Key Takeaways
- Vested offers liquidity for startup employee stock options, addressing the issue of abandoned equity.
- The platform proactively sources deals by monitoring employees leaving preferred companies.
- Vested's investment strategy focuses on diversified exposure to the top 20% of venture-backed startups.
- A proprietary 'data moat' and accurate pricing model are key to Vested's competitive advantage.
- The company's long-term vision includes developing private market indexing and providing extensive liquidity data.
Deep Dive
- Dave Thornton built trading and risk models at a Citigroup internal hedge fund before moving into entrepreneurship.
- He developed an illiquid asset pricing model, drawing lessons from his hedge fund experience.
- An anecdote from his second startup, a healthcare analytics business, highlighted employee struggles with equity management, a key insight for Vested.
- Earlier ventures included machine learning models for NBA teams and algorithms for poker and daily fantasy sports.
- Vested initially launched as an equity education platform, providing free content and tools to attract startup employees.
- The goal was to later offer financial products and referrals, such as mortgages and wealth management.
- About 18 months in, users primarily sought capital to exercise stock options before their 90-day post-employment window closed.
- This emerged as the dominant use case, despite initial hypotheses of other capital needs like home down payments.
- Many startup employees struggle with managing their equity, often abandoning stock options even with financial incentives.
- Vested observes diverse signals from employees regarding their stock options, highlighting a common challenge.
- The guest notes that slow feedback loops in private markets over the last three years complicate hypothesis testing on employee signals.
- Vested's current sourcing method is entirely proactive, identifying employees of preferred companies who have recently left.
- The platform monitors job websites like LinkedIn for employees leaving Vested's preferred list of companies.
- Vested automatically reaches out to these individuals when an end date is posted.
- Long-term, Vested aims to provide value throughout an employee's startup equity lifecycle, re-engaging in equity education to reach people earlier.
- Vested utilizes regression models for company assessment, avoiding large language models (LLMs) for this purpose.
- The portfolio naturally weights towards Series A through F+ stages, with slight underweights in the earliest and latest stages.
- Diversification is emphasized due to the difficulty of picking winners in early and mid-stage venture capital.
- Sector weighting generally aligns with the broader venture market, primarily tech, with significant allocations to healthcare and smaller positions in energy and financial services.
- Vested identifies top-tier venture capital firms by analyzing historical cash-on-cash returns, moving beyond brand names.
- An algorithm determines the cutoff for investment based on these returns, in response to market volatility and risks.
- The biggest risk to Vested's strategy is identified as increased competition from well-funded asset management firms.
- Vested aims to build a 'data moat' through proprietary data collection and an accurate pricing model to maintain competitive advantage.
- The market for abandoned stock options is estimated at $200 to $300 billion over a market cycle, indicating substantial scaling potential.
- Vested is building its brand to become the go-to platform for startup employees seeking liquidity, starting with proactive outreach.
- Vested aims to partner with companies to offer employee liquidity programs, highlighting recruiting and retention benefits.
- The guest anticipates potential pushback from primary venture funds in the future as Vested's scale grows.
- Vested envisions a future business phase focused on indexing private markets, providing liquidity and data to secondary markets.
- The guest notes the current anemic state of private secondary markets, characterized by limited trading volume.
- Vested believes its extensive data set on private companies can characterize startups for buyers, leading to a profitable index business.
- This vision draws parallels to the historical development of public market indices and recent industry moves like BlackRock's acquisition of Preqin.