What is a syndicate?
An investment syndicate is a group of accredited angel investors who come together to invest in a particular venture opportunity that is made available by a lead investor with access to particular deal flow, in this case Nucleation Capital. In this way, a syndicate pools the capital provided by a group of accredited investors with interest in particular types of opportunities but who wish to invest in smaller amounts, into a single investing entity, which simplies things for the ventures that are raising capital.
How does syndication work?
Nucleation Capital will select opportunities, perform due diligence, write up a deal memo summarizing information about the venture and create a special purpose vehicle (an SPV). We will offer those who join our network the opportunity to read our deal memo and decide if you’d like to participate. There is never an obligation to invest. In exchange for creating deal flow, performing due diligence, writing the memo, negotiating terms and supporting the SPV over time, Nucleation Capital earns a fee and carry on future returns. (Note: we are not acting as brokers or finders and are never paid by founders.)
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 our network and receiving our confidential deal memos. If you do choose to invest in a syndication, you will pay the standard 2% management fee and 20% carry. Additionally, there is a one-time set-up fee for the creation of the SPV (typically an LLC entity). This fee is split on a pro-rata basis among the investors who opt into the deal. If you are also a subscriber in the Nucleation Capital fund and the fund has invested in the same venture, then you may qualify to receive a reduction in the management fees (as determined by the managing partners).
What’s difference between investing in Nucleation’s rolling fund versus the Nucleation syndicate?
Rolling fund subscribers elect to participate at a set level of capital in all of the direct deals that Nucleation Capital makes over the period of time of the subscription, typically four or eight quarters. Nucleation makes the investment decisions and provides quarterly reports and the investor need not review deal information. In contrast, syndicate investors do not commit capital in advance but are given the opportunity to review select deals and decide if they wish to participate, on a deal by deal basis. In this way, they make their own investment decisions about which opportunities they are interested in and how much to invest each time.
How does Nucleation decide whether to invest in a deal through its rolling fund or through its syndication?
Nucleation Capital invests its available quarterly rolling fund capital in the best deals it finds first. From time to time, some of these deals will have additional allocations of equity that they are seeking to issue. Other times, a deal will come along which the rolling fund is unable to invest in for one reason or another. Nucleation Capital may choose to syndicate these opportunities to its network. Syndication offers will go first to existing fund subscribers, then to general members of the Nucleation syndicate network if sufficient allocation is available.
What is carry?
“Carry” is short for carried interest which is a share of the deal’s profits. Carry for most syndicated deals is 20%. Carry is paid when the deal is successsful to the deal manager as upside reward for its selection of good ventures, negotiating deal terms, performing due diligence, writing the deal memo, and taking the risk to form the SPV.
What do you expect I will see in terms of potential deals from the syndicate each quarter?
You can expect to see one or two syndicated deals per quarter in which you can invest starting as low as $1,000 per deal but for this deal flow to grow over time.
Can I participate as a foreign resident? Can I participate if I am not accredited?
Yes, you may participate as a foreign investor however, you need to be able to meet the US SEC accreditation requirements through the submission of evidence of income or assets, whether you are a US citizen or a foreign national.
Will the names of those who invest in the rolling fund or in syndications be disclosed publicly or appear on the venture’s cap table?
No. Both rolling fund subscribers and syndicate participants remain confidential and are not disclosed by Nucleation Capital. Cap tables in both cases only list Nucleation Capital. Some investors may choose to list their participation in the rolling fund or their syndicates as part of their AngelList bios. Only if you provide your approval would we list you as an investor on our syndicate page within the AngelList community.
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 feasible to offer participation in such vehicles at really affordable levels. This means that it is not just the top 10% of high net worth individuals who can afford to invest in these kinds of deal but now nearly all accredited investors can consider a range of private equity opportunities—rather than simply investing in public market securities. Among those who work in banking, finance, venture capital, hedge funds, or who have been entreprenurs or engaged in technology innovation, these types of deals are pretty well known. For those who have worked in more traditional industries, government service or lab research, private equity and venture investing is almost unheard of. Nucleation Capital is seeking to build a network that broadens access to qualified investors who work or worked in traditional industries, or were members of the scientific, engineering, energy, research and even academic commununities to these exciting, private, extremely high risk but now more affordable investment opportunities.
Investing with the Nucleation Capital syndicate
Joining our syndication network means that you will learn about select investment opportunities in advanced nuclear, carbon capture, carbon utilization, smart grids and more. There is no obligation to invest. If you do choose to invest in a syndicated deal, you will then be directed to the portal where you can review and sign the deal docs, complete accreditation and wire your payment. Syndication deals are one-time investments that can start as low as $1,000. The syndication portal will track all Nucleation Capital syndication deals and maintain records of your investments, funding, management reports, K-1 tax returns and investment performance for the duration of these investments.