Sometimes you find a deal you like, you WANT to invest in, but no one in your group really understands the space. Normally, that means the deal gets declined. But if you have a network of contacts at other angel groups you have a chance of finding the expertise you need. And when you do, you not only get that other group’s angel’s experience & money, he or she can bring in angels from THEIR group as well.
If your group has all the expertise and money needed to pull off a deal, there is little incentive (beyond diversification of risk) to syndicate. However, every angel group I’ve spoken to is looking for more money and more domain expertise to help them get deals done. Bringing in more angels and more GROUPS of angels gives your portfolio company a deeper bench of investors to tap when follow-on rounds, strategic challenges, and exit negotiations come around.
From the entrepreneur’s perspective: There is a *small* possibility of collusion to beat up on the entrepreneur – but not much of one. If the groups each lack enough $$ and expertise to pull off a deal, then the options for the entrepreneur are “syndicate or no $$.” If there is plenty of expertise and money to go around, then by syndicating the angels are diluting their own interest in the company – they could probably get a better deal by working the deal alone and keeping it all for themselves.