Wanna checkout fast? Check out Fast.

The company: Fast

Fast is the one-click, no-password e-commerce shopping disruptor that is making buying online faster, safer, and easier for both consumers and merchants. By making it simple to complete transactions across devices and across platforms the company is shaking up the multi-billion dollar ecommerce market. 

Co-founded by serial entrepreneur Domm Holland (Tow) and operations heavy-weight and tech investor Allison Barr Allen (Uber, PwC), Fast lets consumers track shipments and reorder items all in one place. It helps merchants improve the e-commerce checkout process and push those dreaded abandoned carts through the checkout process and onto business’ sales ledger. 

Why you should pay attention 

The young company was named as one of the Retail Tech 100 innovators who are transforming retail and it made Business Insider’s Top 100 Starutps of 2020. It’s garnering such early attention because it’s improving the online purchase checkout process, which has remained stagnant for 30 years. Customers abandon up to 80% of potential online purchases because of friction during checkout, which can involve filling out an average of 23 fields just to make a single online purchase. Fast is making buying online fast, easy, and safe and in doing so they’re building the world’s fastest online login and checkout platform. 

How it works

Fast Login and Fast Checkout enable a one-click sign-in and purchasing experience. The company’s products work on any browser, device, or platform to deliver a consistent, stress-free purchasing experience. Fast is entirely consumer-focused and invests heavily in its users’ privacy and data security.  

Why we’re obsessed 

Fast lets consumers forget passwords, skip long entry forms, and shop securely online with a single click. It gives businesses the checkout button that increases conversion, boosts sales and delights customers. Fast Checkout installs for businesses in minutes and Fast Login gives consumers a hassle-free experience and lets them check out in seconds. It’s safe, easy, and fast.

How Fast? 

One click. No passwords. Get the world’s fastest checkout. Get Fast. 

We believe culture, diversity, and operational excellence are a key part of building truly great companies. Learn more on our website or by connecting with us on Twitter and LinkedIn.

 

The great 2020 knowledge exchange

How much can you learn in a year? That depends on your mindset – but perhaps 2020’s unique challenges gave us an even greater knowledge exchange. We learned a tremendous amount from others, shared our own expertise, and expanded our minds in new ways. As we celebrate Operator Collective’s first birthday, let’s look back on all we learned. 

We started out with value learning

We kicked off the year by offering tips to build a thriving community from scratch and discussing how we brought so many first time investors into venture capital. We even threw back to the OG feminist movies that moved us. Inspiring topics – clearly we had no idea what was coming in the weeks ahead. 

Angel investing is always a hot topic for investors (and those who want to be). First Susan Kimberlin told us everything we wanted to know about angel investing, but were too afraid to ask. Later we offered a legal checklist for angel investing, and Einat Meisel led us through the financial aspects

We shifted to pandemic learning

Then COVID-19 hit and our community immediately jumped in to help. Our Operator Collective core team shared their tried-and-true tips for working from home, while our LP base shared their favorite at-home activities, books, and podcasts to keep us all productive and sane. We learned to steady on from the amazing Dan Scheinman, while Iris Choi told us what companies should strive for in a down market. Jenny Sohn gave us her best 3 CFO tips to adapt your finances in a downturn, and Erica Schultz gave us 6 tips to keep building revenue and sales

Around that time we also launched The Challenge Series so our wildly experienced operator LPs could offer their support and advice to others in our community… but then we chose to cancel the final one in solidarity as the country struggled through multiple devastating racial and social injustices. (We’re grateful our amazing customer success leaders ended up answering our questions anyway – thank you, Christina Kosmowski and Nick Mehta.) 

We supported equality and social justice 

In light of those devastating social injustices, LP Merline Saintil offered 6 wise words to help you act against injustice. Then Lexi Reese and Bernard Coleman explained how voting helps us create the future we want to see. Behind the scenes, under Leyla Seka’s leadership, we created and launched Black Venture Institute, a curriculum-based program to bring more Black operators into venture capital, in partnership with BLCK VC and others. 

