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How RaliCap VC built a collaborative, scalable community that gives investors skin in the game

Apr 19, 2022

Halle Kaplan-Allen

To date, RaliCap has deployed capital into 50+ startups, focusing on fintech companies in emerging markets. Through capital allocation and a robust community of fintech operators, RaliCap has enabled the growth of companies that are having a truly life-changing impact in Asia, Africa, and Latin America. But RaliCap’s story is not without its roadblocks. In many ways, RaliCap’s founder Hayden Simmons has turned traditional venture capital on its head in order to support overlooked opportunities with immense potential.

Hayden has spent his career helping fintech companies expand into emerging markets. He saw an opportunity to use his expertise to help support founders who were early in their journeys and began angel investing in 2018. He felt fulfilled by the impact he was able to have, and he even started seeing some healthy markups on his investments before too long.

In 2020, RaliCap VC was born. Hayden, still relatively new to the world of venture capital, was overwhelmed by all of the moving pieces he had to align in order to support the founders he was excited about. He compared notes with some friends, in search of a way to get started that was aligned with his goals for the RaliCap community. But, as he looked for answers to many of his questions, he was disappointed by how difficult it was to get started.

After a year of trial and error, Hayden has finally found the answers to many of those questions — and has come up with new solutions where he couldn’t find any. We asked Hayden to share some of what he’s learned over the past year in hopes that it helps new investors who are just starting on their journeys.

Sydecar (SC): What was your thesis when you were launching RaliCap?

Hayden Simmons (HS): RaliCap is very unique in our structure. We use SPVs to deploy capital and have a very low minimum check size. Since the beginning, it’s never been about maximizing AUM. It’s about building our brand and getting the right people in the community — people with experience in the trenches who can really relate and provide value to founders.

SC: When you started RaliCap, what did you see or anticipate about early-stage investing that others might not have seen?

HS: We learned really early that we didn’t want to do the traditional syndicate model. The traditional model is: you find a deal that you want to do, tell the founder that you’re going to do it, and then go back to the community and try to raise money. And then you have to make sure the raise amount is proportional to the SPV fees.

That’s the old-school way. It's a bad experience for the founder who’s having to wait around, and also for the deal lead who’s responsible for hounding LPs to get their wires in on time. We wanted to do things differently, which is why we're leveraging Sydecar's Fund+ structure. Fund+ allows us to raise committed capital and deploy it on a deal-by-deal basis through SPVs. It's the best of both worlds.

SC: What were some of the challenges you faced when getting RaliCap off the ground?

HS: When you’re just starting off, you don’t even know what questions to ask. There’s no playbook that says “here’s how you get your fund off the ground.” For me, it was a process of constant discovery and feeling like I had no idea what I was doing.

Because of our low check sizes, I learned early on that transaction fees were always going to be a constraint for us. You typically want admin fees to be less than 5–10% of the SPV, which meant that smaller SPVs weren’t feasible with some of the providers we talked to at the beginning.

I also learned how important it is to work with a provider that has your back. At RaliCap, we’re often some of the first money into the companies that we’re backing. We’re enabling their core operations and paying their salaries, so our ability to deploy capital efficiently and on time is crucial. We don’t want to be faced with some last-minute banking issue or communications snafu that keeps us from wiring money to a company.

SC: What makes Rally Cap so special?

HS: We're not running your typical syndicate where we jump on deals and push you to squeeze your pockets. We dislike syndicates for this particular reason: incentives between syndicate leads and syndicate investors are misaligned.

Ralicap's SPV strategy comes as a complement to our overall fund strategy where we offer our LPs (and future LPs) value that we know to be unique. It's literally impossible to get direct access to the deals we share — they happen behind closed doors, are incredibly competitive, and, unless you've got $1B in AUM, you can't access them.

The magic bullet for RaliCap is having committed capital to pull from so that we can seed SPVs and then allow LPs to top up their contributions. It’s not just a community where people are passively looking at deals. The real innovation is making sure that investors have skin in the game so that they are more engaged.

SC: When you talk about LP’s having skin in the game and adding real value, what does that actually look like?

HS: People join RaliCap because they want a hands-on touchpoint with founders. Our LPs can help with deal sourcing because they have existing relationships with amazing founders. They can help with due diligence because they’re actually operating in the market. And they can add a ton of value for companies across business development, hiring, pricing strategy, and performance marketing. We’re super intentional about onboarding new community members to ensure that we’re building the best possible support system for our portfolio.

