As an emerging fund manager, building a track record is critical to attracting investors and establishing credibility in the industry. However, building a track record can be challenging for new managers who are just starting and may not have a portfolio of successful investments to showcase.
One solution to this challenge is to use syndicates to create a track record. Syndicates are groups of investors who come together to invest in a particular opportunity, usually led by a lead investor or fund manager. By participating in syndicates, emerging fund managers can build their track record by investing alongside experienced investors and leveraging their expertise.
Here are some key benefits of using syndicates to create a track record as an emerging fund manager:
Access to experienced investors: Syndicates are often led by experienced investors with a track record of successful investments. By participating in syndicates, emerging fund managers can learn from these investors and gain insights into the industry.
Diversification: By investing in syndicates, emerging fund managers can gain exposure to a diverse range of investments and industries, which can help to mitigate risk and build a well-rounded portfolio.
Credibility: Participating in successful syndicates can help to establish credibility for emerging fund managers, as they can showcase their participation in successful investments and demonstrate their ability to select high-performing opportunities.
Networking: Syndicates provide opportunities for emerging fund managers to network with other investors and industry professionals, which can help to build relationships and open doors for future investment opportunities.
Lower minimum investment requirements: Syndicates often have lower minimum investment requirements than traditional funds, making it easier for emerging fund managers to participate and gain exposure to high-quality investment opportunities.
Several professional VC funds use AngelList Syndicates as their sole source of deal flow. https://medium.com/angellist-blog/announcing-400m-for-startups-on-angellist-d17193cee9d. These are generally micro VCs, with one or two partners or a small team, with small capital.
E.g., of a few syndicate leads (professional funds leveraging angel.co for syndication):
In conclusion, using syndicates to create a track record is an intelligent strategy for emerging fund managers looking to establish credibility and attract investors. By participating in successful syndicates, emerging fund managers can build a portfolio of successful investments and gain valuable experience and insights from experienced investors in the industry.
Some other essential reference links
There are some key differences between syndication and crowdfunding. https://startupxplore.com/en/blog/differences-crowdfunding-syndicate/
AngelList Press Presentation: https://www.slideshare.net/venturehacks/angellist-press-presentation-oct-12-2015-53827649
To know more about how AngelList SPV works: https://angel.co/spv.
Fund Design - Building for the underserved African market with a gender lens: https://lelapa.co/fund-design-building-for-the-underserved-african-market-with-a-gender-lens/
A Guide to Investing in First-Time Women and Diverse Fund Managers: https://www.gendersmartinvesting.com/first-time-and-gender-diverse-fund-managers
If you have not subscribed, please do subscribe to keep up to date with my musings on the venture ecosystem, impact investing, conscious capitalism, and fund management.