How we’re 5x-ing black representation in venture

It’s no secret that venture capital has a problem. Despite a landslide of evidence supporting diverse teams, only 1% of venture-backed startups have a Black founder, and less than 3% of VC funds employ Black or minority professionals. If that’s not bad enough, Morgan Stanley says excluding those potential investors and entrepreneurs means the industry is leaving a trillion-dollar opportunity on the table. 

While individual organizations are working to fix this, the industry needs systemic change and a greater pipeline of founders and investors from underrepresented backgrounds. The current system will not right itself; if we want different people, we have to change the system.

Let’s flashback to summer for a minute and remember the feeling of desperation following the deaths of George Floyd, Breonna Taylor, and so many more. While many felt hopeless, I felt a call to action, a need to use any resources I could gather and do something to create meaningful change. How could we turn those equality conversations into action – and make sure those actions continue once the newscycle ends? Our Operator Collective partner team – Mallun Yen, Ambrosia Vertesi, and I – agreed that one way is through education. 

The power of education for change

Venture capital isn’t something you can just pick up. Even if we could break down the barriers and throw open the doors, there’s still a huge learning curve. It takes time to learn the terms, understand the process, and make the connections. Some people grew up in that world, absorbing this knowledge through osmosis, but others need a leg up.  

What if we could create a curriculum to train Black executives on the fundamentals of venture investing? A program for experienced operators led by some of the industry’s most respected leaders and certified via a top institution? The idea felt larger than life, but soon we were working our connections and devoting hours every day of the week to build a framework and partnerships. 

Many people stepped up to help people who’d led successful programs of this kind before. Operator Collective LP Richelle Parham connected me to Sue Toigo, who shared invaluable advice from decades of promoting minority professionals in finance. The brilliant Freada Kapor Klein provided her expertise from decades of work as Silicon Valley’s diversity activist. And Kapor Capital’s Ulili Onovakpuri offered valuable insights from her own experience. All these wildly impressive people came together with the common goal of creating much-needed change in an industry too content with the status quo. 

Announcing Black Venture Institute

Now Operator Collective is proud to partner with BLCK VC, Salesforce Ventures, and UC Berkeley Haas to launch the new Black Venture Institute, an intensive program for Black experienced operators interested in learning more about venture, including angel and venture investing. The program will teach foundational venture principles like financing, sourcing, diligence, and corporate governance. Fellows will discuss how investors evaluate opportunities, collaborate, and negotiate terms. All while learning from top industry minds, business leaders, and UC-Berkeley professors. It’s a full package of education, exposure, and connections. 

There are roughly 75 Black check writers in venture capital today. Black Venture Institute will graduate 300 fellows in three years, to potentially 5x that number by 2023.

Putting this together was no small feat; many of us devoted significant amounts of time, energy, and resources to get it done. But it shows the power of what can happen when driven groups collaborate to bring about change. Through it all, it’s been uplifting to see the response and work with other organizations hell-bent on creating a more equitable industry. Special shout-outs to Jackson Cummings, Frederik Groce, Brian Hollins, Camden McCrae, and Toby Stuart for their tireless efforts.

2020 has drawn a line in the sand: We can actively push for equality, or we can keep our profoundly disappointing status quo. We proudly choose the former. 

We hope you’ll join us in supporting Black Venture Institute.  

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 benefits of building an EcoSystem

When Salesforce launched the AppExchange in 2006, it quickly became a game-changer in so many ways – the first cloud platform, the introduction of platform as a service, the beginning of APIs – but what might be most impressive is that the AppExchange ushered in an entirely new model for partnerships. 

Until then, no one in the tech industry had partnerships like we do now – they just didn’t make sense. But all of a sudden with the rise of the cloud, everything became interconnected. We discovered that working together made technology products much, much stronger and that symbiotic relationships could pave the way to new levels of success.  

How techs first ecosystem came to be

It all started with forecasting. Back then, Salesforce offered basic forecasting tools, but companies also began to realize they could build their own forecasting apps and make them work with Salesforce. The resulting apps offered different functionality, integrated well, and made the product stronger. This was the aha that led to what’s now the AppExchange. CEO Marc Benioff had the brilliant idea to build a marketplace (originally called the AppStore!) and offer these products as add-ons so other companies could capitalize on them too. 

Once launched, the AppExchange became the start of a new partnership model, an exciting and innovative way for companies to build powerful, lasting relationships. It also led to plenty of other benefits for Salesforce, like:

  1. Increased Product Value
    A marketplace of partner apps would enhance the value of Salesforce and create multiple new revenue streams. Soon Salesforce customers had dozens of apps in every category to choose from, giving them a tremendous amount of value, not to mention a higher ROI on their purchase of CRM. Why would a customer buy another CRM when they could buy Salesforce and have all these other add-ons to choose from?

