Sydecar - Shopify for Private Market Investing

Company & Team Introduction

Sydecar is the platform designed to modernize the venture industry by increasing accessibility, reducing regulatory burden, and improving liquidity. The company was founded in January 2021 by Nikhil Talerja (CEO) and David Meiste (CBO), a pair of ex-lawyers turned venture investors. The pair were well acquainted with the inefficiencies and high entry barriers plaguing the venture industry and decided to take their uniquely positioned experience at the intersection of legal compliance/contracts and Venture Capital to build a platform that helps private market investors get back to what they do best: making investments, not spreadsheets. Sydecar is headquartered in NYC, New York and has scaled its team to ~50 employees.

Product Overview

Sydecar is the backend operating system built for the Venture industry. Initially focused on SPV as its core competency, the company has since extended its product line to serve additional use cases such as Funds and Syndicates. Sydecar relieves private market investors of distracting and tedious tasks such as automating legal documentation, integrating a bank account, compliance checks, managing contracts, tax reporting, communications with LPs, and performance reporting. Sydecar helps GPs and Syndicate leads get back to their real job, sourcing and investing in the best companies and generating strong returns for LPs.

Total Addressable Market

Sydecar is well-positioned to capitalize on the massive opportunity to simplify fund management for VCs. The industry has seen a significant pullback from the insane levels of 2021, when, according to Statista, VC-backed startups raised a staggering 345.4B in the United States alone. As the industry returns to non-ZIRP levels, VC-backed startups in the US received a much more sustainable $170.6B in investment capital. The NVCA reported that at the end of 2023, there were 3417 VC firms in the US.

Business Model & The Numbers

Sydecar’s business model is fee-based, with their main revenue driver being percentage-based, totalling 2% of the capital the fund/SPV raised. Other revenue streams include a $1000 payable at the first distribution, state/provincial regulatory fees or “blue sky fees” of up to $1500 calculated based on the location of the fund/SPV’s LP’s. Fees surpassing $1500 are then passed on to investors proportionally. There is also a Pass-through entity surcharge of $2500 when investing in an LLC or partnership due to added regulatory/tax complexity. There is also a $1000 non-US investment surcharge. Sydecar announced earlier this year that they now had over $1.1B in assets under administration and growing quickly, up from $350M AUA just two years before, while the broader industry shrank as it returned to normalcy from the massive influx of capital in 2020 and 2021 as investors ventured further out on the risk curve seeking higher returns for their investors.

Traction

The founding team’s intimate knowledge of SPVs and their connections within the broader venture ecosystem was invaluable to the company as they built the platform and searched for early customers. The company now serves over 975 GPs and 20000 LPs, and the company released earlier this week that they had closed over 2000 SPVs. Sydecar’s technology is also super scalable, bringing utility to investors no matter the deal amount. When paired with their percentage-based pricing model, Sydecar can efficiently serve funds and investment vehicles of all sizes. The company has aided deals as small as $25k all the way up to massive $100M investment vehicles.

Competitors

The market dynamics of backend software for VC firms are quite promising, as the legal technicalities create a significant barrier to entry. There are a few key players aside from Sydecar: AngelList and Carta. Here are the differences between platforms and how Sydecar has differentiated itself as the best-fit solution for many dealmakers:

Sydecar - Sydecar is the most cost-efficient option of the 3; it allows for the fastest fund launches and is the easiest to use. It is best for investors with pre-existing relationships with LPs; think Shopify for private market deal makers where they have a more direct relationship with their LPs.

AngelList - Angelist is positioned more like Amazon of the private markets; they provide similar features to Sydecar, but they allow you to tap into the existing AngelList network of investors to source new LPs and have a more customizable platform, but at a higher price point.

Carta - Carta offers SPV/Fund management as a product in their broader equity management platform. Carta is best suited for larger funds/vehicles looking for comprehensive support and are willing to pay a hefty price, as many features are “add-ons”. Their offer isn’t the company's main focus, unlike Sydecar, which was built from the ground up from day 1 to fix these problems for Fund managers/syndicate leads.

Funding

Sydecar has raised a pre-seed, seed, and seed extension round of funding since its inception in 2021. The company first raised venture capital in March 2021 with $1.8M in pre-seed funding from investors such as Hawke Ventures and TechU Ventures. This raise helped Sydecar tap into the VC ecosystem and connect with new, more prominent investors. These connections eventually led the company to find a lead investor, Desians, to spearhead their seed round. Investor appetite was strong, leading an oversubscribed $6.5M round while initially targeting to raise $6M. A variety of other VC firms also participated in the round, including Pipeline Capital, Hustle Fund, Anthemis Group and angel investors Mike Vaughn (CEO, The Regis Company), Nik Milanovic (GP, The Fintech Fund), Shai Goldman (ex-Director, Brex), and Winter Mead (Founder/CEO, Coolwater Capital). Due to an existing investor wanting to increase their investment in Sydecar, the company raised a ~$8.1M seed extension in January 2023 but did not disclose participants in the round.