AngelCentral is a membership based platform service. Our partners spend a lot of efforts curating and reviewing startups, with the intention to better facilitate our members’ investment processes. In 2018 alone, our Partners have already reviewed ~300 startups, organised 10 pitch days, and featured ~45 different companies to our members. So far, our featured startups have gone to raise ~$6m worth of investment commitments and ~$3.5m worth of actual funding; we expect these numbers to increase further in the coming months.
If you are unsure about joining us yet, we recommend that you check out one of our Angel Investing workshops conducted by our partners. The workshops are meant to give angels or potential angels a holistic framework on portfolio management and angel investment evaluation thoughts and sharings. At the workshops, you will also interact with our team and get a better sense of who we are and why we are doing what we are doing. In 2018, we have trained ~200 angels, and many of them decided to sign up as members after.
We constantly update our blog with new and useful information for angel investors. If you are new to the space, you can consider checking out the following articles and resources:
- After More Than 75 Angel Investments, Here's What I've Learned - Brad Feld
- How much do I need for angel investing? - Huang Shao-Ning
- How should Angels behave? - Lim Der Shing
- How to Be an Angel Investor - Paul Graham
- Should you be an angel investor? - Jason Calacanis
- 2018 YC Investor School Notes: The Why and How of Angel Investing - Sam Altman
- 2018 YC Investor School Notes: How to Be a Good Investor - Aaron Harris
- 6 bad angel investor practices that will sabotage a startup's success - AngelCentral blog
Angel investing is typically the act of investing in an early stage startup, usually in exchange for convertible debt or equity. Angels invest with the expectation that it will bring about a positive Return on Investment (ROI) in the future, which can take as long as up to 5 to 10 years.
However, most angel investors also do it for other reasons, such as the opportunity to be exposed to the latest technology and trends, getting to know brilliant individuals, and having the opportunity to provide mentorship and advice.
Generally, angel investors are accredited high net worth individuals that have sufficient cash to make such investments.
According to Section 4A Chapter 289 of the Securities and Futures Act in Singapore, an accreditor investor means an individual:
- whose net personal assets exceed in value SGD2 million (or its equivalent in foreign currency) or such other amount as the Authority may prescribe in place of the first amount; OR
- whose financial assets (net of any related liabilities) exceed in value $1 million (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount, OR
- whose income in the preceding 12 months is not less than SG300,000 (or its equivalent in foreign currency) or such other amount as the Authority may prescribe in place of the first amount.
Besides investing their money, angel investors typically contribute to the startups in other ways. They can include: providing guidance and mentorship, sharing their networks and contacts, etc.
Angels can expect to hold a position in the startup for a couple of years, cashing out only when the startup exits by either IPO, a trade sale, or if another investor wishes to buy out the shares of pre-existing shareholders.
The profiles of angel investors usually include one of the following: former entrepreneurs that exited their own company and wish to “pay it forward” by investing in and helping the next breed of founders, high-paying professionals working in large companies, or business owners who wish to diversify some of their investment portfolio.
Simply put, a syndicated investment happens when a group of investors pool their funds together into one single fund, often through a Special Purpose Vehicle (SPV), to invest in another entity. There can be syndicates for different types of investments, not just for angel investing.
It is important to note that the Investors of the syndicate are not direct shareholders of the startup but instead, shareholders of the SPV that is created specifically to invest in the entity or in our case, startup. For AngelCentral syndicates, the running of the SPV will be managed by AngelCentral and the directors of the SPV will consist of the syndicate lead and an angelcentral appointed director.
Some of the many benefits of joining a syndicate include:
Smaller bite sizes
A common thing that some experienced angels shared were that they would mentally treat their investment as “gone” after writing the cheque for an investment. While angels have to be accredited and therefore have a certain level of income and assets before they invest, “throwing away” $50,000 or more– typically the average size of an angel investment if he/she were to do it alone, might be a little too much for some to bear – especially for those just starting out! By investing in a syndicate, you can invest as little as $10,000 for some deals.
Rather than having ten different investors separately discuss terms with the founder, conduct due diligence, handle paperwork etc, a syndicate will help investors save precious time and effort to undergo the tedious process of managing an angel investment. This is especially important for those that have just started out and might not have experience in structuring such deals before.
Banded together for strength vis a vis other investors
Imagine you are the sole angel looking to invest in a startup. While you have the cash, you do not have the track record, expertise or experience to negotiate better terms to protect yourself. Basically, you have a lack of bargaining power and (well, even if you do, you might not know what to do with it anyway!). In a syndicate, a collective entity made up of many investors will have a much stronger bargaining power than the average angel to better ensure their rights are sufficiently protected. At AngelCentral, we vet the startups, the lead investor and the syndicate lead and make a best effort to ensure the deal is a good one.
By investing with a quality syndicate lead, you will be on the same boat as someone who is likely to have had years of prior experience and (hopefully!) success. It would be much easier to learn and seek advice from these experienced angels – knowledge that is great to have when considering future deals. Also, by investing in multiple syndicates as compared to just one investment, you would be able to gain a lot more exposure to the ups and downs of the journeys of multiple startups. Essentially, joining multiple syndicates will provide you with a shortcut to your learning as an angel investor.
A key issue with angel investing is the lack of liquidity in the market. Typically, angels, who provide the cheque at the beginning of a startup’s journey, will have to wait years before their returns can ever be realized. However, with a syndicate, it is possible for secondary transfers to take place in a syndicate. This means that if an investor wishes to withdraw his/her funds before the startup exits, it is possible to do so if a willing buyer is found.
