Gil Penchina’s Army: How AngelList’s Largest Syndicate Plans to Lead A Rounds, Hire An Associate & Keep VCs Honest

Gil Penchina doesn’t appear in TechCrunch or Valleywag often. He tweets infrequently. Maybe you haven’t heard of him until now. But he’s raised the largest syndicate on AngelList, turning himself effectively into a one-man fund for, if not the masses, at least the 270 people who have already committed nearly $3.4m for each investment he wants to make. 

Gil cut his tech teeth as an early eBay exec and I met him first several years ago when he was CEO of Wikia. Having followed AngelList Syndicates pretty closely (I believe Homebrew was the first institutional fund to invest alongside one), Gil’s multimillion dollar path and his future plans, strike me as pretty exciting and undercovered by the tech press. 

Q: Although your $3.3m AngelList syndicate has surprised some people, you’ve been angel investing for quite a while, right?

I did my first angel investment in 1998, so 16 years and 60+ investments.  I’m not focused on making a log of noise but honestly it wasn’t too surprising to me when you consider:

  • my [angel] portfolio is up 5x cash-on-cash

  • most of my peers from the early 2000 days of angel investing are now VC’s (Reid Hoffman, Peter Thiel, Josh Kopelman, Jeff Clavier, Mike Maples, Dave Whorton, etc).  I was one of the few not to raise a fund

  • I had 9,000 angel list followers many of who had tried to co-invest with me previously

Q: When AL launched syndicates, what was your immediate reaction? Had you been thinking about raising a fund via other channels?

I had thought about raising a fund several times and always decided not to.  The main reason was that having a fund requires spending a lot of time with lawyers and accountants. Process people make me crazy since entrepreneurship is all about challenging the established order of things.

Q: Secrets of your success? Why do you think you’ve raised the largest syndicate thus far?

It’s a combination of many entrepreneurs I’ve helped over the years who owe me one, investors who I’ve traded deals with in the past and an enormous amount of trust from people I don’t know.  It’s actually a bit intimidating when you realize the burden that places on you.

Two of my three syndicate deals have already had an up round from well known VC’s.  The Andreessen and Founders Fund investment in AltSchool is public.  The other one I can’t talk about yet, but we’re very excited about it. So clearly picking good deals has helped both build trust with my co-investors in the syndicate and attract more commitments.

Q: Can you talk a bit about the composition of your syndicate – people you know or strangers? Small commitments or large commitments? Do you let anyone join?

Join today at: https://angel.co/penchina#syndicate

Anyone can join. I have $1,000 backers and big money backers. Dentists from the Midwest, tech CEOs, Facebook engineers, VC’s and private equity partners.   What’s great is they all want to help too.  With advice, referrals, customer intros and more.

Q: $3.3m+ is a stunning amount – fully deployed it would allow you lead an A Round. Do you think of yourself as being competitive with VC firms? Have you elbowed any VCs out of deals?

I’ve already been working on 2 A rounds. I recently lost the chance to lead one, but because my “better offer” let the entrepreneur improve the price and terms from the VC…  he called it a GATNA (Gil Alternative to A Negotiated Agreement).  I also think we may be an ideal bridge round partner for companies that need a little more money before an A since I don’t need board seats and am generally stupidly entrepreneur friendly.

Our syndicate has already lead and priced a large seed round twice. Those deals would have been an A a few years ago ($1mm+). That said I fully expect to lead an A in the next year.

Q: Has being more public changed your dealflow or the nature of conversations entrepreneurs, coinvestors are having with you?

I see entrepreneurs reaching out to have me join their round because a hot deal on AngelList raises their company’s profile to VC’s and employees.  That let’s me get small investments in some of the best entrepreneurs

AngelList is also a very high profile service, so being a top angel has many benefits

  • more entrepreneurs reach out now

  • I continue to attract new funds at a crazy rate.  I expect in a year we could legitimately do B rounds too

  • as a credibility badge, saying 250+ people think I’m a great angel is a fantastic signal to entrepreneurs.  As are the comments entrepreneurs have left on my angellist profile page at https://angel.co/penchina

Co-investors have occasionally been a little offput.  I’ve attended a couple board meetings where a bridge round was discussed and the VC’s work together as a club to set the price rather than bidding against each other.  In both cases I’ve stated that I want to bid against them to give the entrepreneur a fair market price.  In one case a VC ranted at me “this is an insider round!!”  I responded with a smile “yes, and I think I’m an insider”.   I ended up bidding the deal up to almost twice what the “insiders” had generously offered the CEO.  So if you know someone frustrated with the “inside round” offer they get from their VC’s, tell them to contact me on LinkedIn or Facebook and we can “fix” a low ball offer

Q: Advice for someone who is thinking about joining a syndicate?

Think about the fact that VC’s need 10 deals to have 1 winner.  In my experience angels need 25-30 deals to get that same winner… So don’t bet your whole savings on one deal :-). I have counseled several angels to cut back on their commitment to me so they can do a smaller amount in more deals and spread their risk.

Q: Any predictions for what Syndicates will look like 12, 24 months from now?

I am attempting to expand the definition of the syndicates in several ways today:

  • A rounds

  • buying common from founders

  • bridge rounds

Assuming the current crazy growth continues I fully expect to start bidding on B rounds next year. I’ve already hired an intern and am interested in talking to people who would want to be an Associate for my virtual VC firm.

gil-penchina-headshot

 

5 thoughts on “Gil Penchina’s Army: How AngelList’s Largest Syndicate Plans to Lead A Rounds, Hire An Associate & Keep VCs Honest

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