Leading vs Following

Hunter Walk has a good post up on the coming competition among angels with syndicates to get into deals. Hunter observes:

My guess is there are also some angels who were popular when they represented a $25k check but won’t be as sought after if they try to push $300k into a round.

What Hunter is getting at is the difference between leading and following. A lead investor sets the price and terms of the investment, takes a large part of the round, and usually agrees to represent the entire round on the board. Then everyone else gets to pile in behind them and piggyback on all of that work. And the entrepreneur and lead investor allow the followers to do that because either they are likely to help the company in some way or because the company needs more capital than the lead is prepared to invest at this time.

USV is a lead investor. Benchmark is a lead investor. Gotham Gal is a lead investor. I suspect Hunter's Homebrew is a lead investor.

Angel List Syndicates are turning angels who have traditionally been followers into leads. That's a good thing in many ways. The more folks who can lead a round, the better, at least for the entrepreneurs. But, as Hunter points out, it will mean that less of these angels will get into rounds than before because they will all be showing up with a lot more money than before. 

It also means that they will have to learn to lead and lead well. They will have to step up before anyone else does. They will have to negotiate price and terms. They will have to sit on boards. They will have to help get the next round done. Essentially they will have to work. That's why they are getting carry from the syndicate, after all.

And over time we will get to see who is actually good at this and who is not. And I can tell you this. Not everyone is good at this. In fact, very few are. It's hard to be a great lead investor and a completely different thing than being a well sought after angel investor who can get into someone else's deals. Some will turn out to be great at this. Many won't. And only time will tell who is and who isn't.

#VC & Technology

Comments (Archived):

  1. Jorge M. Torres

    The work angels will have to do is the work of being a VC. Which is why Syndicates is game changing for those angels who aspire to move up the capital food chain. Aspirational angels can’t raise a fund without a track record of realizations. They might be able to network into good deals, but checks south of $100k that don’t come with a board seat and other incidents of leadership don’t allow aspirational angels to get attribution when the deals work out. Larger checks syndicated on AngelLIst coupled with the responsibilities and incidents of leadership allow aspirational angels to build a track record of exits but also to tie realizations back to their intimate involvement in helping their founders succeed. This is huge when trying to raise money from LPs, and I think Syndicates is going help a lot of aspirational angels do just that.

    1. Richard

      The question I’ve always had is why do lead investors leave money on the table for co investors if the lead investors don’t need the co investors skills or dollars?

      1. pointsnfigures

        No one can be great at everything. Plus, there are generally going to be succeeding rounds-and you don’t know when they will occur. Financing could get lumpy if a VC is in between funds, or at the end of a fund. It also pays to play nice in the sandbox and diversify risk. I let you in my deal, you let me in yours.

        1. LE

          “diversify risk” – exactly.Diversity is not putting all your eggs into one basket no matter how attractive that basket looks at a point in time. I have things that I do that earn only a fraction of the money that I might earn from another activity. But I still do them in order to not have everything hinged on one particular way of earning income. This is really my version what Bell Research Labs did or more recently what Google did with it’s 20% time (or used to do I’ve heard they don’t do that anymore). Over time I’ve had thinking like this pay off as one activity fell out of favor and another activity that I had some experience with allowed me to move into a new direction.In any case the cliche: “pigs get fat hogs get slaughtered” comes to mind.

      2. ShanaC

        Yesterday answers that. One of the smart things Fred admits yesterday is that they aren’t great and bringing radically new technology to market easily. No one knows everything

      3. fredwilson

        they wouldn’t if they didn’t need/want one of those two things

      4. Jorge M. Torres

        Mark Suster has a good post up that sheds some light on this question.

    2. Matt A. Myers

      great way to build a name / brand for yourself too

    3. William Mougayar

      “The work angels will have to do is the work of being a VC.” Not 100% correct. There can be a VC leading a round, and an AL Syndicate following it, so it depends on each case.The work a Syndicate lead will do is related to doing these pop-up raises within their own network and stepping-up to rub shoulders with the VCs and provide value to the entrepreneurs. In essence, it lets solo angels look like and act like a micro-VC or super-angel.

  2. jason wright

    ankle biters nibbling knee caps?

