them about your investment thesis, handling their questions, and maintaining regular communication demands substantial time and energy. The nurturing piece becomes important over time, but getting off the ground is going to be more of a focus on building and growing your initial LP base to support your earliest deals. 

• Moving quickly when opportunities arise: Startup funding rounds often move at a quick pace, especially for the most competitive, in-demand round. If you're not prepared to drop everything to launch and close an SPV within days, you'll miss opportunities. Lots of times we express urgency in deals we run when we are Last Money In. There is a real reason for it and we need to focus heavily on securing the allocation and meeting sometimes super quick timelines to get in, and on time without losing the allocation.

Many aspiring syndicate leads have demanding full-time jobs that make it difficult to provide the immediate response and attention required. When a hot deal appears, they simply can't react quickly enough to capitalize on the opportunity. This is yet another reason the role can be harder than it looks on paper and deter good syndicate lead from ever running a syndicate. 

6. Frustration with LP Decision-Making

A particularly demoralizing experience for many syndicate leads is discovering the gap between how they evaluate deals and how their LPs make investment decisions.

Syndicate leads often develop thoughtful investment theses based on founder quality, market dynamics, competitive positioning, and other fundamental factors. They expect LPs to value this analysis and trust their judgment or maybe put more decision-making weight on their judgment.

Instead, many LPs primarily look for external validation signals including:

• "Who else is in the round?"

• "Which name-brand VC is leading?"

• "Has the founder previously exited a company?"

• "Are there logos from well-known customers?"

When LPs consistently pass on deals where external validation is limited, regardless of the syndicate lead's conviction, it often creates a high level of frustration. The syndicate lead feels their expertise and judgment are being devalued, reducing their role to merely providing access rather than insight.

This dynamic often leads to disillusionment among thoughtful syndicate leads who hoped to differentiate themselves through superior deal evaluation rather than simply riding on the coattails of well-known investors and/or proven founders.

Note: this is not the case for every syndicate lead obviously, but if you didn’t have a serious track record and brand name (personally or from a previous VC) you will likely fall into this bucket of providing access rather than insight. 

Summary

Being a syndicate lead is hard :) For what it's worth, we still encourage you to try and join us!

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

• Bridge Rounds; A VC’s Dream or Nightmare?

• The Challenges of Relying on Public Comparables for Valuing Your Startup

• Why Revenue ≠ Revenue! How to See Past the Blanket Revenue Multiples Put on Companies

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.

If you enjoyed this post, please share on LinkedIn, X (fka Twitter), Meta and elsewhere. It goes a long way to support us!

Follow the Last Money In authors on LinkedIn

✍️ Written by Zachary and Alex