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Dundee Venture Capital launches AngelList syndicate

Dundee Venture CapitalOMAHA—Dundee Venture Capital wants to make the startup investment game more accessible.

The venture capital firm announced last week it’s launching an AngelList syndicate.

A syndicate allows investors to co-invest alongside other notable investors without having to vet companies and pen deals on their own. AngelList launched its Syndicates program last September.

Individuals who back a notable investor’s syndicate commit to invest as much or as little as they want in their future deals and agree to pay lead investors a percentage if the company exits.

So far the syndicate has raised $86,000 of the $200,000 that Dundee has committed to the program. More than 19, many from Omaha, have backed the syndicate.

Beginning with four, $50,000 investments over the next year, DVC will make AngelList syndicates a part of its investment strategy. It allows the firm to leverage its capital, expose its brand and investment thesis to a broader network, and give more startups more capital.

A recent regional example: In June, Brad Feld’s FG Angels syndicate invested $1.1 million in KC-based Leap.it.

Dundee Venture Capital founder Mark Hasebroock wrote in a company blog that the syndicate will make startup investing more transparent, efficient and open.

“There is no shortage of wealthy investors in the U.S., but there is a shortage of wealthy investors investing in startup companies,” Hasebroock wrote. “There are over 8.5 million accredited investors in the U.S., but only 3 percent are actively investing in startups and small businesses.

“There are a variety of reasons, including risk appetite, but my hunch is the majority of wealthy individuals do not invest in startups for two reasons: lack of knowledge and lack of convenience.”

Startups are difficult to value, are creating new industries and often have nothing but an idea on a piece of paper, so it’s easy to get burned, Hasebroock wrote. The syndicates, he said, are better than angel investing because it takes time and capital to be involved.Mark Hasebroock

Hasebroock told SPN that many are becoming more comfortable with the idea of startup investing. In 2010, when he was forming DVC’s first fund, many weren’t interested, but now some of those people are joining the syndicate, even if it is just a few thousands dollars.

“The odds of funding a $1 billion company are astronomical—1 in 1,500 venture-funded companies reach that mark,” he wrote. “To mitigate risk, angel investors need a broad portfolio. And with a minimum check-size of $25K, a portfolio of 100 startups would cost $2.5 million… and gives only a 6 percent chance of investing in a company that will eventually be worth $1 billion. It’s no wonder 97 percent of accredited investors stay away.”

AngelList allows accredited investors to take the mutual fund approach to startup investing, through individual syndicates and through their own fund manager. The convenience and the ability to learn is there for interested investors.

“It’s really key for this area because it’s increasing the knowledge of how investing works and gets more people involved,” Hasebroock said. “We’ve got to loosen up the purse strings in the Midwest and this gets a lot of people interested and involved. It’s not just watching and talking about it, now it’s about understanding the process and educating the market.”

He said he’s asked about 25 community members to be involved and about 18 have signed up. They are also reaching out to others across the country, too.

“The response we received today is probably not the response we would’ve got a few years ago,” he said. “People are understanding that now is the time for Omaha, for startups and this ecosystem to succeed.”

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  • The frustrating part about angel or syndicate investing in startups is that one must be an “accredited investor” to play the game. This means $200k annual salary or $1M net-worth (not including value of primary residence). I meet neither of those qualifications, but I do have a bit of savings I would consider putting into a syndicate if I were allowed. I hope to be a full fledged angel investor someday, but until then I would love to get my feet wet with a little bit of dosh. Uncle Sam says no, yet he’ll let me invest as much as I want (and a chance to lose it all) in the stock market game. Something isn’t adding up…

    • Trent Allen

      That should change in the next few months. Title III of the JOBS act is well overdue and SEC chair Mary White said it’s a priority this year. After that startups will be able to raise up to a million dollars from non-accredited investors. Startups & Syndicates will still need to decide if they want to take money from non-accredited investors due to extra red tape.

      • I hope so. I believe most people who have money to invest into startups are generally understanding that it’s a risky venture. Perhaps the SEC could require new investors to sign some sort of release statement assuring they understand the risk factors for angel investment.

        Of course, when you talk about the SEC and accredited investors, you can’t ignore this current debate:

        http://www.crowdfundinsider.com/2014/06/42279-changes-accredited-investor-definition-clip-wings-angel-investors/

        A move that will further alienate perspective startup investors. #sigh

      • JB

        Or, Matthew will soon have a $1M+ net worth, which could also happen in the next few months!

  • This is fantastic – Props to DVC & Hasebroock

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