  3. Elie Seidman

    What do you see as the characteristics of people who are “good at this”?

    1. Matt A. Myers

      holistic thinkers, who are good at understanding a wide range of business models – the more the better, and can quickly see value no matter what angle or form it comes in

      1. Dave Pinsen


        1. Matt A. Myers

          it must have been full of love

          1. Dave Pinsen

            Disqus ought to add a feature where you can block certain commenters so you never see their comments.

          2. ShanaC

            guys… come on

          3. Matt A. Myers


          4. Matt A. Myers

            but then the world would look like a much more optimistic, caring place.. at least my from my view point

          5. Dave Pinsen

            Win-win then.

    2. fredwilson

      people who treat the entrepreneur as their customer instead of the capital they are raising.

  4. William Mougayar

    But there is another option. An AngelList Syndicate doesn’t have to be leading that round. Even at $300K, an angel investor can lead their own AL syndicate which participates in a round led by a VC or other angel.

    1. Abdallah Al-Hakim

      So who leads the syndicate? Is it the angel with most capital upfront?

      1. William Mougayar

        It could be another angel syndicate or a VC from outside AL.

        1. Abdallah Al-Hakim

          Interesting. So you could have an angel syndicate leading other angel syndicate to a deal.

          1. William Mougayar


          2. Abdallah Al-Hakim

            Thanks. I found a good piece today (via Howard Lindzon blog) on Angel List by Fred Destin summarizing some key points about AngelList. You might be like it! http://freddestin.com/2013/

    2. JamesHRH

      I think I am going to form an AL Syndicate and follow Fred into rounds…… 😉

      1. William Mougayar

        That’s a good idea. Fred should form a special AVC-AL Syndicate…open to AVC top commenters and Donors Choose participants 🙂

        1. Drew Meyers


  5. Bruce Warila

    I really like what AngelList is doing with syndicates. However, let’s anticipate the story of syndicates over the next couple years: -lots of buzz-the rise of rockstars-some bad press-some falling stars-more/better analytics -syndicate analysts, bloggers, and newsletters-updated rules and regulations-rinse, cycle, repeat

    1. William Mougayar

      The one thing I’m afraid about is that this might lead to lower quality deals getting done, that wouldn’t pass scrutiny before. Not because of the AL syndicates, but because of the whole system being looser. But that’s the nature of the beast. A lot of good deals will also get done.

      1. Matt A. Myers

        In a sense though this will match the availability of more capital and in part from those who aren’t as qualified to be investing or don’t bring as much additional benefit to the table. It’s then up to the founders/entrepreneurs to vet for who they want or prefer, e.g. more money or higher quality investors

        1. pointsnfigures

          It is a free market. If you have more information than the market you can profit from it. There is a lot of asymmetric information in startup investing. This might make the market more transparent.

    2. JamesHRH

      Tim Ferris is already on this trend.Will he turn out to be a great lead?

  6. Abdallah Al-Hakim

    Did I sense a bit of frustration in your post about those who think being a lead investor is easy! The one line “Essentially they will have to work” was revealing!

  7. John Revay

    “That’s why they are getting carry from the syndicate, after all”Carry as in the sense of a say a 20% carry?

    1. fredwilson

      yup. but angel list takes a piece of it

  8. BillMcNeely

    I have heard Jason Calcanis (SP) refer to the party round where nobody is in charge and nobody has an real expertise to help the entrepreneur. And maybe this is part of the activity associated withMark Suster’s call over the last 2 years. Do you think these syndicates are a way to let the air out of that bubble?

