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Deal Sheet = Deal Flow Unlike You’ve Ever Seen!

Deal Sheet is a paid weekly newsletter that delivers the best startup investment opportunities weekly. These deals are being syndicated by 20+ of the best and most active syndicate leads we’ve worked with. All Deal Sheet deals include discounted carry (10% carry versus standard 20%).

Next week we will be sharing a 0% Carry Deal (doing > $250m in revenue & reported to IPO in 2024), however here are the 4 deals that went to Deal Sheet subscribers this week; subscribe to Deal Sheet to unlock access!

• Deal ex. #1 → AI deal led by Khosla

• Deal ex. #2 → Deep-Tech Seed from founders who previously built a 10-figure enterprise valued biz

• Deal ex. #3 → Spark Capital led Series A Space deal

• Deal ex. #4 → Leading ChatGPT competitor that grew>10x in a year to over $100m and on track to surpass $800m this year

***If you are interested in becoming a Deal Sheet subscriber, but want to chat further, email us here directly ***

Chronicles of a Syndicate Lead

Having run hundreds of syndicates over the years, you better believe there are many stories that have come out of this. And these stories go in every direction… good, bad, funny, wild & more! 

Zach and I have been heads down for about five years consistently trying to get allocations and fund the best startups via SPV’s through many macro cycles and economic climates. When we ultimately decided to share these learnings via Last Money In, we realized we not only have endless learnings from running so many SPV’s but also have accumulated many stories throughout the years.

Today, I am going to share some of my more memorable stories, providing a behind the scenes look of what it's really like running SPVs.

Oh, and when I say I was heads down doing deals, I really meant it. I can recall working on launching/closing SPVs:

• The morning before I proposed to my now wife (it was actually a deal I co-syndicated with Zach and invested over $1m)

• Checking the status of a competitive deal we were running in the hotel room before and after my brothers wedding (I think we are sitting on a sizable winner there)

• Even issuing a last call for a deal I was co-syndicating morning of my wedding day

On that note, let’s get into some of these stories…

1. The “Investor” LinkedIn Update

We were investing into an enterprise SaaS Seed round that Founders Fund was leading. It was the day before we were launching the SPV and I had spoken to the founder to align on process and deal memo. The founder requested we keep our SPV process tighter (i.e. solicit to only a small fraction of LPs) than usual but nothing that deviated far from a typical process here. 

We had agreed on a $200k allocation and that was the maximum allocation given Founders Fund was taking a large portion of the round with the round otherwise about to oversubscribe. Everything was in place and ready to go for the next morning. So, at about 10am ET I launched the deal to a subset of LPs who were active in Riverside. 

About 30 minutes after launching the deal, we had raised ~$50k, which was a great start and provided assurance we’d fill our whole allocation extremely quickly…however, one LP who invested $10k immediately went to LinkedIn after completing his commitment and added himself as an “Investor” of the company.

This notified the founder who immediately called me extremely upset, and justifiably so. We spoke and calmed him down but unfortunately I ended up losing the allocation because of this. While we actually kept our process extremely tight, it signaled to him that it wasn’t and that concerned him.

The funny part… a week or two later I saw another syndicate run an SPV for this company and I highly suspect they went much wider with LPs. 🤷🏻🤷🏻 I can laugh now but I was extremely frustrated at the time. I also removed the LP from my syndicate, which is common for any syndicate LP who breaks confidentiality 👋👋. Hopefully, this one example can help demonstrate why we stress confidentiality on deals. 

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2. VC Intros, a Syndicate Leads Best Friend

We invested in a pre-seed healthcare tech business in 2022. As with most pre-seed companies, we really bought into the founder as we were investing in a pre-launch stage business. Fast-forward exactly a year to mid 2023, the company was now going out for a proper seed round.

They had already had a Tier 1 lead in place, so it felt like the round would likely get competitive. The founder was transparent with me in that he wanted to get us pro-rata, however it was TBD based on the makeup of the round.

I clearly was going to “fight” for my pro-rata, so I was trying to figure out how I could be helpful here, and identify if there were other VC’s in my network that were healthcare focused and a likely good fit to close up the round.

I introduced the founder to a friendly fund that I had co-invested with multiple times and it ultimately was a great 2-way fit (and more)! Here is what proceeded:

1. The VC took the remaining allocation in the round

2. They also invested an additional $800k at a higher cap/30%+ premium to the ongoing seed round.

3. Because of that intro, I was (to my knowledge) the only pre-seed investor who got pro-rata in the seed round :)

3. Acquisition mid ROFR

We recently acquired secondary shares into a growth-stage company that has performed extremely well over the years. I worked with another investor who was a previous investor in the company and closer to it. We liked the comps, momentum, and market. We were buying preferred shares at a double digit discount to the previous round that had taken place. 

We ran the deal and transparently did not get as much LP interested as expected (happens a lot). Regardless, we got plenty of commitments and proceeded to invest. 

Because this was a secondary transaction we needed sign-off from the company and the ROFR (right of first refusal) process to complete. This means the company or other investors who have the right of first refusal to buy the shares get the opportunity to do so, potentially pushing us out of the transaction. This is a standard secondary process.

Anyways, while we were in the 1 month ROFR period, the company ended up getting acquired by a major player in the space. Transparently, this has never happened to me so I was not sure what was going to happen. I just kind of assumed that the deal would get blocked given the activity taking place. 

