Anyone have any opinions of AngelList's syndicate system? My primary concern is that nobody has any significant incentive to do any due diligence because the investment from the lead tends to be either not disclosed or negligible.
angellist.com/syndicates
angellist.com/syndicates
If only syndicate members have skin in the game and everyone else is playing with house money, where's the incentive to make the deal fair to syndicate members? And who is incentivized to do the thorough due diligence needed for such early stage investment? Am I wrong?
If I'm investing $10,000 and there's a lead whose investing $500,000 at the same terms I am, then I don't worry too much about having to check out the deal in full detail. But for $10K, I can't afford to do that and if nobody else can either, then it seems like a bad deal.
This seems like a simple way to acquire a portfolio of investments in early companies. But if nobody's evaluating the deal terms because nobody has an incentive to, that seems to be a huge problem to me. Lots of deal flow is good, but someone has to do diligence.
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