  9. edzimmerman

    The point of giving a small slice to “value add” angels has always been to create an incentive for them to help the company. That incentive was their personal capital. When the capital isn’t all their own, the incentive changes slightly, as do the types of worries the angels have about one or more of their companies doing poorly. One of the nice things about being an angel is that when we fail, we generally do so privately (unless we want to talk about it). It is liberating to not have to worry about your track record or fiduciary obligations to those who have handed you capital. That also enables us to have a different conversation with the founders we back — if people are judging your performance and there’s also potential liability, you have to handle outcomes very differently.We also saw this dynamic over a decade ago, when early stage funds (this predated the super seed fund phenomenon) became able to raise much larger funds. A fund that used to do seed or early investing started limiting their new investments to much larger slugs in companies with revenue. They found that (1) analyzing those companies was different, (2) the deal process differed, (3) the syndicate partners who used to source them deal flow and share diligence with them were no longer relating to them the same way, (4) they often had to go in solo as opposed to building syndicates, (5) the pro rata and its importance in the next round were also very different and (6) the help those companies needed was different. This is now happening to some of the super angel funds that have raised much larger pools of capital as well. Some funds performed well despite the new tasks, frameworks and competitors they faced. Others were fish out of water.The question will be the same with these angels: will you perform well in this revised context? Part of that depends on their understanding of how the revised context will change the reason they angel invested in the first place (both specifically as to the specific company they’ve selected and more generally as to why they invest as angels at all).Getting a carry (even without the management fee) can be a powerful incentive but if the angel has concluded that the likelihood of a carry is almost zero, it will be easy to walk away. All I’m saying is that raising the initial money will be way easier for the angels than managing the investment for co-investors (esp. those you don’t even know) for many years to come…

    1. William Mougayar

      But you don’t have to join a syndicate to continue investing the way it is now. I think the reality will be a mix of different vehicles.Joining a Syndicate is one option, going solo is another option. I think the Syndicates will appeal to those angels that want to play a bit more upstream, kind of between a solo angel and a VC firm.The way I see it, a syndicate can make an ambitious angel look like a super angel.

  10. JimHirshfield

    Seems to me these syndicates formalize what’s always been: an angel brings all his rich pals into a deal. This doesn’t (yet) open it up to all.I also think the reputations of the angels helps propel the company forward, perhaps receiving more press and traction than competing companies with better products.

    1. Matt A. Myers

      Trust factor too for future investors, re: unknown name vs. known

      1. JimHirshfield

        Yes. But a lot of this is self fulfilling. Is hot shot angel in it because it’s a hot deal? Or is it a hot deal because hot shot angel is in it?

        1. JamesHRH

          Carry is the key.Tim Ferriss is pimping his venture track record hard and not talking much about the carry he will get of other people’s money.Not that I blame him.

          1. Matt A. Myers

            the other part is if tim ferriss’ investments mere mainly available to him and not others because of his name/reach, and not because he made better choices than otherswhat happens when he starts to be associated with dozens or hundreads of investments?

          2. JimHirshfield

            Track record?Or is it that he’s always been a great self promoter and sales person that’s endeared himself to the tech angel elite?

          3. JamesHRH

            Couldn’t agree with you more.He is a master at the shortest path to the highest profile payout.What he knows about leading deals has to amount to zilch – he has never done one.

        2. ShanaC

          that is also true of vc

          1. JimHirshfield


    2. Aaron Klein

      I agree with that but I think it’s more than that, too.It’s creating an operating system for running a micro VC fund on the side.The question – which Fred rightly asks – is how good are you at the stuff that the operating system can’t handle?

      1. Abdallah Al-Hakim

        That is what divides average VCs from the good ones and the same will apply to angels as well

      2. JimHirshfield

        Right. Your comment is a correct elaboration of what I meant when I said “formalize”.

  11. pointsnfigures

    It is really hard work to lead a deal. It also comes with more risk. It’s really easy to follow and let everyone do the hard work for you. It reminds me of the trading pit. Saw so many guys follow the herd. Eventually, sheep get slaughtered.It’s hard work to invest, if you are going to invest successfully. At Fred’s party I was talking with Gotham Gal about this. It surprises me how many angels and funds that I know that don’t understand how to invest. They sit on the board as judge and jury, but they don’t think out of the box, create connections or customers.It’s too early to tell what will happen with all this. I was a fan of the JOBS Act in principle, but don’t like the sausage they made. Prior to it being passed, I felt that the entire thing would become Bayesian. The name investors will have a much easier time of raising a syndicate than the no names. If XXX syndicate invests, everyone else would want to invest.Fact is, the probability of any one deal being more successful than another deal at the very beginning is basically the same-adjusting for some extraneous factors. That’s why it’s important to be disciplined, have a general thesis and to stick with your principles.