While the deal has not officially closed, legal has signaled our secondary purchase will go through despite the company M&A announcement. Talk about a quick markup… 

4. 200+ NDA’s signed manually

I recently secured a follow-on allocation into the most sensitive round I had ever been a part of. We were close with the company as we had invested in their first round of capital and they were now raising a $600m+ Series B. As the round was taking place, I had spoken to both the founder/CEO and Chief of Staff to 1) secure a $1M allocation and 2) align on process to fill the SPV with LPs.

The challenge here was that the company needed the terms & co-investors to remain completely confidential UNLESS the LP was under NDA. Now NDAs are not typical and especially not when sharing information with LPs of a syndicate. This meant I could not simply launch the deal and invite LPs (as I always do) but rather, I needed to reach out to LPs to share a few bullet points on what was publicly available and request interested LPs to fill out a type form with indication interest, so that I could:

1. Send them an NDA

2. Once the NDA was signed, I could then manually invite each LP to the deal to explore commitment to the deal

This was a no fun process as over a week or so I had to manually email (DocuSign helped) over 200 LPs NDA’s only to wait around and see once they completed, so that I could follow up manually with an invite to the deal. 

The Con: I definitely left millions on the table given the high friction to put together this SPV. There were many interested LPs that came late or would have been interested. I also put in a lot of work to secure this allocation and tried to be super attentive to when interested LPs expressed interest and completed the NDA. I hope to not need to have to do this again anytime soon. 

The Pro: We still raised just shy of $1M and we did it compliantly and the right way in which we agreed with the company. Almost all of the non-signaling VCs’ syndicates in the round got scaled back, but we did not :)

5. Raising Half a Million in 45 minutes 

In September of 2021, we secured a $500k allocation in a later stage company that was raising a buzzy growth stage round led by Coatue. The raise was in the hundreds of millions, so our check size was pretty insignificant. I was able to secure an allocation into the company from an existing investor who had good & direct access to the company. Let's remember, that September, 2021 was a different market and capital was flowing, pretty much at an all time high.

We secured the allocation from the founder who gave us up to $500k. Now $500k is a larger SPV than normal for us but we knew this deal had a lot more signal and was later-stage, so we expected it to generate a lot of LP interest quickly. 

We put together the deal materials and got the SPV launched. I only invited those who had done 3+ deals with us to start out and see what the feedback would be. I launched the deal and came back 45 minutes later to see if there were any commits. ~45 minutes after launching the deal I had ~$540k committed from 13 different LP’s.

That was it. This does not happen frequently, but to launch a half a million allocation and fill it up 45 minutes later from 13 LPs felt pretty wild to me. I closed the deal then and we hung tight for the company to call capital. Unfortunately we could not get more allocation given the competitive nature here.

6. When a Primary Round is Massively Oversubscribed, Try Founder Secondary!

There was a fintech founder I invested in personally and brought some angel friends in back in 2018. I did not run a SPV, it was a true angel investment here. Within the next 2-3 years, the company pivoted into a much better business and went on to raise an oversubscribed Series A. 

I had built a really great relationship with the founder and we are friends today. I introduced him to their head of sales who was a friend of mine with hyper-relevant experience to what they were building. 

So, here we are with Tiger leading a $25m Series A and 3-4 other institutional funds wanting to follow on. It’s a good, but also a tough spot for a founder trying to get everyone their allocations. At this stage, I was looking to do a few hundred thousand in a SPV as the syndicate had been built up substantially since my angel investment. The problem was there truly was no allocation available even though the founder wanted to get me in. I of course wanted to get an allocation, however I did not want to put him in a bad position with institutional funds that had pro-rata etc. 

This was a rare scenario, where the founder was selling a small portion of common shares to the lead investor and therefore the founder was able to allocate some of that secondary to my syndicate. We originally started with a $250k block but ended up getting $500k in demand and the founder was great, and easy to work with here allowing us to do the full $500k secondary block.

To me, this is a great example of one (of multiple) ways to get creative when you’ve got a strong founder relationship at a massively oversubscribed priced round. Over the years, it has been exciting to navigate innovative ways to “make it all work”!

7. Be Careful What You Share (even when the founder signs off)!

One of our portfolio companies that was doing extremely well was taking a little extra capital given high investor demand. I secured a small follow on allocation for interested LPs, both existing investors and new investors. The company was also acquiring a business and had provided an update on the status, however it WAS NOT a done deal.

Before I went out with the update and materials in the new SPV, I had the founder sign off on everything to ensure nothing was too sensitive. I’m friendly with the founder, but we are an insignificant check given the size of the company. In short, he approved everything and we were ready to launch. 

I invited LPs to evaluate the deal and included some of the company highlights in the email itself. Within hours of launching, the founder reached with very high concerns specifically on the details of the not-yet-completed acquisition I referenced. He felt this put the deal at risk, so we spent the next day figuring out everything we can do to redact the email, limit the information shown, etc.

This might be the worst I had ever felt in my career running SPVs. As an investor, we obviously aim to be helpful and NOT jeopardize an acquisition or success of a portfolio company!!

Luckily, this did not ruin anything and the acquisition went through as planned, but my heart stopped for a second there.

2 Lessons Learned:

1. Use judgment on sensitive info even if the founders “approve” details 

2. Don't share sensitive info via email. You can’t take away what comes through an email, whereas you can redact information in a deal memo.

Have any horror, funny, amazing SPV stories as a GP or LP? We’d love to hear them! Directly reply with details! 

If you enjoyed, this article, check out our prior articles on the GP experience: 

• 🎓How being an LP in VC Syndicates Landed me my First VC Position

• Pay to Play Rounds - The Bane of the SPV

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✍️ Written by Zachary and Alex