Flex: Flexible Capital by Founders, For Founders

March 7, 2021
March 6, 2021
Auren Hoffman, Tod Sacerdoti, Jeff Lu

We started Flex with a simple idea. The venture capital product is no longer just about money, but rather the people attached to the money. The people founders increasingly want to work with are other founders.

In today’s funding environment, founders have a lot of options: solo-capitalists, operator-angel funds, alumni syndicates, DJ VCs, Athlete VCs, and of course, the legacy multi-stage firms.

In a perfect world, capital would be bundled with the best counsel. Looking back on our collective 40+ years of founding and running companies, the most valuable advice we’ve received was from other founders who were still operating companies. 

Over the years, we have advised our fair share of companies. It evolved from investing out of our own piggy bank, to raising AngelList syndicates, and even occasionally taking board seats. Through this process, we realized the best founders want a service that doesn’t exist yet - Founders who are still operating venture-backed companies, but also investing out of a venture capital platform.

Enter Flex Capital.

Not just “founder friendly,” we are currently founders.

Flex Capital is a fund founded by founding CEOs. Founders are simultaneously our customers and our peers, as we are also currently operating companies.

Tod previously founded BrightRoll, which was acquired by Yahoo!, and started a new company, Pipedream. Auren previously founded LiveRamp, which is currently publicly traded (RAMP), and is the founding CEO of SafeGraph

What our customers want is to add people to the cap table who are currently fighting the good fight and not just passing on second hand war stories as hard-earned wisdom.

In essence, founders prefer to add investors who are peers to join the journey. The best co-founders are current founders.

By simultaneously investing and operating companies, our blended experience is an asset.

We are experienced investors. Collectively, we have invested in over 250+ companies, from the inception stage to pre-IPO. Jeff previously spent 7 years at Battery Ventures, investing across software, financial services, and consumer Internet. Tod’s AngelList record is in the top 1% of all investors on AngelList. Some of our investments before launching Flex include AppLovin, Brightroll, Checkr, Chime, Coinbase, Flexport, GetYourGuide, LiveRamp, Marqeta, Niantic, and StockX.

We are flexible. We don’t have ownership requirements. We can buy preferred or secondary. We can lead or follow. We invest in software businesses of all stages. We invest $100k-$10M across seed to Series C. We assign our voting rights to the founders.

We have a love-hate relationship with board seats. We take board seats by invitation. Our preference is to take an observer seat and take it a year at a time. We don’t presume to be additive to the conversation for the entire life of the company and the board should shift as the company hits different inflection points.

We want to present solutions that fit into the problem. When entrepreneurs raise capital, there’s typically a “job to be done” they are looking to complete. They don’t go out thinking, “I want to sell 20% of my business, do an option pool refresh of 5%, and add a board member who I will meet ~3-4 times in a month and decide to work with that person till death do us part.” 

We want to be a part of the solution for the “job to be done” and that requires some flexibility on our end and creativity on the part of the entrepreneur. Some real examples where we can use our position as a flexible investor to be helpful:

  1. We committed to investing before the entrepreneur went out to raise a series B. We helped go through a few iterations of the pitch and materials, helped form the initial investor outreach list, and made warm introductions. When the deal terms were not ideal, we issued a competing term sheet to help move the terms.
  2. We acquired secondary to help the CEO clear the cap table of a co-founder who left and as well as problematic early investors.
  3. Led the Series A of a high-growth SaaS company with just access to internal metrics and no pitch deck. We set the terms but allowed room for existing investors to buy more ownership.

More to learn from Founders. We are just getting started. There’s a lot more to build as we have a lot more to learn. We look forward to sharing more over the coming months as we build in public.

Our next post will be a summary of our investment themes for Fund I. If you would like to follow along, please subscribe below or feel free to email jeff@flexcapital.com if you’d like to work together.

Tod, Auren, and Jeff