    1. Matt A. Myers

      the smart leaders will have a strong investment thesis, find those founders/startups, and put money in in a fair way – and if that money the startup needs for their runway is more than that person has + to dilute risk, they’ll include their friends who have money to invest. it’s pretty much identical to how VCs function, just with smaller amounts of money – and where if $500k is needed, then a lead maybe puts $100k or $200k (or less) and then get the rest in $10-$25k+ amounts from others.this kind of management isn’t where the VCs putting bigger amounts of money work, because that’s not an efficient use of time, and the tasks required are different for a company at a stage of getting millions.

    2. fredwilson

      and diversify your risk

  12. edzimmerman

    Agreed. But will they be good and helpful investors and will they lose some of their deal flow as they need larger slices?

  13. Matt A. Myers

    I can see certain personalities really loving to leading syndicates. I would do it if I didn’t have my own grand plans.

  14. paulsethi

    As is the case with some PE “shops” structured this way (individual investment vehicles), I do not like the fact that Syndicate “Lead” can keep 100% of his/her carry in Investment 1, yet when Investment 2 blows up, s/he is not penalized. Even in the exceptional cases, quality Lead Investors end up being wrong “once in a while”, but LPs benefit from the portfolio approach/participation – which does not play out here. (And in this case, while lesser issue, the Syndicate Participants may not have even had the opportunity to invest in each of this particular Syndicate Lead’s deals.)

  15. Daniël W. Crompton (webhat)

    Since AngelList started with Syndicates I’ve seen far more mails come in from the newsletters I subscribe to begging me to join their syndicate. On the first day it was annoyed when I received the tenth, but now everybody has jumped on the bandwagon it has slowed to a trickle.

  16. WA

    My bailiwick is not exactly the financial construction part of the many great posts here. Today’s title, when it arrived in my email this morning launched another thought process before opening it. That process stays with me after reading it as well. Its a behavioral comment and of more relevance to the of the enterprise’s owner, management, employees. But it seemed to just translate for me so here it is:To be a great leader, one may be found to be supported by what we call Courageus follwers in OB land. I wonder if the performance motivation we find in many “seasoned followers” is where it is supposed to be when consistent track records of success as a follower are evident. In other words sometimes the performance of that courage is best maximized in the position it has proven itself. Just a thought…not a blanket statement and of course how would we have new leaders evolving if the best of followers do not eventually become prove themselves even better in the pole position.. Happy Sunday.

  17. GlennKelman

    Great post Fred! Old-fashioned question: how can an investor lead without reserving capital for follow-on investments, through sunny and rainy days? You can’t convince a new entrepreneur that even the most successful companies have rainy days. Redfin wouldn’t have thrived — it wouldn’t exist at all right now — without a strong show of support from Madrona that it would continue to support the company. This isn’t just a matter of avoiding false signaling from angels who never intended to participate in future rounds; leadership is much stronger support than that.Too many investors are now in for a dime but not for a dollar.

    1. ShanaC

      Is an angellist syndicate meant to do that?

    2. fredwilson

      there is a mechanism for syndicates to do follow-ons, but this is one of the things we are going to have to wait and see to know if this model will work

  18. JLM

    .”Never get mad at the money, it will change its shape and mind.”One of the phenomenon that is developing is the “professionalizing” of the Angel Investor, so much so that the continuum of investment arguably looks like:1. Bootstrapping — entrepreneur’s own money;2. Friends and family — maybe more than once;3. Angels — high net worth individuals, “plungers”;4. Angels II — syndicates of angels who are infinitely more professional in underwriting, deal structure and conduct;5. VC funded rounds A/B/C/D;6. Monetization of all kinds.These new Angel Investor syndicates or groups are pooling money and creating a bit of professional due diligence infrastructure and corporate governance and therefore making larger investments.This is a classic example of money changing its shape and those who see this phenomenon for what it is will be able to work effectively with this newly formed and shaped money.JLM.

    1. William Mougayar

      #4 was like the Super-angels or Micro-VCs. I think that group will thrive on AL, and a bunch of #3’s will be able to move-up to #4.

    2. JamesHRH

      Where is that quote from? Classic.

