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Why Syndicates Offer the Best Investment Opportunities in VC for Individual Investors

For decades, venture capital has been the playground of institutions, family offices, and the ultra-wealthy. The high minimum investment requirements—often starting at $1 million—have effectively locked out individual investors (accredited/qualified purchasers) from accessing this asset class that has created immense wealth through companies like Apple, Google, Amazon, and more recently, Airbnb and Uber.

However, the venture capital landscape has evolved (and currently is) significantly in recent years. Today, individual investors have several options to participate in startup investing, including:

• Traditional venture capital funds [typically reserved for the UHNW, well connected, institutions] 

• Online investment platforms [may have adverse selection or focus on more commoditized/widely available offerings]

• Angel investing directly into startups [extremely time consuming and deal flow constrained to own network/effort]

• Equity crowdfunding platforms [typically adverse selection, but not always]

• Venture Capital syndicates 

While each option has merits, syndicates have emerged as the superior vehicle for individual investors seeking venture capital exposure. In this post we’ll explore why syndicates offer the best available combination of access, economics, control, and opportunity.

What Are Venture Capital Syndicates?

Before diving into their advantages, let's clarify what syndicates are. A venture capital syndicate is a group of investors led by a "syndicate lead" who pools capital to invest in startups. The lead typically has expertise in a specific sector, privileged deal flow, and the ability to add value to portfolio companies. In recent years, platforms like Sydecar & AngelList have popularized this model, allowing individuals to back syndicate leads and gain access to their deals with minimum investments often as low as $1,000-$5,000 per deal. They’ve also been incredibly helpful to syndicate leads to be able to run SPVs at scale as almost all back office is now automated by a full service fund administrator. 

Superior Deal Access and Quality

Better Deal Flow Than DIY Investing

In my opinion, when compared to direct angel investing or equity crowdfunding, syndicates provide access to significantly higher quality deals. Here's why:

1. Access to Professional Networks: Syndicate leads are often former founders, operators, or venture capitalists with professional networks. They can access deals that never appear on crowdfunding platforms or reach the vast majority of individual angel investors.

2. Reputation Currency: Top founders prefer investors who bring value beyond capital or they simply get along with the syndicate lead (who is a person not a platform). Established syndicate leads have built reputations that help them access competitive deals that would be impossible for individual investors to source independently. They’ve also built reputations with other venture scouts, venture funds etc. 

3. Competitive Rounds: The most promising startups typically have oversubscribed funding rounds where allocations are limited. Individual investors rarely receive allocations in these rounds, but in some cases, syndicate leads can leverage their relationships to secure space.

To underscore - here is a list of a few companies that I’ve personally seen (and had the opportunity to invest into) over the last few years that we’re directly on the issuers cap table → Anthropic, SpaceX, Anduril, Databricks, Groq, Grok, Varda, Shield AI, Abridge, Revolut, Feastables, Olipop, AngelList, Worldcoin, Shield AI, Carta, Mercury Banking, K2 Space, LMNT and hundreds of others….Syndicates candidly are unmatched in terms of their breadth and quality. It’s worth mentioning that if you want to see many of the best syndicated deals with better terms, you can check out Deal Sheet.

Better Selectivity Than Platforms

Unlike investment platforms that may accept a wide range of startups, syndicates are typically much more selective:

1. Lead's Reputation at Stake: Syndicate leads put their reputation on the line with each deal they present to their backers. This creates an incentive for quality curation that doesn't exist on broader platforms.

2. Skin in the Game: Most syndicate leads invest their own capital alongside syndicate members. This alignment of interests encourages rigorous due diligence and selectivity.

3. The “Need” for Capital: Lots of companies that have trouble raising will utilize an investment platform to help raise capital. While that does not mean it’s a bad company, it definitely weakens any signal.

Economic Advantages

More Favorable Economics Than VC Funds

Traditional venture capital funds typically charge "2 and 20"—a 2% annual management fee on committed capital and 20% carried interest on profits. Syndicates offer more favorable economics:

1. Deal-by-Deal Fees: Rather than paying management fees regardless of fund activity, syndicate investors only pay fees on capital they choose to deploy into specific deals.

2. No Management Fees on Idle Capital: In traditional funds, investors pay management fees on committed capital even when it hasn't been deployed. Syndicates eliminate this "cash drag" by allowing investors to keep their capital until a specific investment opportunity arises. They also require less in management fees and many times no management fees.

3. More Efficient Carry Structure: While syndicate leads do take carried interest (typically 20% like VCs), it's only on deals investors choose to participate in, giving investors greater control over their economic outcomes. 

Unprecedented Control and Flexibility

Perhaps the greatest advantage of syndicates [albeit this may be a disadvantage for unsophisticated participants] is the control they offer individual investors:

1. Deal-by-Deal Discretion: Unlike traditional funds where investors commit capital blindly to all future investments, syndicate backers review each opportunity and decide whether to participate—maintaining complete control over capital allocation.

2. Portfolio Construction Freedom: Investors can build personalized venture portfolios by backing multiple syndicate leads with different sector expertise, investment theses, or geographic focuses. Note: this is a con for LPs who are not active and do 1 deal a year etc.

3. Capital Efficiency: Investors maintain control of their capital until they decide to invest in a specific opportunity, creating more efficient use of funds compared to committed blind pools.

For sophisticated investors, this advantage → deal by deal selection, offers an extremely compelling advantage as all of the constraints of a fund [ownership requirements, stage, industry, geography, access] are eliminated, as syndicates can simply offer the “best” deals the Syndicator finds. 

Syndicates → A Tool to Build A Diversified Portfolio 

The biggest concern we have is poor capital management as every LP essentially takes on the role of fund manager, which is extremely hard to do. This is amplified as higher volume syndicates offer LPs a very large amount of deals to participate in. It can become overwhelming and without a plan, it can actually lead to overinvesting, poor investments or other negative outcomes. So we caution → build diversified portfolios without resorting to the "spray-and-pray" approach. Feel free to review our prior article on LP strategy for our view on Pre-Seed/ Seed stage investing. 

There are similar challenges on the GP side. Because there’s no limit to the number of deals each GP can syndicate, it will similarly lead to a huge variation of quality, making it difficult for LPs to decipher what is a good/bad deal and creating a GP incentive to syndicate more over less given every SPV can theoretically produce a large outcome for the GP. 

Other Challenges and Considerations

While syndicates offer compelling advantages, they aren't without challenges:

1. Lead Quality Variation: Not all syndicate leads are created equal. Some may lack the experience or networks to access truly premium deals.

2. Follow-On Funding Challenges: Some syndicates struggle to maintain pro-rata rights in subsequent funding rounds, potentially leading to dilution. They also may not be able to raise enough capital to put together a follow on investment when they have secured an allocation.

3. Potential Conflicts of Interest: Syndicate leads may sometimes have competing priorities or conflicts that affect deal selection or terms.

Conclusion

When comparing investment options for individual investors seeking venture capital exposure, in my opinion, syndicates emerge as the clear winner. They combine:

• Generally high quality deal access similar to institutional investors

• Aligned economics with minimal to no management fees

• Unprecedented control and flexibility in investment selection on the LP side 

• An avenue to build a diversified portfolio all directly via deals (and not a fund)

For individual investors who want to participate in venture capital's potential upside while maintaining control over their investment decisions, syndicates offer a very compelling combination of advantages, albeit with some their drawbacks. 

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

• VC SPV Trends Data → Q3, 2024

• ❓Do Syndicate leads do the job Full Time?

• The State of SPV Investing: 2025 Outlook

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