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How a Roll Up Vehicle Allowed Arrows’ Co-Founders to Build With Their “Friends”

How a Roll Up Vehicle Allowed Arrows’ Co-Founders to Build With Their “Friends”

”Most of our investors said the process was too easy.”

Daniel Zarick and Benedict Fritz have large professional networks—a byproduct of spending a combined two decades working in tech.

When the duo co-founded Arrows—a collaborative customer onboarding tool—in early 2020, they found their networks became their biggest boosters. 

“We called them the ‘Friends of Arrows.’ Most were just people we knew personally or had met through work,” said Zarick. “They were always reaching out to see how we were doing and asking for updates about the company. It was nice in those early days to have that support while Benedict and I were building the product.”

After launching publicly in March of 2021, Zarick and Fritz decided to raise their first round of financing to help scale the business (they had bootstrapped to that point). Among the interested parties were the Friends of Arrows. 

The Problem: Arrows Wanted to Offer Allocation to Their Friends Without Overcrowding the Cap Table

Zarick and Fritz had about 50 friends who were interested in investing. However, many had never angel invested before and couldn’t write a large check. Zarick and Fritz didn’t want to add a lot of small investors to their cap table, nor did they have time to handle the logistics associated with raising from many investors.

“It was tough because there were so many people in our corner that we looked up to and admired. By including them, we could benefit from their advice and experience,” Zarick said. “But since many of the checks our friends could write were between $1k and $5k, it just wouldn’t be possible to bring them all onto the cap table.”

The Solution: Allow All Small Investors to Come in as a Single Line on the Cap Table Using a Roll Up Vehicle

Zarick heard about Roll Up Vehicles (RUVs) when they launched in March, and it immediately piqued his interest. He reached out to AngelList for more information and learned that an RUV would allow him to raise from up to 250 accredited investors via an SPV, with just one new entry on the cap table.

Furthermore, RUVs could be created and run by the founder(s) rather than a stand-in investor.

“It was an immediate ‘oh this is interesting,’” Zarick recalls. “I reached out to our friends to see if it were something they’d be up for, and the response I got was resoundingly positive.”

After securing Gradient Ventures as the lead investor, Zarick began rounding up all the angel investors to include in the RUV. Among them were Paul Ford, co-founder of Postlight, Majd Taby, CEO of Darkroom, Ryan Dawidjan, CEO of Riff, and Ned Dwyer, CEO of Great Question

All in, Arrows put 28 angel investors in their RUV, raising a total of $128k. Each investor received a link to a deal page set up by AngelList to review the terms of the deal and send funds. AngelList handled entity formation, accreditation, KYC, signatures, and wired Arrows the funds at close.

The entire process took less than two weeks: one day to create the RUV and a week and a half to collect the funds from investors.

“All we had to do was plug in a few details and shoot out a link to our investor list,” Zarick said. ”Many of the investors in the RUV, who never had angel invested before, said the process was too easy. They thought it was this nice on-ramp to try out venture investing.”

Build With People You Know Using a Roll Up Vehicle

Arrows raised $2.75M total in its seed round. Zarick said the RUV allowed him and Fritz to bring the people close to them along for the ride.

“Without an RUV, we flat out would not have been able to welcome most of our friends’ investments,” Zarick said. “It made it easier to say yes to people at lower amounts but not take on the burden of complicating things in later rounds.”

Zarick recommends an RUV to other founders seeking leverage and inclusion in their fundraise:

“You can use it to make sure you have all the right people on your cap table,” Zarick said. “It offers founders simplicity and control over their fundraising while also enabling a lot more inclusivity and access to their companies—and that’s a pretty powerful value proposition.” 

start your own ruv


Disclaimer:

Quotes included in these materials related to AngelList's services and should not be construed in any way as an endorsement of AngelList's advice, analysis, or other service rendered to its clients. This document and the information contained herein is provided for informational and discussion purposes only and is not intended to be a recommendation for any investment or other advice of any kind, and shall not constitute or imply any offer to purchase, sell or hold any security or to enter into or engage in any type of transaction. Any such offers will only be made pursuant to formal offering materials containing full details regarding risks, minimum investment, fees, and expenses of such transaction. The terms of any particular fund or AngelList product, including size, costs, and other characteristics, are set forth in the applicable constituent documents for such fund and may differ materially from those presented in this blog post. Venture investing is inherently risky and only suitable for qualified investors. LPs included above are chosen based on their notability. Their inclusion above does not represent an endorsement of AngelList, and they may either approve or disapprove of AngelList or the advisory services provided by its affiliates.
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