ANGEL INVESTOR SYNDICATION: SYNDICATE FORMATION AND NETWORKS IN FINLAND

Author Paula Väätänen Title Angel investor syndication: Syndicate formation and networks in Finland Subject International Business and Entrepreneurship Type of work Master’s thesis Date 24.6. 2021 Number of pages 84 + 9 Abstract The purpose of this thesis is to examine the formation of angel investor syndicates in Finland. Angel investors have increasingly started to operate in groups or as a part of a network, changing the angel investment market from previously dominant individual activity to more collaborative activity. These angel networks and groups provide a more visible platform for companies to apply for angel funding and for investors to make syndicated investments. The study aims to contribute to the understanding of the process of how, why, and with whom angel syndicates are formed. This study uses mixed-method research with both qualitative and quantitative data. The data sample consists of quantitative angel investment data between the years 2013-2019 collected by the Finnish Business Angel Network (FiBAN) and qualitative interviews conducted with eight angel investors. The objective of the data collection is to produce information about how angel investors form syndicates and to visually map the basic structure of the angel syndication network. The study’s results show that syndicate investing is common among Finnish angel investors. All of the investors see syndication as a way to diversify the risks related to startup investing, make larger total investments, and guarantee possible follow-up funding. Operating in syndicates also improves the quality of how the investments are assessed, given more knowledge is available through multiple investors. The angel investors typically form syndicates in two ways: either the syndicate is formed around the investee company through the formal investment process facilitated by FiBAN, or the angels collate the syndicate themselves from the investors in their network. EntrepreneursThe purpose of this thesis is to examine the formation of angel investor syndicates in Finland. Angel investors have increasingly started to operate in groups or as a part of a network, changing the angel investment market from previously dominant individual activity to more collaborative activity. These angel networks and groups provide a more visible platform for companies to apply for angel funding and for investors to make syndicated investments. The study aims to contribute to the understanding of the process of how, why, and with whom angel syndicates are formed. This study uses mixed-method research with both qualitative and quantitative data. The data sample consists of quantitative angel investment data between the years 2013-2019 collected by the Finnish Business Angel Network (FiBAN) and qualitative interviews conducted with eight angel investors. The objective of the data collection is to produce information about how angel investors form syndicates and to visually map the basic structure of the angel syndication network. The study’s results show that syndicate investing is common among Finnish angel investors. All of the investors see syndication as a way to diversify the risks related to startup investing, make larger total investments, and guarantee possible follow-up funding. Operating in syndicates also improves the quality of how the investments are assessed, given more knowledge is available through multiple investors. The angel investors typically form syndicates in two ways: either the syndicate is formed around the investee company through the formal investment process facilitated by FiBAN, or the angels collate the syndicate themselves from the investors in their network. Entrepreneurs searching for funding could also form syndicates if they bring potential individual investors together. Angels often syndicate with investors whom they have invested with in the past and who they trust. Furthermore, repeated syndications usually form between investors with similar activity and investment focus. The results of the study suggest that syndicate investing has taken its place among Finnish angel investors. However, syndicate formation seems to be rather informal and dependent on the existence of these investor networks that are formed through syndication. The study opens up many possibilities for further research on angel syndication that the current research has not yet exhaustively studied.