There were moments of good news, too. Three of our LPs published books within weeks of each other, and we celebrated the rise in women’s voices in publishing. Leyla Seka let us in on why it’s important to build a partner ecosystem and answered some of the questions she gets on the topic. The fabulous LaFawn Davis offered four tips to help you build an inclusive org

We love to lift up our operators

Through it all, we wanted to showcase some of our radically accomplished operator LPs, so we shined a light on HR leader Cindy Robbins, DEI leader Aubrey Blanche, executive recruiter Lynn Carter, partnerships leader Bonita Stewart, Chief Technical Officer Rathi Murthy, data and analytics queen Anita Lynch, engineering leader Yanbing Li, fashion mogul and activist Suzanne Lerner, founder and COO Michelle Zatlyn, executive producer Danielle Renfrew Behrens, and talent leader Michael Kieran

We also shared solid words of wisdom and operational advice from Leyla Seka, Ambrosia Vertesi, Tekedra Mawakana, Lexi Reese, Bonita Stewart, Erica Schultz, Li Fan, Dug Song, LaFawn Davis, Rathi Murthy, Monique Covington, Cindy Robbins, and Claire Hughes Johnson, plus a few words from me too. Whew! 

We shared our diligence

And along the way, of course, we made some investments! We are a venture fund, after all. Of all the investments we made this year, we were able to tell you more about our obsession with Guild Education, our uncomplicated love for DataGrail, and why our tie to Ironclad is simply binding. We showed you how to SetSail with a unique take on sales productivity, get smarter with Forethought AI, and check your productivity with Spekit. Need more? Find out how Textio helps your words matter, and learn how your sales team can Outreach, outlast, and outperform. Finally, we’re ready to introduce you to the Origin of financial wellness, as well as a new BFF for your CFO: Cube

How much will we learn next year? 

We learned a lot this year, but our number #1 lesson wasn’t from any of the great content above. We learned that our community is what keeps us going and grounded. We’re so thankful to have an amazing group of operator LPs who are not only radically accomplished, but also so happy to share their knowledge and support our #RiseTheTide mission.  

We barreled through our first year like a freight train. And as we look to 2021, our momentum is still going strong. We picked up and shared a huge amount of knowledge – but as always, this only gives us a baseline to beat next year. Onward!

We believe culture, diversity, and operational excellence are a key part of building truly great companies. Learn more on our website or by connecting with us on Twitter and LinkedIn.

Operator Collective by the numbers: Our first year in review 

One year ago we launched Operator Collective as a new model for venture investing. We dismantled the traditional fund structure and rebuilt it from the ground up to optimize for bringing in operators from diverse backgrounds. Pictures from Operator Summit and our launch party – both near the end of 2019 – show bright faces giddy with hope and anticipation. We had no idea what this year would bring, of course. No one did. 

The world has changed so much since those photos up there, but despite the once-unimaginable challenges 2020 brought, we steadied on. We set out determined to rise the tide in the venture ecosystem, create an access point for operators from underrepresented backgrounds, and bring our broad skill sets to support the next generation of game-changing tech founders. We stayed focused on investing in humble, lifelong learners from all backgrounds who share our belief that culture, diversity, and operational excellence are a key part of building truly great companies. We believed this would lead us to companies with better financial performance, especially in challenging times when the cracks are amplified

What we ended up with was a fund that included more than 130 operator LPs – 90% women, 40% people of color — who’ve built and scaled companies like Stripe, Zoom, and Salesforce. And what does an enterprise-focused fund with a diverse LP base look like one year after our public launch? I’m a data-driven person so I thought I’d share some numbers.

We leverage our community for deal flow

Every investment begins with deal flow, so let’s start there. We built Operator Collective to be a more collective approach to venture investing. Creating a collaborative model to serve as more of a flywheel than a traditional funnel would allow us to concentrate more time and energy on what is most sought after by our community: efficiently engaging busy operators.

First, we believed a diverse and active community of LPs would lead to a great number of warm and contextual intros to high potential founders. As it turns out, LPs are our #1 source of referrals. 

