So you want to invest in early-stage tech startups? I get it – the world of emerging tech is exciting. I’m highly passionate about investing in it – both financially and through mentorship and support of founders and entrepreneurs. But, what if you either don’t have the deal flow or the capital to invest directly? Or both? If that’s your situation, you can find yourself in the cold when it comes to accessing tech startup investment opportunities. I’m fortunate to have decades of experience and network in the tech entrepreneurship space, which affords me the opportunity to be involved in funding rounds for the next generation of startups who are creating world-changing tech solutions. Not everyone gets the chance to be a part of these types of opportunities, not just in tech, but in all kinds of niche investments. If you’re an investor who is looking for opportunities to engage in funding rounds for startups, there are ways to gain access to these deals, such as syndicates. Here’s more on what syndicates are, why they’re a great option for some investors, and why I just started one for MacDonald Ventures.
What is a syndicate?
Syndicates are single-deal VC led funds that let investors invest deal-by-deal in specific startups. Essentially, they create a temporary alliance between a group of investors so that they can pool resources towards a single investment. Syndicates are led by a “syndicate lead,” an experienced angel investor who has a proven track record of successful investments who serves to source deals, conduct due diligence and secure funding.
Syndicates will typically have different requirements and specialization, as well as minimum investment sizes. While some angel investors form their own syndicates as syndicate leads, you can also find crowdfunded syndicates. An example of these, and one I’m on the board of, is Florida Funders, which is made up of a group of serial entrepreneurs, VCs and experienced angel investors who are focused on funding early-stage tech startups.
The Top 5 Benefits of A Syndicate To Investors?
So, what’s in it for you (the investor)? Why wouldn’t you just pursue direct investment instead? Being part of a syndicate affords investors with more opportunity, access and resources than they would typically have on their own. Here are the top benefits of investing with a syndicate.
1. Increased Access
Syndicate leads are typically major players in their investment space with a higher deal flow than a typical investor may have. For example, my deal flow consists of 300-500 deals per year, and I’ll typically select 10-15 per year, averaging a new deal each month. This is aggressive! Because I have a proven track record in tech and, in particular, healthcare tech, founders of quality solutions reach out to me for early-stage deals. This affords me the opportunity to be more selective on the deals I take – and gives me the volume to open up deals to accredited investors in my network through my syndicate. Seeking out a syndicate run by a syndicate lead whose investment interests mirror yours is a great way to gain access to the kinds of deals you want to be part of.
Unless you’ve founded, run and successfully exited tech startups, or invested in many, many tech startups, it is hard to have developed the experience that will allow you to determine whether a tech solution has what it takes to succeed in a brutal marketplace. That’s where your syndicate lead comes in. Syndicate leads typically have deep experience and resources in the subject matter area they’re investing in – and in the world of investing in early-stage startups. You can learn from their valuable experience without learning those lessons the hard way, which is by losing a lot of money on bad investments. The hard way is highly unpleasant.
3. Due diligence
There’s no sugar-coating it: early-stage companies, founder-led, non traditional companies – they’re a risk. You’re betting on the founder, you’re betting on their idea. It’s not always going to work, and it’s a risk. It’s less of a risk when you have a seasoned syndicate lead evaluating the founders, how their solution compares in the space, analyzing the market, talking to customers. Part of your syndicate lead’s job is to ensure their investors don’t get taken advantage of – so there’s some protection and reassurance to investing in a syndicate that just isn’t there as a direct investor.
4. Less skin in the game
You want to be in – but you may want to be all in. When you’re investing with a syndicate, the minimum investment size varies, it could be anywhere from $1,000 to $10,000 or more (for my syndicate, it’s $25,000). You’ll be writing a much smaller check than you likely would be if you were responsible for coming up with the full investment. That allows you to participate in more deals and spread your interest around across investments you like.
5. Less work for the investor
Investing comes with a lot of mind numbing, time consuming paperwork and bureaucracy. As part of a syndicate, none of that falls on you. Time is money, and the time saved dealing with these administrative tasks is valuable.
How do you find syndicates?
If you’re interested in investing with a syndicate, websites like AngelList and OurCrowd provide the opportunity for accredited investors (usually with a few successful direct investments that are known in their community) to find and participate in syndicates.
What About Startups?
Startups stand to benefit from syndicates as much as investors do. They’re attractive to a founder in part because of the streamlined set up. With everything going through the syndicate lead, they get to essentially outsource fundraising to a single highly skilled individual instead of juggling multiple investors. In their cap table, a syndicate appears as a single investor, as the investment is completed through a vehicle (the syndicate).
Be part of something big.
A syndicate can allow you to be part of something big. It gives you the opportunities, resources and guidance to invest in the next generation of world-changing tech in a scaled way and with the reassurance of a seasoned syndicate lead at the helm. I am highly focused on the Florida tech scene, with an eye towards pre-series A seed companies that are developing solutions to legacy problems. I eat, breathe and live that world. Investors in my syndicate benefit from my tireless approach, extensive experience and expansive network in the tech startup world. Depending on what your investment focus is, a syndicate can help you level up your investment game and be part of the deals that will launch the great companies of the future. If you’re a founder with a revolutionary tech solution, learn more about the MacDonald Ventures Syndicate here.
MacDonald Ventures Syndicate
MacDonald Ventures seeks out and nurtures the next generation of entrepreneurs who are creating the technology that will change our world for the better. More than investors, we embed ourselves at inception, partnering with inventors, challengers, and adventurers to cultivate leaders.
Steve MacDonald launched MacDonald Ventures following $400mm of exits from successful healthcare software companies he founded. Named the 2020 Tampa Bay Tech ‘Community Dedication and Leadership Award’ Winner, a Florida Funders Board Member and Entrepreneur in Residence at the Tampa Bay Wave tech incubator, Steve is a serial entrepreneur and visionary who nurtures, mentors and invests in tech start-ups committed to creating a better world.
Steve created the MacDonald Ventures syndicate to give investors in his personal network access to opportunities in his dealflow and to be a part of Tampa Bay’s emergence as a tech epicenter in the state of Florida. As syndicate lead, Steve will focus on pre-series A tech companies, particularly those who use robotics or AI to provide simple solutions to legacy problems.