  2. Lower Attrition
    Once the AppExchange marketplace was built and fortified, another advantage soon became clear: attrition numbers fell drastically (in our favor). With these powerful new options to enhance the product, the likelihood of customers attriting went down significantly with each successful install.

  3. Built-In Community
    The AppExchange also gave Salesforce a huge new community of customers that came from our partners. The amazing thing was that they all wanted to share advice and best practices – with each other AND with Salesforce. Constructive ideas and feedback from the community really helped us refine and improve the both the AppExchange and the actual ecosystem.

Building a democracy inside a kingdom

I worked on the AppExchange for almost 10 years, overseeing its growth into the powerhouse it is today. The job was an education in itself and I’m grateful every single day for the experience. Looking back, I often think of what we did as building a democracy in the middle of a kingdom – We built an open marketplace that ran inside a company. This was unheard of at the time. The logistics of that were intense and overwhelming; this had never been done before, so we had no examples to follow and no one to turn to for help. 

Now, years later, I’m immensely proud of what we accomplished and what the AppExchange has become. Our team relied on innovation, strategic thinking, and an amazing crew of technical gurus to take this idea from concept to creation to sustained success.

As a result, I’m constantly peppered with questions on how we did it, what made it successful, and what challenges we faced. So stay tuned as I lay out the most common questions I get about how to build a thriving ecosystem.  

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.

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.


The Rise of Women’s Voices in Publishing

Publishing is another one of those despite-all-the-advancements industries that’s faltering under recent scrutiny. 

In addition to a documented pay gap within publishing houses themselves, a 2018 study also found that women-authored books are priced 45% lower than books authored by men. More recently we’ve seen the rise of the #PublishingPaidMe hashtag, which ignited a conversation about the disparities between how much authors make. (This Buzzfeed article explains it well.) 

A yearly analysis of gender bias on The New York Times bestseller list digs into the data of writers whose works are featured in and reviewed by literary outlets. The most recent study shows that female authors are publishing more, yet the gender ratio on the NYT bestseller list remains below 50%. However, while “the major literary prizes still skew male… there’s clear market signal that women authors are just as commercially viable as men.”

Better book news is out there

We may be far removed from the George Eliot days where women had to publish under a pseudonym to be taken seriously (or are we?), but there’s more promising news out there if you look. In July Simon & Schuster named Dana Canedy its new SVP and publisher. Canedy, a former reporter for The New York Times and published author herself, won a Pulitzer in 2001 for her work on “How Race is Lived in America.” She is the first black person (and only the third woman) to head a major publishing house. In a PBS interview, Canedy said she’s committed to both equality and diversity and asks to be held accountable for progress. 

And just last month Elle Magazine pointed out an uptick in accolades for Black women writers with an honest piece: Black Women Are Topping Best Seller Lists. What Took So Long? The author celebrates recent gains while also describing the years of frustration she felt “as a Black woman who learned from a lifetime’s worth of class curricula that to be ‘well-read’ meant to immerse myself in white authorship.” I couldn’t have been the only reader thinking: Same, girl. Same.

New books from our Operator Collective community 

We find even more good news right here in our own Operator Collective community, where we have three LPs with books coming out in a two-week span. Just as contemporary fiction female writers have become more honest in their portrayals of racial and gender identities, health, mental illness, and family struggles, these women leaders bring an intense honesty to the workplace. They hold nothing back in order to change the conversation on women’s issues, both in the office and at home.

  • Shellye Archambeau’s Unapologetically Ambitious, recounts the challenges the author faced as a young Black woman, wife, and mother, while climbing the ranks at IBM and later as a CEO. She uses her own stories to relay approaches and practical strategies for others to employ on their journeys.
  • Bonita Stewart’s A Blessing: Women of Color Teaming Up to Lead, Empower, and Thrive offers a deep-dive analysis of Black female leaders and even offers a playbook of sorts to help Black women support one another as they climb what can be a lonely and stressful career ladder.
  • Maelle Gavet’s Trampled by Unicorns: Big Tech’s Empathy Problem and How to Fix It explores how the tech industry has both pushed humanity forward and also created an immense empathy deficit. Gavet is honest in her history, yet takes care to include specific calls to action to help drive lasting change. 

Now’s the time to find your voice

You know that book you’ve always been dying to write? That storyline or drama that evolves in your mind every night as you drift off to sleep? Publishing is at a tipping point, forced to reckon with gender and racial biases, so perhaps now’s the time to find your voice and get going on that first draft. 