We also believed that if we built an operator-focused fund, other VCs would see the inherent value and refer deals to us, deals they were leading or in which they were considering investing. And VCs who are outside of Operator Collective referred our second highest number of deals.

Finally, founders are our next most significant source. We love it when our “customers” refer other customers – it’s the ultimate validation.

We love to invest in the unsexy 

We’ve made 10 core investments and 13 supporting investments. Our focus remains on early stage enterprise/b2b startups, with a preference for the unsexy – the often not-visible solutions that have the potential to transform industries in need of disruption. COVID has accelerated the digitization of the workplace, and we’re fortunate that 3 of our core investments are receiving pre-emptive follow-on rounds already.

Here’s how our first-year investments break out by sector:

  • 31% are in productivity platforms, like SetSail (revenue data analytics) and Spekit (digital enablement)   
  • 22% are in developer solutions, like Balsa (tools for builders) and Hex (data project sharing) 
  • 17% are in financial or insurtech solutions, like Fast (payments), Cube (FP&A planning), and AgentSync (insurance licensing) 
  • 17% are in workforce platforms, like Guild Education (re-skilling workers) and Textio (business communications) 
  • 13% are in regulatory and compliance solutions, like Ironclad (contract lifecycle management) and DataGrail (data privacy) 


We invest in founders from all backgrounds

Given our LP base, there’s often a presumption that we only invest in female founders or founders of color – but that’s not the case. We’ve always looked to invest in founders from all backgrounds. Studies show that funder diversity has a natural trickle-down effect on the companies and types of founders being funded, and our data supports that. 

Looking at our portfolio companies:  

  • 74% have a founder of color (48% Asian, 17% Latinx, and 9% Black)
  • 35% have a CEO of color (17% Asian, 9% Latinx, and 9% Black) 
  • 57% have a female founder, while 35% have a female CEO
  • 30% of our companies have a female CTO or technical co-founder
  • 13% of our companies were founded by an all-female team   


We anticipate and expect these numbers to bounce around over time, and we’re always striving to be deliberate at expanding to reach beyond our current immediate networks.

There’s no finish line in the fight for equal opportunity 

We are still in early days, and we have much work ahead of us. We’ve already been busy thinking ahead to where and how we can improve in the future, but as our first year comes to a close, we’re also taking a moment to reflect on what this collective has done so far. We set out to create a new kind of venture fund, one that brings together the most respected operators in the world to find, invest in, and support the next generation of amazing tech companies, and it’s working.

An enormous thank you to our operators, our founders, our collaborators, and of course our dedicated Operator Collective team for believing in our vision and joining us on this inaugural journey. We would not be where we are today without you. I can’t wait to see what this collective can accomplish together from here. Let’s do this! 

We believe culture, diversity, and operational excellence are a key part of building truly great companies. Learn more on our website or by connecting with us on Twitter and LinkedIn.

 

Your CFO’s new BFF: Meet Cube

The company: Cube

Cube is a next-generation FP&A (financial planning & analysis) platform that empowers finance professionals to deliver faster, more strategic insights that drive the business forward. Cube streamlines manual data transformation, reduces errors, and improves collaboration to help businesses make smarter decisions lickety-split – Think enterprise FP&A meets the flexibility of a spreadsheet. And unlike traditional enterprise offerings, the solution can go live in just days, without the need for external consultants.

The details

Automation has made its way into the CFO tech stack via tools like Expensify for expense reports, Bill.com for invoicing, and Carta for equity management. But now Cube is changing the game by elevating the CFO’s vantage point. It untangles manual spreadsheets, taps key business systems for data, and brings it all together in a platform that gives CFOs clean visibility into the key insights of their businesses. CFOs can go from numbers to narrative in record time. 

How it works

The Cube platform ingests all of a business’s vital data sources (e.g. ERP, CRM, HRIS, etc.), as well as forward-looking financial and operational models, and transforms them into a single source of truth that’s easy to access and manage. Powerful analytics give CFOs faster access to strategic insights, and deep spreadsheet integrations and intelligence means the platform is easy enough for anyone to use. 

