1st Q2 Featured Founder | Sweater
The 1st New Majority founder currently fundraising from YOU this quarter.
Meet the future of venture capital investing with this week’s Featured Founder, Sweater!
Sweater
First, some context:
🙁🫰Breaking into investing can be difficult – information about investments, especially private companies can be complex and opaque and accredited investors in the US must have at least $1m net worth or have earned $200k+ in the past two calendar years (Source: SEC). Not you? Read on.
🤯📈Historically, privately held companies funded by VCs have had up to a 32.4% annual return rate, compared to the S&P500’s 9.1% annual average (Source: Sweater). But, most investors don’t have access to this exclusive “VC asset class.”
😄🌐Legacy crowdfunding sites like Wefunder, StartEngine, and Republic have carved out a niche by appealing to the investment-curious, who may not have previous investing know-how or the assets to become accredited investors.
🍯Crowdfunding generates around $17.2b per year in North America, and this number is growing! (Source: Fundera)
☄️🙌On crowdfunding sites, potential investors can learn about available startup offerings, educate themselves on the basics of investing, and – crucially – can invest as little as $100 in the company of their choice!
🔀🆚But, investors have to dedicate the lump sum of their choice to one startup at a time, and there aren’t easy mechanisms for individuals to track the performance of their investment.
🧩💰That’s where Sweater comes in! Sweater is bridging the gap between traditional VCs and crowdfunding with their model Cashmere Fund.
🫵For everyday investors: Through the Sweater Investor App, everyday investors can access the Cashmere Fund’s portfolio with a $500 minimum investment. Investors buy shares in a Sweater “public VC fund” at a price determined by the fund’s current Net Asset Value (NAV). Traditional VC funds are only open to accredited investors, “public VC funds” are open to the everyday investor.
Tell me more:
Sweater is a first mover in creating a platform for everyday investors to build their investment portfolios with a “public VC fund” aka vetted private early-stage start-ups. Sweater launched their first fund, the Cashmere Fund, in 2022. Future plans include becoming a platform for other “public VC funds” offering personalized fund management services and infrastructure as Sweater partner funds.
THE DETAILS
Industry: FinTech, SaaS
Impact: Reduced Inequalities (SDG 10)
Team Diversity: Woman Co-Founder
HQ: 🏔Beautiful Boulder, CO
Company size: 10-25
Year founded: 2022
Key investors: Sweater’s institutional investors from their first seed round include Zilliqa Capital (Blockchain investment firm focused on fintech and open/decentralized finance solutions), MRTNZ Ventures (notable exits include Postmates and Cruise), and several others.
Investment type: Preferred Stock*
*Preferred Stock provides a slice of ownership in a company and typically includes voting rights.
Price per Share: $35.50
💸 Valuation: $48.49m
Investor Perks: Your $500 investment gets you a Sweater t-shirt!
Amount Invested: $313,819.57
Number of Investors: 263
Min investment: $177.50 (5 shares)
Goal: $15k - $1.09m
Deadline: April 30, 2024
Early traction:
🚀Since launching the Cashmere Fund in June 2022, Sweater has acquired 5.5k+ investors and provided capital to 33 startups. Companies currently included on the Cashmere Fund include:
🥵SweatPals: SweatPals is building the next big fitness tech app and community. SweatPals also won Sweater’s inaugural Barnburner by Sweater VC startup pitch competition in 2023! Read our Q1 Featured Founder Write Up for SweatPals here.
🫒Graza: Graza has made a name for itself as the coolest olive oil on the market, and is stocked at major retailers like Whole Foods, Target, and more.
🐣EarlyBird: backed by a variety of institutional seed investors, EarlyBird enables families and loved ones build wealth for their children, who inherit their EarlyBird account and portfolio at age 18.
⚖️View the full Cashmere Fund portfolio!
💸🔜In addition to running their own fund, Sweater is launching a SaaS/fund management offering - think the “public fund” version of AngelList. For this new “product offering,” Sweater has a massive deal pipeline that could generate up to $4.6b AUM*. Three potential fund partners have signed engagement letters to launch their funds on Sweater’s platform, with one of these fund partners set to launch in 2024 and have a potential fund value of $500m!
