Much-needed article. Worth adding some color on AngelList syndicate incentives:
Syndicate leads are compensated by earning carried interest on the additional capital that follows them. [1] [2] [3]
Carry creates leverage for syndicate leads. Which is cool because syndicate leads have a bigger stake in a company's success, and often want to help the company more.
This also means a lead may want to invite as many investors as possible in order to get more $ into their syndicate and create more leverage. If left unchecked, this would create conflicts with a founder's interest in privacy.
Part of AngelList's job is to ensure lead behavior doesn't conflict with a founder's interests. Here's some of what we do:
* 80% of syndicate deals in the last 4 months were private (invite-only).
* AngelList has tools to block specific users / competitors from seeing information about a deal.
* Probably the most interesting tidbit: AngelList is undergoing a professionalization of capital. Most syndicate deals have fewer than 20 investors participating, and much of the capital is institutional. These investors are vetted by AngelList and act more like LPs in in a VC fund (for example, most institutional investors on AngelList have signed confidentiality agreements)
If you've got ideas or questions about syndicates, feel free to ask below or email me at kapil@angel.co
-
[1] Some syndicates (both on and off AngelList) do charge 0% carry, but they're uncommon.
[2] Leads earn carry deal-by-deal vs. on a portfolio basis, where gains net out losses. This creates a different set of incentives, but IMO doesn't impact founders much. (http://avc.com/2016/02/fund-level-vs-deal-by-deal-carry/)
[3] Currently no management fees on AngelList.