Why you should pay attention

FP&A is strategic to the business – but it’s also still highly manual, time-consuming, and fraught with errors. This is an area that has historically been underserved and is ripe for disruption. Cube was founded and is led by Christina Ross, a former CFO herself who’s seen these challenges firsthand. Cube’s leadership team has been in the trenches, and they’re blazing a trail away from frustrating, manual, error-prone processes to a flexible, powerful, collaborative FP&A solution.  

Why we’re obsessed

Nearly 90% of companies are still using spreadsheets to manage all of their forward-looking planning, analysis, and reporting. The lion’s share of analyst time is spent on searching for and consolidating data. The model is broken: FP&A is desperately in need of a more collaborative approach. Built by finance for finance, Cube has both the innovation and leadership to drive that change. 

Get involved

Get faster, smarter, simpler financial planning and analysis; then get ready to make sharper, better, faster business decisions. Go on – Get Cube. Your CFO will thank you.

We believe culture, diversity, and operational excellence are a key part of building truly great companies. Learn more on our website or by connecting with us on Twitter and LinkedIn.

Team productivity? Check it, then Spekit.

The company: Spekit

Spekit is the top-rated enablement and adoption solution that helps employees work self-sufficiently and smarter in the cloud.

The details

Spekit keeps your teams in sync, drives adoption of your tools, and boosts productivity by embedding your training right within any application for self-guided learning. This makes your knowledge and enablement resources available contextually from any workflow – including email, Slack, and other team productivity tools.

How it works

Spekit creates an intuitive, user-friendly interface that consolidates knowledge, policies, and playbooks from across your organization into a centralized platform. Extensions (from Chrome, Edge, Slack, Outlook, Salesforce Lightning, and more) then allow you to integrate it across applications, surfacing your definitions, processes, and enablement resources in real time, wherever you and your team need them. As you roll out new processes or resources, Spekit keeps everyone aligned by sending in-app alerts to notify your team, right where they’re working. It even helps you measure training engagement and performance with powerful analytics.

Why you should pay attention

In a work-from-home world where employees are constantly context-switching between their dozens of workflows and applications and change is constant, the old LMS or webinar-approach to training drains resources and kills productivity. Employees rarely retain that crucial knowledge when presented in such a disjointed way. 

With Spekit, learning is reinforced right where work happens, making it easy to share, communicate, and train in real-time. Spekit’s Salesforce integration is the #1 choice on G2 and the AppExchange for Salesforce documentation, training, and change communication. It’s loved by scaling technology companies like Hippo, Docsend, and Mural, along with large enterprises like Southwest Airlines, JLL, and Wolters Kluwer. You don’t need coding skills or a technical background to use the integration features. Changes will automatically sync, you can document quickly by adding images and videos, and Spekit will then intelligently embed your training to maximize efficiency. 

Don’t have time to create your own training? That’s ok, too. Spekit has partnered with vendors and industry experts on the most popular tools to provide you with customizable training content to get you started. Think: Salesforce, Outreach, Linkedin SalesNavigator, and more.

Why we’re obsessed

Spekit is changing the way we train and enable employees by allowing them to learn at their own pace, track their progress, and reinforce learning in existing workflows. Co-Founders Melanie Fellay and Zari Zahra have created a much-needed modern way for companies to create consistent learning and training experiences – and savvy companies are here for it.   

Get involved

Utilize your digital companion to accelerate learning on the go! Check out Spekit and help your teams become more efficient.

We believe culture, diversity, and operational excellence are a key part of building truly great companies. Learn more on our website or by connecting with us on Twitter and LinkedIn.

Operator Spotlight: Cloudflare Co-Founder & COO Michelle Zatlyn

Looking for practical help and advice on an operational area that may be outside your realm? Each month we spotlight one of our talented operators, who’ll share their expertise and offer insights and ideas that may help improve your own operations. This month we spoke to Michelle Zatlyn, Co-Founder & COO of Cloudflare.

You founded Cloudflare in 2009. How has the landscape changed for women founders/operators since then? 

