SecFi raises $1 million from Social Leverage, FJLabs, CoVenture to provide risk-free loans for option exercise and against private company shares
SAN FRANCISCO, Calif., February 12, 2018--
What’s the news
In the U.S. alone around 35 billion in startup equity is locked away in employee stock options. Most employees either don’t have the know-how or the finances to exercise their options so they’re losing out on thousands and in some cases millions of dollars. SecFi, a company poised to help startup employees make sense of their stock options and equity, raised a $1m seed funding round led by Social Leverage, FJLabs and CoVenture to help employees finally take control of their stock options.
What does SecFi do
Whereas traditional financial institutions only care about the currently wealthy, SecFi is building products for employees pre-wealth so they can take advantage of their financial opportunities. They do this by providing financing to employees of growth and late-stage private companies so they can exercise their stock options and to the shareholders who already own their stock. The key to their offering is that all financing comes without risk to the borrower – if the company goes under, there is no legal obligation on the borrower to pay anything back. In return, borrowers pay a compounding interest rate and share a portion of their equity when the company has a liquidity event. Using SecFi for financing has the following benefits:
•Unlike selling, our financing defers capital gains taxes until exit and lets you keep your Qualified Small Business Stock (QSBS) tax treatment.
•Financing against your shares lets you keep the upside compared to selling on the secondary market.
•Avoid having all your wealth locked up in one company and keep your savings for what matters to you.
Here’s how it works: employees and shareholders apply for financing on SecFi’s platform, which based on each individual’s personal and tax situation determines how much financing you are eligible for. Once an agreement is reached, SecFi pays the determined amount. SecFi’s structure works for all companies, too. They have ensured that their platform doesn’t violate any company’s restrictions so employees everywhere will have an opportunity to exercise their options when they want to. In instances where the employee doesn't need financing, they can still use SecFi's products to better understand the value of their equity/options, better plan for upcoming taxes and best prepare for a potential IPO or company tradesale.
SecFi’s ultimate goal is to be the financial advisor that helps employees and shareholders before they are wealthy and are bombarded by a plethora of “old school” financial advisors. We simply couldn't find a technology solution that helps people in this process.
Howard Lindzon, who’s venture fund Social Leverage also invested in Robinhood, AngelList, and Kustomer, said: "The value of issuing options to employees of fast growing, venture-backed, late stage growth companies is crystal clear and is a cornerstone of Silicon Valley's success. Unfortunately, the absence of products which help these employees exercise their options or provide for a simple way to get liquidity on private company stock is a major issue and frustrates both companies and employees."
The company will use the funding to fuel growth and further evolve its products that help employees plan to make the best of their options and help them position themselves well for that eventually sought after IPO.
Who is SecFi
SecFi is founded by Wouter Witvoet, an engineer-turned-founder Cambridge graduate and last held position as Chief of Staff at Karhoo. SecFi is backed by strong institutional investors of Social Leverage, FJLabs and CoVenture. These investment funds have invested in notable companies such as Uber, Robinhood, Kustomer, ProducePay Flexport, and Palantir.
SecFi provides financing to option holders and shareholders of late-stage private companies without them having to sell those shares. For option holders, our financing covers all the exercise cost and federal and state taxes. By exercising early, employees can save on tax as all future gain on the equity will be taxed as long-term capital gains instead of ordinary income. Our platform does all the tax calculations for employees and gives insight into how much someone could save. For shareholders, we can provide partial liquidity on their private company stock.
Venture Capital Database