      1. JLM

        .That quote is from JLM and you knew that.Stay well and stay sharp.JLM.

        1. LE

          Sounds like it was adapted from some kind of reference to a man’s _____ .

        2. JamesHRH

          I was logistically pre-empted from the AVC get together in NYC – did you make it?

          1. JLM

            .No, unfortunately, I was in Highlands, NC for a wedding.It is a special place and I love it.JLM.

          2. karen_e

            I was logistically preempted as well, James. My husband said to me on Monday, “Morose does not look good on you.” I was morose.

          3. JLM

            .Good one, husband. Giv e him a well played.JLM.

    3. LE

      Would seem that there is an opening for consultants that can help potential newbie angel investors navigate and understand how they can get in “the game”. [1] Or perhaps a new financial arrangement or instrument similar to REIT’s with real estate.[1] Which I think is a bad idea on a small scale as is commonly thought by everyone and his uncle that wants to gamble away money.

    4. ShanaC

      too many steps, and it means more headaches for the entrpenuers

      1. JLM

        .”too many steps”There’s that Millenium sense of entitlement shining through. Nobody owes you anything. You have to go get it, cher.Raising money is supposed to be hard. It is a test.JLM.

        1. Richard Carlow

          In some ways the more steps makes it easier. Each one prepares you better for the next. And hopefully a one can skip through a few 😉

          1. ShanaC

            that would be luck, but if that is not the regular case then you are going to see more time spent fundraising and not businessing.

          2. Richard Carlow

            I don’t see raising money and “businessing” as at odds or competing for my time. Luck has nothing to do with it.

          3. JLM

            .Raising money is as mechanical as assembling an Ikea table.Make sure you have all the parts.Read the damn instructions.Make damn sure you have the right tools.Assemble it all loosely and then tighten it up.JLM.

          4. Richard Carlow

            You need all of the above anyway, right?Even if you don’t need to look for outside money.

        2. ShanaC

          it is really not about entitlement – it is about building companies. Fundraising is a distraction, and breaking it out into more pieces means more distractions

          1. JLM

            .”Fundraising is a distraction…” like breathing and eating are distractions, cher.JLM.

    5. Kasi Viswanathan Agilandam

      I look at money as “The Mask” … it basically brings OUT the person behind it. It is just a catalyst of what the actions is….

      1. JLM

        .Very insightful. Well played.JLM.

  19. JLM

    .Leadership is as important as the money itself.One important consideration as to fiduciary implications is that a Boardmember owes her duty to ALL shareholders and not just those who are in her tranche of funding.This is an important consideration and one which is violated with such frequency as speeding on the Interstate.The conflicts, which are very real, are going to be the source of incredible legal liability in the years ahead as investors routinely make statements as to where their loyalties lie which are inconsistent with the plain spoken and obvious implications of the law.JLM.

    1. fredwilson

      “violated with such frequency as speeding”such a great line JLMi have found myself in many instances where i had to do the right thing by the company or the bank and against my own interests. its that first time that you think twice. once you do the right thing once, you tend to do the right thing every time after that.

  20. Andrew

    After I saw all this syndication talk ramping up other day I tweeted…”Judge angels not by who they invested in, but who they missed or passed on. This will tell u if they’re fwd thinking leaders or just sheep.”I see everyone saying “this [AL syndication] changes everything” I say, this blurs everything.I really hope this doesn’t mean more people will put “investor in….” under their twitter bio. I really hate that.

    1. JamesHRH

      Anytime any tells you that ‘this changes everything, they have a 0.01% chance of being right. That is how often something changes everything.

    2. ShanaC

      you could pass for other reasons

  21. JamesHRH

    Experience talking.

  22. kirklove

    Hunter strikes me as a younger, better looking version of you, Buster. 😉 Long way to go though to obtain #pimp and #punk status.

    1. LE

      Let’s see if Hunter still has his hair when he gets to Fred’s age. I want Fred’s hair.