MICHELLE: As I reflect on the last decade, what’s changed is that there’s an increased awareness of the gender imbalance. That’s a good thing – There’s more awareness today that there are fewer women in technology, across a broader set of people. Now we need to see continued progress on making change. There are so many incredible women in technology, and I hope more of them choose the founder/operator path. We need all of you! I’m optimistic for the future.

This year has been full of disruptions. What are the biggest operational challenges you face right now?  

MICHELLE:  Our team is focused on how we can continue to provide the best Internet experience for our customers and the online world in a time when the world is relying on the Internet more than ever. The superheroes of this crisis are the medical professionals and scientists taking care of the sick and searching for a cure to this disease. But the faithful sidekick has been the Internet. Globally there’s been roughly a 50% increase in Internet utilization since March – and while the Internet isn’t necessarily a public utility, there aren’t many utilities that would continue to function if they saw a 50% increase in utilization over the course of a few days. As one of the guardians of the Internet, I’m proud of how our team has risen to the occasion to support our customers, new and old, as they deal with unprecedented challenges.

Last year you brought your family with you to the NYSE for Cloudflare’s IPO. Why was it important to have them there? 

MICHELLE: Building a company is an incredible, rewarding experience, but one that takes a ton of time, work, and energy. That’s true for the team that shows up every day, but it’s also true for the team’s loved ones. 

As I reflect on building Cloudflare, I was lucky to start the company with my co-founder Matthew Prince, and then take it public together a decade later. That was a real pleasure, and something we’re both proud of, since it doesn’t always happen that way. But as we prepared to go public, I had this realization of how lucky I was that my husband Jamie had also been there from Day 1. We were dating at the time and living in Vancouver. He encouraged me to move to the Bay Area to pursue this opportunity to see where it would go. I realize how fortunate I am that I had a supportive partner who encouraged me to go for it.

So a small group of us got together to talk about who would be on the podium the day we went public, and I thought about having Jamie and my kids there with me. It wasn’t a clear decision; several people thought it was a bad idea, plus you can have 14 people on the NYSE podium. I also reached out to Stitch Fix Founder/CEO Katrina Lake since she’d done it ahead of me; she encouraged me to do it.

In my late 20s, I remember having a conversation with myself about how I really wanted to have a career, a loving relationship, and kids. As I built Cloudflare with Matthew and our incredible team, Jamie and I created a life together in parallel. I made choices along the way to enable this. But as I faced the decision of who would be on the podium when we went public, I knew it was important for my family to be right there with me. 

Cloudflare is a security infrastructure company. What’s one insight no one knows about web security? 

MICHELLE: Organizations of all sizes are under cyberthreat. We see it with businesses of all sizes and in all kinds of industries. Small businesses are threatened by email-borne ransomware and phishing to get access to bank accounts and payroll systems. We’ve seen competing day spas launch attacks against each other to disrupt their websites – that’s an example that has always stood out to me as unexpected. Large organizations face a wider range of threats including ransomware, phishing, industrial espionage, cyber-activism, defacement, DDoS, and data theft. 

Everyone needs to think about security – whether that’s keeping personal information secure or keeping an organization secure. The good news is most attacks are simple to defend against; don’t get distracted by “movie plot” cyberattacks. Attackers will typically look for poor passwords, unpatched software, phishing targets, and websites without basic DDoS protection. Use password managers, update your software regularly, be careful of emails you open and attachments you download, and you can sign up for Cloudflare to help secure your online properties (websites, apps, APIs, blogs). 

How can the tech industry do a better job of supporting women operators and executives? 

MICHELLE: The best way to support women in tech is to lead or join a company that supports women in the workplace. I’m optimistic that we can continue to move forward as an industry, and I’m proud of how we’ve done this at Cloudflare. We’ve always said that a diverse team wins, whether it’s with our team or on our Board, where three of our eight members are women. Supporting the next generation of executives is equally important. I’m proud of what we’ve done to partner with organizations like Path Forward in the US and Mums@Work in Singapore to facilitate returnships for caregivers and women looking to get back into the workforce. We all need to be able to recruit the best of the best, no matter their background, ethnicity, gender, sexual orientation, or gaps in employment. 

