A taxonomy of online syndicates

Abstract

New businesses financing has evolved over the years from closed-end funds to limited partnership financing, angel investing and the most current form of online syndication. While VC financing has been covered thoroughly from financing and behavioral perspectives in research, very little is known about online syndicates which have appeared in recent years with the creation of AngelList. This paper's objective is to establish a first taxonomy of the most active angel syndicates at the time this research was conducted. Based on characteristics related to work experience, education and reputation this paper presents a systematic overview of these syndicates' founders, where they have studied and worked, how well-known they are in social media and how their investments have performed. By dividing the data into quartiles according to total funding raised and number of backers attracted, I find astonishing differences across the quartiles for certain variables while others are rather inconclusive. Education and work experience (e.g. consulting, IB, VC, etc.) as well as years spent as entrepreneurs and investors do not show a clear relationship with the number of backers or total funding a lead is able to attain. Number of startups founded, number of acquisition exits, Twitter followers and Google search results, however, seem to explain 36% of the variation of total funding raised and 43% of the variation in the number of backers. The findings suggest that despite a large heterogeneity in syndicate lead characteristics, those successful at raising high amounts of funding and attracting many backers share common traits.