Author: Abu Cassim

29 October 2021

From our previous blog you’ll recall that syndication is simply when a group of investors club together to invest in a specific opportunity. The syndicate is led by a lead investor while the rest of the investors take on the role of a backer. The reason for a distinction in the roles is firstly because it makes for better deal management if a point person is nominated and secondly because it’s not necessary for everyone to do everything.

Choosing to be lead investor on a syndicate is a lot like signing up to run the Comrades Marathon. For the crazy ones it sounds like a great idea at the beginning, it’s a lot of work for the most part and the reward when it’s all over is addictive – you’ll want to do it again. Like the Comrades, leading an investment round is not for everyone though. Not only are you steering a team of big hitting investors but you’re also doing all the heavy lifting for those that tag along (backers).

Lead Investor Considerations

There are a few things to consider before putting your hand up to be a lead investor:


The first consideration and possibly the most important is experience. There’s no substitute for getting your hands dirty. There’s a lot of literature around leading a round but lessons from the school of hard knocks always speak louder. It’s for this reason that we at Jozi Angels require angels to participate as a backer on deals before taking on lead responsibilities.

Domain Expertise

Getting involved in new technologies and new markets is always exciting but to validate the startup’s potential you need to have some idea of the business landscape. Your domain expertise will bring credibility and ensure you produce a thorough assessment of the startup.

In addition to knowledge of the business sector, it’s important that the lead understands the startup’s tech and operating model. Deep learning, blockchain and quantum computing are all sexy buzz words in the tech industry and it’s easy for a founder to bamboozle angels with BS. It’s important the lead not only understands these terms but also how they are being applied. A high-level understanding is sufficient, we are not suggesting you need to be a developer.

Conflicts of interest

The interests of the lead investor and that of the startup need to be aligned throughout the investment process. Should you choose to proceed given a conflict it’s important for this to be disclosed to the startup. At Jozi Angels we ask that all angels agree to our Terms of Service and these include conducting yourself in an ethical manner. Remember the aim of any professional angel is to build a portfolio of 20 or more companies and that improper conduct will only work against you in the long run.

Bridge to follow on funding

Raising capital is an inevitability in the startup space. Capital is required when things aren’t going to plan and the startup needs life support. It’s also required to grow the business when things are going well. In your typical startup angels fulfil an early stage need for funding, venture capitalists, corporates and other investors will generally follow on with further investment at a later stage. Having a relationship with follow on funders will be like a downhill in our proverbial Comrades Marathon. At Jozi Angels we host regular events that encourage relationship building with other angels and follow on funders.

Lead Investor Responsibilities

A lead angel is usually an experienced angel investor who has built up a robust channel of networks. They typically have several deals under their belt and can draw on this experience in the negotiation and deal handling process. The lead angel’s level of expertise will influence how long it takes to close the deal and the amount of friction experienced leading to the conclusion of the deal.

The lead angel takes on additional responsibility in the deal process to move it along through the various stages. This includes negotiating the term sheet with the founders of the startup and managing the due diligence team (whether this is being outsourced or conducted internally) and arranging the contractual agreements. Responsibilities may be extended to post investment management support.

At some angel networks the lead angel may also provide guidance on the structure of the syndicate – whether that be a SPV or an agreement binding the syndicate members. The structure may also carry a defined strategy with regards to exiting the investment which the lead will facilitate and document.

You’ll recall that angel investors bring three things to any investment: knowledge, networks and capital. It is in the post-investment period when investors de-risk their investment through strategic support offering guidance on decision making and opening doors in their network. This is usually facilitated through regular meetings and usually arranged by the lead investor. Not all investors attend these meetings and the nominated point person is usually responsible for relaying information discussed and sharing current business imperatives with the group. The role is akin to mentorship, it is strategic in nature, not operational. Many startups fail due to the lack of experienced management and relevant support systems. The startup benefits from the valuable insights from the lead.

When it comes to funding, the lead is normally the first to offer financing or at least be a meaningful contributor to the investment round. It’s rare and can be dysfunctional for a party with a minority interest in the investment round to negotiate terms on behalf of investors who are placing more at risk.

In effect the lead investor is the voice of the syndicate and allows the group of investors to operate as a single investor. The lead has to act in the interest of both the company and the co-investors and make decisions that will improve the company’s performance which will increase the overall value of the investment.

Lead Investor Remuneration

As seen above, the syndicate lead has quite a lot on their plate, but what do they get in return?

Leads normally get remunerated either through a discounted price on the shares or through carried interest for leading an investment round. They can also receive a fee for the work they do, this is particular popular in a manager lead angel investor network – the alternative being a member lead network. With each deal a lead angel also gains credibility in the ecosystem. This will lead to an improved status, greater visibility and potentially more work in the long run.