Why is it important for companies to think about building an ecosystem? 

MICHELLE: All companies operate within a larger context. Ecosystems make me think of waves. If you build an ecosystem, it’s like you’re riding the wave and being proactive about what partners you’re working on and bringing more people into your wake. It also amplifies your size, which leads to having more influence in certain conversations and situations. Ultimately, building an ecosystem is a strategy operators can use to make more progress towards their goals, faster.

AOC often talks about the skills she picked up as a bartender, and others talk about what they learned working retail. What were some of those formative jobs for you?

MICHELLE: I love the feeling of being part of something. I worked at my dad’s law office for many summers, answering phones, running errands, and bookkeeping. I learned the importance of sweating the details and building strong relationships. I also spent a summer as a Camp Counselor at a special needs camp. Talk about being inspired! The camaraderie that I experienced there is something I’ll never forget. I’m a firm believer that life is a collection of experiences, and that’s why a winding career path or getting out there and seeing the world in many different ways is an asset. 

What’s one unconventional thing you’re doing to keep yourself sane?

MICHELLE: Just as shelter-in-place measures swept the globe, Cloudflare launched Cloudflare TV, a 24×7 live television broadcast with programming entirely curated and driven by employees to connect with the broader community. I produce and host a show called “Yes We Can,” a weekly segment that highlights non-C-Level women in tech, offering a chance to amplify their stories in one-on-one interviews. I’ve had the chance to interview incredible women showing up every day to build technology that impacts millions of people around the world. Past guests have been leaders in data science, marketing, engineering, design, and business development from companies like Shopify, Uber, Twitter, IBM, Patreon, IBM, and Houzz. I look forward to these interviews every week. I hope the segments show how women are making their marks on the tech industry and that their stories propel other women to choose a career in tech.

What’s the one condiment you could never live without? 

MICHELLE: I’m a proud Canadian, so it would have to be maple syrup. 

We believe culture, diversity, and operational excellence are a key part of building truly great companies. Learn more on our website or on Twitter and LinkedIn.

 

Get Smarter with Forethought AI

The company: Forethought

Forethought is an AI company that is changing the way businesses access, share, and leverage institutional knowledge to serve their customers. At the heart of the solution is an AI agent who can help solve, triage, and assist enterprises in their customer support workstreams. Forethought’s offering also includes robust analytics to provide actionable insights and help optimize efficiencies within the customer support organization.

The details

Bringing in Forethought is basically like adding an AI superhero to your customer support team. The AI – called Agatha – uses natural language understanding to solve common questions; it also applies collective knowledge to help agents find answers fast. Agatha helps businesses save time and increase efficiency, while also improving their abilities to provide fast and accurate answers for clients. 

How it works

Forethought has built a best-in-class artificial intelligence tool that interprets underlying intent without having to set up a series of keywords to get answers. Agatha continually gets smarter by dynamically tapping existing knowledge sources within the company – that includes everything from help articles to internal email and Slack conversations. The platform helps reduce support team workloads by intercepting common issues before they reach agents. It can categorize issues as they come into the helpdesk and route them to the right place for resolution. Agatha even suggests answers to increase agent efficiency by as much as 35%. Cool, huh?

Why you should pay attention

Forethought is unlocking the power of collective knowledge for businesses. They’re building the future of intelligent workflows in the enterprise and taking on a $30+ billion market opportunity. 

Why we’re obsessed

Founded by a team of Facebook, Dropbox, and LinkedIn alumni, Forethought’s mission is to “enable everyone to be a genius at their jobs.” The company won at TechCrunch Disrupt and was featured in Forbes 30 Under 30. And it’s already delivering outstanding results for its customers, driving down time spent working on tickets by up to 20%, increasing cases closed per hour by more than 30%, and elevating quality customer interactions one hundred percent of the time. 

Get involved

Embed intelligence into your employees’ workflows. Get Forethought and be smarter.

We believe culture, diversity, and operational excellence are a key part of building truly great companies. Learn more on our website or by connecting with us on Twitter and LinkedIn.

