Roll-up vehicles: Simplify your cap table & speed up fundraising

We all know that securing investment is essential for business growth. But as your list of investors expands, your cap table might start to collapse under the weight of success.

It’s an amazing problem to have. And a problem that comes with a solution in the form of roll-up vehicles (RUVs).

RUVs are a type of Special Purpose Vehicle (SPV) you can use to streamline your shareholder structure and make fundraising more efficient for all involved.

RUVs can save you time and stress today and improve your odds of raising funds in the future.

Read on to explore what RUVs are, how they work, and why they're catching on among forward-thinking founders.

What's a roll-up vehicle, anyway?

Think of a roll-up vehicle as a way to bundle multiple smaller investors into one tidy package on your cap table.

Instead of juggling dozens of individual shareholders, they’re rolled into one entity – hence the ‘roll up’. Here's how it works:

1. You set up an RUV (usually as a limited liability company or limited partnership)
2. Multiple investors pool their money into this RUV
3. The RUV invests in your company as a single entity
4. Your cap table shows one line for the RUV instead of a long list of individual investors

This structure offers a host of benefits, which we'll explore in depth. But first, let's consider why RUVs have become increasingly relevant in today's startup ecosystem.

The rise of roll-up vehicles

In recent years, we've seen a surge in angel investing and crowdfunding. While the democratisation of startup investing is exciting, it can create bloated cap tables. 

RUVs are an elegant solution to this modern problem and gained traction when the popular angel investing platform AngelList started offering them in 2021. 

It addressed a common pain point for startups – managing a cluttered cap table filled with numerous small investors. (FYI, you'll find top tips for effective cap table management in our free guide).

Here’s an example from AngelList: when JJ Tang and Quentin Rousseau raised a seed round for their engineering startup Rootly in 2021, they used an RUV to create a quick, efficient cap table that could handle multiple investors. 

“The legal process of adding that many small checks was complex…not to mention all the signature chasing we’d have to do when we raise our next round,” explained Tang.

RUVs aren't just for simplifying investor management and relations for seed-stage startups though. 

Later-stage companies preparing for Series A or B rounds can benefit from consolidating their earlier investors. It's all about presenting a clean, manageable shareholder structure to potential new investors.

We should mention that AngelList certainly isn’t the only way to create and manage RUVs. Vestd offers a handy way to set up and manage them, whether you’re a founder, business owner, investor or fund manager. More on that shortly. 

Now, let's dive into the nitty-gritty of why RUVs are becoming an excellent solution for cap table headaches.

Why bother with roll-up vehicles?

By consolidating investors through an RUV – especially using a platform like Vestd – you can cut admin costs, reduce the need for expensive cap table software, and focus your resources on actually growing your business. Here’s why:

A cap table that's actually manageable

Imagine closing a funding round with 50 new angel investors. Great news, but now you're faced with managing 50 new entries on your cap table. With an RUV, those 50 investors become one single entry. Suddenly, your shareholder structure looks a lot tidier.

This isn't just about keeping things neat. A straightforward cap table is much more appealing to potential future investors, especially VCs who might be eyeing your company for a larger round down the line. 

When a VC is evaluating your company, they're not just looking at your product or market potential. They're also assessing how easy it will be to work with you and your existing investors.

Streamlined communication, decision-making, and admin

Keeping investors in the loop and managing shareholder approvals can consume a lot of time when you're dealing with a crowd of individual shareholders. 

RUVs typically have a lead investor who acts as the point person for everyone in the vehicle. This means you can share important updates through one channel and get faster approvals for big moves.

Need to green-light a new funding round? With an RUV, you're dealing with a single representative instead of chasing dozens of signatures.

Keep control where it belongs

One of the biggest worries for founders when bringing on new investors is maintaining control of their company. RUVs can help here by consolidating voting power through the RUV's representative.

It's not about silencing your investors. An RUV structure just allows for more efficient decision-making processes. It reduces the risk of deadlocks or conflicts arising from a large, diverse group of individual shareholders. 

Is an RUV right for your startup?

That’s the golden question. RUVs offer tremendous benefits in the right scenario but are not a one-size-fits-all solution. In short, they tend to be most useful when:

• You're dealing with a large number of smaller investors
• You're gearing up for a bigger funding round and want to tidy up your cap table
• You're spending too much time on investor admin and not enough on actually running your business
• You need to make decisions quickly and can't afford to get slowed down by wrangling multiple shareholders

If this sounds like you, it might be time to consider an RUV for your next funding round. 

RUVs to fuel your fundraising goals

RUVs offer a smart way to manage a growing investor base while keeping your cap table clean and your admin streamlined.

As any founders out there will testify, anything that can simplify processes and save time is worth a look!

If you're considering setting up an RUV, Vestd Nominees makes the whole process easier than ever. You can:

• Easily set up and manage your RUV structure
• Keep your real-time digital cap table clean and up-to-date
• Simplify communication with your investors
• Streamline the process of issuing shares and share certificates to investors

If you want to learn more or get started, book a free, no-obligation call with our team. We’ll be happy to help!

Meet with Vestd

Please note: The Syndicate and Pledge Fund products are intended for Sophisticated Investors and High Net Worth Individuals, under the relevant legislation. Vestd acts only as the Platform Operator and Nominee Provider, and does not act as a Fund Manager in this arrangement. Vestd Ltd is authorised and regulated by the Financial Conduct Authority (685992).