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A Guide to Co-Syndication

Nov 30, 2023

Halle Kaplan-Allen

What is co-syndication?

Co-syndicating is when two or more syndicates team up to run an SPV together, leveraging capital sourced from both of their networks. Typically, one of the managers will identify the deal, secure an allocation, and then invite another lead to share the deal with the network. The two managers will collaborate on management responsibilities, including filling the allocation and communicating with the company, and then will share economics (carry and management fees) from the deal.

Why should managers co-syndicate?

Co-syndication is especially valuable for emerging syndicate managers who are looking to grow, operationalize, and level up their business. The benefits of co-syndicating for emerging managers include the opportunity to:

  1. Expand your network and collaborate with other emerging managers. Unlike traditional venture capital managers, who tend to be highly competitive with one another when it comes to winning deals, syndicate leads are often collaborative with one another. Syndicates are typically more flexible when it comes to portfolio construction and deal size, as they aren’t optimizing for ownership percentage in a company.

  2. Meet new LPs from your co-syndicator’s network who may be interested in your deal flow.

  3. Access a larger pool of capital, which can make it easier to win allocation into competitive financing rounds and gives you a larger upside potential.

  4. Increase your deal flow and opportunity to see deals with mitigated risk, because they have already been sourced and diligence and an allocation has been secured.

  5. Get upside via shared economics without having the sole responsibility of organizing a deal and filling an allocation. For a newer manager with a limited investor network, co-syndication can often be the difference between closing a deal or not.

  6. Do more with less. Leverage the power of a shared network to efficiently identify deals, and diligence companies, fill allocations, and support founders.

  7. Diversify your portfolio by gaining access to deals that you might not otherwise see.

  8. Provide better support and more value-add to startups through the power of an extended network.

“Co-syndicating creates so much alignment of incentives and leverages the collaborative nature of early-stage, emerging syndicate managers that does not exist within traditional VC. It has also become my strongest deal flow channel, allowing me to do hundreds of deals per year through my syndicate.” - Alex Pattis, Riverside Ventures

What are some key considerations when co-syndicating a deal?

While co-syndication can be a powerful tool for emerging managers, it also requires thoughtfulness, communication, and coordination. Here are a few things to keep in mind if you’re considering co-syndicating a deal with another manager:

  1. Deal Leadership: While there are benefits in managers co-owning deal responsibilities, it’s often more efficient to have one true deal manager. It can be helpful to divide up areas of responsibility; for example, choosing one manager as the main point of contact for the company to avoid any confusion.

  2. Shared Economics: Typically, when a deal is co-syndicated, the economics (carry and management fees, if taken) are divided between the two managers. Make sure to align on the economic split prior to launching the deal. It may be 50/50 or the deal originator may take slightly more carry if they are more involved in sourcing and managing the deal.

  3. Communication and Expectation-Setting: Maintain open and regular communication among syndicate members throughout the investment process. This includes making sure investors from each syndicate know who their main point of contact is for deal information.

  4. Investor Exposure: Keep in mind that, when you invite your investor network to participate in a co-syndicated deal, you are exposing them to a new manager with unique deal flow. Make sure to communicate clearly with the deal originator about expectations for communicating with investors once the deal has closed.

  5. Pro-Rata and Follow-Ons: Discuss and agree on the pro-rata rights for future investment rounds. This includes decisions on whether syndicate members will invest together in subsequent rounds and how to handle situations when one or more syndicate members choose not to follow on.

  6. Distribution Preferences: Co-syndicate partners should have a mutual understanding of the exit strategy and distribution expectations, including timelines and a process for distributing cash, selling shares, or managing an IPO.

Like any collaborative undertaking, proactive communication and thoughtfulness is key to a successful co-syndication. With these best practices in mind, you’ll be able to develop ongoing relationships with other managers who become regular co-syndication partners.

What is co-syndication?

Co-syndicating is when two or more syndicates team up to run an SPV together, leveraging capital sourced from both of their networks. Typically, one of the managers will identify the deal, secure an allocation, and then invite another lead to share the deal with the network. The two managers will collaborate on management responsibilities, including filling the allocation and communicating with the company, and then will share economics (carry and management fees) from the deal.

Why should managers co-syndicate?

Co-syndication is especially valuable for emerging syndicate managers who are looking to grow, operationalize, and level up their business. The benefits of co-syndicating for emerging managers include the opportunity to:

  1. Expand your network and collaborate with other emerging managers. Unlike traditional venture capital managers, who tend to be highly competitive with one another when it comes to winning deals, syndicate leads are often collaborative with one another. Syndicates are typically more flexible when it comes to portfolio construction and deal size, as they aren’t optimizing for ownership percentage in a company.

  2. Meet new LPs from your co-syndicator’s network who may be interested in your deal flow.

  3. Access a larger pool of capital, which can make it easier to win allocation into competitive financing rounds and gives you a larger upside potential.

  4. Increase your deal flow and opportunity to see deals with mitigated risk, because they have already been sourced and diligence and an allocation has been secured.

  5. Get upside via shared economics without having the sole responsibility of organizing a deal and filling an allocation. For a newer manager with a limited investor network, co-syndication can often be the difference between closing a deal or not.

  6. Do more with less. Leverage the power of a shared network to efficiently identify deals, and diligence companies, fill allocations, and support founders.

  7. Diversify your portfolio by gaining access to deals that you might not otherwise see.

  8. Provide better support and more value-add to startups through the power of an extended network.

“Co-syndicating creates so much alignment of incentives and leverages the collaborative nature of early-stage, emerging syndicate managers that does not exist within traditional VC. It has also become my strongest deal flow channel, allowing me to do hundreds of deals per year through my syndicate.” - Alex Pattis, Riverside Ventures

What are some key considerations when co-syndicating a deal?

