Understanding AngelList Syndicates in India

Naval Ravikant is a fascinating character.

Today he is recognized as the founder of AngelList, arguably the world’s leading crowdfunding platform. He is widely regarded as a thought-leader in startup investing in general, and of late, an authority on Blockchain and the various cryptocurrencies it powers.

But there was a time not that long ago when Ravikant was a pariah of sorts in Silicon Valley.

A disaster avoided?

Ravikant kicked up quite a storm in the year 2005 when he sued the VCs who invested in his startup. He was one of the founders of Epinions.com, an online review site that was acquired by eBay for more than $500 million.

But Ravikant didn’t get a single cent from this windfall because his co-founder and investors had convinced him to sign away his holding on the pretext that the company was worthless and would be disposed of in a slump sale. When he realized that he had been taken for a ride, rather than walking away quietly, he sued his co-founder and powerful investors such as Benchmark Capital and August Capital.

Though he eventually won a settlement, the very act of taking legal action made him a “radioactive” persona non-grata in Silicon Valley.

Rather than let this bitter experience dissuade him from startups, Ravikant parlayed his learnings into a company called Venture Hacks. This company aimed to be an online destination to guide and advise the startup community on understanding and appreciating arcane terms and legal issues around fundraising.

Venture Hacks eventually evolved into AngelList, a crowdfunding platform that has helped thousands of startups raise hundreds of millions of dollars in angel funding.

Life had come full circle for Naval Ravikant.

Last week, with the introduction of AngelList Syndicates in India, Ravikant’s life had experienced another full-circle journey of sorts. After all, India is the place of his birth. Ravikant spent the first nine years of his life here before his parents emigrated to the US, where he eventually found fame and fortune.

But if we leave Ravikant aside, what does the introduction of AngelList Syndicates mean for India? Is it a significant development that was to change the face of angel investing in India?

Let’s find out.

First, a quick introduction to syndicates might be in order.

A syndicate is a form of angel investing where experienced angel investors act as a small fund of their own. They create a pooled investment vehicle where they are the lead investors, and other investors—particularly those who lack significant experience—bring in their capital. The intent is two-fold.

It de-risks inexperienced angel investors who do not have the time, inclination or capability to decide which startups to back or don’t have a network to find good startups. As such, folks can now piggyback on the wisdom and deal-flow of experienced angel investors.

What do they exactly mean by a large treasure-chest?

Second, it allows experienced lead investors to have a larger treasure-chest to invest from, giving them both greater leverage with the startups they speak to as well as direct financial benefit in the form of an additional carry that they can charge the syndicate (“carry” or carried interest is a share of the profits of an investment paid to the investment manager in excess of the amount that the manager contributes to the partnership).

AngelList launched Syndicates in the US in 2013 and the company claims to have helped more than 1,800 startups raise more than $700 million. Since then, the platform has expanded to Canada and the UK and now to India.

Does the fact that AngelList chose India as its fourth geography signal India’s emergence as a “startup nation”?

Not quite. By most accounts, India has been considered a leading startup destination for a while now—be it in terms of the number of startups or the amount of global capital coming into the country.

But considering that most of the capital coming into India is going to mature startups who are raising tens and hundreds of millions of dollars in funding, does AngelList Syndicates have a significant role to play in the early funding rounds—in seed-stage and angel investments?

 

 

Leave a Comment