The financial instruments of angel investing 

We tapped Operator Collective LP Einat Meisel, a partner at Silicon Valley law firm Fenwick & West, for an explanation of the most common financial instruments angel investors use. This is part 2 of our So You Want to Be an Angel series, a resource for anyone who wants to explore angel investing. (Check out the legal considerations in part 1 here.)

Moving the Money: Convertible Equity 

You’ve identified the company you want to invest in. You have high conviction in the founders. You’ve done the initial due diligence. Now it’s time to finance the deal. 

Startups most commonly issue convertible equity to early stage investors. This is a legal document that gives angel investors a right to receive a negotiated amount of stock in the company at a later point in time in exchange for the seed money. With convertible equity, the stock is not issued up front. Instead it will be issued after there has been a VC financing round  at a negotiated valuation. Most angel investors won’t know precisely what percentage of the company they own until this valuation is done. 

Why? Many early stage companies want to avoid having the conversation of valuation with angel investors. That’s because proof of concept, repeatable revenue, and other key metrics and milestones all inform valuation. Early stage companies are working to build those key metrics, and that’s why they’re taking angel investment.  

Convertible Notes

A convertible note is one of the most common instruments of convertible equity. It’s a loan that an angel investor gives to the company. The convertible note has an interest rate (market rate, typically 2-6%) and a maturity date (typically 18-24 months). If the company raises VC money during the period of the note, the note will convert into the type (typically preferred stock) and number of shares represented by the investment given the negotiated valuation.  

Angel investors don’t have a say into how the valuation happens. But they do have the ability to negotiate the financial terms of the note. These terms include a discount the angel investor receives on the valuation once the VC round happens, the angel investor’s right to continue investing in future rounds, and other future rights. The angel’s leverage in these negotiations will be determined by how big and how early the angel investment comes in, as well as how confident the company is that they’ll secure VC funding and how quickly they think they can close it. 

SAFEs

A Simple Agreement for Future Equity (SAFE) is the other commonly used convertible equity instrument used in angel investing. The SAFE is similar to a convertible note in that it is a legal agreement that gives the angel investor the right to acquire the type and number of shares issued to the VC investors at a future point in time within the framework of pre-negotiated terms. Unlike a convertible note, the SAFE does not carry an interest rate, nor does it become due on a defined maturity date. Rather, the SAFE survives until it converts in a qualified preferred stock financing event or some other kind of exit. SAFEs don’t require the company to carry debt on their books, and they’re shorter and more straightforward to negotiate than full blown investment documents, containing legal costs for the young company, which is what makes them more attractive to startups. 

Like the convertible note, the SAFE gives angel investors the ability to bet on a promising company early in exchange for a negotiated discount on preferred stock at a future point in time. Another similarity: the angel investor receives the shares after the negotiated valuation, and the investor won’t know exactly what percentage of the company they own until after that has happened.

Side Letters 

Angel investors betting on a company early are taking a bigger risk (and typically seek bigger rewards as well). Some use “side letters” to secure additional investor protections including: 

  • Pro rata rights: The ability to continue to invest in future rounds.
  • Information rights: The ability to have access to board packages, quarterly updates, and ongoing financial details.
  • “Major Investor” status: The ability to access additional rights such as the Right of First Refusal (ROFR) which allows the angel investor to purchase common stock that founders or employees may have to sell before it’s offered up to an outside third party. 

Find out more about the key legal considerations of angel investing by checking out the first part of this So You Want to Be an Angel series. 

We believe culture, diversity, and operational excellence are a key part of building truly great companies. Learn more on our website or by connecting with us on Twitter and LinkedIn.

We’ve found the Origin of financial wellness

The company: Origin

Origin is a holistic financial planning platform that helps employees reach their goals.

The details

Origin provides personalized financial plans and support, as well as the resources and tools necessary to ensure every employee is financially stable. The onboarding process allows organizations to roll out the product in as little as an hour, rather than weeks. And the best part? It’s a benefit employees will actually utilize.

