Through Vator we want to increase the access entrepreneurs have to capital, and increase the access investors have to startups.
That said, this is a really messy business. Most startups will fail and most investments will end in a complete loss.
Vator believes in entrepreneurs and entrepreneurship. The founders of Vator have spent their entire careers in the entrepreneurial ecosystem and believe that entrepreneurship and innovation are the building blocks of advancement.
If we think of investing in mature, publicly-traded, companies like backing a shipment of cargo on an airplane, with a relatively clear manifest, route, and largely predictable arrival time, then investing in a startup should be thought of as backing an explorer about to set sail on an expedition to undiscovered lands, across dangerous seas. All the explorer can tell you is the general direction they plan to head, and the rumors they’ve heard of the gold at the other end. Most of these explorers won’t find any gold. Worse, many will die trying.
In the end, there’s not much Vator can do beyond presenting the opportunities for investment. The rest is really up to the investor (you), and the level or due diligence you want to do, and the level of risk you are willing to take.
So, the odds are high that on any given investment you will lose all of your principal. It’s just the nature of this business. So invest in this market because you enjoy participating in the entrepreneurial ecosystem generally, not because you plan to make anywhere close to predictable returns.
We’ve gone to great lengths to lay out the risks, disclaimers, and terms in plain english. We don’t like legaleze and we truly only want people to invest in startups who are aware of the risks, and understand that Vator is providing no guarantees or warranties.
We’re continually trying to help startups put their best foot forward, and to make the investing process fun and easy, but the risks remain the same.
If you have any questions at all please do not hesitate to email us at [email protected] - we would be happy to discuss early stage investing with you.
Vator’s FAQ’s, disclaimers and terms are subject to change. Participation on Vator’s sites and in the Vator Funder process is entirely at Vator’s discretion. Vator can, with or without notice, and at any time revoke a startup’s, investor’s, or member’s right to use the sites and supporting services. No commitments are implied or made.
To participate in Vator Funder you will have to agree to indemnify and hold harmless Vator for any and all investment related activities.
Early Stage Startup Investing is Extremely Risky
As is discussed at length on Vator’s sites, early-stage investing is extremely risky. In all likelihood most, and potentially all, of an early stage investor’s investments will result in a complete loss of all of the investors principal.
Proceed with extreme caution.
What is Vator Funder?
Vator Funder provides members of Vator, who are accredited investors, with the opportunity to invest in startups on Vator. The minimum investment is US$2,000. Investors can discover and filter startups based on the startup profiles, and place their non-binding indications of interest on Vator. Once a startup hits a predetermined commitment threshold of indicated interest from potential investors, Vator Management LLC will consider forming a fund to receiving the capital from the interested Vator members and investing in the startup.
Who can invest in Vator Funder companies?
Members of Vator who are accredited investors. Vator does not allow unaccredited investors to invest in startups. We are hopeful that we will be able to construct a process that is compliant with US Securities laws that will enable un-accredited investors to invest alongside accredited investors in the future. We are, however, not there yet.
Accredited investors are individuals with net worth or joint net worth with a spouse that exceeds $1 million, excluding the value of the individual’s primary residence. Or individuals whose income exceeds $200,000 in each of the two most recent years, or joint income with a spouse of $300,000. Corporations or charitable organizations or partnerships with assets over $5 million, or a business in which all equity owners are accredited investors. Before any investor can make an investment Before any investor can make an investment using Vator Funder, they must submit investor qualification documents.
When I invest on Vator am I investing directly in the startup?
No. You are investing in a fund (which could take one of many possible forms) formed by Vator Management LLC.
How does Vator Funder make money?
The preponderance of Vator Funder’s revenue comes from carried interest, which is the manager’s share of the profit should a fund have a positive outcome. Here are two examples:
Example A Vator Funder Fund A invests $1,000,000 in Startup XYZ. Startup XYZ goes out of business (which is likely going to be the case for most startups). Investors lose their money and there is no carried interest for Vator.
Example B Vator Funder Fund B invests $1,000,000 in Startup ABC. Startup ABC is acquired on attractive terms and Vator Fund B’s investment is now worth $6,000,000. The first $1,000,000 is paid back to the investors in the fund, leaving $5,000,000 in profit. For this hypothetical investment, let’s say that Vator Funder’s carried interest was 20%, so Vator Funder would get $1,000,000 of the profit with investors receiving the remaining $4,000,0000. So, in this case, investors invested $1,000,000 and saw back $5,000,000.
