An angel investing syndicate is a group of investors who put money into a start-up together, led by one experienced investor called the lead. An angel investor is a person who invests their own money in very young companies. A syndicate platform is the software through which the lead finds members, shares each deal and collects the money.
Here is how a syndicate works. The lead finds a start-up and agrees the terms with its founders: how much money the start-up will raise, and what share of the company that money buys. The lead then shares the deal with the syndicate's members on the platform. The members read the start-up's documents in a virtual data room, a secure online folder. Each member decides separately whether to invest, and how much.
For instance, a lead investor in Bengaluru finds a start-up that is raising ₹2 crore. She invests ₹20 lakh herself and offers the rest to her syndicate. Thirty-six members invest ₹5 lakh each, which makes ₹1.8 crore. The platform's investor portal collects each member's money and sends the signed documents. The money is pooled into one fund, which invests in the start-up as a single shareholder. So the start-up's cap table, the record of who owns what share of the company, shows one new line instead of thirty-seven. The lead usually receives a share of any profit, often around 20%, in return for finding and managing the deal.
In India, such pools are usually set up as angel funds registered with SEBI. Only investors who meet SEBI's tests of income or wealth can join them. There is a good reason for this. Most start-ups fail, and the money in the others can stay locked up for five to ten years before it can be sold.
A syndicate is different from a venture capital fund. In a venture capital fund, investors give their money to a fund manager, who chooses every investment. In a syndicate, each member chooses each deal separately. It is also very different from an index fund, which spreads money across fifty large listed companies.