The typical model of venture investment is to attract a large pool of subscribers to fund portfolios, but this model doesn't always work in the life sciences waiting game. Ann Arbor's Arboretum Ventures is a firm cited for its small syndicate approach.
Excerpt:
"A broad syndicate is supposed to reduce the risk that a start-up will run out of cash and enable the company to bargain from a strong position with new investors or collaborators. When a syndicate is united, it can do just that. But the difficulty health-care investors have had in selling companies or taking them public recently has forced them to hold positions longer. As years go by, investor groups that started strong can fray.
Syndicate members may develop different agendas depending on how the rest of their portfolio is performing. One member is counting on a company to produce big returns and wants to hold out for a 10X; another wants to exit soon. Some members have plenty of cash reserved, while others run short. Meanwhile, pay-to-play provisions punish firms that are unable to continue participating in a company’s financing rounds."
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