    2. fredwilson

      Yeah, he’s doing a lot of things the way I would do them. But he’s got real world experience building and shipping product which I don’t have and that’s really valuable

      1. William Mougayar

        It’s not too late Fred. You could become an operating Chairman or executive at AngelList, and accelerate further the changes in this industry. I can’t think of a better startup for you 🙂

  23. LE

    It also means that they will have to learn to lead and lead well. They will have to step up before anyone else does. They will have to negotiate price and terms. They will have to sit on boards. They will have to help get the next round done. Essentially they will have to work. That’s why they are getting carry from the syndicate, after all.My guess, human nature wise, is that the overwhelming majority won’t they will just satisfice. In the same way that a real estate salesman tells you they will work hard to get you the best price for your property, but in the end they all pretty much fall into the same trap of wanting to wrap things up and move on to the next exciting opportunity. Given that this particular “crew” has age short attention spans I would think that is going to be even more the case here. Everybody talks a good game at the start. A new broom sweeps clean. Etc. Etc.

  24. Doit

    Here is the big deal with all of this, in 5-15y if this could become mainstream and really used by the general population and take let’s sa 5-10% of the 5b + annual gambling that people spend in Vegas, (and people realize it is exactly that, gambling)That would mean hundreds of millions of dollars put into startups, which sure 99% will fail but at least people work hard, try ideas, fail learn and net net most def will be positive for the society, instead of going into casino lords pockets.

    1. fredwilson

      great way to think about it.

  25. LIAD

    What does it for me is that out of nowhere, with their 5% carry on all syndicated investments, naval and co and managed to manoeuvre themselves into owning a piece of all/most tech startups over the near/medium term.Running a marketplace and becoming an integral part of the transaction is such a great place to be.

    1. LE

      managed to manoeuvre themselves into owning a piece of all/most tech startupsNot all. They will own a piece perhaps of the freshly hatched newly minted kids that haven’t been around because of this thing getting dropped into their head while impressionable. [1][2] So some kid who is 18 and starts to look at this stuff will not know the history and will think it’s the real deal. Or some 26 year old or 40 year old who hasn’t been following the scene and doesn’t know one player from another.[1] And they believe all that “we are different we aren’t the man and here’s why”.[2] Ironic given that Fred talking about it will give it legitimacy and add fuel. Old school, one of the reasons IBM never talked about the competition or acknowledged it as the legend goes. I’m always surprised when I know nothing about something and I ask a salesman “so who is your competition” and he responds by giving me the other people I should also talk to. [3] Thanks for being so honest and helpful![3] Not as relevant now with all the information transparency but this worked very well prior to the internet.

    2. Daniël W. Crompton (webhat)

      5% carry? The first post I saw from Tim Ferris on syndication it was 20% carry.http://www.fourhourworkweek

      1. LIAD

        syndicate lead gets 20%. AngelList get 25% of it/ i.e. 5% gross

        1. Daniël W. Crompton (webhat)

          Getting my numbers confused, thanks for the clarification.

    3. ShanaC

      highly smart men. easy way to get either a diversified or not diversified portfolio

    4. fredwilson


  26. Semil Shah

    Very few people truly lead in these types of deals. At the early-stage, we will see how much it matters as the culture for the past few years has been to get a party on board. AL Syndicates just helps certain people in that party, but I do expect things to expand from here. Also, not much has been discussed around the math for Super Angels like Jason and what AngelList takes for each brokerage: http://blog.semilshah.com/2

  27. sethberman

    The benefit of syndicates to startups seems clear: if you can get one angel to do a syndicate, you no longer have to use that name to find the other $100-$500K yourself. Angels like Tim Ferris have the ability to get people to write checks in hours vs. the months it takes startups, but Fred’s point is a good one: Is Tim Ferris (or fill in the celebrity angel of your choice) really going to do the work required by a lead investor? And even if he does, will he (or your favorite celebrity angel) be any good at it? As Fred seems to suggest, it’s worth considering if unproven lead investors, celebrity or not, introduce additional risk to angel investing, which already expects a 70% failure rate. I guess we’ll have to check back in 5-10 years to find out.

