in Angel Investors, Canada, Investors

Syndicating Canada

In 2013, Angel List launched its syndicates feature, a way for angel investors to pool their funds. By turning syndicates into a turn-key process, Angel List has made this fundraising option broadly available and drastically lowered the barrier to entry for individual investors. Unfortunately, this feature is only available to startups that have a US entity as part of their structure. Can we kick off the process of having more syndicates in Canada?

While we haven’t been able to find much evidence of angel syndicates happening in Canada, it looks like Brightspark is using a similar model for their VC deals, where they intend to treat each deal as a separate fund. This is great, and something that early stage angel groups and individual investors can do on their own with a simple syndicate model in place.

At the same time, Angel List has made a hire in Europe to spread adoption there. As TechCrunch says:

It cannot be underestimated the impact this will have in Europe. The fact that AngelList – used extensively in the US by almost all startups – will have someone of Moehring’s calibre shepherding their operations in the region is likely to have a highly positive and far-reaching ramifications for startups in Europe, who typically have to rely on much small levels of funding. AngelList’s virtual nature could speed up the funding process to make it far easier to raise money, and put them on a more equal footing with US startups.

This is the same impact we need in Canada.


Let’s look at what some of the benefits of a syndicate model is:


Many startups pitch a number of angel investors, collecting $50K, $25K, or even $10K checks one at a time. Each of these investors are a separate shareholder, and need to sign a variety of documents. This can become quite a bit of overhead once the number of shareholders grows.

With a syndicate, the syndicate lead is the person that represents all the investors in the syndicate, and has the authority to make decisions for the entire block of investors. The lead is also responsible for informing the syndicate participants and keeping them up to date.


Angel investors can often function as advisors and of course want you to succeed. They might make intros to other potential investors, but ultimately they aren’t directly compensated when helping a startup raise funds.

With a syndicate, there is the potential for a syndicate lead to request a carry. This is exactly what professional investment funds, VCs, etc. have in place to reward the general partners. The short explanation of carry is that in the event of a return (the startup being invested in being acquired or doing an IPO), the syndicate lead gets a return beyond just their dollars invested.

This is a benefit for startups as their syndicate lead can afford to invest more time and energy into helping them both as part of their fundraising round and as the startup grows.


Ultimately, syndicates lead to more funding for startups. I would also argue that funding becomes easier, because you’ve got a syndicate lead who is compensated and incented to help with your raise.

As well, as investors get used to investing alongside each other, they are more willing to participate in each others’ syndicate deals. This creation of a network is hugely valuable.


Let’s go through an example of the terms and mechanics around a syndicate.

AcmeCo is doing a Seed 2 round, looking to raise $750K on a pre-money valuation of $4M. Amy really likes the AcmeCo team, but only has $50K to invest. AcmeCo and Amy decide that a way that Amy can help with the raise is to run a syndicate. She’ll commit to filling a $300K syndicate, of which she has already committed $50K.

Amy decides that she’s going to put in quite a lot of work, and is going to be a very active investor. In order to commit the time, she decides to charge a 15% carry.

Amy needs to find other investors who will put in $250K into her syndicate, after she puts in her own $50K. A rule of thumb is that the syndicate lead should put in 10% of the total size of the syndicate allocation.

AcmeCo needs to find the remaining $450K. Amy and AcmeCo decide that AcmeCo will focus on seed funds and other sources of larger checks, while Amy will focus on the smaller checks. AcmeCo still wants a firm to lead the round, putting in $250K or more and being lined up for their next round.


Amy’s responsibilities include:

  • Setting up a General Partnership (with her or a corporation she controls as the managing partner)
  • Setting up a Limited Partnership that is the investment arm and which all the other investors will be a part of
  • Finding investors to participate in the AcmeCo investment round; this might mean doing initial meetings, passing warm leads to founders, and so on
  • Helping wrangle the paperwork (and checks!) to get the deal done
  • After the deal closes, keeping track of the accounting and tax on an annual basis, including filings and updates to syndicate investors, government, etc.
  • Providing updates on the company to the syndicate
  • Acting as the decision maker and person who signs on behalf of the block of equity that the syndicate owns

This is quite a lot of work, and doesn’t actually end when the deal closes. The syndicate is a legal entity that needs to be maintained on an annual basis.

