Let's connect, angels! Why it's good to bring together smaller investors

Let's say that a startup has a minimum investment of 100,000 euros with an investment round of 1 million euros. This makes sense. Smaller amounts would mean overly fragmented shares and far more complicated administration for project founders. With an average investment of an angel investor of 25,000 euros, four investors are needed to meet the minimum investment.

At that moment, one of the ways to get the necessary amount is to connect the investors. Thanks to the possibility of establishing an SVP (special purpose vehicle), ie a company created exclusively for joint investment, it can bring together several smaller investors and enter the project as one. They then share the shares fairly. Not only is the startup more likely to select the necessary funds, but it will also gain a lot of useful contacts or practical opinions with smaller investors. Because, as we know, two heads are better than one.

Therefore, it is necessary to create opportunities for such investors to participate in an investment that they would not have achieved themselves. At the same time, they can invest, while significantly reducing the risk, because they are not alone in the whole thing. Syndication is the most effective way to create a network of smaller investors, and thus strengthen the possibilities of their interconnection.

Syndication will strengthen the startup ecosystem

While angelic syndicates (see the long list on AngelList) are common practice in America, they are still waiting for their larger expansion in Europe. Apart from slightly more complicated legislation than in the USA, there is nothing in the way of syndications of smaller investors in the EU. Besides, they could provide a much-needed boost to Europe's entire startup ecosystem.

A perfect example is a country where the syndications originated - the USA. This practice has even developed there in such a way that the local syndications are almost replacing investment funds because they can collect enough even without them. However, we still have a long way to go. We have to admit, there are more complex legal regulations of individual countries which cause a certain delay in the Old Continent. The size of the startup market is also poorer than the American one, and this is not very supportive for angel investors as well. However, the issue of syndication is very topical in Europe, as it is one of the effective ways to boost international investment.

In the Czech Republic, syndication is complicated mainly due to the lack of angel investors. But there are successful attempts here: it works, for example, at StartupYard or at our DEPO Angels, where we can associate several angelic ones with the main investor. And not only from the Czech Republic but also from elsewhere.

Europe is waking up

Just as syndication is created in the DEPO Angels network, it is created among the members of every angel network. For example, DANBAN, the Danish network, creates 30 to 40 of them a year. In the EBAN board, we try to encourage the creation of international syndications. We would like to connect Europe more and allow angel investors to invest together. Not only to European startups, after all, borders in the online world no longer mean anything. DEPO Angels network wants to lead by example, we are looking for global projects we can syndicate. For example, a startup based in the USA, one founder is from South Africa, and the other is from Munich. For those who have global goals, borders mean nothing.