    1. LE

      celebrity or notWith respect to celebrity, and a point I made before regarding “hero worship”, a young entrepreneur should test by giving said “celebrity’s” credentials to a typical successful business person not involved in the startup scene and seeing if he would think the entrepreneur was making a mistake and putting to much halo around the celebrity. Bottom line is to make sure you aren’t getting conned by the halo.you no longer have to use that name to find the other $100-$500K yourself.I could argue that the effort and pain of having to do that separates the men from the boys or the women from the girls. Same way immigrants who came to this country actually had to get on a boat and come here. It took effort and we ended up with immigrants who weren’t lazy and were willing to put in effort for what they wanted. Or people who get into top schools (not by connections but by working hard). Stuff like that does matter. They don’t require business plans anymore (for this type of things I mean they don’t even require a way to make money.) But it used to be that someone couldn’t even think about getting money w/o one. Now all you need is a http://launchrock.co/ page.Starting a company and getting money shouldn’t be more in the direction of just taping an ATM machine.Imagine if I wanted to build an office tower like JLM in Austin and was just able to come up with an idea, assemble a “team” hit the ATM and poof I’m on my way.Friction can be an important part of the process.

  28. reece

    as i said on Hunter’s blog:”it sounds great at the outset, but i have a feeling the ramifications of this will be a widened funnel of funded startups, without the respective growth in Series A investors”

    1. reece

      good investors are good investors and whether they’re angels or VC’s, good entrepreneurs will want them on their side

      1. William Mougayar

        Great point. Good investors add real value, and entrepreneurs see that, right away.

      2. reece

        also, theoretically, we’re talking about founders who want to build huge, world-changing businesses (otherwise, why raise money?)…if they’re going to change the world, it takes capital… need to make sure your investors have extra to support you over timeagain, good investors will…

        1. ShanaC

          because there is no bank debt to take anymore

  29. dave

    I hope this works because the leading VCs (the ones who lead investments) always have blind spots, and tend to hunt in herds. They find a groove that works, and tune out everything else.This new system may allow users to find and fund products that aren’t on the VC roadmap.Having been around the cycle a few times, I’ve found that the leading VCs almost never see around the corner to the new markets that are developing.

    1. fredwilson

      yup. so true dave. that is what i’ve observed as well. and why i may be irrelevant in five or ten years.

      1. dave

        Hard to imagine. More likely imho it will pull your business in a new direction, much as the advent of blogging influenced the news business. Or it might not make a difference at all. From my point of view I hope we’ll have investors who are actually willing to invest.

  30. Capitalistic

    Why is it difficult being a lead investor? In my opinion, I would think seed investing is more qualitative than quantitative? “The founders think I’m cool and we get along.”, that kind of feeling?I’ve seen a lot of founders reject an investor because of their arrogance, impatience or propensity to micromanage.

    1. fredwilson

      the hard part is after you make the investment

  31. jasoncalacanis

    Deep wisdom.Thank you Fred.I’m super excited to learn to be a lead investor, and I’m humbled by the 118 backers who have committed $615,000 per deal who have trusted me to make the call.I’m certain there will be many, many failures, but I’m in this for the long-term. Inside.com is my last startup, and after that it’s investing for me. So, this is accelerating my plan by a couple of years.Note: signup for my inside.com beta at http://www.inside.com (never stop selling!)

  32. garyvaynerchuk

    i 100% agree with these $0.03

    1. Matt A. Myers

      what’s your preference? do you ever lead?

  33. jasoncalacanis

    Update: Dave Morin just hit $750,000 per deal, and Kevin and I are at $600k or so.I’m not sure if these numbers will actually be hit in practice, but it’s clear that the top couple of syndicators will hit $1m, which clearly means leading or co-leading rounds.Really exciting…..

    1. tyronerubin

      Congrats! Had a feeling you would make an AVC appearance on this post.

