We're a team of founders who've built startups before. We've lived the struggle. We want to pay it forward.
Our moonshot: to help 20,000 founders get off the ground. By 2029. In all 50 states. Of all backgrounds.
We run an accelerator for pre-seed startups and also serve as Lead Investors to help startups raise more money on Wefunder.
Yes. We make $20K to $50K investments in pre-seed startups out of a fund.
We only make investments out of our fund for startups accepted to one of our accelerator programs. Our partners, however, may make personal investments.
Yes. We also act as Leads on Wefunder. Startups can raise up over $1M on Wefunder, with only one entity on the cap table. It is similiar to how a Syndicate works.
We started as an internal Wefunder project, then spun out as a separate company. Wefunder has no ownership in XX. However, as Wefunder alumni, we think they are pretty awesome.
We run it once a year. In 2018, we ran it for female founders. In 2019, for immigrant founders. In 2020, for startups tackling the coronavirus crisis.
Our acceptance rate is under 3%.
About 20% of our investments have later been accepted to Y Combinator.
There are two ways for founders to join the XX community:
Founders we invest in get:
We follow the Y Combinator ethos. Your time should be spent talking to users, building product, and staying healthy. Every Wednesday, there are group office hours, followed by dinner and an intimate fireside chat with an accomplished founder. You can request individual office hours if you feel stuck on a problem.
Unlike most non-YC accelerators, you focus on real work. The program is a ruthless sprint to focus on the 'most important thing', so your startup becomes valuable. It's not about spending 3 months in classes or pitch workshops.
We don't charge an equity fee. However, when investing in startups that attend out programs, we invest on with an uncapped SAFE with MFN provision. This basically means that we get the same terms that later investors offer you. You can read about how this works here.
If, after the end of the cohort, you are happy with the value we offer, you may opt in our advisor program. If you choose to do this, we take a 1% advisor stake, vesting over two years. You can fire us anytime.
We're not Paul Graham. But we do our best. We've all founded companies and internalized the hard lessons. We're very confident our advice is worth it. We also certainly will not offer negative value like most of the accelerators that distract founders from doing real work.
We try to help with that. But it's not through any "inside access" (recommendations from YC alumni count for little) or "interview prep" (the best way to prep is to know your business inside out). It's by helping you become a better startup.
So far, about 25% of the startups we've worked with have gone on to YC.
That's fine! We'll even try to help with any visa issues.
You never know. So just apply! We have no problem helping founders who are very early-stage. That's why we exist.
The Lead Investor vets a startup and decides to personally invest.
Other angel investors on Wefunder then invest more money on the same terms, sharing 5% of the profits of their investment with the Lead Investor.
The startup only has one entity on their cap table to aggregate these investors. The founder must only get the signature of the Lead to authorize any corporate actions.
It works much like an AngelList Syndicate Lead, except the legal structure is not an investment fund, as a fund is not legal for unaccredited investors to invest in. Instead of an SPV, we use an SEC-registered transfer agent to serve as a custodian.
The Lead Investor:
A Lead Investor earns 5% of all the profits made by investors after an acquisition or IPO This compensation works like carried interest, except it is taxed like ordinary income.
What does 5% mean in terms of money? Let’s pretend you are the Lead for the next Uber and they used Wefunder to raise $1M for the seed round. That $1M would be worth $5 billion at IPO (based on Uber's return multiple from seed through IPO). The Lead Investor would earn $249,950,000 - 5% of all profits from Wefunder investors.
The Lead Investor also earns an additional 5% carried interest in any pro-rata rounds that may be filled by XX.
XX will interview a first-time Lead Investor for 10 minutes to determine if they meet the criteria. We look for if they:
$1000 or more, on the same exact terms. The amount will be disclosed.
Yes! You must disclose any potential conflicts of interest, such as if you already are a shareholder, have a prior investment, are on the board, are an employee, etc.
Most potential conflicts are not disqualifying, except for being a family member.
Yes. The investment of the Lead Investor will be one line on the cap table.
Other small investors on Wefunder will be represented by another line on the cap table: XX Investments LLC, an SEC-registered transfer agent that acts as a custodian.
You sign any corporate documents for both your personal investment and XX Investments LLC.
The main difference with a Syndicate is that we also allow unaccredited investors.
Instead of an SPV, we use an SEC-registered transfer agent to serve as a Custodian. This is because an investment fund is not legal for unaccredited investors to invest in.
