Ask HN: Help me understand investment syndicates? On angel.co/syndicates, there are many syndicates, and they have 4 numbers each: 1. "Syndicate Backing" Is this the amount of backing available per startup, or per all startups in a year? 2. "Typical Investments" What do these numbers mean exactly? 3. "Deals Last 12 Months" I'm assuming this means startups funded in last 12 months? It's very confusing. |
The use of 'deals' is the tipoff. Professional investors, unlike the retail investors that have retirement funds and stocks and bonds and such, do deals. They have deal flows. Each deal flow has a velocity and volume that requires sufficient liquidity and tolerance for risk. Syndicates with high volume high velocity deal flows are suitable from some investors and not others. Syndicates with lower volume and less risk attract a different market segment of investors. Unless you have a pile of cash to invest, this stuff does not mean much.
For example, Company A in tech segment I looks at syndicate W and sees investment in companies B and C in segment I and D and E in related segments H and J. They look at Syndicate X and see one investment in segment K. They look at Syndicate Y and see no investments in I, J, or K.
Which one is worth focusing on? There's no way for company A to tell from the data. W may be looking to diversify. X may be happy with having one investment in the larger segment that is the union of H,I,J. Y may be looking to get into H,I,J or not.
Unlike Company A, a qualified investor can simply ask each syndicate about its strategy and see how it matches their goals. Moreover they can look at Syndicate W and decide whether or not it is overexposed.