We celebrate this rise in women authors – within our own community and across the globe – and look forward to the changes this year brings as we continue to push for parity in new places. As these changes continue, I can’t wait to see your book on the bestseller list. 

Right next to mine.

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.


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.

Operator Spotlight: Michael Stars Co-Founder Suzanne Lerner

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 Suzanne Lerner, Co-Founder & President of Michael Stars.

You’ve been at Michael Stars since you and your husband co-founded it in 1986. How has the landscape changed for women-led companies since then? 

SUZANNE: There are more women-owned and led businesses than ever before. That’s the good news. Yet when it comes to leadership, women continue to fight stereotypical assumptions about what they can or cannot achieve.

I became a serial entrepreneur after realizing I was not going to be considered for leadership roles by the various companies I was working for. And when it was time for me to take the helm of the company I co-founded and built with my husband Michael after he passed away, I had to overcome the skeptics who said I “didn’t have the experience” to lead. Of course any man with my experience would have been given the benefit of the doubt and encouraged to take over. And that was just five years ago! 

The first thing I did as leader was to break down silos that had been built up over time and encourage collaboration. Today we are a diverse, women-led organization with a collaborative team, great products, and a purpose, vision, and mission we work toward every day.

For all the strides women leaders have made, we’re still not given the same chances men receive. The best way to address this is to support other women on their leadership journeys. It’s important to invest in women entrepreneurs, learn from each other, and create the social capital that enables women to grow and succeed.

This year has been full of disruptions. As a business leader and an activist, how have you been affected by the renewed focus on social justice? 

SUZANNE: This level of social justice activism in the business community isn’t renewed. It’s brand new! What I see today is a committed wave of founders and CEOs getting real about their responsibility to end systemic inequity in our country.

Many of us who’ve been fighting for racial and gender equity for decades welcome this “wokeness.” We started the Michael Stars Foundation nearly 20 years ago with a mission to build critical pathways to gender and racial equality through access to mentorship, education, and economic opportunity, especially those focused on women and girls of color. 

Through that work we’ve learned how receptive our customers are to our social justice and activism efforts. Our latest initiatives include collaborations with Gloria Steinem on voter registration and the ERA Coalition to support the Equal Rights Amendment, as well as our Michael Stars “One for All” campaign, which provides emergency relief through $10k grants to support communities hit hardest by the inequities exposed by the pandemic. The response from our customers has been incredible. People tell us that they want to buy from a company whose values they share. 

How has COVID-19 affected your team at Michael Stars and how have you changed because of it? 

SUZANNE: We’ve always worked hard to live our values and the team’s response to COVID-19 has really taken that to another level. As an organization, we’ve become closer and more caring. Our leaders and staff, many of whom have not lived through a crisis like this, have experienced the power of purpose and the value of open collaboration in overcoming obstacles.

We faced some big challenges back in March when we decided to make masks. None of us could sit on the sidelines as we listened to the continuous reports of PPE shortages for frontline healthcare workers and responders. But we also knew that we were not a production house and we’d need to take on new roles in order to make masks for customers and for donation. 

I’m so proud of what our team has accomplished – We’ve now made and shipped thousands of masks. It wasn’t easy, but we were fueled by our purpose. That “Rosie the Riveter” spirit has become even more a part of who we are today and will enrich our culture moving forward. 

Michael Stars led the charge in so many ways comfort fashion, women in leadership roles, equal pay, diversity, and more. Why is it so important for business leaders to be a voice for equality and change? 

SUZANNE: You can’t afford not to be a voice for gender and racial equality if you want your business to thrive. Inequity threatens the independence, economic stability, and health of your employees and society at large. I’m looking forward to seeing more U.S. businesses get behind social justice and support legislation like the Equal Rights Amendment. No business can afford to be on the wrong side of history. 

Why is it important to support founders with nontraditional backgrounds? 

SUZANNE: Non-traditional in the start-up world often means that you’re a person of color, a woman, or both of those things. Most of my social impact investing and philanthropy focuses on women and girls of color. They have an incredible ability to innovate, contribute to economic growth, and organically advance gender and racial equality through whatever they do.

Not many people realize that women of color are one of the fastest-growing segments of small business owners. They are starting businesses at a rate that is six times the national average, generating more than $200 billion in revenue, and employing nearly 1.4 million people! Yet businesses with women of color CEOs get less than 1 percent of all VC funding every year.

Smart, progressive investors know that when a woman of color is founding a company, she is most likely solving a complex and important problem that has the potential to positively impact her community, make a profit, and help the economy. 

What’s one amazing insight no one knows about the fashion industry?   

