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How Rootly’s Founders Used a Roll Up Vehicle to Add Strategic Angels to Their Seed Round

How Rootly’s Founders Used a Roll Up Vehicle to Add Strategic Angels to Their Seed Round

“It was nice to be able to provide a self-service way to do something that’s usually complicated.”

Rootly is a company founded by engineers, for engineers. The startup’s incident management software allows site reliability engineers (SREs) to resolve technical incidents directly from Slack.

When co-founders JJ Tang and Quentin Rousseau raised their seed round in April 2021, they sought out CTOs as investors because they felt CTOs would understand the problem they’re trying to solve.

“CTOs get what we’re doing because they’ve had to deal with it themselves,” said Tang, who worked as a project manager at Instacart with Rousseau (who was an SRE) before they launched Rootly in 2020. “We wanted to involve as many CTOs in the fundraise as possible because we it would make it easier to scale the business.”

As it turned out, raising money from a large number of strategic angel investors proved anything but easy.

The Challenge: The Traditional VC Model Doesn’t Easily Accommodate Adding a Large Number of Strategic Angels to a Fundraise

Tang and Rousseau reached out to—and got immediate interest from—several potential investors for their seed round. The problem then became apparent: For each investor, they’d need to create a separate SAFE that would add a new line to Rootly’s cap table.

“The legal process of adding that many small checks was complex,” said Tang. “Not to mention all the signature chasing we’d have to do when we raise our next round. I couldn’t believe there was no low-cost way to do something that would be so obviously beneficial to the business.”

Tang and Rousseau considered cutting back on the number of angel investors invited into the round. Then a friend proposed another option.

The Solution: Bundle Strategic Angels Together in a Roll Up Vehicle

Tang’s friend Shrav Mehta had used an AngelList Roll Up Vehicle (RUV) during his company’s recent Series A round.

He described how it worked: Send your angel investors a link to a deal page, and when they invest, they’ll come in as a single line on the cap table.

“We thought this was the hack we needed to bring in all the strategic angel investors we wanted to work with,” recalls Tang. “And the best part was it doesn’t even cost anything.”

Tang provided AngelList with some basic information about the raise, and the team spun up his RUV in 24 hours. He was then able to send a link to a page where every investor could review the terms of the deal and invest into an SPV that would then invest into the company.

In less than three weeks, Rootly had raised from 11 strategic angel investors, including former Dropbox CTO Bart Mediratta, former GitHub CTO Jason Warner, and Instacart founders Brandon Leonardo and Max Mullen.

In the background, AngelList handled: 

  • Accreditation
  • KYC
  • Signatures
  • ACH and wire transfers

What’s more, the AngelList team was on hand to respond to all investor inquiries.

“If our lawyers or our investors’ lawyers had questions, we just dropped AngelList in the email thread and let them handle it,” said Tang. 

Overall, Tang said the RUV allowed him and Rousseau to focus on raising without having to worry about logistics.

“The extent of our involvement was sending out a link,” said Tang. “It was nice to be able to provide our investors a self-service way to do something that’s usually pretty complicated.”

Bring on Investors Who Will Drive Your Company Forward With a Roll Up Vehicle

Overall, Rootly raised a $3.2M seed round led by XYZ Ventures with participation from 8VC, Y Combinator, and the investors in the RUV.

Tang says the angels in their RUV offer advantages they couldn’t find anywhere else. 

“They work just as hard, if not harder than other investors,” Tang said. “Their strategic input matters so much to us because they’re very close to the problem.”

Tang said Rootly’s angels have helped the company in several different ways:

  • Networking: Rootly’s angels have introduced Tang and Rousseau to new customers, subject matter experts, and talent.
  • Credibility: Having Fong, Warner, and others associated with the brand has helped Tang and Rousseau build more awareness for Rootly.
  • Speed: The strategic advice offered by Rootly’s angels has allowed Tang and Rousseau to expedite feedback loops and make better decisions.

“Our angels will drop whatever they’re doing to speak with us. Nobody ever says ‘no,’ and nobody ghosts,” said Tang. “Those are the kind of people you need when building a company.”

Had Tang known about RUVs before his seed round, he says he would have sought out a lot more angels (RUVs can accommodate up to 249 accredited investors).

“With an RUV you can fill up an entire round with strategic angels at very little cost,” said Tang. “It opens a door to a whole new kind of way to build a company.”

start your own ruv


Disclaimer:

This article 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. Investing in venture capital funds is inherently risky and illiquid. It involves a high degree of risk and is suitable only for sophisticated and qualified investors. Performance of past deals or a lead investors' track record is not a guarantee of future returns. Illustrative examples of investors are chosen on the basis of their notability in the industry. 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. 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.
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