I sent this out as an investor update in Jan 2022 but thought that I’d post it here for posterity.
Agave Lab portfolio company EasyLex just did the first closing on their seed round.
In and of itself, that’s not so surprising – they are doing great ( >1000 customers served, 62% growth year over year, strong team, big market, etc. etc. etc.) The thing that is intriguing is HOW they did it.
Rather than a single, monolithic round, they decided to break the round into 5 tiers with progressively higher valuation caps (from $6M usd to $19M). This way, early investors get rewarded with better terms while more institutionally-oriented funds could invest later – when the round already had momentum and the risk profile was lower.
When we first discussed it, I was skeptical – I’d never heard of a startup doing this. Ironically, early stage tech investors (like us) are fairly conservative when it comes to innovations in fund raising. However, the more we thought about it, the better it seemed.
EasyLex had a lot of skilled, knowledgeable, industry insider fans who understood the market and how they were addressing it but there was little motivation for them to be the “first money” in. Offering a first-mover advantage would give these hyper-connected investors a reason to get involved. Ultimately, EasyLex decided give it try.
Surprise – it worked!! They launched this approach in December and almost immediately filled the first tier with some absolutely stellar investors – c-level execs in some of the most recognized and successful LegalTech, and entrepreneurial companies. These early investors have offered guidance on company strategy as well as connecting them with other investors that have established a momentum for the round – they are now quickly filling tier two.
If anyone is interested in learning more about the EasyLex round, let me know. Or, if you’re interested in this unique funding approach, I’d be happy to talk through the details. For an early stage company that wants to progressively build investor momentum – and has the courage to try something different – it works really well.