Lessons from the Trenches: What Syndicates Taught Me About Startup Investing

When I first started angel investing, joining a syndicate felt like a no-brainer. A curated deal, a lower capital commitment, and someone else doing due diligence? What’s not to like, especially for someone new to the profession?

Syndicates are a popular entry point for many new investors—and for good reason. They’re accessible, they promise exposure to hot deals, and they let you learn the ropes without writing massive checks. Successful investors like Jason Calacanis helped popularize the model, and platforms like AngelList made the process feel seamless. Almost all of my investments were made through syndicates during my early years as an angel.

But after a few years of going down that road, and a few hard lessons learned, I’ve come to view syndicates a bit differently. They can be useful tools, yes. But they also have some fundamental flaws. And if you’re not careful, you’ll find yourself making the same mistakes I did early on.

Why I Started with Syndicates

When I first got into startup investing, syndicates looked like the obvious on-ramp. I could participate in promising deals for as little as $1K–$2K, which was ideal as I was still figuring things out. I wasn’t ready to lead deals or do deep due diligence on my own, and syndicates offered a shortcut.

The logic made sense at the time: back smart people, trust the process, and build experience while staying diversified.

What I didn’t see at the time was the additional risk I was carrying, and how little control I actually had over these investments.

What Syndicates Get Right

Let’s start with the positives, because they do exist.

• Low barrier to entry: You can get started with small checks and minimal experience.

• Learning by osmosis (sometimes): If you’re in a well-run syndicate, you’ll get exposure to investor memos, founder calls, and occasional updates. It’s a window into how others assess early-stage risk.

• Networking (sometimes): Some syndicates include in-person events or founder meetups. One of my favorites was a Napa gathering where I got to speak directly with founders and other angels. That kind of access is rare—and valuable.

• Training (sometimes): Some groups offer training for investors, usually for a fee. For example, my local syndicate, Rockies Venture Club, offers extensive “nuts & bolts” classes, including due diligence, valuation, tax planning, etc., as well as mentorships for leading syndicate deals.

For new investors, these benefits are real. But there’s a flip side.

Where Syndicates Fall Short

Here’s the problem: the same things that make syndicates easy can also make them dangerous.

• Lazy diligence: Early on, I’d read the pitch, look over the deck, and assume the lead had done the heavy lifting. That’s a mistake. Just because someone else looked into a deal doesn’t mean they looked at it the right way, or that their interests are aligned with yours.

• No transparency: One of the biggest red flags is how little performance data syndicates provide. Years later, I still don’t know the status or return profile of most of my earliest investments. In many cases, I’m not even sure if they’re alive.

• Minimal investor rights: Syndicate investors are usually the last to know anything, and the first to get squeezed in a down round. You have no say, no control, and little recourse.

And perhaps most importantly:

• Misaligned incentives: The syndicate lead gets carry (often 20%) whether or not they put skin in the game. Platforms like AngelList also get their cut of everyone else’s investments. Both are incentivized for quantity over quality. Nobody's really penalized if the startup flames out. They just move on to the next shiny thing.

What I Learned the Hard Way

Eventually, I began to spot the patterns. The best syndicates gave investors direct access to founders. They provided context. They followed up.

The worst ones? They took your check, disappeared, and never contacted you again – except to pitch the next Big Opportunity.

Over time, I began conducting my own diligence. I took meetings. I dug through data rooms. I ran backchannel references. And when I had conviction, I started writing direct checks outside the syndicate structure.

One of my early direct investments was in Bitrefill, a crypto-native company that aligned with my expertise and values. I understood the space, vetted the founders, and invested with conviction. That experience taught me more in a few months than a dozen passive syndicate deals could have taught me in a dozen years. It is also one of the best-performing investments in my portfolio.

How to Spot a Well-Run Syndicate

If you’re still keen on syndicates (and I’m not saying you shouldn’t be), here’s what to look for:

• Does the lead invest their own money in every deal?

• Do you get access to the founder?

• Are there regular investor updates?

• Is the lead available to answer questions, or are they too busy spinning up the next deal?

If the answer to most of these is “no,” you’re not in a syndicate. You’re just buying into a newsletter.

A Closer Look at the Platforms

AngelList is the 800-pound gorilla, and it has done a lot to democratize startup investing. But the quality bar is low. Anyone can launch a syndicate, and most LPs have no idea how to vet a lead. There’s no rating system. No performance dashboard. No real accountability.

Compare that with locally run syndicates, run by investors you can meet in person—people who are accessible and therefore more accountable. Those have felt more like actual investments than online check-writing.

Independent virtual syndicate groups offer mixed results. Some, like Launch and Gaingels, are genuinely adding value, providing decent due diligence and some level of performance updates. Others are just dressed-up pitch funnels. If you’re not in the inner circle, your check is just a number on a spreadsheet.

The Bigger Problem

There is a structural issue here. Syndicates and syndicate platforms, as they exist today, don’t reward quality. They reward volume.

What’s needed are better tools and protections for LPs:

• Contractual obligations for updates

• Transparent reporting on past performance

• Platforms that let investors rate syndicate leads and escalate complaints

Until that happens, the burden is on investors to protect themselves. Read everything. Ask hard questions. Don’t chase hype.

Final Thoughts

Syndicates are a helpful stepping stone, but they’re not a destination. They’ll give you exposure, but they won’t provide you with insight. That only comes with time, experience, and skin in the game.

If you’re new to startup investing, use syndicates to learn. But learn actively. Don’t rely on someone else’s conviction in place of your own.

And when you’re ready, bypass the syndicates and invest directly in sectors you understand well. Real growth happens when you stop outsourcing your judgment.