This is essentially how most venture capital funds operate.
Vator also charges an administrative fee for funds raised. This is typically between 5% and 10% of the funds raised and is held to cover direct fund expenses. Any unused administrative fees will be return to investors when the fund is closed.
Why should I invest through Vator Funder and not directly in the startup?
This is completely up to you. If you would like to invest directly in the startup you should speak with them and determine if they are interested in having you as a direct investor.
In general, from a startup standpoint, they would prefer to deal with fewer investors so it’s attractive to them to have smaller investors bundled together into larger entities. To the startup a Vator Funder investment is a single entity with which to deal.
Vator Funder also assigns a steward to keep tabs on the investment and make decisions related to the investment. There are potentially other benefits to being part of a larger investor group, like a stronger negotiating position, and the benefit of a larger pool of resources and expertise.
What is a Steward?
For every fund created by Vator Management LLC Vator assigns a Steward. The Steward may, or may not, be an employee of Vator (most often not) and is someone Vator Management LLC feels has sufficient experience in the startup ecosystem to provide oversight of the investment. This is much like how a traditional venture capital firm has venture partners to help steward specific investments. The Steward will be responsible for helping facilitate the startup’s access and relationship with the Vator community and for keeping tabs on the investment. The Steward’s economic return for this work is a participation in the the carried interest of the fund.
What is an indication of interest?
An indication of interest is a non-binding indication that should the startup reach their commitment threshold an investor would like to invest the designated amount. When the startup reaches the commitment threshold, investors who have placed an indication of interest will be invited to formalize their relationship with the fund and make their investment. In order to facilitate a vibrant and reliable community, Vator will keep track of people who do and do not follow through on their indication of interests so that investor reliability can be measured.
What are the terms of the investment?
Vator’s preference is to invest alongside other sophisticated investors. As such the terms of the investment in the startup will typically match those negotiated by the other investors (other venture capital funds, experienced angel investors, and so forth). In the rarer case where Vator Funder is the only, or first, investor the current round, the investment will in most cases be structured as convertible debt.
What is the commitment threshold?
The commitment threshold is the amount of capital that must be committed by interested investors on a non-binding basis before Vator Management LLC will consider creating an investment fund. The minimum threshold is a percent of the total capital raised, and will typically be between 30% and 50% of the target amount.
Vator appears to be highlighting startups ‐ are those investment recommendations?
Vator is absolutely not making investment recommendations. Even the very best VCs lose money on many of their investments, and we don’t think we can pick any better!
Picking into which startups to invest is your job. What Vator Funder tries to do is use heuristics to help identify patterns which could be a signal for a greater likelihood of success. That said, it’s impossible to know which company will emerge, and if our heuristics will be correlated to startup success.
What is Vator Management LLC?
Vator Management LLC is the entity which forms the Vator Funds for startup investments.
How many investors can be in each fund?
For most funds Vator Funder will set a cap of 95 investors, but this may vary on a case-by-case basis. The JOBS Act raised the shareholder ceiling from 499 to 2,000 for private companies (provided that no more than 499 are not accredited investors).
Is listing on Vator considered a general solicitation?
No, companies can create a generic profile on Vator.co for the general public as they would on any social network. All communication related Vator Funder’s activities is private and is only visible to the members of Vator Funder.
Can I tell people that I’m investing in a startup on Vator?
This is a tricky question. You cannot communicate that a startup is raising money to the general public as that would be considered a general solicitation (even if you do it and not the company). However, it is OK to tell your friends privately that you are making an investment. But they have to be people you already know and you should have a good sense that they are accredited investors.
You are also welcome to tell people to sign up to Vator generally. You just can’t communicate with people you don’t know about specific startups in the process of raising money, as again, that would be considered a "general solicitation."
What does an investor own when they invest in a Vator Funder fund?
An investor purchases an ownership interest in a fund that has an equity stake or a convertible note in the company. Investors receive a portion of the proceeds upon distribution after an exit ‐ M&A or IPO.