While co-syndication can be a powerful tool for emerging managers, it also requires thoughtfulness, communication, and coordination. Here are a few things to keep in mind if you’re considering co-syndicating a deal with another manager:

  1. Deal Leadership: While there are benefits in managers co-owning deal responsibilities, it’s often more efficient to have one true deal manager. It can be helpful to divide up areas of responsibility; for example, choosing one manager as the main point of contact for the company to avoid any confusion.

  2. Shared Economics: Typically, when a deal is co-syndicated, the economics (carry and management fees, if taken) are divided between the two managers. Make sure to align on the economic split prior to launching the deal. It may be 50/50 or the deal originator may take slightly more carry if they are more involved in sourcing and managing the deal.

  3. Communication and Expectation-Setting: Maintain open and regular communication among syndicate members throughout the investment process. This includes making sure investors from each syndicate know who their main point of contact is for deal information.

  4. Investor Exposure: Keep in mind that, when you invite your investor network to participate in a co-syndicated deal, you are exposing them to a new manager with unique deal flow. Make sure to communicate clearly with the deal originator about expectations for communicating with investors once the deal has closed.

  5. Pro-Rata and Follow-Ons: Discuss and agree on the pro-rata rights for future investment rounds. This includes decisions on whether syndicate members will invest together in subsequent rounds and how to handle situations when one or more syndicate members choose not to follow on.

  6. Distribution Preferences: Co-syndicate partners should have a mutual understanding of the exit strategy and distribution expectations, including timelines and a process for distributing cash, selling shares, or managing an IPO.

Like any collaborative undertaking, proactive communication and thoughtfulness is key to a successful co-syndication. With these best practices in mind, you’ll be able to develop ongoing relationships with other managers who become regular co-syndication partners.

What is co-syndication?

Co-syndicating is when two or more syndicates team up to run an SPV together, leveraging capital sourced from both of their networks. Typically, one of the managers will identify the deal, secure an allocation, and then invite another lead to share the deal with the network. The two managers will collaborate on management responsibilities, including filling the allocation and communicating with the company, and then will share economics (carry and management fees) from the deal.

Why should managers co-syndicate?

Co-syndication is especially valuable for emerging syndicate managers who are looking to grow, operationalize, and level up their business. The benefits of co-syndicating for emerging managers include the opportunity to:

  1. Expand your network and collaborate with other emerging managers. Unlike traditional venture capital managers, who tend to be highly competitive with one another when it comes to winning deals, syndicate leads are often collaborative with one another. Syndicates are typically more flexible when it comes to portfolio construction and deal size, as they aren’t optimizing for ownership percentage in a company.

  2. Meet new LPs from your co-syndicator’s network who may be interested in your deal flow.

  3. Access a larger pool of capital, which can make it easier to win allocation into competitive financing rounds and gives you a larger upside potential.

  4. Increase your deal flow and opportunity to see deals with mitigated risk, because they have already been sourced and diligence and an allocation has been secured.

  5. Get upside via shared economics without having the sole responsibility of organizing a deal and filling an allocation. For a newer manager with a limited investor network, co-syndication can often be the difference between closing a deal or not.

  6. Do more with less. Leverage the power of a shared network to efficiently identify deals, and diligence companies, fill allocations, and support founders.

  7. Diversify your portfolio by gaining access to deals that you might not otherwise see.

  8. Provide better support and more value-add to startups through the power of an extended network.

“Co-syndicating creates so much alignment of incentives and leverages the collaborative nature of early-stage, emerging syndicate managers that does not exist within traditional VC. It has also become my strongest deal flow channel, allowing me to do hundreds of deals per year through my syndicate.” - Alex Pattis, Riverside Ventures

What are some key considerations when co-syndicating a deal?

While co-syndication can be a powerful tool for emerging managers, it also requires thoughtfulness, communication, and coordination. Here are a few things to keep in mind if you’re considering co-syndicating a deal with another manager:

  1. Deal Leadership: While there are benefits in managers co-owning deal responsibilities, it’s often more efficient to have one true deal manager. It can be helpful to divide up areas of responsibility; for example, choosing one manager as the main point of contact for the company to avoid any confusion.

  2. Shared Economics: Typically, when a deal is co-syndicated, the economics (carry and management fees, if taken) are divided between the two managers. Make sure to align on the economic split prior to launching the deal. It may be 50/50 or the deal originator may take slightly more carry if they are more involved in sourcing and managing the deal.

  3. Communication and Expectation-Setting: Maintain open and regular communication among syndicate members throughout the investment process. This includes making sure investors from each syndicate know who their main point of contact is for deal information.

  4. Investor Exposure: Keep in mind that, when you invite your investor network to participate in a co-syndicated deal, you are exposing them to a new manager with unique deal flow. Make sure to communicate clearly with the deal originator about expectations for communicating with investors once the deal has closed.

  5. Pro-Rata and Follow-Ons: Discuss and agree on the pro-rata rights for future investment rounds. This includes decisions on whether syndicate members will invest together in subsequent rounds and how to handle situations when one or more syndicate members choose not to follow on.

  6. Distribution Preferences: Co-syndicate partners should have a mutual understanding of the exit strategy and distribution expectations, including timelines and a process for distributing cash, selling shares, or managing an IPO.

Like any collaborative undertaking, proactive communication and thoughtfulness is key to a successful co-syndication. With these best practices in mind, you’ll be able to develop ongoing relationships with other managers who become regular co-syndication partners.