How do syndicates work?
Here’s an example.
Emily, a notable angel that is an approved CannaFundr marketing partner and Syndicate Leader,decides to lead a syndicate and back a company on which she has done her due diligence.
Emily asks the company for a $500K allocation, at favorable terms, for her syndicate. She invests funds in her syndicate and offers, to her network and the accredited investors on CannaFundr.com, an opportunity to the balance of the syndicate.
Investors invest in her syndicate by agreeing to invest, based upon the minimum requirements of her negotiated deal. Typically, a deal this size would require a $5,000 minimum investment from the accredited investors who wish to participate. Syndicates are formed under SEC guidelines, which allow for an investment fund to have up to 100 investors; so, a minimum is easily decided upon by taking the total amount of allocation and dividing it by 100.
Emily uses the standard subscription agreement and funding system managed by CannaFundr.com’s parent company, CrowdFundConnect (CFC). By using standard templates for these agreements, an investor and the lead always know their standing in ALL syndicates in which they invest, reducing the costs for all parties.
CFC manages the issuer and the syndicate using the automated systems provided by CFC for investor onboarding and shareholder management services. This reduces their costs, including legal expenses, as well as lowers the amount of time normally associated with these services. More money flows into the company, and they can focus their time and money on growing their business. This is a win/win situation for everyone!
The documents used are already accepted and understood by leading angel groups and the National Venture Capital Association, so later-round funding and due diligence is a simpler, lower-cost solution going forward, as the company goes after additional rounds of funding to grow and accelerate their business.