The Rise of Angel LP Syndicates 😇
Core learnings on picking and working with venture funds from a panel with 100+ startup investments.
In the ever-evolving landscape of startup investing, gaining access to the most promising ventures across Europe can be a daunting challenge. The fragmentation of the market and the sheer activity in the space make it difficult for individual investors to identify and secure the best opportunities. However, there is a route far too little traveled by Europe’s angels to tap into the European startup ecosystem: investing in venture funds.
Before we delve into the reasons why investing in VC funds can be a game-changer for angel portfolios, it is important to acknowledge that fund investments carry inherent risks just as anything in venture. It takes only a quick glance at the chart below to realize that you want to pick funds as carefully as you pick startups.
With that in mind, let's explore the potential benefits that venture fund investments can offer:
1) Access to Exceptional Deal Flow: Venture funds act as gatekeepers to a diverse range of startups, providing investors with unparalleled access to high-potential opportunities. This access to deal flow can be a significant advantage, enabling you to invest in promising companies that may have otherwise eluded your reach.
Investing in funds gives you exposure to a carefully curated portfolio of startups that experienced fund managers have rigorously vetted.
2) Co-invest & follow-On Opportunities: Investing in venture funds opens up the possibility of participating in follow-on investment rounds. As startups progress and demonstrate their potential, they often require additional funding to fuel their growth presenting you with the opportunity to double down on the most promising companies in your underlyung portfolio.
By being a value-add LP for a venture fund you increase your chances of securing the coveted co-invest and follow-on opportunities,
3) Knowledge and Networking: Venture funds offer more than just financial returns. They provide a wealth of knowledge and expertise in specific industries or geographies. Additionally, the network of investors and industry experts associated with the fund can prove invaluable in terms of mentorship, strategic guidance, and even co-investment opportunities. This is something we’ve seen many times and why we in our post on the value and role of AGM’s stressed the importance of building an LP community.
Investing in funds that align with your investment goals and areas of interest allows you to tap into the insights and experiences of seasoned fund managers and their LP community.
4) Expanding Investment Reach Geographically: Europe is a diverse and vibrant region with a myriad of startup ecosystems. Investing in venture funds can provide you with exposure to markets where you may lack direct access or expertise. Whether it's exploring the burgeoning tech scenes in Berlin, Stockholm, or Barcelona, or seeking opportunities in emerging markets, venture funds can open doors to exciting new frontiers.
I knew that in Berlin, I’d have pretty solid access. But I recognized a booming opportunity in LatAm and Africa that I couldn’t reach on my own.
By investing in venture funds, there’s a plethora of upside to be earned ranging from tapping into their specialized knowledge and gain access to deals that lie beyond our comfort zone, to leveraging the network and expertise of other investors. This not only mitigates risks in our angel portfolios but also allows for economic alignment and synergy with our fellow investors in the ecosystem.
A Framework to Pick Venture Funds
When selecting a venture fund, it's essential to evaluate several factors. Clearly, you want to look for consistent returns, successful exits, and evidence of value creation in the fund's historical performance. Assess the fund's investment strategy, focusing on its stage preference, verticals, and geographic scope, ensuring alignment with your investment goals and desired exposure.
Additionally, don’t rely on the track record to tell you the whole story. There are managers that wildy overstate their role in the success of others and there are managers that have yet to convert real value add to euros on the table. Evaluate their expertise, experience, and reputation, as well as their claim for value-add capabilities. If evaluating VC funds is outside your area of expertise, don't hesitate to seek advice. Investment consultants, financial advisors, or experienced LPs can provide valuable insights and help you analyze a fund opportunity, enabling you to make informed investment decisions.
Lastly, if you're looking to supercharge yourself, it is crucial to emphasize the importance of partnership and community fit. Consider whether you see yourself working with the VC team for the long term and think about building a community of like-minded investors around you - at least if you’re investing for the YOUx, not just the 3x. You want to ensure that you’ll have a good channel of communication, and receive regular updates that go beyond just pure performance. Ensuring alignment of expectations will contribute to a successful and mutually beneficial relationship and should not be forgotten.
Never forget, different funds may be better suited for institutional LPs, family offices, or fund of funds. It's important to match the right fit for what you’re after! At eu.vc we have a high bar for the partnership fit, as we and our co-investors are looking to derive strategic value from our fund investments.
In summary: Investing in venture funds allows angel investors to unlock Europe's startup potential and gain access to the most promising opportunities. By carefully selecting funds that align with your investment goals, you can benefit from exceptional deal flow, follow-on opportunities, knowledge sharing, and expanded geographical reach. Remember, venture fund investments should be approached with diligence, strategic intent, and a long-term perspective.
At eu.vc, we are committed to building Europe's leading GP/LP community, deepening relationships between VC funds, Superangels and venturing families. Our syndicate profile extend beyond our portfolio model—it's our vision to foster collaboration and value creation among investors and startups. And we invite you to join us in our search for funds acing all levels of Maslow’s Hierarchy of Venture Fund Investing. Together, let's seize the incredible opportunities that European startups have to offer and create a thriving ecosystem that fuels innovation, growth, and success.
Stream the webinar on-demand below 👇
A huge thank you goes out to our expert panel consisting of (from the left):
And of course my always magnificent partner in crime David Cruz e Silva 💖