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How Secureframe Maximized the Value of Its Cap Table With a Roll Up Vehicle

How Secureframe Maximized the Value of Its Cap Table With a Roll Up Vehicle

“It felt like we were managing one check instead of 50.”

Secureframe attributes a lot of its early success to its investors. When the data security and compliance startup raised its $4.5M seed round in October of 2020, co-founders Shrav Mehta and Natasja Nielsen offered allocations to operators—including angel investors, other founders, customers, and employees. 

These individuals proved to be motivated members of Secureframe’s cap table—introducing Secureframe to new customers, sourcing qualified candidates, providing tactical advice, and helping propel Secureframe to an $18M Series A in less than two years.

When it came time to raise their Series A in January of 2021, Mehta and Nielsen knew they wanted to let more operators in on the round. But this presented a challenge.

The Problem: Raising Money From a Lot of Investors is Expensive and Time Consuming

Secureframe sought to add a few dozen operators to their cap table. To do this, they would need to solicit a few dozen signatures, collect a few dozen checks, and review the accreditation status of a few dozen investors.

Managing these obligations would slow down the financing process, while driving up Secureframe’s legal fees. Having too many names on their cap table could also present logistical challenges and bottlenecks as the business scales.

“There’s so much complexity involved in raising from a lot of investors that it’s almost not even worth it,” said Mehta. “We needed something that would reduce all this friction while still allowing us to include all of these smart and resourceful people we had built relationships with.”

The Solution: Allow Operators to Invest Through a Single Link Using a Roll Up Vehicle

secureframe's ruv deal page
Secureframe's RUV deal page

Mehta was considering using a special purpose vehicle (SPV) to offer allocation to small investors. He reached out to AngelList and the team offered him an option more tailored to his needs: a Roll Up Vehicle (RUV).

Roll Up Vehicles are private SPVs that don't require a stand-in investor to act as GP to avoid conflict of interest issues for the founder. They can be created by founders themselves. RUVs on AngelList allow for up to 250 accredited investors.

Within two days of contacting AngelList, Secureframe’s RUV was live. Mehta was then able to send a link to the deal page where investors could commit and send funds. AngelList oversaw capital collection, accreditation, KYC, and signatures—and wired Secureframe the funds at close.

All in, Secureframe raised from over 50 world class operators—including DoorDash executive Gokul Rajaram, Carta CPO Webb Stevens, and Brex CRO Sam Blond. These investors comprise but a single line on Secureframe’s cap table.

Shrav estimates adding these investors via direct investment would have cost Secureframe over $100k in admin and vendor fees. With AngelList, he paid a one-time fee of $8k.

“It was cheap and I barely had to involve myself,” Mehta said. “After the RUV was set up, we sent it out to our customers and other operators who wanted to help us on this journey, and watched as they filled the allocations (minimum check size: $1k). After close it took an email or two to get the wire from AngelList. It felt like we were managing one check instead of 50.”

Build With Great Investors Using a Roll Up Vehicle

Secureframe $18M Series A was led by Kleiner Perkins. Shrav said they were supportive of Secureframe’s RUV.

“It’s smart to find a way to involve as many value-add investors as possible,” said Mehta. “I think using an RUV in a fundraise is going to become the norm because it makes founders’ lives so much easier.”

Mehta and Nielsen will use the funds to scale the team and launch new products. Meanwhile, AngelList will oversee all filings, tax documents, and distributions for Secureframe’s RUV investors.

When the time comes for Secureframe’s next fundraise, Mehta says AngelList will be his first call.

“Roll Up Vehicles aren’t just for early-stage financing,” Mehta said. “AngelList makes it possible to collect checks from anyone you want to be in business with at any stage of the company. Founders looking to simplify their logistics while raising money from a lot of great angels should use a Roll Up Vehicle.”

create your own ruv


Disclosure:

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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