Let's say the pre-money valuation of a startup is $4m and they raise $1m. The syndicate would own 20% of the company.

Let's say the company exits for $20m. Let's ignore preferred stock and assume it's all common to make the math easier. The syndicate would get $4m.

The first $1m would be payed back to the entire syndicate. The lead would get an additional 20% of the $3m or $600k. Then the rest of the $2.4m would be split amongst the syndicate.

Read chapter 9 of Venture Deals for more detail.