Syndicated equity crowdfunding : the trade-off between deal access and conflicts of interest

An increasing number of startups raise capital through syndicated equity deals on platforms such as AngelList. Syndication is a useful source of entrepreneurial finance because there are many households that would like to invest in startups and relatively few with the knowledge and networks required for successful outcomes. Accordingly, syndicate leads tend to be well-networked investors. In this paper, we study whether there is a cost to investing alongside leads who have many investment avenues and opportunities. We find that syndicated rounds are riskier and have longer harvesting periods, consistent with the use of syndication as a screening technology for subsequent non-syndicated investments. Companies in which the lead has previously invested tend to perform worse than non-syndicated deals involving the same lead. We also find that syndicated rounds are more likely to be successful if the lead investor has fewer ongoing investments in other companies