SC: In 2020, you left your job at Facebook to go full-time on RaliCap. What influenced that decision?

HS: I realized that we were consistently getting into quality deals, that our companies were raising follow-on capital, and that founders were finding value in our community. The thesis proved out quickly. And on the other side, our LPs were telling us they wanted to double down and we started to get bigger funds reaching out saying they want to invest in RaliCap. That really gave me confidence that there was enough interest and traction that I could pay myself to do this full-time.

SC: What is your advice to new deal leads who are looking for an SPV partner?

HS: Being able to outsource a lot of the back office was pretty critical. A lot of my early success was possible because I wasn’t spending hours every week thinking about the backend — subscription docs, regulatory filings, tax documents, wrangling LPs to get checks in on time. That would have been a huge distraction for me.

Given our low AUM, how we allocate money and time is really crucial. Sydecar’s flexible pricing is a good fit since we’re deploying smaller check sizes and have to be mindful of fees.

SC: What shifts do you think we’ll see in venture capital over the next few years?

HS: I don’t have a crystal ball, but what I do know is that our model works. I don’t understand how small generalist funds will survive the changes in VC and am confident that doubling down on fintech is the best bet for us. I look back on our marketing messages from a year ago and at the time I was like “who the hell knows if this will work?” Now I realize we were spot on. This grassroots, decentralized community with no overhead really can outperform traditional venture models.

To date, RaliCap has deployed capital into 50+ startups, focusing on fintech companies in emerging markets. Through capital allocation and a robust community of fintech operators, RaliCap has enabled the growth of companies that are having a truly life-changing impact in Asia, Africa, and Latin America. But RaliCap’s story is not without its roadblocks. In many ways, RaliCap’s founder Hayden Simmons has turned traditional venture capital on its head in order to support overlooked opportunities with immense potential.

Hayden has spent his career helping fintech companies expand into emerging markets. He saw an opportunity to use his expertise to help support founders who were early in their journeys and began angel investing in 2018. He felt fulfilled by the impact he was able to have, and he even started seeing some healthy markups on his investments before too long.

In 2020, RaliCap VC was born. Hayden, still relatively new to the world of venture capital, was overwhelmed by all of the moving pieces he had to align in order to support the founders he was excited about. He compared notes with some friends, in search of a way to get started that was aligned with his goals for the RaliCap community. But, as he looked for answers to many of his questions, he was disappointed by how difficult it was to get started.

After a year of trial and error, Hayden has finally found the answers to many of those questions — and has come up with new solutions where he couldn’t find any. We asked Hayden to share some of what he’s learned over the past year in hopes that it helps new investors who are just starting on their journeys.

Sydecar (SC): What was your thesis when you were launching RaliCap?

Hayden Simmons (HS): RaliCap is very unique in our structure. We use SPVs to deploy capital and have a very low minimum check size. Since the beginning, it’s never been about maximizing AUM. It’s about building our brand and getting the right people in the community — people with experience in the trenches who can really relate and provide value to founders.

SC: When you started RaliCap, what did you see or anticipate about early-stage investing that others might not have seen?

HS: We learned really early that we didn’t want to do the traditional syndicate model. The traditional model is: you find a deal that you want to do, tell the founder that you’re going to do it, and then go back to the community and try to raise money. And then you have to make sure the raise amount is proportional to the SPV fees.

That’s the old-school way. It's a bad experience for the founder who’s having to wait around, and also for the deal lead who’s responsible for hounding LPs to get their wires in on time. We wanted to do things differently, which is why we're leveraging Sydecar's Fund+ structure. Fund+ allows us to raise committed capital and deploy it on a deal-by-deal basis through SPVs. It's the best of both worlds.

SC: What were some of the challenges you faced when getting RaliCap off the ground?

HS: When you’re just starting off, you don’t even know what questions to ask. There’s no playbook that says “here’s how you get your fund off the ground.” For me, it was a process of constant discovery and feeling like I had no idea what I was doing.

Because of our low check sizes, I learned early on that transaction fees were always going to be a constraint for us. You typically want admin fees to be less than 5–10% of the SPV, which meant that smaller SPVs weren’t feasible with some of the providers we talked to at the beginning.