As a result, there are a few important differences for a Lead Investor:
On the plus side:
Yes! A startup can raise on both Wefunder and from your Syndicate.Some startups - such as consumer-facing ones with passionate fan-base - can get a lot of value from having an army of people who are personally invested.
In this case, you'd help deliver more funding to the startup, while earning compensation from both your Syndicate and Wefunder.
Yes! Every time you serve as a Lead Investor, it's easy for other investors to follow your profile. They'll be notified when you decide to act as a Lead for future companies. This means you may be able to deliver money faster to a startup you help. It also builds up your brand as a valuable investor and helpful human being.
No, you don't need to source all the companies. Many times, other XX members source deal flow and can introduce you through our online forum. If you hit it off with the founder, you can agree to be their Lead Investor.
Not exactly. The Lead Investor earns 5% of the profits of only those investors whose shares are held by the Custodian.
A founder can choose to invite certain investors they already know to invest directly in their company, bypassing the custodian. A Lead Investor will not earn any compensation from those that invest directly on the cap table of a startup.
When a startup that you are a Lead for raises follow-on financing (such as their Series B), pro-rata rights allow Wefunder investors to invest more of their money (at the valuation and terms at that round that the VC's negotiated), in order to maintain their percentage ownership.
As a Lead Investor, you will earn 5% carried interest on any Pro-Rata funds that are formed to maintain the pro-rata share of the Custodian. Behind the scenes, XX will spin up a Venture Capital Fund specifically meant to only to invest in the company, and invite eligible accredited investors to invest.
XX Team LLC hires Lead Investors as independent contractors.
XX earns 10% of profits of the investment upon acquisition or IPO and then shares 50% of those profits with the Lead Investor.
Refer to the Lead Investor Agreement.
Only in extraordinary circumstances, such as evidence of egregious behavior or undisclosed conflicts of interest.
The Lead Investor can be replaced if Wefunder decides to organizes a vote of all investors in the custodian. We'd lay out all of the facts and let them decide.
Yes, you can resign anytime. However, you would forfeit any compensation./p>
Email Kieran to request an invite. Please let him know how you can best help founders.
XX Investments LLC is an SEC-registered transfer agent that acts as a Custodian for all securities sold on Wefunder, so a company has only one entity on the cap table.
A custodian is a broker-dealer, bank, or transfer agent that holds any securities you sell on behalf of your investors (known as "beneficial owners" of the custodian).
This means investors do not actually possess any shares, convertible notes, or SAFEs in a company. Instead, the custodian holds them on behalf of the investors. The custodian also votes these securities and signs any documents on their behalf, following the direction of a Lead Investor.
The Custodian is the one entity on your cap table, because they hold all the securities. The finance lingo is that they hold these securities in "street name" on behalf of the "beneficial owners".
XX Team LLC hires Lead Investors as independent contractors.
XX Team LLC earns 10% of profits of any investments held in the Custodian upon acquisition or IPO, and then shares 50% of those profits with the Lead Investor.
The compensation the Lead Investor earns is roughly equivalent to 5% carried interest, except it is taxed like ordinary income.
From the standpoint of startup founders, this works like an SPV and Syndicate Lead like on AngelList, except the legal structure is not a fund. When using Wefunder, a company will have one line on their cap table and a single Lead Investor to sign any corporate documents.
Technically, yes. XX is new kind of "pre-seed" venture capital firm. The partners are experienced founders, most of which are part-time, who earn carried interest.
We want to band together hundreds of founders who want to pay it forward. When one of our partners personally invest as little as $1000 in a pre-seed founder, one of our funds will match it.
You'd be a good fit if you want to help earlier-stage founders get off the ground... because it's the right thing to do. We believe in paying it forward. We get fulfilled when we've made an impact. We often learn a lot of interesting things too.
You also can earn carried interest, like a VC, without having to raise your own fund. Plus, your personal capital goes farther. You can invest smaller amounts in more founders. When you personally invest, one of our funds will match it.
We wrote a blog post with more details.
Partners provide office hours, fireside chats, and one-on-one mentorship to startups funded by XX.
Partners also run our accelerators.
Yes. XX has a fund that Partners may invest out of, so long as they invest at least $1000 personally in that startup.
Partners split the profits for all startups funded while they are an active partner. This means a Partner will have small stakes in hundreds of startups.
