No management fees are being charged; only performance fees.
I'm not in the VC business, but there are a lot of investors who are going to be very, very hurt in the next couple years once consumer technology valuations crash. On the other hand, this move may let the party last a bit longer.
Too many people are chasing companies believing the investment will lead to a 10x or 100x return. But, investing in unprofitable businesses is quite different than publicly traded investments and private equity investments.
In that sense, it puts the syndicate organizers in the same boat as the investors. As you point out, VCs can get quite comfortable off management fees without making investors a dime.
> ...but there are a lot of investors who are going to be very, very hurt in the next couple years once consumer technology valuations crash.
Completely agree, and I think some of the hardest hit will be individuals who fashioned themselves as angel extraordinaires as they didn't even capture management fees.
At least investors chasing yield in the bond and public equity markets the past several years will be able to say that they enjoyed their dividends and distributions. Many of these angels will have next to nothing to show for their investments when all is said and done. On second thought, I guess they'll be able to say that they helped Ruby on Rails and Node.js rockstars make their San Francisco rent payments.
A lead angel investor gets a commercial bonus for connecting other investors to an early-stage startup fund.
My reaction-
Not all exchanges of value have a direct commercial value associated to them. After we've torn all of the middle-men down with technology, we're now slowly bringing them back into the mix.
This is disruptively (subversively?) awesome, not just for its initial incarnation but all the ways it could iteratively evolve.
Right now it's like a per-person "0 [fees] and 20 [carry]". Will AngelList try to enforce a 20% carry standard or let it vary? [UPDATE: I see a tweet by @naval confirming angel chooses carry rate.] How about the 0%?
Does the answer change if and when syndicates-of-syndicates arrive? Is that powerful or too much like an MLM-downstream?
Will loose affiliations of syndicate-leads cross-syndicate (simulating a mini-VC-firm)? What kinds of support services will syndicate-leads need (and perhaps share)?
Although HN reaction to AngelList syndicates has so far varied from negative to blah, I think this could be big for startups outside of Silicon Valley. For early stage startups in e.g. Europe, it's quite significant investment of time and money to raise an international seed round and having an easier way to organize international syndictate rounds can be a game changer.
Think about it.
No management fees are being charged; only performance fees.
I'm not in the VC business, but there are a lot of investors who are going to be very, very hurt in the next couple years once consumer technology valuations crash. On the other hand, this move may let the party last a bit longer.
Too many people are chasing companies believing the investment will lead to a 10x or 100x return. But, investing in unprofitable businesses is quite different than publicly traded investments and private equity investments.