SUZANNE: You purchase a “simple” tee. What you may not know is behind that tee is a complex process. Every stage is critical: concept and inspiration, design which includes fabric selection, color palate, styling details, pattern making and fitting, production, and distribution. As a company that produces 90 percent of its collection in Los Angeles, we control every aspect of this process to ensure we craft high quality, long-lasting garments and utilize manufacturing contractors who share our values.

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?

SUZANNE: For me it was all about typing and secretarial work. I have to thank my mother for insisting that I acquire a “skill to fall back on.” When I left university to travel, I basically typed my way around the world, finding interesting jobs like working at an NGO in Nepal and for Reuters in Australia. Those and other gigs exposed me to the critical social issues of the time and taught me how to work with a diverse group of people. 

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

SUZANNE: I’m typically on the road 50 percent of the time. Since the pandemic, I’ve been home much more and discovered that sweeping my patio is like being in a Zen garden! It’s my way of meditating and keeping sane.

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

SUZANNE: Marmite on toast, a habit I acquired in Australia. It’s so much more than a condiment and I can’t live without it!

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.


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. 


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.

Voting can’t change our history. But it can change our future.

This week marks a milestone in our country’s complex history of voting rights, less than 80 days from a historic national election. 

One hundred years ago, the Nineteenth Amendment prevented the government from discriminating against voters on the basis of sex – a landmark decision often celebrated as the moment women gained the right to vote. However, that moment did not include Black women or women of color. This anniversary is a moment to honor the suffragette movement that made change possible, and to acknowledge the amendment was primarily a step forward for White women. A century later, the right to vote still doesn’t extend freely and fairly to all Americans.

Until the Voting Rights Act of 1965 – 45 years after the passage of the Nineteenth Amendment – the government continued to legally discriminate against Black women and men at the polls. It’s just one example of the enduring status quo, even in the face of progress. Oppressive systems don’t disappear; they mutate and re-emerge, often more subtly. 

As business leaders, we have both an opportunity and a responsibility to keep a vigilant eye on those systems and help build more equitable ones – and voting is the best tool to do so. Our role in this movement is to activate our companies and networks, and to amplify the voices of people who are fighting for these rights. 

The devastating impact of inequality

Everything is at stake in the upcoming election for all communities. Historical disenfranchisement perpetuates inequality and undermines the promise of the American dream. This election is about equal access to health care in the time of COVID-19, civil rights, checks and balances in the judicial system, and economic stability, among so many other things. 

At Gusto, we’ve seen up close how COVID-19 has devastated small businesses – particularly Black-owned small businesses. Recent data shows that Black-owned businesses were twice as likely to close permanently in the early stages of the pandemic. The disproportionate hardship stems from historically-rooted inequities like a lack of access to financing and uneven aid distribution. 

Business leaders can take steps to address these inequities, but only policy can solve them at scale. The first step is to vote for elected officials we trust to act in everyone’s best interests. As Stacy Abrams recently wrote about the importance of voting, “You can have a car with all the bells and whistles – but if it doesn’t have wheels, you can’t move forward.”

Instituting voting rights leads to meaningful change, as history has shown many times. After the Voting Rights Act of 1965, registration among Black voters in the south skyrocketed, the number of Black-elected officials jumped, and there were long-term gains in Black employment and income. 

Today, voting rights are in danger again. Where there were once poll taxes and literacy tests, politicians are implementing voter ID laws and other changes that are proven to disproportionately hurt people of color. States including Kentucky and Texas have shuttered polling places that primarily serve Black communities.

What you can do to support voting rights for all

Much of what we can do to combat this is simple. As citizens, we can register and vote, support automatic voter registration, and educate ourselves about how historical systems of oppression shift and re-emerge. Apathy is as much of a threat to our democratic system as active suppression. In 2016, roughly 60 percent of the citizen voting-age population exercised that right. 40 percent did not participate.

As leaders, we have the power to mobilize our families, neighbors, and communities. We can use our networks and company platforms to educate people – about how to register, how and when to vote, and how to vote early and in-person. And we can activate people to get involved at a grassroots level by volunteering at the polls and registering people to vote.

Many of us are also in a position to amplify the voices of this movement’s leaders. That means using our personal platforms to ensure their words are heard. We should take another lesson from the history of the Nineteenth Amendment and make sure the stories of today’s activists are not lost to history, as much of the Black suffragettes’ work has been. 

Voting can’t change our history, but it can change our future

There’s reason to be hopeful – because of this leadership and the energy that’s fueling activism today, and because 2020 has shown us that nothing is inevitable. Now is the time to use our influence to make progress for long-oppressed communities. Voting is the foundation.

We believe culture, diversity, and operational excellence are a key part of building truly great companies. Learn more at or 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