[Section 2] Syndicate Value & Economics - Highlights
Investor Perspective
- Syndicates operate on a deal-by-deal basis, allowing investors to build their own portfolios.
- ~5-7% of capital goes towards fees (SPV setup, legal, and management fee).
- Investors receive 1x liquidation preference—their original capital must be returned before profit sharing.
- Above 1x, a 20% carry fee applies, meaning investors keep 80% of returns.
Syndicate Lead Perspective
- Leads earn:
- A portion of the 5-7% admin fee.
- 20% carry on profitable deals (none on losses).
- A portion of the 5-7% admin fee.
- Each deal functions as a call option rather than traditional portfolio theory.
- To be viable, a syndicate should raise at least $100K per deal—anything lower is subscale.
Scaling Syndicate Economics
- Larger syndicates reduce costs as a percentage of capital raised:
- SPV costs decrease at scale (~2% at $3M deployed annually).
- Management fees can be adjusted to maintain a total fee cap of ~7%.
- SPV costs decrease at scale (~2% at $3M deployed annually).
- At $100K raised, leads earn ~$3,500 in cash and a potential $18.6K in carry.
- At $750K raised, this increases to ~$40K in cash and ~$140K in carry.
Key Takeaways
- Growth optimises both cash flow and equity upside.
- A well-run syndicate attracts investors organically over time.
Target larger deal sizes to maximise both upfront fees and long-term carried interest.
