Syndicates are great groups of people combining experience, analysis and money. It is an absolute delight to work with professionals with goals inline, finding a company worth spending some of your time and assets how ever small or big. At the end of the day, it's all about the people, people and people.
Syndicate makes the rules
Great minds think alike. Running through the screenings can first feel a bit like swiping dating apps. The real art begins when expertise is challenged. Syndicate of twenty some people is bound to have both seasoned players and rookies on board as well as opinion leaders and followers. For a lead investor this is where the people business starts.
How you look at it makes all the difference
We started off with some 100 companies. The grade of maturity varies always significantly. All the companies were getting ready to pitch at SLUSH, the greatest pitching event of the world. The pitch decks were well done and informative, impressive even. In some cases that was all there was. Our program started with proper desk job ploughing through material submitted. Meeting the team representatives in person came only later.
Some of the best investors never invite for a pitch. Smell of sweat on papers counts. Most attractive cases are reasonably well kept companies that show understanding of the governance ie administration, accounting, management, focus as well scalable product and capable team. It’s foolhardy to think that additional money takes care of these basic aspects. You either have the ability to lead a whole company or you have a tribe that is hoping to get some money to fool around. Due Diligence gives more colours to this picture.
Looking at our deal flow afterwards I revealed some surprising statistics. After three rounds there were 30 companies left of which 9 were female led. This is about the usual rate in any population of startups. The diversity of the teams got wider the higher up they ranked. But the real surprise came when there were 10 companies left. 6 of these had a woman as CEO-cofounder. At the final stage there were only female led companies.
You are part of the deal
We were lucky to find something to invest in. Not all competitions end in finding a suitable candidate to build a future and profitable exit. Admitting there is no winner is also a challenge.
Agreeing on valuation with the founders, the base of profitableness of the whole business, is very much people management. It is much easier to get an educated guess on where the money will be spent than a solid accounting for pre-money valuation. This makes the ground for negotiation very soft. One of the key elements is to understand what keeps the founders happy and hungry for growth at the same time. Setting right valuation is crucial for paving the way for the next round.
As a syndicate member you are interested in the cap table as a whole, the very crowd you’ll be part of. Diversity, capability and knowledge of different markets in a syndicate is worth more than cash. With well communicating syndicate you are into great ride with great people.
About the author
Annukka Mickelsson is a long term strategic developer of organizations and businesses. She has long experience in risk management in financial sector i.a., combined with track record in business culture transformations. As a business angel she is most at home with solutions for great communications and health tech.
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