Relationships with other investors - syndicate leads, angels and funds - provide deal access and shared diligence. They are built on reciprocity, reliability and honest views about deals.
10 min read · Level 5
The co-investors I value most are the ones who will tell me, privately and early, that they are worried about a deal we are both in. Anyone will share good news; the relationships that make investing better are the ones where bad news travels quickly and honestly.
Co-investor relationships work through reciprocity:
You give You receive Share good deals that fit their focus their deals that fit yours Contribute diligence in your area of expertise their diligence in theirs Commit reliably when you say you will being invited again Honest views, including doubts honest views in return
The lead investor in a round usually negotiates terms, coordinates diligence and often takes a board seat. Following a lead you trust lets smaller investors participate in better-structured deals.
What to evaluate in a lead:
Track record over many years, not one outcome How thoroughly they do diligence How they behaved in down rounds and difficult companies Whether they share information with co-investors Their incentives - fees, carry, relationships with the founder
Reliability matters. An investor who says 'I'm in for 25,000' and then withdraws after the round is organised damages their reputation with both the lead and the founder.
Because no individual investor can see every deal or be expert in every sector. Co-investors extend both reach and knowledge.
However, following others can also spread mistakes - if everyone relies on the lead's diligence, nobody checks independently.
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Educational, not personalised financial advice. Nothing in the Investor Academy is a recommendation to buy, sell or hold anything — what is right for you depends on your own circumstances and the rules where you live.
Sources: U.S. SEC - Investor.gov; UK FCA - information for consumers; FINRA - investor information
Reciprocity over a year.
An angel with healthcare experience shares two health-tech deals with a syndicate lead focused on software, and joins their diligence calls with clinicians. The lead invites the angel into three software rounds, two of which fit the angel's thesis.
The angel invests in one of them after doing their own reference calls - relying on the lead for structure, but not outsourcing the decision.
Following a lead investor's decisions without doing any independent diligence, or taking deals from co-investors without ever sharing any.
Evaluate track record, diligence quality and behaviour in hard times.
Pass on deals and expertise that fit others' focus.
Commit only when you intend to follow through.
Do some independent diligence even when following a strong lead.
When investing alongside other investors or through syndicates.
Do not share confidential company information with co-investors without the founder's permission.
Online syndicate platforms display information about syndicate leads and allow backers to follow leads they trust, and platform operators and investors have noted that the quality and track record of the lead is a central factor in backers' decisions.
When following a lead, the lead's judgement and behaviour over time is effectively part of the investment.
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