DEPO have created a syndicate composed of angel and private investors for startup Neuronix AI
During the seed round DEPO have created syndicate composed of private and angel investors for startup Neuronix AI. Now, we are adding another $111,000 (which is roughly 2.5 million Czech crowns) to the investment made previously by the Grouport fund in pre-seed round. We are showing another way of investing that can be offered to potential investors. At the same time, we want to point out its advantages and simplify the way how can Czech and European investors invest in early startups.
"Although, angel investing is more individual, we see a big gap between crowdfunding and direct investing in startups. We are aware of the people that are interested in investing but don’t know how. Funds and syndications are one of the ways to work with experienced investors, so new investors can also learn how to properly evaluate a startup,” says Petr Šíma, CEO of DEPO Ventures.
From the beginning to the end
DEPO Ventures takes care of the entire syndication process. The first step is the establishment of the so-called SPV (Special Purpose Vehicle) which is similar to s.r.o. and is intended exclusively for one time investment project. In addition, it is composed of private investors or funds. Under this unique entity, investments are made in one startup. This method is already well-established and relatively common in the world. On the other hand, in the Czech Republic it is used rather rarely due to current legislation.
We also take care of the entire syndicate legally and procedurally. Thus, it offers investors complete security, including startup management and reporting for a period of five years. However, investments in syndicates are only possible for qualified investors.
"It is necessary to realize that the syndicate is in most cases a minority investor, so it is necessary to conclude an investment round with the so-called Lead Investor. He invests the highest amount, conducts Due Diligence and has a stronger negotiating position in determining the conditions with the founder,” adds DEPO Ventures partner Michal Ciffra.
Diversification, simplicity, less risk
Investing through a syndicate brings many benefits to those interested in investing in startups. One of the biggest benefits is diversification, which is mainly used by experienced investors. Thanks to the syndicate, you can invest, for example, ten thousand euros in ten different startups and at the same time reduce risk of startup’s failure. It is common for startupists to require a minimum investment of twenty-five thousand euros, so in the case of individual investment, an amount of one hundred thousand euros would suffice for 3-4 investments. To lower risk, the syndicate is led by a lead investor who has proven results and is a professional in these specific processes. In addition, according to the DEPO Ventures survey, up to 70% of angel investors in the Czech Republic prefer diversification through syndication and are aware of the fact they can make more profit.
Another significant advantage is the simplification of the financing process. DEPO Ventures takes care of everything, and the investor does not have to spend much time on administration. Even startup itself can benefit from syndication. Higher number of angel investors can offer more money, access to human capital or expertise. This can significantly help the company to grow, and thus again create positive results for all parties involved.
“Another important advantage is access to experience. New qualified investor can encounter an experienced investor in a syndicate and can learn a lot from him. In addition, some syndicates still maintain contact with startups in which they invested one to two years ago, so the investor will gain an overview of how the company is doing. This gives them, for example, the opportunity to find out why some companies are not achieving their goals. In DEPO Syndicate, we regularly report to our clients up to 5 years,” adds Šíma.
Investments that will help create a leader in AI hardware
Both DEPO Ventures' investments are designed to help startup Neuronix become a leader in the ever-growing AI hardware acceleration market. It is estimated that this market will reach a value of up to $ 50 billion by 2025. The technology is built by an experienced team in the field of artificial intelligence, video compression and software architecture. It provides a cost-effective solution by providing more than 60x faster video download performance. The individual experts involved in the development have worked for companies such as Alterra, Lattice or Harmonic. A prototype of the technology, which works on the cloud platform AWS (Amazon Web Services), is already ready to this day. This allows the startup to further develop cooperation with potential clients and partners, show the benefits of their technology and explore the possibilities of commercial use.