What Is a Roll-Up Vehicle (RUV)?
As a special purpose vehicle (SPV), roll-up vehicles make it possible for startup founders or angel investors to get into a company more easily. The angels will invest in the RUV, which will then invest in your company, rather than the angels having to track and record every single investment individually.
The following is a visual representation of how investments are rolled up on your company cap table.
An RUV, which was popularized by AngelList, has the distinct advantage that it allows you to raise money from a larger number of (smaller) angel investors without clogging up your cap table with dozens of entries.
There is a relationship between you and your angels. Your angels invest in the RUV, which in turn invests in you as a company. So, from a company’s perspective, it is one entity.
Benefits of RUV
The RUV model has several benefits for entrepreneurs:
- It allows founders to pool their resources and expertise.
- It provides a structure for starting a new company with the help of an experienced team.
- It can help entrepreneurs save money on taxes.
- It can help entrepreneurs raise capital more easily.
- It can help entrepreneurs protect their intellectual property.
- It can help entrepreneurs manage their risks.
- It can help entrepreneurs Exit their businesses more easily.
How Roll-Up Vehicles Work
Aside from entity formation, AngelList takes care of KYC and accreditation, collecting funds, taking care of tax documents, signing the documents, and distributing them to investors.
1. Submit your company information
To get started you need to enter your company’s information.
2. Share the link with the investors
Upon receiving your Roll Up Vehicle, AngelList will create a private deal page for you.
3. Investors fund their investments
The Roll Up Vehicle is closed electronically by the investor. As part of the service, AngelList takes care of fund collection, accreditation, and KYC.
4. Receive funds
As soon as AngelList has formed the entity, it sends a single wire with a single line to the cap table to the company.
Why an RUV?
An RUV can help your coaching or agency business in a number of ways.
- By providing extra cash to reinvest in your business.
- It can help you grow your business and hire new employees.
Additionally, it can reduce your overall tax burden by allowing you to deduct certain expenses associated with running your business.
Many states also have additional tax credits available for businesses that are adding software components or performing other R&D activities.
If you’re looking for ways to reduce your taxes, an RUV can be a great option. By reinvesting in your business and taking advantage of available tax credits, you can save money and grow your business at the same time.
How do you set up an RUV with AngelList?
The process is actually very simple. Sign up here by clicking here. The first thing that they ask you is how much you are raising, what are your SAFE terms, and some other stuff. There is nothing complicated about it.
How Roll-Up Vehicle (RUV) works for Founders?
Founders often reinvest a portion of their exit proceeds back into their company by acquiring new equity. This is commonly done through a roll-up vehicle (RUV). An RUV is an entity that is used to hold the equity of multiple companies. The RUV then “rolls up” the equity of the underlying companies and issues new shares to the founders.
The key benefit of an RUV is that it allows founders to defer taxes on the sale of their equity. By deferring taxes, founders can reinvest the proceeds back into their business and grow their company without having to pay taxes on the sale.
An RUV can also be used to diversify a founder’s portfolio. By holding equity in multiple companies, a founder can reduce their risk and still participate in the growth of their underlying companies.
There are a few key things to keep in mind when considering an RUV:
- The RUV must be structured properly in order to defer taxes.
- The RUV must be approved by the IRS.
- The RUV can only be used for equity, not debt.
- The RUV can only be used for US-based companies.
- The RUV can only be used by accredited investors.
If you’re a founder looking to defer taxes on the sale of your company, an RUV may be a good option for you.
How does it work for Investors?
As a first-time investor, whether investing directly or indirectly through a company, I found the investor side to be very straightforward, even for first-time investors.
This process involves the use of an e-signature on the RUV documents and the input of your bank account information so that AngelList can start an ACH transfer (electronic transfer) for you. There is also the option for investors to wire money if that is what they prefer, if they want to do so.
That’s exactly what it is, that’s all it is. An easy and smooth process.
RUV has 3 pricing plans. The first plan is a Standard plan for $8000 + Filing fees, the second plan is the Custom plan for $10500 + Filing fees, and the third and last is a Business plan for 8000 + Filing fees.
No-fee RUVs are available now to companies on angellist growth plans, and non-angellist can also access no-fee RUVs on an invite-only basis.
A Roll Up Vehicle allows founders to efficiently raise money from up to 250 accredited investors with just one entry on the business cap table. Additionally, it can reduce your overall tax burden by allowing you to deduct certain expenses associated with running your business.