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Episode Synopsis "6/23/19: Exicate Weekly Update + Podcast"
Hey All!Last Week’s ProgressSee previous 6/16/19 update for context.Newsletter subscribers: 109, +10 from last week. 10% WoW growthInsights from last week* I learned about “Exchange” funds that are offered by banks and others. These seem to be used for executives in public companies with highly concentrated positions. Execs exchange stock for an interest in the fund which can track various indices. I’m getting more information on this from the bank I spoke with along with researching tradeoffs.* It might be possible for an SPV to assign carry to an “Exchange” fund and then a startup exec own a portion of the fund. Essentially an equity swap but with carry?* “Access” as a business model re securing investors may not be feasible as secondary liquidity picks up dramatically for Series C+ names. Researching this further.* I’ll experiment with a daily update in addition to the weekly updates after I get back to the US. I expect this to accelerate things by increasing accountability.* I heard about a few more eye-popping examples of executives negotiating allocation in pre-IPO unicorns as part of their comp package. Verifying if they invested all their own capital or used syndicates.Follow ups on last week’s goals:Implement new outreach program to execs, CEOs, and VCsIt’s clunky but starting to work. Right now I’m hugely backlogged with inbound intros so I will prioritize those before ramping up outbound.Figure out how to get allocation commitment from CEOs without reducing their flexibility in structuring rounds. Possibly mini intermediary rounds for just the execs at a 20%-30% markup between standard institutional rounds? This would give VCs a quick markup to show LPs while simplifying round mechanics for founders.The best answer so far here seems to be targeting allocation sizes of ~$500k. And then attempting a land-and-expand strategy for later rounds. Will explore further.Deep dive w/ counsel on regulatory concerns and hypothetical fund structureThis may be worth an entire separate post. It seems that this might not present any legal issues as long as the employee is not in any way managing the SPV/fund. There’s also an open question if carry can be assigned purely based on capital raised i.e. Person A helps a manager raise 33% of an SPV’s total capital, and then receives 33% of the carry (33% of 20%). It may make sense to request a no-action letter to verify if this is feasible. If so, then that may also have wide ranging effects on the entire private fund industry.Secure 20 more email list subscribersAchieved 50% of goal. This coming week* Traveling/vacation so no additional workDisclaimerI'm not a professional CPA, lawyer, CFP, RIA, B/D, ERA, etc. or anything else. All content is informational only and is not intended as professional/investment advice/counsel or an offering of any kind. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit harveymultani.substack.com
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