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.
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. Since Inception, we have trained ~300 angels, and many of them decided to sign up as members after.
Alternatively, you can join us for our coffee & chat sessions to find out more.
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. So it is important to ensure that you have competent and good people running the SPV.
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 investors 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 $10K-20K 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 investing in 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.
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 on 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 encourage our syndicate lead angels to put in 10% of the round or S$50K at least.
In most syndicate deals, there are usually 2 main 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, SPV setup etc.), and an ongoing annual fee to pay for the running of the syndicate which includes compliance and corporate actions etc.
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.
AC syndicates are syndicates formed by Angelcentral members with an existing member being the syndicate lead. This syndicate then appoints AngelCentral to provide administrative service to setup and run the SPV on standardized terms and service levels.
You will need to be an AngelCentral member at the point of investment into the SPV. Find out more about AngelCentral membership benefits here.
For AngelCentral syndicates, we can accept funds from accredited investors only. Please refer to MAS Section 4A Chapter 289 of the Securities and Futures Act for the definition of an accredited investor in Singapore.
Typically, the minimum bite size of the syndicates is S$25K or US$20K per angel. This is significantly lower than if you were to invest in the startup directly, which can be anywhere from S$50,000 - $100,000.