I also learned how important it is to work with a provider that has your back. At RaliCap, we’re often some of the first money into the companies that we’re backing. We’re enabling their core operations and paying their salaries, so our ability to deploy capital efficiently and on time is crucial. We don’t want to be faced with some last-minute banking issue or communications snafu that keeps us from wiring money to a company.

SC: What makes Rally Cap so special?

HS: We're not running your typical syndicate where we jump on deals and push you to squeeze your pockets. We dislike syndicates for this particular reason: incentives between syndicate leads and syndicate investors are misaligned.

Ralicap's SPV strategy comes as a complement to our overall fund strategy where we offer our LPs (and future LPs) value that we know to be unique. It's literally impossible to get direct access to the deals we share — they happen behind closed doors, are incredibly competitive, and, unless you've got $1B in AUM, you can't access them.

The magic bullet for RaliCap is having committed capital to pull from so that we can seed SPVs and then allow LPs to top up their contributions. It’s not just a community where people are passively looking at deals. The real innovation is making sure that investors have skin in the game so that they are more engaged.

SC: When you talk about LP’s having skin in the game and adding real value, what does that actually look like?

HS: People join RaliCap because they want a hands-on touchpoint with founders. Our LPs can help with deal sourcing because they have existing relationships with amazing founders. They can help with due diligence because they’re actually operating in the market. And they can add a ton of value for companies across business development, hiring, pricing strategy, and performance marketing. We’re super intentional about onboarding new community members to ensure that we’re building the best possible support system for our portfolio.

SC: In 2020, you left your job at Facebook to go full-time on RaliCap. What influenced that decision?

HS: I realized that we were consistently getting into quality deals, that our companies were raising follow-on capital, and that founders were finding value in our community. The thesis proved out quickly. And on the other side, our LPs were telling us they wanted to double down and we started to get bigger funds reaching out saying they want to invest in RaliCap. That really gave me confidence that there was enough interest and traction that I could pay myself to do this full-time.

SC: What is your advice to new deal leads who are looking for an SPV partner?

HS: Being able to outsource a lot of the back office was pretty critical. A lot of my early success was possible because I wasn’t spending hours every week thinking about the backend — subscription docs, regulatory filings, tax documents, wrangling LPs to get checks in on time. That would have been a huge distraction for me.

Given our low AUM, how we allocate money and time is really crucial. Sydecar’s flexible pricing is a good fit since we’re deploying smaller check sizes and have to be mindful of fees.

SC: What shifts do you think we’ll see in venture capital over the next few years?

HS: I don’t have a crystal ball, but what I do know is that our model works. I don’t understand how small generalist funds will survive the changes in VC and am confident that doubling down on fintech is the best bet for us. I look back on our marketing messages from a year ago and at the time I was like “who the hell knows if this will work?” Now I realize we were spot on. This grassroots, decentralized community with no overhead really can outperform traditional venture models.

To date, RaliCap has deployed capital into 50+ startups, focusing on fintech companies in emerging markets. Through capital allocation and a robust community of fintech operators, RaliCap has enabled the growth of companies that are having a truly life-changing impact in Asia, Africa, and Latin America. But RaliCap’s story is not without its roadblocks. In many ways, RaliCap’s founder Hayden Simmons has turned traditional venture capital on its head in order to support overlooked opportunities with immense potential.

Hayden has spent his career helping fintech companies expand into emerging markets. He saw an opportunity to use his expertise to help support founders who were early in their journeys and began angel investing in 2018. He felt fulfilled by the impact he was able to have, and he even started seeing some healthy markups on his investments before too long.

In 2020, RaliCap VC was born. Hayden, still relatively new to the world of venture capital, was overwhelmed by all of the moving pieces he had to align in order to support the founders he was excited about. He compared notes with some friends, in search of a way to get started that was aligned with his goals for the RaliCap community. But, as he looked for answers to many of his questions, he was disappointed by how difficult it was to get started.

After a year of trial and error, Hayden has finally found the answers to many of those questions — and has come up with new solutions where he couldn’t find any. We asked Hayden to share some of what he’s learned over the past year in hopes that it helps new investors who are just starting on their journeys.

Sydecar (SC): What was your thesis when you were launching RaliCap?

