A fun innovation in financial engineering I saw recently and thought was worth sharing: I am an extremely tiny angel investor, which means I periodically send small checks to startups in return for an equity investment. This has historically been very toilsome for all parties.
-
Show this thread
-
Typically, a startup will be collecting checks from many people like me along with, possibly, a few firms distinctly unlike me (in that they're professionalized and running someone else's money). Theoretically speaking, every conversation is independent of each other.
2 replies 1 retweet 73 likesShow this thread -
Practically speaking angels do not particularly desire to have entirely independent conversations about contractual terms, because they/we rationally believe almost all of the value created happens outside the contract, but even with standardized terms (SAFEs, etc) it toilsome.
1 reply 0 retweets 54 likesShow this thread -
Meanwhile, lawyers have to review *everything*, because professionals are professionals and it would be extremely bad news if they missed "Oh whoops 6 years ago we actually promised an angel the moon and stars on a silver chain" in the runup to an IPO.
1 reply 0 retweets 51 likesShow this thread -
The cost of legal review and overall annoyance factor (having conversations, chasing down checks, etc) has historically made the minimum viable angel investment +/- $25k.
2 replies 2 retweets 85 likesShow this thread -
So here's the cool innovation: A startup I had promised a check to said "OK, we're doing our friends-and-family checks via an AngelList Special Purpose Vehicle." It's, effectively, an extremely specialized one-use one-time computer program which pretends to be a company.
6 replies 19 retweets 198 likesShow this thread -
AngelList spins up a company. (In this case, the company receiving investment covers the costs here, which are non-trivial but much less than having 40+ parallel bespoke conversations with lawyers.) Angels invest in that company. That company invests in the target company.
2 replies 11 retweets 139 likesShow this thread -
This Tweet is unavailable.
-
Replying to @rudolf_olah
Conceptually, a holding company for a single stock position.
1 reply 0 retweets 1 like
You could imagine creating For Sake Of Argument Investments MMCXVII, LLC whose operating agreement spelled out, in excruciating detail, that the purpose the Members were coming together for was investing their capital in 2,000 shares of Bank of Bigness, right? Same idea.
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.