*AUM means Assets Under Management, a term used to define the market value of investments that a fund/brokerage/advisor (in this instance, Sweater) manages for investors (Source: Investopedia).
💥🏆With events like the Barnburner by Sweater VC startup pitch competition, Sweater is putting themselves on the map in the startup world.
✍️Sweater’s notable press includes features in Business Wire, Workweek, and Axios.
Founding Team:
Jesse Randall (CEO, President, Chairman, Founder) – Jesse has a decade of experience in startups, with roles at startup accelerators, as well as in finance and revenue strategy.
Emma Clark (COO, Principal Financial Officer, Board Member, Co-Founder) – Emma is a fintech pro, having previously served as Head of Business Operations/Analytics at Recurly, a platform that optimizes subscription services.
Jaron Jones (CTO, Co-Founder) – Jaron has nearly 20 years of software and engineering experience at major companies like Amazon, SoFi, and Intuit.
DUE DILIGENCE
Pros:
👏🗂Sweater is a first mover in the space, having spent five years honing their fund structure to build this public VC fund
👥With the Sweater Investor App, funds and the Sweater investor community remain native to Sweater’s platform.
🔥Diversifying your investments through a portfolio approach is a proven investment strategy that reduces risk. By enabling Sweater partners to open up their high-performing portfolios, Sweater is making this possible for everyday investors, who typically have to rely on traditional crowdfunding sites.
💵👍Diversifying Revenue Streams:
🔑🔗Portfolio Revenue: Sweater earns a Net Asset Value management fee from the Cashmere Fund and Sweater partner funds.
🔋🔁Partner Revenue: in order to use Sweater’s platform and technology, Sweater will also charge an annual SaaS fee to their B2B partners. For example, the $500m partner fund set to launch in 2024 is projected to generate at least $15m in such fees for Sweater over the duration of the contract.
Potential Risks:
⚠️☔️Sweater prioritizes companies raising Seed or Series A rounds. These early stage companies are incredibly risky with an estimated 9 in 10 companies failing, with the theory that the one that does succeed provides returns that more than makes up the whole portfolio. This explosive growth and ROI is not guaranteed.
🤹♀️🎲Sweater’s contract projections for their Fund Partners are ambitious. SaaS fees are recurring, but Net Asset Value fees may not be as lucrative as Sweater anticipates and depends on the size of funds they’re able to attract.
🚦⏳Liquidity of funds: Sweater’s use of an interval fund means that their shares do not trade on the secondary market and lack liquidity – this means that Sweater is the only entity which can buy back shares from investors during bi-annual redemption / buyback periods.
Competitors: Sweater isn’t the only company seeking to democratize investing! Sweater’s target investor demographic may continue to prefer existing, established crowdfunding sites or wait until they’re accredited to invest in this asset class. Potential fund partners could choose traditional VC or launch on Angellist.
Wefunder: WeFunder has been at the forefront of crowdfunding since 2012, with over $655m invested on the platform to date. Notable companies like Zenefits and Substack have raised on Wefunder! Wefunder has also pioneered side-by-side co-investing with VCs, where everyday investors on Wefunder can invest on the same terms as institutional investors.
StartEngine: Founded in 2014, StartEngine acquired rival crowdfunding platform SeedInvest in 2023 and has been listed on Inc. 5000’s fastest growing companies in America list for two consecutive years. Among StartEngine’s key advisors and investors is Kevin O’Leary – aka Shark Tank’s Mr. Wonderful!
Republic: Over $500m has been invested on Republic since its inception in 2016. Republic has expanded their offerings to include options for European and accredited investors, their own VC offshoot (Republic Capital), and even Republic Note. Republic Note is a digital asset that gives investors access to a special 623 company strong private equity portfolio. Companies in the portfolio include big names like SpaceX.
Why Sweater: Sweater is building an innovative platform and fund model for the next generation of investment platforms, starting with their Cashmere Fund with over 5.5k+ investors and 33 startups funded to date. Sweater’s use of technology to create a seamless fund launch process for partners, multimillion partner fund pipeline, success of their first Cashmere Fund, and emphasis on user experience and community on the Sweater Investor App has demonstrated the potential for public VC funds to disrupt the landscape for everyday investors.