Angel investors can either invest alone or as part of a syndicate. A syndicate is obviously a team of Angels that invests as a “group”, trying to spread risk and use their multidisciplinary background in order to help early stage businesses.
This type of investment can be seen in two ways
One way is on a deal basis. It is a syndication operating on an ad hoc basis build around a specific opportunity. This form of investing is quite popular in the UK. Normally, in a syndicate someone operates unofficially as the Lead angel, working as a liaison between other angels and the company. Also, the Lead angel is coordinating important processes like the due diligence and final negotiations. This is only done for the convenience of investors. On the final papers, each Angel is a separate investor and responsible for its own investment decision.
Another way is by making a formal syndicate. It is usually the next step after regular deal-by-deal investments for Angels. It is also ideal for fellow investors who are looking to place their money in different deals, while looking for a formal syndicate structure. A formal syndicate can be described as a group of investors with specific representation sharing a fairly structured way of investing, with the use of specific documentation and other important legal assets.
According to EBAN (www.eban.org), Business Angels Syndication is the “gathering of several business angels into an informal consortium for the purpose of creating a critical mass of funds above what each business angel could — or would be prepared to — invest. This term also applies to the pooling of competencies in order to offer more managerial skills than any individual business angel could display”.
Tip: A term more than a century old
Unofficially, the term “Angel investor” and the first Syndicates in modern history appeared at the beginning of 1900, when wealthy people invested in Broadway plays.
If you wish to find out more, check out these links: www.eban.org, https://www.ukbusinessangelsassociation.org.uk/