This is exactly why the service that Angel List provides for startups that have a US structure is so fantastic. In speaking with Angel List, it took them 9 months to design the structure and process, plus find a firm that can maintain and update the syndicate entities over time. The potential time frame for the life of a syndicate is 10 years, so this is a non-trivial amount of backoffice work. This is why even if the syndicate lead doesn’t charge a carry, Angel List takes a 5% carry to cover these costs over time.


In December, I had some back and forth with the awesome Angel List team about the potential for offering a Canadian version of syndicates. Even with their experience in figuring out the process once before, their guess is that it would take 6 months of work to set it up in Canada.

Angel List also reminded me that if a Canadian company has a US entity as part of their structure, they can use that to run a syndicate. This is true, but doesn’t help us scale Canadian-based investing. As well, the structure Angel List uses for the syndicate lead is an LLC, which causes tax issues for Canadian investors participating.

Without easy infrastructure in place, the barrier to a single angel investor deciding to run a syndicate is high. So we’re unlikely to see many syndicates. Without the scale of lots of syndicates, there is little motivation to invest time in setting up such easy infrastructure.


Ryan Holmes has started a conversation about the Maple Syrup Mafia: having Canadian entrepreneurs invest in the next generation of startups with money and advice.

This is a great idea – we can’t always be running down to the US for funding and get drawn into the gravity well of creating US entities rather than Canadian ones, culminating in moving down there as well. US investors these days are more than happy to invest in Canadian entities, and ideally syndicate leads can lean on their south of the border connections to participate even at the angel level.

Let’s equip active angel investors in Canada with the syndicate mechanism. We can work together, co-invest in each others deals, and get compensated for putting the work into helping Canadian startups succeed. All this while putting more money into startups.


We have a copy of the Angel List format, and would like to use that as the template to base Canadian syndicates on. It’s our hope that doing a handful of syndicates in 2014 will prime the pump for Angel List supporting Canada directly.

We’ve already worked with our lawyer, Justin Young at Lawson Lundell, to do an initial review, and creating Canadian syndicates doesn’t appear to be overly complicated.

If you are interested in running a syndicate as an angel investor, are a lawyer that often acts for investors, or are otherwise interested in being informed about the ins and outs of syndicates in Canada, get in touch.

  1. I’m trying to take your advice and up my blogging :)

    I have heard some chatter about an issue with “syndicates” in quotation marks. But as far as I can tell, the model much like Brightspark did it, where you great a GP / LP structure per deal, doesn’t have any issues.

    Do you have more info or a link to reference?

  2. There is a heavy emphasis on the lead and all investors being accredited. There were definitely some nuances that Brightspark did a very good job of navigating. A first timer starting a syndicate may step on a few landmines.

    This is a great model to open up more capital. My main concern is that this approach will follow the typical cycle where it will pick up steam, the regulators will get nervous because it isn’t an old school model, they will clamp down unnecessarily and then the taps will slowly get turned back on. Or maybe I should just have more faith and stop being so cynical…

  3. Didn’t Saskatoon allow this already?

    In Ontario, here are some links. What we need is for Canadian startups to have direct access to AngelList or crowdfunding mechanisms. But I also know that Blacksumac received $300K from Indiegogo, and Fabule raised $150K from Kickstarter.

  4. To be clear: this is not crowd investing. This is accredited investors. This is, as far as I know, perfectly legal. — Boris, 778-968-2171

  5. There are new models emerging (too slowly though) that will allow Angellist type activity in Canada. But at this time, our model is to function within the Venture Capital guidelines: Accredited investors only, no financing fees, no “marketing of deals” to the public, etc. ”
    Syndicates” like Angellist require a Cdn version of the Jobs Act and wider ability to market. But, at Brightspark, we are creating a VC fund per every investment, and lowering costs with standard docs. So far, we are seeing incredible dealflow and are scaling up.
    Just remember – its all about quality, not quantity.
    I’m happy to share our experience…

  6. Mark, thanks for getting on the phone and sharing your learnings so far.

    For those following along at home, there are some limitations.

    1) Everyone needs to be accredited (same as AL in the US)
    2) There is a limit of ~45 investors if you want to keep the small business exemption
    3) The entity / people helping to put the syndicate together can’t market the deal and can’t primarily be in the business of raising money (and can’t be directly compensated for raising money — carry is fine).

    I’ll be sharing some more notes with Mark and see where we get to.

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