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AngelList introduces new Roll Up SPVs

An article we liked from Sumukh Sridhara of Angel List about a new way of raising money for startups: 

Introducing Roll Up Vehicles to simplify startup fundraising.

Streamline your closing with one entity for angel investors. With Roll Up Vehicles, founders get a single link that allows investors to commit and send funds online—and AngelList takes care of the rest.

AngelListAt the early stages of a company, the most supportive investors are often customers, angel investors, and other operators. Despite having dozens of value-add investors eager to participate in a financing round, founders often have to turn away smaller checks because of legal costs and increased cap table complexity.

With Roll Up Vehicles (RUVs), founders get a private special purpose vehicle through which up to 250 accredited angels and operators can invest. AngelList will handle the RUV formation, collection of capital, accreditation, KYC, and signatures.

Through a closed beta, over 25 companies have already run an RUV on AngelList, including SecureFrame, Mainstreet, and Italic.

Today, we’re excited to make RUVs available to more founders.

Close Investors With a Single Link

Traditionally, to close a round, founders either spend time chasing down signatures and reconciling wires or pay their law firm to manage the process. With RUVs, founders get a single link that allows investors to commit and send funds online. Once the RUV closes, AngelList sends one single wire to the company.

Shrav Mehta, Founder & CEO of Secureframe, used an RUV for his recent fundraise.

“During our fundraise, we had early customers and value-add investors that wanted to participate in our round. Managing dozens of individual investors would have substantially increased operational overhead for us. AngelList took care of all the paperwork and was incredibly communicative throughout the process. Our investors were able to sign and wire right on the platform. Our legal counsel is a lot happier too!”

Streamlining Cap Tables

Adding dozens of small-check investors makes a company's cap table harder to manage over time. While SAFEs and convertible notes have made it easier to raise capital, companies still have to manage a complex and expensive conversion process of getting signatures from each shareholder when they convert to equity. Even after the conversion, founders still end up with a complex cap table.

A larger cap table increases the complexity of future financings, corporate actions, and exits. RUVs allow founders to raise from the angel investors they want with just one new cap table entry. 

Nick Abouzeid, Head of Marketing at MainStreet, said:

“We had dozens of early customers and massively-skilled operators that wanted to invest, but managing 50+ individual SAFEs would have been exorbitantly expensive and unruly. AngelList made the entire process smooth-as-butter ... they handled all of the compliance, wires, and minutiae of paperwork. Win-win-win.”

Cost Savings

Each additional investor in a round results in increased costs for the company. For a round with 40 individual checks, managing those investors’ direct administrative costs over the company’s lifetime could be as high as $95,000.

However, RUVs cost $8,000 as a one-time fee and include all filings, tax documents, and distributions management over the vehicle’s lifetime.

Jeremey Cai, Founder & CEO of Italic, said: 

“The prospect of having to manage a complex cap table, chase signatures, and reconcile dozens of wires led us to use an RUV. AngelList made it really simple for over sixty investors to close and helped us avoid the high legal costs that we would have incurred otherwise.” 

Getting Started

AngelList is eager to make Roll Up Vehicles available to more founders.

If you are interested in using an RUV, you can sign up here - tell them the OC Startup Council sent you!

SOURCE: https://www.angellist.com/blog/introducing-roll-up-vehicles

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