Why I’m Switching Over to @AngelList Syndicates

AList

As hinted in the previous post, I’m changing tactics, even though I haven’t changed startup investing philosophy.  I’m cutting down the pace of individual company investments at least by half and probably more, even though I’m increasing the overall total of the investments (courtesy of @Crashlytics and Twitter). The difference: I’m farming out the work.

Time Frame           Angel Companies/% Money        Commingled Funds/% Money

Last 4 years                      55 deals/85%                         3 funds (80 positions)/15%

Next few years                  5 a year/ 25%                         9-10 funds/75%

Yesterday I recommitted to two funds I’ve backed in the past: TechStars Boston 2014-2017, and Project 11 Fund II. So that’s an East Coast presence, along with almost all of my current angel investments. And I’ve committed to Angel List syndicates over on the other Coast with @naval, @kevinrose, FG Angels (Foundry Group), Salil Deshpande of Bain Capital Ventures,  Thomas Korte of AngelPad, Elad Gil, and as a wild card since I love his blog and he is getting deeply wired in, Semil Shah. And I’ve got requests into two other syndicates.

For those looking at syndicates in Boston, I’d like to recommend one just starting up from Semyon Dukach. I’ve got a ton of overlap with his investments (we counted 4 companies we’ve co-invested in that start with “C”), so we share the same taste in companies, but unlike me, he works his ass off with them. He’s also charging 0% for his personal carry–5% goes to AngelList for all of the admin. So it doesn’t get better than that for people looking to ride some intelligent, experienced and successful coattails.

From around a deal every 3 weeks for the last 4 years to probably a half dozen direct and the rest indirect. Now THAT is a big change of behavior, but it makes sense to me.

There are three reasons why I’m happy to pay the carry, even though I only invest my liquid money in no-load, minimum fee index funds from Vanguard and am otherwise cheap enough to still take soap from hotel rooms:

  1. I’m working again full-time in a startup and don’t have the time to for doing any meaningful diligence, but instead can only rely on instinct;
  2. I’m going more passive in my investments, and not add much sweat value, (although I’m always good to make an intro or give a response to a pitch deck or new demo); since there will be little value added by participation, any edge I bring is reduced, lowering expected value in those “non-party round” investments where now I will be MIA; and
  3. AngelList syndicates have solved how to best access the market without my involvement. as well as put together a coherent strategy via who I back and how much.

As I think this out on the fly (don’t have the luxury of time to spend time editing this stuff), I see a few posts I should lay out, before I go back to another 4 months of blog hibernation.

Why Syndication from AngelList is going to change the VC world forever 

My WishList for Naval and Nivi–My suggestions on improving AL Syndicates, and How to take on and win the institutional investing game. A few spoilers–make my life easier by registering as a b/d, so I don’t have to wire money everytime. Simple logins.  (Opt-out, not positive action to wire in). Investible Indices/themes. Verifiable Performance #s. And a capped amount “I’m in the next deals at $x a shot until I reach $XXXX” so I know exactly the top side of my commitments without having to monitor. Who actually knows the pace these syndicates will actually be cranking out at? But overall, nice dashboards, great execution to date.

Why I am Trying to Recruit New Baby VCs (yes, that’s you Wayne, Jeff, Jennifer, and Bowei), all great entrepreneurs, and why they should syndicate (I’ll commit on the spot!) and bring more investing dollars to follow their passions.

Maximizing my Signal to Noise both Inbound and Outbound, for more impact and more free time

How Life as an Endowment Trustee Changes My Thinking as an Angel  I’ve been a few times on the other side of the fence as a trustee picking asset managers, and how you have to think about blending a team that’s stronger than the individual parts. Harry Markowitz theory and all that.

One stray thought before I sign off: there are 3 probably good reasons to be an angel investor–1) making money; 2) having fun; and 3) giving back and finding meaning.  All are valid, and all 3 can possibly be done simultaneously. For me #1 goes without saying–investing is pure cold logic–but as I get sucked in deeper into my own startup, I find that what I can offer my portfolio companies is probably limited to a good data dump at the start of the relationship, and maybe once a year thereafter at best. Other than that, I’m just noise. As for Fun–well, however much fun angel investing is, it doesn’t come close to the fun of running a company. As Mark Suster says, if you can still shoot the three, you don’t retire to coach. So I’m more intent on focusing on doing, not the coaching/investing. As for #3–that sort of is a constant in your life that you can do with or without putting bucks up. But it’s natural I’ll have less time for the community, for this blog, for all the related activities that aren’t directly tied to BuysideFX. I expect to be back investing with a vengeance in a few years, either with a lot more cash, or a need for more should I crash and burn. So I’ll have some good posts maybe in a couple of years. Let’s hope they are victory lap stories and not post-mortems!

As for cataloguing this new round of thinking, I’ll try to bang out some of these articles this weekend, and otherwise finish them over the Thanksgiving or Christmas holidays. Wish me luck, because after that, I go back to the day job.


5 thoughts on “Why I’m Switching Over to @AngelList Syndicates

  1. Ty: I hear you – investing in a startup is like adopting a puppy – long relationship, and a lot of work. Done right, it can suck up a lot of your time. So I too have been supplementing my activities with a small bit of fund investment, but with a slightly different twist: I am in Tech Coast Angels ACE II fund to get some west coast diversification and because their cost structure is really really low, and I am in LearnLaunchX because EdTech is an area I want to learn more about since I have been doing some MBA teaching at Babson. But I have steered away from a lot of the other new and emerging things for the moment because I worry about fees and risk-adjusted fees – it is easy to really whack your returns with all these fees and carries. They may be worth it if the costs reduce your risks, or boost your returns, but if neither is true, then…. In looking at a lot of what is going on lately with syndicates, etc. I am reminded of the famous Warren Buffet article in which he talks about how intermediaries can really crush your returns (http://money.cnn.com/2006/03/05/news/newsmakers/buffett_fortune/). Now, I don’t have a startup to run full time like you do, so I may have more time to devote to investing directly and avoiding fees, but I do think that, if outsourcing is the way for someone to go, they should be thoughtful about fees, costs and carries? -Christopher

    1. Christopher, I hear you! One thing that I like about these syndications is that the success is all back-end, meaning that fees aren’t the usual VC 2/20, but rather 0/20. (Or whatever they may be.) And that annual fee REALLY eats away at returns. That’s why I’m so happy I can draft behind guys like you doing the hard work!

      PS–nice video from Warren on you. Tweet it so I can repost? Or leave the link back in comments?

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