Have you ever heard about Toptal? An emerging platform that matches businesses with top talents around the world. According to Glassdoor estimates, the company makes between $100M and $500M in annual revenue.
In some ways, Toptal's success looks like a standard unicorn success story—founded by two entrepreneurs in 2010, the company raised funding from venture capital firms like Andreessen and quickly staffed up, promising its early employees equity in the growing business.
But, according to a report from The Information, Toptal's CEO Taso Du Val hasn't given any employees or investors equity in the company. He carefully avoided raising money after its initial seed round, which meant that, contractually, he didn't owe anyone anything.
Toptal is now 100% owned by Du Val, despite contracts that granted equity to early employees, including co-founder and former COO Breanden Beneschott, fired after demanding his equity.
Andreessen Horowitz and others invested $1.5m in Toptal in 2012 in a stake that they expected to be around 15% of the company—but they, too, haven't seen any cash.
As one Toptal investor told The Information, Silicon Valley runs on the trust that people aren't going to do something like this. Reading this story leaves such a sour taste in the mouth. Reply to this email and let me know your thoughts. Do you believe we should rethink how convertible securities work? You know I always enjoy discussing with you and reading your thoughts and insights.
Back to Angel Notes, it's the start of a new month, and I'm already hard at work to find our next investment. With the new regulation that took place in mid-March, I saw an incredible increase in the number of startups listed on equity crowdfunding platforms. It may be because founders can now list their company in reserve mode without filling any form C, making the process easier and cheaper than ever. Since here at Angel Notes, we are investors in WeFunder, I love to see such an incredible growth.
With our last investment in Linen, we jumped on two of the most promising market trends of the next decade: blockchain and decentralized finance. Most VCs are very bullish on these trends, with a16z launching a new $1B crypto venture fund, according to a report from the Financial Times. So it is no coincidence that Linen is backed by both Coinbase Ventures and Polychain Capital. The company is still raising funds on Republic—if you miss the investment report, you can find it here.
I hope you enjoyed the reading. Now it's time for me to get back to deal sourcing. There are hundreds of pitches waiting for us.
As always, see you next Saturday.