How it works

First, employees meet with a personal planner to discuss their goals, questions, and concerns. Next, each employee receives an individualized financial roadmap created by their Origin experts. 1:1 meetings provide the attention and detail employees need to make well informed financial decisions. From opening an emergency savings account to evaluating your insurance, your financial planner will make actionable recommendations you can accomplish through the app. We all know life doesn’t go as planned, so it’s a relief that Origin can be there to help you adapt.

Why you should pay attention

Financial stress is the number one reported issue in the workplace — and in the past year, the number of employers offering financial wellness to their employees has increased by 25%. Origin helps companies relieve that stress by eliminating seminars and time wasted on researching unhelpful financial products. Simply put? Origin is the modern approach to financial wellness for employees. 

Why we’re obsessed

Origin helps every stage of employee — from your recent graduates, to the ones starting families, and to those approaching your neighbor who is ready to retire. No employee is left behind. 

Get involved

Are you a financial advisor and want to join Origin’s network? Click here and apply today! Are you a benefits broker and want to partner with Origin? Click here for more information.

We believe culture, diversity, and operational excellence are a key part of building truly great companies. Learn more on our website or by connecting with us on Twitter and LinkedIn.

Your legal checklist for angel investing

Angel investments can give promising companies critical initial momentum, and it’s been shown to continue propelling them forward in several ways: they’re more likely to raise subsequent VC funding, they typically have 30-50% growth in critical metrics, and they benefit from strategic introductions their angel investors make. And while investors are creating more entrepreneurs, a Wharton/Harvard study showed entrepreneurs are also creating more angels. In a climate where taking action against bias and inequities is a mandate for so many, angel investing is emerging as a powerful tool for creating positive change as well.

We tapped Operator Collective LP Einat Meisel, a partner at Silicon Valley law firm Fenwick & West, for some core legal fundamentals to keep in mind as you consider angel investing. This is the first installment of the So You Want to Be an Angel series, a resource for members of our community who want to explore angel investing. 

✔ Make sure the startup has a proper legal structure 

Most startups organize as a C-corp or LLC in Delaware or California. It’s important to confirm the incorporation has happened as it gives angel investors important legal protections. Investing in other structures (e.g. partnerships) have important tax and liability implications that should be carefully examined before investing. 

✔ Make sure the IP is actually owned by the company

For most early stage companies, intellectual property (“IP”) is the key asset. It’s vitally important that the IP is assigned and owned by the company, including pre-incorporation IP. Asking to see founder and employee assignment agreements can help the angel investor assess IP ownership issues. Be aware that IP can come from myriad sources: employees, third-party contractors, customers, and more. The longer a company has been around, the more entangled the web of IP can be.  

✔ Ask the cap table question

A capitalization (aka “cap”) table is the list of the company’s shareholders and the people who have rights to equity. At the very early stages, capitalization is usually straightforward because companies have not raised money from a lot of sources. Inquire about how equity has been allocated, who owns it and what rights attach to that equity.  This will give you an understanding of  the community that’s supporting the founders, as well as an understanding of the special rights or issues that exist with respect to that equity. While angel investors should ask to see the cap table, it’s not uncommon for founders to keep details of the cap table close to the vest in angel rounds. 

✔ Ask legal compliance questions

Having a look at the company’s employment practices and assessing their understanding of securities law is deeper diligence that some angel investors do. Employment law violations such as misclassifying employees and contractors or failing to get a valid securities law exemption with every equity issuance could create headaches for everyone involved down the road. 

✔ Explore possible tax gains 

Angel investing is risky business, but one huge perk many investors are not aware of is the tax gain afforded by the Qualified Small Business Stock (QSBS) Act. Essentially, QSBS allows angel investors to exclude from federal income tax 100% of the gain on the sale of certain qualified small business stock, limited to the greater of $10 million or 10 times the adjusted basis of investment. This tax credit could save you millions — but the regulation and criteria can get complicated so be sure to consult with your tax advisor to determine if your investment qualifies. It’s fair to say, however, that most early-stage investments in C corporations meet the QSBS criteria.    

We believe culture, diversity, and operational excellence are a key part of building truly great companies. Learn more on our website or by connecting with us on Twitter and LinkedIn