The Basics

What is a syndicate and how does it work?

A syndicate is a group of investors who pool their capital and resources to invest in early-stage startups. The syndicate is led by a syndicate lead (Broadstone Ventures) who is responsible for deal sourcing, due diligence, negotiation, and management of the investment. Investors in the syndicate are called Limited Partners (LPs) or syndicate members, and they can invest on a deal-by-deal basis.

What is the typical investment size and structure?

Investment sizes can vary, but pre-seed and seed stage syndicates often invest between €50,000 and €500,000 in a single startup. The investments are usually structured as equity, convertible notes, or SAFE (Simple Agreement for Future Equity).

What is the role of the syndicate lead?

Broadstone Ventures, the syndicate lead, is responsible for sourcing and diligencing investment opportunities, negotiating deal terms, managing the syndicate, and communicating with syndicate members. Generally speaking, a syndicate lead is an experienced investor or entrepreneur with a strong network and a track record in the startup ecosystem, and our team's experience reflects this.

What is the expected return on investment (ROI)?

Investing in early-stage startups is inherently risky, and there is no guaranteed return on investment. However, the goal of syndicates is to achieve substantial returns by investing in high-potential startups that can grow rapidly and exit through an acquisition or an initial public offering (IPO). Successful investments can yield returns of 10x, 20x, or even more. The timeframe for an exit can vary, but it typically takes several years for a startup to grow and achieve a successful exit.

Structure & Process

What is a Special Purpose Vehicle (SPV) and how is it used in syndicate investing?

A Special Purpose Vehicle (SPV) is a separate legal entity created specifically for a single investment purpose. In the context of syndicate investing, an SPV can be set up to pool the capital from syndicate members and invest it in a single startup. This structure allows syndicate members to invest collectively without directly holding individual shares or securities in the startup, simplifying the cap table and legal complexities.

Who manages the SPV and what are their responsibilities?

Broadstone Ventures, the syndicate lead, manages each SPV per deal. Our responsibilities include setting up the SPV, handling legal and administrative matters, managing the investment in the startup, and communicating with our syndicate members. Our role is to act in the best interest of the SPV's investors and ensure compliance with all relevant regulations.

What is the investment decision-making process?

As syndicate lead, Broadstone Ventures will conduct due diligence on potential investment opportunities and present the deal to syndicate members. The due diligence process typically involves a thorough review of the startup's team, product, market, business model, financials, and other relevant factors. We may also conduct reference checks, consult with industry experts, or engage third-party providers for specialized analysis. Once due diligence is completed, the deal is shared and members will then have a specified time window to review the information, ask questions, and decide if they want to participate in the investment.

Participation is not mandatory, and members can choose to opt out of any deal.

How do syndicate members stay informed about their investments?

Broadstone Ventures will provide regular updates on the progress of the startups, including key milestones, financial performance, and any material events. Communication may occur through email updates, conference calls, or online platforms.

What are the fees associated with participating in a syndicate?

There may be various fees involved in participating in a syndicate, including management fees, carry fees (performance-based fees), and legal or administrative fees. These fees can vary depending on the structure of each deal, and the agreement between Broadstone Ventures and syndicate members.

How can I join the syndicate?

Complete our non-binding expression of interest form here. Once membership of the syndicate is granted, you'll be able to participate in future investment opportunities presented by Broadstone Ventures.

What industries and sectors do you typically invest in?

We consider pre-seed and seed investments in industries that reflect our backgrounds such as B2B SaaS, developer tools, Open Source, AI, enterprise software, fintech and regtech. We also have a geographic focus of teams building companies in Ireland, UK and European Union.

What is the typical ownership stake that the syndicate acquires in a startup?

The ownership stake acquired by the syndicate depends on the investment size and the startup's valuation. In pre-seed and seed stage investments, we will aim for an ownership stake of around 5-15%, although this can vary depending on the specific deal terms.

How do you source investment opportunities?

Investment opportunities are typically sourced through our network which includes relationships with entrepreneurs, other investors, accelerators, and industry events. Syndicate members may also bring forward investment opportunities for consideration.

Can syndicate members actively participate in the startups they invest in?

While syndicate members may not have direct control over the startups, they can often provide valuable support by offering advice, introductions, and other resources to help the companies grow. We encourage our members that have relevant experience to spend time with the founders we invest in, should they ask for help.

