The Nucleation Syndicate Network
A syndicate is a special purpose vehicle (SPV) used for pooling a larger number of investors together into a single entity which is incorporated for the purpose of holding private equity. Nucleation Capital will sponsor occasional SPVs to offer equity in deals we have diligenced for our fund. This enables both existing fund subscribers and members of our broader pronuclear investor network to invest additional capital towards the equity of select ventures at reduced cost.
The SPV purchases the total allocation of equity in the underlying venture and each investor holds a pro-rata share of the SPV. By pooling together smaller investors, the SPV sponsor is able to make equity available in reduced amounts. If you are interested in accessing these opportunities, please join the Nucleation Syndicate. There is no cost to join or obligation to invest. The minimum amount to participate in an SPV is $1,000.
Not every deal that we invest in through our fund can or will be syndicated. We fill these allocations on a first-come, first-served basis at the same valuation that we invest in with our fund. Existing subscribers typically get priority access to syndicate offerings, after which general members of our syndicate are invited to participate. See our Q&A below for more details.
Open Syndicated Offerings from Nucleation Capital
What is a syndicate?
An investment syndicate is simply a group of accredited investors. Their funds are pooled together to acquire private equity to be held by a special purpose vehicle (SPV). Every syndicate has a lead investor, in this case Nucleation Capital, which sponsors the SPV to simplify closing a larger number of investors into a single deal. In this way, each investor owns that percentage of the SPV that is the proportion of their investment to the total raised by the SPV. SPVs provide cost savings on what could be prohibitive legal fees for smaller investors.
How does syndication work?
Nucleation Capital will select opportunities, request allocations and, if successful, write up a deal memo summarizing information about the venture. We then submit the information and direct AngelList to incorporate the special purpose vehicle (SPV). Once formed, we will send invitations to network members about the opportunity. Each investor will receive a link that allows them to read the deal details and decide if they’d like to participate. There is never an obligation to invest. There is also no guarantee that there will be sufficient allocation available. The minimum to participate in any SPV is $1,000 and is a one-time event. This minimum can make investing in higher-risk opportunities more affordable for investors.
What are the fees for investing in the syndicate and how do they differ from the fees for the rolling fund?
There is no cost for joining the syndicate and receiving confidential deal memos. Additionally, Nucleation does not charge a management fee on syndicated deals, since all the vetting and diligence work was done on behalf of the venture fund. There are, however, two types of fees that do apply to syndicates. There is a fee charged by AngelList to set up the SPV, which covers the incorporation costs and any state jurisdictional tax that applies. This fee is shared pro-rata by all investors. The second fee is a success fee called carried interest (“carry) paid to Nucleation Capital as the sponsor, when the investment returns profits beyond the principal amount invested. (Note: Nucleation Capital does not act as a broker or finder and is never paid by founders.)
What’s the difference between investing in Nucleation’s rolling fund versus the Nucleation syndicate in terms of deal access?
Rolling fund subscribers have automatic pro rata participation in every deal the fund invests in. Not all of the deals the fund invests in will be syndicated. When a syndication is possible, fund subscribers have priority to take the available allocation. Only thereafter is the remaining allocation made available to those participating in the syndicate. Thus, syndicate members may not have access to every deal and may have limited allocation available in certain deals.
How does Nucleation decide whether to invest in a deal through its rolling fund or through its syndication?
Nucleation Capital always invests first on behalf of the fund, seeking as much allocation as the fund choses to invest from available quarterly subscriptions. If there is an additional allocation of equity available thereafter, Nucleation Capital will seek to syndicate that both to allow subscribers and members of the syndicate a chance to add to their holdings but also to provide more capital to the portfolio venture and support their capital raise.
Why can’t all deals syndicated?
Early stage equity tends to be the most expensive equity, so founders naturally want to limit the amounts that they raise early on. As a result, some deals generate more investor interest than what the founders want to raise. These are “over-subscribed” deals and these never offer extra allocations for the purpose of syndication. In other instances, founders disclose very sensitive and confidential information and require that this be protected by Non-Disclosure Agreements (NDAs) that are signed by Nucleation Capital. These ventures may not allow syndication to better protect their confidential information. Sometimes, a round is closing too quickly to permit the formation of a syndicate or the Nucleation team does not have the bandwidth to sponsor the syndicate.
What is carry?
“Carry” is short for “carried interest” which is a share of the deal’s net profits. Carry for most syndicated deals is 20%. Carry is paid when the deal returns proceed in excess of the amount invested by the LPs. This is a “success fee” paid to the deal manager as upside reward for its selection of good ventures and for managing the SPV.
How many deals will I see through the syndicate each quarter?
You can expect to see one or two to four syndicated deals over the coming year. As our fund grows, we expect the rate of deals that we can syndicate to grow over time.
Can I participate as a foreign resident? Can I participate if I am not accredited?
Yes, for the most partk foreign investors may participate in syndicated opportunities. In rare instances, such as for Danish residents, local rules prevent them from investing in the Copenhagen syndicate. Foreign investors will need to be able to meet the US SEC accreditation requirements.
Will the names of those who invest in syndications be disclosed publicly or appear on the venture’s cap table?
No. Syndicate participants are not direct investors but rather shareholders of the SPV, so their identities remain confidential (unless they hold 25% or more of the SPV). Cap tables list ownership as the “Nucleation Syndicate.”
Why haven’t I heard of investment opportunities like this before?
Syndications have been around a long time but technology has only recently made it both affordable and accessible. Now, nearly all accredited investors can afford to participate in a range of private equity opportunities. Nucleation Capital is leveraging existing investment platforms to make affordable nuclear-related deals accessible to more investors.
Join the Nucleation Capital syndicate
Joining our syndication network means that you create an account at AngelList which will send you our notifications about the select investment opportunities we offer. There is no obligation to invest. Should you choose to invest in a syndicated deal, you will be able to do so directly through the AngelList portal where you can review and sign the deal docs and wire your payment. Your account at AngelList will track your investments, funding, management reports, K1s and investment performance for the duration of these investments.