When AngelList launched its “syndicates” program last September, AllThingsD anointed one investor, Kevin Rose, as its “million dollar man.” The reason: within a week of AngelList making it possible for backers to put their money behind one individual, Rose collected more than $1.1 million in commitments.
Rose, a Google Ventures partner, told his 245 backers that he planned to participate in five seed investments per year on the platform. But six months later, he hasn’t invested in any. Both MG Siegler of Google Ventures and Path cofounder Dave Morin, who also quickly attracted hundreds of thousands of dollars to syndicate deals, haven’t pulled the trigger on anything, either.
Neither Google Ventures nor Morin responded to a request for comment. But AngelList cofounder Naval Ravikant has a theory based on his own investing experience. “I think some [investors] assembled syndicates but didn’t know what to do with them. I think some are scared because the platform is very transparent. [An investment] is going to be tracked. People will see the deal in detail. There’s no hiding anything, and it causes people to freeze up a bit.”
Some have painted another picture of why Rose may not be syndicating deals on the platform. One source cites a low volume of high-quality deals, while another says that if there’s enough demand for a startup’s seed round, there’s no reason to include a syndicate.
It seems entirely possible, too, that it’s harder for full-time VCs to justify their involvement with the platform until it’s better understood. Google Ventures, as a single LP fund, might also be struggling with whether to essentially create a separate management company around one of its partners.
Perhaps unsurprisingly, Ravikant rejects each one of these ideas, noting that both venture firms and LPs are showing increased interest in syndicates, including Maiden Lane, a new fund backed institutional investors that will invest both directly in syndicates and in direct investment opportunities found elsewhere on AngelList’s platform.
Ravikant further insists the quality of the deals being syndicated is “actually quite good.” He points to AltSchool, a year-old, San Francisco-based company that’s creating a brand-new network of schools. On Tuesday, the company announced that it has raised $33 million in Series A funding led by Founders Fund and Andreessen Horowitz. Among AltSchool’s other, earlier investors is former Wikia CEO Gil Penchina, who syndicated the investment on AngelList.
Ravikant also notes that syndicate leads can choose whether information about a deal will be made available to the general AngelList investor community or to specific backers only, suggesting that some of the program’s best startups are being funded under the radar. He highlights Ben Davenport, whose mobile messaging startup, Beluga, was acquired by Facebook and turned into Facebook Messenger. Davenport recently syndicated an investment in NYBX, a New York-based company focused on cryptocurrencies. By design, his backers are serious Bitcoin investors only, and “unless you were one of Ben’s LPs,” says Ravikant, you didn’t see it.
I ask Hunter Walk of the venture firm Homebrew about his experience with the platform. Last September, his firm led a $2.1 million investment in the shipping startup Shyp, some of which came from a syndicate led by entrepreneur-author Tim Ferriss. It created a lot of press at the time for Shyp, but in retrospect, was it worth it? Walk says it was. “Tim was able to assemble a great set of angels – some known, some new to investing – but we saw his participation as strategic.”
AngelList’s syndicates program is “still very much in beta, so going slow,” says Ravikant. “I don’t think [the program] will be hitting its stride until next year.”
In the meantime, he says, there’s “a lot more demand than we can run. Fundamentally, something is working.”