Other reasons can include, access to better deal flow, taking on less risk as the investment has already been “vetted” by the syndicate lead, branding purposes (imagine sharing that you invested in 10 different startups with just $100,000 – compared to just one!), etc. Startups tend to prefer syndicated deals too, as it will mean they will not have to manage with multiple angels at once, access to a greater pool of potential business partners and mentors, a less complicated cap table, etc.
The syndicate lead will typically be the individual representing the SPV for all matters of discussion and communication between the startup and syndicate. He/she will also communicate all startup matters with the syndicate investors directly. The syndicate lead will usually be someone that has had prior experience in the space, and should have the following characteristics: 1) Access to capital, 2) Proprietary deal flow, and 3) Good judgment.
While not necessary, the lead investor would also typically be the one that puts in a good amount of money to the syndicate. At AngelCentral we aim for at least 10% if not more.
In any syndicate deal, there are usually only 2 types of fees the investor has to be aware of: the administrative fee, and the carry. For the former, it consists of one-off costs relating to handling the administrative and operational aspects of the investment (e.g. legal, due diligence, etc.), and an ongoing annual fee to pay for the running of the syndicate.
The second type of fee is the carry, short for “carried interest”, which is the share of profits that will be paid to those managing the investment (including the lead investor). The fees typically range from anywhere between 6%-25%, depending on the platform used.
We typically charge the syndicate a one-time 2% setup fee and an annual management fee of either 0.6% of the total invested sum or S$3,000 to be shared proportionately among all participating angels (whichever is higher) per year, paid upfront for 5 years. Additionally, we will typically charge a performance fee of 12%, while exceptions could be made depending on the structure and context of the deal. Please note that If the SPV's life extends beyond 5 years, the annual fees for the following years will be charged to the investors accordingly.
We find this model to be a lot more affordable than the typical fees of investing in a VC fund where it is the usual 2/20 model. (2% annual management fee + a 20% carry).
Illustration of investing in an AngelCentral syndicate:
For example, if you invested $14k and you are entitled to $140k after the exit event takes place after 5 years:
- Total setup fees (one time 2%) = $280
- Total management fee for 5 years (0.6% / year for 5 years) = $420
- Performance fee (12%) = [$140k (total exit amount) - $14k (original capital)] X 12% = $15,120, which will be distributed between AngelCentral and the syndicate lead, depending on their initial agreement
Lastly, please note that you will need to be an AngelCentral member at the point of investment into the SPV. An Angel membership costs $500/year, while a Seraph membership costs $1,200/year. Being an AngelCentral member brings about many benefits which can help to enhance your angel investing experience.
Find out more about AngelCentral membership benefits here.
For AngelCentral managed syndicates, we can accept funds from accredited investors only. According to Section 4A Chapter 289 of the Securities and Futures Act in Singapore, an accreditor investor means an individual:
(A) whose net personal assets exceed in value SGD2 million (or its equivalent in foreign currency) or such other amount as the Authority may prescribe in place of the first amount; OR
(B) whose financial assets (net of any related liabilities) exceed in value $1 million (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount, OR
(C) whose income in the preceding 12 months is not less than SG300,000 (or its equivalent in foreign currency) or such other amount as the Authority may prescribe in place of the first amount.
Typically, the minimum bite size of the deals that AngelCentral offer is between S$14,000 - $20,000. This is significantly lower than if you were to invest in the startup directly, which can be anywhere from S$50,000 - $100,000.
If the syndicate is leading the fundraising round, it will depend on the syndicate lead to discuss the terms with the founder(s). If there is a lead investor in the fundraising round, the syndicate will follow the terms set by the VC / angel who is leading the round.
Deal terms must be made known to the investors before they decide to commit to the syndicate.
Yes, you can. However, please refer to your own country’s laws and regulations that you are able to invest in the syndicate. We will also require you to make a self-declaration that you are an accredited investor.
Yes. Both individuals and private funds can form syndicates with us. However, if your fund has Limited Partners (LPs), please check with your lawyers that the LP agreement allows you to form a syndicate.
During the fundraising process:
- Ring fence the commitments together with the founder
- Negotiate the terms with the founder
- Lead the due diligence process (both legal and business aspects)
- Work with the lawyer to structure investment terms and documents, to execute the investment into the startup
- Work with the lawyer to review and structure the SPV such that management of the SPV is kept to the minimum, and how company level decisions will be made in the event of an exit
- Ideally continue to support the founder to build the business, regardless of pace and growth (think cheerleader!)
- Regular progress meetings, and update the SPV partners (co-investors)
- (Best practice: monthly email updates, which should be shared with co-investors; quarterly face to face meet up to review progress + strategic discussions and reviews)
- Provide relevant contacts to support growth
Next stage fundraising:
- Be the conduit between next lead / VC, founder and the SPV partners
- Always look out for the interest of the SPV partners!
The performance fee of the syndicate lead will be decided on a case by case basis between AngelCentral and you. It will depend on factors such as 1) the number of investors you bring onboard from your own personal networks, 2) amount of responsibility and tasks you have already taken on and are expected to bear as a syndicate lead, and 3) willingness of syndicate investors to participate in the deal with the performance fee you have proposed.
Your startup will have to first pass through our screening process. Some of the areas we look at include:
- Quality of the startup and the deal terms
- Presence of a syndicate lead (not mandatory)
- How much your startup is raising (preferably at least S$300K)
- Number of investors that have expressed their interest to participate in the syndicate