How to invest in startups without having a VC fund

Hi! I’m glad you’re here. You’ve made it to issue #78 of VC Demystified🪄.

My name’s Nicole - I’m a Principal at an early stage venture fund, and I know firsthand that VC can often be a black box. Breaking into the industry may feel daunting and resources can seem scarce and inaccessible. I wanted to put together a newsletter to give others the playbook I wish I had when I first started.

Today’s deep dive: A beginner’s guide to how angel syndicates work, how to join one, and why they’ve become the easiest on-ramp into venture investing

^{My personal mission is to open as many doors as possible for other people and this newsletter is just one avenue to do that. As always, I will continue to post VC insights daily for free across my socials. This newsletter may contain paid partnerships or affiliate links.}

Read time: 5 minutes

A beginner’s guide to how angel syndicates work, how to join one, and why they’ve become the easiest on-ramp into venture investing.

Most people think you need millions to invest in startups. You don’t! And that’s where syndicates come in.

The Basics

Venture capital can feel exclusive. Big checks, big firms, long fund cycles.

But over the past decade, angel syndicates have opened the door for anyone, operators, founders, or individuals with some disposable capital, to invest in startups deal by deal.

Think of a syndicate as a crowdfunded VC deal:

• A lead investor finds a startup raising capital.

• They negotiate the deal and open it to others (called backers).

• Dozens or even hundreds of people can invest smaller amounts (like $1K-$10K each).

• The money is pooled into a single investment vehicle, Special Purpose Vehicle (SPV), that appears as one investor on the startup’s cap table.

How Syndicates Work

Here’s the play-by-play of a typical syndicate deal:

1. The Lead Finds a Deal
   The lead investor (usually an angel, operator, or VC scout) identifies a startup they want to back.

2. The Deal Is Shared
   The lead posts the deal on a syndicate platform like AngelList, Allocate, Flow, or Stonks.

3. Backers Opt In
   Syndicate members review the startup, check size, and deal terms and choose whether to invest. There’s no commitment beyond each deal.

4. An SPV Is Created
   The platform forms a Special Purpose Vehicle (SPV), a one-time mini fund that holds the investment. The startup only sees one investor on the cap table, the SPV.

5. Money Flows to the Startup
   When the round closes, funds are wired, the SPV owns equity, and the startup continues building.

6. Exits and Returns
   When the startup exits (via acquisition or IPO), returns flow back into the SPV and are distributed to the backers.

Key terms to know:

• Carry: The lead takes a share of profits (usually 10-20%) if the investment succeeds.

• Minimum check size: Often $1K-$5K per deal.

• Fees: There can be one-time admin fees (2-4% of the investment amount or fixed dollar amount per deal) that are shared among investors. There can also be management fees for the first few years of the investment (2% per year).

Why Syndicates Matter

Syndicates have exploded because they solve problems for both investors and founders.

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