Start-up Syndication

Start-up syndication is a very useful strategy to avert resource constraints when you are starting up, or growing up . The basic idea is if a start-up does not have all it needs, it can form a syndicate relationship with other start ups who have.

This gives a nice cashless basis for getting more services, and bargaining benefits when resources is a constraint.

The basis of syndicate relationship could be

a. Equity Swaps: Each party can take equity in the other start-up at a price that they mutually agree, or through help of independent start-up valuation individuals or firms that they both trust
b. Service Swap: Each start-up can offer a service in return
c. Customer Swap: Start-ups may agree to exchange customers where on the same login, both start-up services are available to both customers.
d. Simple Loan to be paid in kind later on by beneficiary start up.


Some examples
Forming syndicate relationship between start-ups in different geographical location would give start-up guys a place to work, and a place to stay in another geographical location.

Forming syndicate relationships between start-ups with complementary services would enable both start-ups to offer bigger range of services at no significant additional costs.

A syndicated group can present a bigger force in bargaining situations like Corporate Discounts, Travel and Stay discounts, and can get great bargains on services like advertisements, hoarding space, print space, recruitment sites etc.

Some Constraints:
If you form a syndicate, you should not expand competitively into services you gained as a result. This would unravel the basis of syndicate relationship, and you will not get more syndicate partners. Also, this behaviour will form part of start-up history, and convey unethical shades. So form syndicate relations with only those start-ups with whom you will never compete in services that you have syndicated.

Start-ups in syndicate relationship should not poach employees from each other, for the same reasons as mentioned above.

Syndicated relationships count
A start-up should limit the number of syndicated relationship it enters into to a self decided number, otherwise its syndication management costs would overwhelm the syndication benefits. Determination of this number could be a basis of Entrepreneurial research.

Infrastructure that can help
If some-one creates a start-up syndication clearing house, with start-ups offering what they have, and requesting what they don't they can find matches. If non-competitiveness is established, and if syndication history is good, a relationship could be established. This could be a nice business idea as well.

Syndication Contract
A syndicate relationship should be formed formally after signing a syndicate contract, which can list the principles above. The would give a measure of enforceability. Also, syndicated assets could potentially be sold off in non-competitive settings, creating a nice way for a start-up to build assets.