It's free to gain access to investing on AngelList. However, when investors make an investment, some portion is retained to cover setup, management or administrative fees. These fees are specific to each Fund or Syndicate (SPV) and are explained during the closing process. Additionally, if the investment returns a profit, a portion of that profit (="carry") is retained by the fund lead or the investment advisor.
When investing in a syndicate, investors pay a portion of the setup cost (proportional to their investment amount) and usually carry to the lead or the investment advisor. In rare cases, there is no setup fee or carry.
Here is an example of a standard syndicate structure. Note that the syndicate you're investing in might have a different structure.
- A syndicate has a $92,000 allocation to invest in ACME, Inc.
- The setup fees are $8,000.
- The carry is 20%.
- Thus, the syndicate is raising $100,000 in order to make a $92,000 investment into ACME.
- The syndicate raises from 10 investors, each investing $10,000.
- Since each investor contributes 10% to the syndicate, each is covering 10% of the setup fee. In other words, of the $10,000 contributed by each investor, $800 go towards setup fees, whereas $9,200 go to ACME.
- Five years later, ACME gets acquired and the syndicate receives a $500,000 payout.
- Now, each investor receives back their full investment first ($10k each, so $100k total). Of the remaining $400k, $80k are retained as carry (20%), and $320k are distributed to investors.
- In total, each investor receives back $42k ($10k + 10% of $320k).
When investing in a syndicate, investors generally pay a management fee and carry to the fund lead.
- Management fees are usually 2% of the fund's total amount.
- Carry is generally 20%
- Imagine a $1M fund that an investor invests $100,000 into.
- The fund lead receives a $20,000 management fee (2% of 1M), and the investor in question pays $2000 (10% of $20,000), leaving $98,000 to go towards the investable capital.
- Imagine the fund has a positive return, and the investor is due a distribution of $1M. The investor receives the amount they invested ($100,000), and then 80% of the remainder (80% of $900,000 = $720,000).