Hayden Simmons (HS): RaliCap is very unique in our structure. We use SPVs to deploy capital and have a very low minimum check size. Since the beginning, it’s never been about maximizing AUM. It’s about building our brand and getting the right people in the community — people with experience in the trenches who can really relate and provide value to founders.

SC: When you started RaliCap, what did you see or anticipate about early-stage investing that others might not have seen?

HS: We learned really early that we didn’t want to do the traditional syndicate model. The traditional model is: you find a deal that you want to do, tell the founder that you’re going to do it, and then go back to the community and try to raise money. And then you have to make sure the raise amount is proportional to the SPV fees.

That’s the old-school way. It's a bad experience for the founder who’s having to wait around, and also for the deal lead who’s responsible for hounding LPs to get their wires in on time. We wanted to do things differently, which is why we're leveraging Sydecar's Fund+ structure. Fund+ allows us to raise committed capital and deploy it on a deal-by-deal basis through SPVs. It's the best of both worlds.

SC: What were some of the challenges you faced when getting RaliCap off the ground?

HS: When you’re just starting off, you don’t even know what questions to ask. There’s no playbook that says “here’s how you get your fund off the ground.” For me, it was a process of constant discovery and feeling like I had no idea what I was doing.

Because of our low check sizes, I learned early on that transaction fees were always going to be a constraint for us. You typically want admin fees to be less than 5–10% of the SPV, which meant that smaller SPVs weren’t feasible with some of the providers we talked to at the beginning.

I also learned how important it is to work with a provider that has your back. At RaliCap, we’re often some of the first money into the companies that we’re backing. We’re enabling their core operations and paying their salaries, so our ability to deploy capital efficiently and on time is crucial. We don’t want to be faced with some last-minute banking issue or communications snafu that keeps us from wiring money to a company.

SC: What makes Rally Cap so special?

HS: We're not running your typical syndicate where we jump on deals and push you to squeeze your pockets. We dislike syndicates for this particular reason: incentives between syndicate leads and syndicate investors are misaligned.

Ralicap's SPV strategy comes as a complement to our overall fund strategy where we offer our LPs (and future LPs) value that we know to be unique. It's literally impossible to get direct access to the deals we share — they happen behind closed doors, are incredibly competitive, and, unless you've got $1B in AUM, you can't access them.

The magic bullet for RaliCap is having committed capital to pull from so that we can seed SPVs and then allow LPs to top up their contributions. It’s not just a community where people are passively looking at deals. The real innovation is making sure that investors have skin in the game so that they are more engaged.

SC: When you talk about LP’s having skin in the game and adding real value, what does that actually look like?

HS: People join RaliCap because they want a hands-on touchpoint with founders. Our LPs can help with deal sourcing because they have existing relationships with amazing founders. They can help with due diligence because they’re actually operating in the market. And they can add a ton of value for companies across business development, hiring, pricing strategy, and performance marketing. We’re super intentional about onboarding new community members to ensure that we’re building the best possible support system for our portfolio.

SC: In 2020, you left your job at Facebook to go full-time on RaliCap. What influenced that decision?

HS: I realized that we were consistently getting into quality deals, that our companies were raising follow-on capital, and that founders were finding value in our community. The thesis proved out quickly. And on the other side, our LPs were telling us they wanted to double down and we started to get bigger funds reaching out saying they want to invest in RaliCap. That really gave me confidence that there was enough interest and traction that I could pay myself to do this full-time.

SC: What is your advice to new deal leads who are looking for an SPV partner?

HS: Being able to outsource a lot of the back office was pretty critical. A lot of my early success was possible because I wasn’t spending hours every week thinking about the backend — subscription docs, regulatory filings, tax documents, wrangling LPs to get checks in on time. That would have been a huge distraction for me.

Given our low AUM, how we allocate money and time is really crucial. Sydecar’s flexible pricing is a good fit since we’re deploying smaller check sizes and have to be mindful of fees.

SC: What shifts do you think we’ll see in venture capital over the next few years?

HS: I don’t have a crystal ball, but what I do know is that our model works. I don’t understand how small generalist funds will survive the changes in VC and am confident that doubling down on fintech is the best bet for us. I look back on our marketing messages from a year ago and at the time I was like “who the hell knows if this will work?” Now I realize we were spot on. This grassroots, decentralized community with no overhead really can outperform traditional venture models.