This compensation is in addition to what a Partner earns by being a Scout or a Lead.
Partners that are running an XX accelerator (invested in by one of our funds) also split the carried interest.
Yes, for a full-time commitment. Check out our Founder in Residence job posting.
To be eligible for profit sharing, at least 20 hours a month with a 6-month commitment.
However, we expect most Partners to be founders between startups. When it's time to go forth to start your next company, you can retain your Partner title while reducing your time commitment. You'll still be involved in the community, you just won't be eligible for profit-sharing.
Email Gadi to request an invite. Please let him know how you can best help founders.
Mentors volunteer for office hours, fireside chats, and one-on-one mentorship to startups funded by XX.
The time can be ramped up or down as needed. All we ask is that if you make a commitment to a founder, you keep it.
No. But if your time commitment increases, you may decide to become a Partner the next time a slot opens.
Be known as a very helpful resource to startup founders.
Email Gadi to request an invite. Please let him know how you can best help founders.
Yes, if you are an accredited investor. We have multiple funds available to invest in, that match the personal investments of the xx partners. Each one has a different investing thesis. To see which funds are available, check them out here.
xx.team has partnered with Wefunder Inc. Wefunder's fully-owned subsidiary, Wefunder Advisors LLC, manages the fund on your behalf. Wefunder Advisors is an exempt reporting investment advisor.
You can view Wefunder Advisor's track record. We have historically outperformed the median venture capital firm. We've invested in multiple startups at the seed stage, that are now valued at over several hundred million to a billion dollars, such as Checkr, Zenefits, Gingko Bioworks, Rappi, uBiome, Equipment Share, and ShipBob. In total, we've invested in 10% of Y Combinator's Top 100 companies.
We believe founders make the best early-stage investment decisions. At this stage, there is little data, and intuition from a lifetime of experience is the guide.
Experienced founders often see the best upcoming founders first, well before venture capitalists do, and are typically on the cutting edge of what is new.
Our funds follow-on when those founders make personal investments. Further, most often these founders are making a personal time commitment to help these startups succeed. We believe matching the wisdom of a group of experienced and well-connected founders will lead to better returns.
For a longer answer, there's a four-part blog article explaining why we created funds, and how we see them as different.
If a fund has greater than 250 investors, it is regulated as a full-fledged mutual fund, which would dramatically increase costs and make the fund impractical as an investment vehicle.
This is a 10 year venture capital fund. Investments in startups have a very long term horizon. It typically takes 3-10 years for a successful company to have a liquidity event, when it either gets acquired or has an IPO.
We disperse funds to investors when any company has a liquidity event, once per year on May 30th.
The Fund charges 20% carried interest and a 2% management fee. This is the standard fee for venture capital and private equity funds.
After you invest in the fund, there will be no further capital calls.
Yes, for 5 days.
No. This is not a mutual fund. All capital will be invested in private companies in long-term, illiquid investments.
Each fund is expected to make at least 10 investments. Most will make 20-50.
No. You can't opt out of any individual investment that the fund makes.
In many cases, yes. We expect most startups will want to raise more money than the fund provides. When this happens, we will give inside access to limited partners.
Most often between $10,000 and $25,000. We may invest up to $100,000.
We have pro-rata rights in almost all portfolio companies. This means that when a seed investment receives additional investment from a venture capitalist, we have the right to invest more to maintain our percentage ownership on the same terms. Since startup investments obey the power law, it's very important to double down on the winners to turbo-charge returns.
When a pro-rata opportunity exists, we will spin up a special-purpose-fund and give limited partners in the fund the opportunity to invest. We give first priority to those limited partners who invest $50,000 or more.
Here's a concrete example: in 2014, we invested $100,000 in Checkr's seed round. In 2015, Checkr raised $9M from Accel in a Series A. We gave an opportunity to limited partners to invest on those terms. Recently, Checkr raised $100,000 million Series C at a substantially higher valuation. To date, Checkr has a 34X cash on cash unrealized return.
We're not allowed to offer tax advice. You'll receive a single K-1 from each Fund each year. Your accountant can offer more specific advice.
Yes, if legal in your country. You should check with your lawyer and accountant.
Yes. We can accept investments in a Fund only from those who are an accredited investor. Unfortuantely, it is still illegal for unaccredited investors to invest in venture capital funds.
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