  34. Scott Barnett

    I think it’s great that we get to try a few new models and see what works and what doesn’t. Think of AngelList Syndicates as a Lean Startup. Yes, failure in their model will have unintended consequences for startups that leverage this avenue, but isn’t that true of failed startups and their customers? Something new and interesting will come of this – some good, some bad. At the end of the day, it’s worth going down this road.I don’t mind Jason C’s take on this – like any entrepreneur, he thinks he’s got a great way to do something new and different, and he’ll “crush” the competition. Time will tell…

    1. fredwilson


  35. kevrmoore

    “That’s why they are getting carry from the syndicate, after all.”That’s how it works in your business. You are a professional who does this as a daily job. Many of these large syndicate leads ARE NOT investment professionals and have other day jobs. Sure, they are well connected and many have had some nice exits. But, they don’t show all of their bombs on their profiles either. As you allude, most of these syndicators are not qualified to lead investments.Also, how does a syndicate lead who is not an investment professional and has another day job justify a 20% all-in carry? It’s essentially a finders fee.And, I am even more interested, Fred, in your thoughts on what happens 3-5 years down the road when 95% of the syndicates have lost money? Retail money (albeit accredited), not big boy institutional money, like yours. I predict a tumultuous path for the democratization of venture capital.

    1. fredwilson

      the money will move to the 5% who have made moneyat least with the transparency that angel list is building into this we will know who those people are

      1. kevrmoore

        Yes. And, I also think that there will be major media, and probably regulatory, blowback once the 70/80/90% loss rate on investments in this new retail channel manifests. There will be blood.

  36. doit

    Longterm this could really become incredibly disruptive for consumer products and services.What if kickstarter and Angelist would merge, example: I saw the soil iq presentation (big data play for gardners and farmers, app + hardware) at TCdisrupt and asked my father who has been gardner for 10y+, he loved it and would buy it but he also said if possible he would invest very small amount. So marrying the positive aspects of MLM,kickstarter+ Angelist: your consumer of the product becomes shareholder via LP model of angelist and also evangelist as he has incentives to spread the idea.So eventually categories will emerge on angelist with dif domains in which lead investors have comp adv vs others and services can be built on top to cater to consumers in each domain. ” Hey you are a gardener, would you use this product, help us launch it btw you can become shareholder of the company” . Wholy cow this will change the game, sure it takes 10y like any other huge disruption, and btw naval & co will become billionaires with 5% in every lottery ticket that eventually will hit a couple of jackpots each decade. well played sir

  37. Bob Troia

    What happens if someone belongs to two different AngelList syndicates that are both interested in backing the same company? Assuming the investor doesn’t want to “double down”, would it be better etiquette to split their investment between the 2 funds (thus reducing their commitment to each fund), or pick one over the other?

  38. LE

    I’m guessing a lot of angels looking to lead underestimate the amount of work involved inThat’s an important trait of human nature.People with experience have been burned (or have seen others burned) and unfortunately lack the naive optimism to take chances.It ends up being bad for the naive personally (if they fail which they will most of the time) but good for others and society who benefit from the funnel. Similarly if you didn’t have all those musicians fooling themselves into thinking they could be Springsteen or Madonna (hey it worked for Lady Gaga though that’s one success) or high school football players thinking they could make it in the NFL (etc etc etc many other examples) you’d never be able to field a team. Or we wouldn’t have any music to listen to!Look at all the kids who are doing this shit based on what Mark Zuckerberg has done. Talk of things like “should I go to Harvard or should I just go through Y Combinator”?As Fake Grimlock would say “IT HILLARIOUS”.

  39. William Mougayar

    Read Jason Calacanis’ take on this. It will make you feel even younger…Maybe some hair will grow on your head too :)https://www.linkedin.com/to…

  40. ShanaC

    you know your limits

  41. LE

    A really good point. Music and sports probably take hold at a younger age and more organically than the current crop of zuckapreneurs business dreamers. By that I mean people who never thought of business prior to seeing some of the large fish that others have caught. [1]And music and sports provide a pleasure that holds it’s own even if you don’t have success I would imagine.[1] Now happening with VC’s, angels which is part of the point of this post. Fred started in the 80’s and put his time in.

  42. andyidsinga

    interesting .. btw, I was just yakking at FG and cdixon on twitter about too much under-confidence. need more naive optimism imho.

  43. ShanaC

    do both.

  44. William Mougayar

    I hear you 🙂

  45. GlennKelman

    You can’t expect someone to follow you over a cliff, but it’s reasonable to ask for support through some ups and downs.

  46. Matt A. Myers

    when you only have $xxk in vs. $xxxk or more in, you’re less likely to keep putting in money

  47. fredwilson

    angel list is going to make all the data on this public. that’s one of the great things about this.