TLDR:
Syndication in venture capital refers to the practice of multiple investors co-investing in a single financing round, spreading risk and allowing larger deals to be completed by pooling capital from several sources.
Syndication Economics and Dynamics
Syndication serves multiple economic functions in venture capital. For the lead investor, bringing in co-investors reduces their individual exposure to a single company while maintaining deal access. For co-investors, syndication provides access to deals they couldn’t source independently. The economics of syndication typically reward the lead investor who does the most work: leads negotiate the term sheet, conduct primary due diligence, take a board seat, and in some syndicates, charge a ‘carry’ or ‘success fee’ to co-investors for deal access.