Shared Equity Pool
What if early-stage tech teams could easily and fairly swap shares with teams across other startups?
Building a startup can be a lonely journey. In addition, too many aspiring entrepreneurs never start, and too many pre-seed businesses fail, because they lack expert feedback and proper focus during the earliest stages. To help entrepreneurs in the earliest stages of a business establish a critical support network of both like-minded and successful international entrepreneurs, KOLEKTIVA developed a Shared Equity Pool where everyone shares equity in the companies from each annual cohort.
An exchange fund is exactly what it sounds like: company founders are giving up a small piece of the stock they own in their venture in exchange for a piece of the action of the larger pool of all the companies that choose to participate. This allows these entrepreneurs to diversify their own holdings and lowers their risk of walking away with nothing, while adding an incentive to help other companies in the portfolio succeed.
Here's how it works - approved KOLEKTIVA members contribute x% of their company equity (in Warrants?) to a five (seven?)-year Shared Pool with other peers from the current cohort. Instead, they get the same percentage in the Equity Pool, as shareholders. When a liquidity event occurs, the Pool returns are then distributed to its shareholders. Whichever members company succeed, every participant from that program cohort receives financial upside.
Why Shared Equity?
There are several main benefits to the KOLEKTIVA's Shared Equity Pool model.
Starting a technology company is one of the hardest things you can do. As Elon Musk once famously said, Entrepreneurship is like eating glass and staring into the abyss.
By joining the Equity Pool, aspiring founders ensure themselves a strong support network of founders like them, who are all vested in their success. Founders are incentivised to help other members, as they become co-investors as well.
When smart people work together towards a common goal, amazing things can happen. Learn more about fundraising and growing successful companies, with a cohort of top founders.
KOLEKTIVA's Vision is to help entrepreneurs across Europe launch meaningful and enduring technology companies. The Shared Liquidity Pool is a key component of our strategy, as it incentivises collaboration between new and experienced entrepreneurs in different startup ecosystems, creating a pay-it-forward mentality similar to the one found in Silicon Valley.
The likelihood of one company being successful is small, whereas the likelihood of one successful exit out of 20 companies (the size of an average cohort) is very high. By joining KOLEKTIVA, you are diversifying your startup risk, while investing in expert mentorship and upside in your peers. This diversification strategy has been successfully leveraged by top startup CEOs in Exchange Funds. KOLEKTIVA innovated on the Exchange Fund model by taking very early stage companies and mandating that each Founder or Founding Team gets the same amount of equity as they contribute.
We predict that exits from any one cohort will occur between five and seven years.
After two years, the average KOLEKTIVA pool with 20 companies might have results resembling the following:
- 5 leading companies that are well-funded and well-respected in their fields.
- 5 good companies that have raised some capital, have a solid team and are making progress in their market.
- 5 companies that are still working on their business in a part-time capacity or with limited success.
- The final 5 companies are either bankrupted or completed stopped.
No matter in which 5 your company will end up, you will benefit from the successful ones, and from your peers' support along the journey.