What is the typical length of time from investment to exit?

The time to exit can vary widely depending on the growth trajectory and market conditions for each startup. Generally, early-stage investments have a longer time horizon, with exits typically occurring 5-10 years after the initial investment. Members are able to engage in secondary sales either as a whole or individually.

What is the minimum investment amount required to participate in a syndicate?

Typically, the minimum for investing in a syndicated deal shared by Broadstone Ventures is €10,000, however this may be lowered if the interest in a particular deal is high and/or the allocation for Broadstone Syndicates is less than €250,000.

Risks

What are the risks associated with investing in early-stage startups?

Investing in early-stage startups is inherently risky due to the high failure rate of new ventures. Risks include product failure, market risk, execution risk, competitive pressures, and regulatory challenges. However, a diversified portfolio of startup investments can help mitigate these risks and increase the potential for outsized returns.

What happens if a startup requires follow-on funding?

Broadstone Ventures will evaluate the opportunity and determine whether the syndicate should participate in the follow-on round. Syndicate members will have the opportunity to review the new terms and decide if they want to invest additional capital. In some cases, the syndicate may choose not to participate in follow-on rounds, which could result in dilution of ownership for syndicate members.

What are the tax implications of investing in a syndicate?

Investing in a syndicate may have various tax implications, such as capital gains tax on successful exits or tax deductions for investment losses. Tax treatment may also differ based on the investment structure (equity, convertible notes, SAFE) and the investor's residency. We advise all members to consult with a tax advisor to understand the specific tax implications of their investments.

What is the role of the syndicate in the governance of the startups?

It varies depending on the deal terms and the startup's needs. In some cases, Broadstone Ventures may take a board seat or an observer role, while in others, the syndicate may rely on information rights and regular updates from the startup. The level of governance involvement and the syndicate's ability to influence decision-making at the startup, can vary from startup to startup.

How does the syndicate handle conflicts of interest?

Conflicts of interest may arise in various situations, such as when Broadstone Ventures or syndicate members have personal or financial connections to the startups they invest in. Broadstone Ventures has a clear conflict of interest policy in place to ensure transparency and fair decision-making. Investors should be aware of this policy and how potential conflicts are managed within the syndicate.

What are the risks associated with liquidity and exit opportunities?

Liquidity risk is an important consideration for investors in early-stage startups, as there may be limited opportunities to sell or exit their investments before a successful exit event (IPO or acquisition). While secondary markets for private investments have been growing, they may still be illiquid or subject to significant discounts. Investors should be prepared for a long investment horizon and be aware of the risks associated with liquidity constraints.

What is the impact of dilution on the syndicate's investments?

Dilution occurs when a startup raises additional capital, resulting in a decrease in the ownership percentage of existing investors. Dilution can affect the syndicate's investments if the startup raises follow-on rounds or issues additional equity to employees or other stakeholders. While dilution is a normal part of the startup financing process, investors should be aware of its potential impact on their investments and returns. Some syndicates may have pro-rata rights or other mechanisms in place to help mitigate the effects of dilution.

How does the syndicate handle information confidentiality?

Confidentiality is crucial when investing in early-stage startups, as sensitive information about the company's strategy, financials, or technology may be shared with syndicate members. Broadstone Ventures will share a confidentiality policy with all syndicate memvbers, and investors should be aware of their obligations to protect the information they receive.

What is the potential impact of regulatory changes on the investments?

Changes in regulations, such as industry-specific rules or tax laws, can have a significant impact on startups and their growth prospects. Investors should be aware of the potential risks associated with regulatory changes and how they might affect their investments. Broadstone Venutres monitors relevant regulatory developments and consider their implications when diligencing and managing investments.

How does the syndicate manage currency risk in cross-border investments?

When investing in startups located in different countries or regions, currency risk can be a factor to consider. Fluctuations in exchange rates may impact the value of the investment and the returns realized upon exit. Investors should be aware of the currency risk associated with cross-border investments and how the syndicate manages this risk, such as through hedging strategies or other mechanisms.

What is the impact of market conditions on the syndicate's investments and exit opportunities?

Market conditions, such as economic cycles, industry trends, or investor sentiment, can have a significant impact on the performance of startups and the availability of exit opportunities. Investors should be aware of the potential risks associated with market conditions and how they might affect their investments. Broadstone Ventures closely monitors market trends and we adjust our investment strategies accordingly.