Venture Financing:

Business Angels

Business Angel Syndicates

The last few years have seen a dramatic increase in the number of business angels who are investing as part of an investment syndicate, an approach that allows them to collectively make larger and more frequent investments. More experienced investors tend to prefer such co-investment groups. These are large groups of angels, sometimes with as many as 100 members, that operate through forums. There are today about 30-40 of these alliances around the U.S. and more are forming.

They usually meet regularly, and deal origination and outside access to the group is typically through one or more of its members. To retain members' anonymity, many of these syndicates (also called angel alliances) establish a storefront (or facade) for the general public.

Angel syndicates offer investors clear advantages:

• Pooling money to invest in larger deals otherwise out of reach

• Diversification across multiple investments
• Leveraging and sharing of network contacts and investment expertise (such as screening, due diligence, valuation, and monitoring)
• The ability to add more investments to an existing portfolio

• The ability to add further follow-on rounds to existing investments.

However, these syndicates also incur certain running costs and may not be appropriate for those investors who wish to have a large say and active involvement in their investments.

Venture Financing: Key Documentation To Be Prepared By the Entrepreneur