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SyndicateRoom Drops Platform Carry




By Ryan Weeks on 7th March 2016


SyndicateRoom will no longer levy a platform carry fee on investments made through the platform.

 

The platform carry was a 2.5% fee that was applied to any profits earned by SyndicateRoom investors. SyndicateRoom originally introduced the platform carry in order to better align its interests with those of its investors. But the platform now claims to have implemented a superior method of aligning those interests – one that allows investors to retain 100% of any profits that are realised through SyndicateRoom investments. For that reason, the platform carry has been abolished, and SyndicateRoom is retroactively waiving it for all investments made since its introduction.

 

Going forward, the platform’s fundraisers will have the option of choosing between the established “all upfront” fee structure and the newly introduced “monthly payments” model.

 

In the “all upfront” structure, companies pay a one-off 7.5% commission on funds raised from SyndicateRoom investors, together with a £1.5k setup fee and follow on fees of 4% for any subsequent rounds involving SyndicateRoom investors over the following 5 years. No fees are charged on investments that were sourced prior to the listing of a round on the platform.

 

The new “monthly payments” structure allows companies to pay a reduced commission of 4% on funds raised from SyndicateRoom investors, alongside a banded monthly fee for ongoing nominee management services, which starts at £150 per month and which is dependent on the number of investors involved (the more investors, the greater the weight of the administrative burden). The £1,500 setup fee and follow-on fees of 4% continue to apply over the following 5 years. The idea here is that companies backload their fee payment, such that they keep more of the money raised in the short term.

 

The latter of these two fee structures only works if the company that has raised funding survives – and thus continues to pay its monthly fees. In this way, SyndicateRoom would argue that it is still very much in the interests of the platform to source high quality investment opportunities. SyndicateRoom described the move as follows:

 

"This is just one more step towards our goal of a fair, sustainable and transparent investment industry."

Comments

Goncalo de Vasconcelos, CEO of SyndicateRoom

11 Mar 2016 05:23pm

Hi Spin Doctors, Quite the opposite in fact. If you read our page on our fees you will notice that at the same time as we removed our carry, we also nearly halved our upfront fee. We moved into a highly innovative charging structure which companies pay us a small amount (from £150) a month. This new fee structure will only pay off if the company goes on to survive for several years, so we are taking a lot of risk as a company without taking any of the profit from our investors. Companies that don't do well will stop paying our ongoing fee and we will be out-of-pocket. We are known in the industry for being very honest and transparent and this new charging structure is yet another innovative and highly welcomed move. Thank you, Goncalo CEO and Co-founder of SyndicateRoom

Spin Doctors

11 Mar 2016 04:54pm

I love how this is framed as being in the best interests of investors, when actually it's just a way for SyndicateRoom to charge riskless upfront rather than on successful exit. At least be honest!


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