Improving Syndication for Angel Investing

February 28, 2018

Author: Dennis Ensing

At SWO Angels, we reviewed our strategic plan late in 2017. We identified two key drivers for 2018:

1. How do we better serve our investor members?
2. How do we better serve entrepreneurs seeking investment?

The necessity of these drivers was clearly evident in feedback we received from a survey conducted of our members, in addition to the invaluable perspective of other key stakeholders including entrepreneurs, sponsors, and our community partners. All echoed similar comments with respect to angel groups in general, including SWO Angels.

• “Angel groups are the last place to go if you want to raise money”
  • Angel groups are too slow
  • Angel groups never seem to have enough money to complete a funding round. So, in order to fill a round, entrepreneurs approach multiple angel groups, and endure a staged syndication process which involves multiple selection committees, presentations and due diligence exercises, all of which lengthens the funding cycle – time that would be better spent running and growing their businesses.
• On the member side, we often don’t have sufficient critical mass (members) to attract enough investors to a given investment opportunity. The result is that if one or two angels want to pursue a deal, they find themselves “orphaned” in the due diligence process, without the financial wherewithal to close the deal, so they fail in the due diligence phase.

Our ANSWER? – Create a system of “simultaneous syndication” by harmonizing the core processes of Selection, Presentation, and Due Diligence for angel groups that are geographically centred, and have a sufficient number of members in aggregate (and therefore investible capital) to be able to close most deals in a single round rather than multiple single rounds.

I am very pleased to announce that starting in March 2018, we will launch a pilot project with Angel One (Burlington), GTAN (Kitchener/Waterloo) and our group, SWO Angels (London), all of which are located within a one-hour drive of each other.

The pilot collaboration of harmonizing our core processes will include:

• A common selection process utilizing staff and volunteers from each organization.
• Companies chosen by this Selection Committee will present to the three groups in the following cycle:
  • Angel One – third Tuesday morning of the month
  • GTAN – third Tuesday evening of the month
  • SWO Angels – third Thursday morning of the month
• Based on level of interest by investors in each group, potential investee companies will enter a common due diligence process with the combined groups in a location dictated by the number of members interested in the opportunity, starting the week following their presentation.

For the entrepreneur, we believe that between the three groups we have sufficient investment capacity to close complete funding rounds. Furthermore, with a combined base of 200 investor members, we will have a deeper pool of domain expertise to assist in the due diligence process.

Also, for individual members, there is a much higher likelihood of getting more members interested in a particular deal, thus alleviating the potential for the “orphan” effect.

Companies that are interested in being selected to present need only visit any one of the web sites of SWO Angels, GTAN, or Angel One, and follow the relevant link to apply.

Otherwise, stay tuned – there will be more to come on the outcomes from this exciting strategic initiative for 2018!