• Voluntary contributions (current approach)
  • GP
    • Unpredictable subscriptions and dollar amounts. Not sustainable at current levels
  • LPs
    • Effectively pay optional. Great deal for LPs
  • Deal velocity
    • Zero friction.
  • Enterprise Value
    • Little to no enterprise value created since payment is optional
• Monthly subscription (all access)
  • GP
    • More predictable pricing and frequency
    • Churn becomes an issue
  • LPs
    • Potentially paying for months where LP does not invest
  • Deal Velocity
    • Could dramatically slow deal velocity since LPs generate soft commits and a paywall would result in fewer LP members than no pay wall.
  • Enterprise Value
    • Would create enterprise value since there would be MRR.
• Annual subscription (all access)
  • GP
    • Same as monthly but with stronger cash flow position all else equal
  • LPs
    • Higher initial cost
  • Deal velocity
    • Likely much slower than with monthly subscription since fewer LPs likely to commit to annual subscription than monthly.
  • Enterprise Value
    • Higher than monthly, assuming all else equal
• Freemium tier with subscription option for for first look
  • Allocation has not really been much of an issue so setting up a structure where subscribers get “first look” seems disingenuous
• Raise capital and figure it out later
  • GP
    • Provides runway for X months
    • Significant dilution without any improvement in roadmap
  • LPs
    • Good for LPs today but may create new skewed incentives for GP later
  • Deal velocity
    • Zero friction
  • Enterprise value
    • Doesn’t change enterprise value
• Management fee per deal
  • How would this work?
    • I’m confirming the following but my understanding is that AngelList and other SPV admins support the ability to charge a management fee on SPVs. The fee is paid out to the SPV advisor over 5 years.
    • Example
      • Let’s say the SPV has Paid-In Capital of $200k.
        • Admin Fees: $8k
        • Blue Sky Fees: $4k
        • Admin fees = $12k
        • Admin expense ratio (fees/paid in capital) = 6%
        • 2% management fee would be $4k
        • Total expense ratio (admin + management) = 8%
        • Invested Capital = $200k - $16k = $184k
        • Management fee is paid out over 5 years, so $400/year to the SPV’s management/advisor entity
    • Since the management fee is collected up front by the SPV admin and paid out to to the manager annually, it may be possible to use a services like Pipe/CapChase/FounderPath/etc. to sell/borrow against the receivable.
      • The revenue is far less risky than standard SaaS MRR that needs to convert to ARR since
        • it’s collected up front by a 3rd party
        • paid for with wire/ACH so chargeback risk is borderline non-existent relative to credit cards
        • There is no option to get a refund
  • Total expense ratio ≤ 10%
    • (admin fees + management fee) / Paid-In Capital
    • For context
      • Reg CF campaigns are around 7.5% of Paid-In Capital (Wefunder) or 6% + 2% in form of equity (Republic)
      • A standard VC fund (”2 & 20”) will charge essentially 20% of Paid-in Capital (2% a year for 10 years)
    • Managerial work
      • Sourcing investor members
      • Moderating the community
      • Building and maintaining capability of gathering soft-commits
      • Connecting with founders to source allocation
      • Gathering materials from founders
      • Drafting deal memo in collaboration with founders and community members
      • Making the GP commit
      • Publishing the deal and managing all founder/LP communication until close
      • Closing the deal (docs and wires)
      • Voting the SPV’s ownership when required
      • Searching for secondary opportunities at the LP level or the underlying security level
      • And more
  • If the management fee is paid out annually for 5 years, what we have is Annual Recurring Revenue with a 5 year contract period. And it should hit the > 90% gross margin target I specified in last week’s update. The revenue drivers are number of deals and dollars raised per deal. AUM.
  • Valuation looks like a RIA/asset management firm but with higher quality revenue. 10x EBITDA?