Story #2: Walid Daniel Dib's fascinating cap table story

Key Capital sat down with Walid Daniel Dib to discuss his fascinating journey from launching, pivoting and finally shutting down Hala....

1. How did you build your cap table?

We had three funding rounds in total:

Seed: We raised $600k at a $3m post-money as Addenda, a B2B SaaS InsurTech. The money was initially meant to last us around 18 months, and would have helped us confirm our product market fit hypothesis. 13 investors participated in this round, 11 of whom were angels. As a small-ish SAFE note round, there was no real "lead". Our fundraising strategy as first time founders relied on existing angels introducing us to newer angels and VCs. The first 25k check came in February 2019, and the final investor - 500 startups - invested 50k a few months after that. In total, I reached out to over 100 VCs regionally and internationally. The vast majority of these VCs were kind enough to meet, but only two ended up investing at this stage: Beyond Capital through a scout program, and 500 Startups. At some points, fundraising was a full-time job.

Pre-Series A: We raised another SAFE note of $1.2m at just under $7m post-money valuation from Entrée Capital, AB Ventures LP, and Oman Technology Fund. Half way through this round, we pivoted the business from a B2B SaaS to a B2C InsurTech called Hala Insurance, and sold Addenda's IP and clientbase to an Australian automotive group. All three investments in this round were coincidental. Two of the three VCs had been conducting due diligence on Addenda at their own pace, and invested in the founders right before we pivoted.

Series A: Then we raised around $5m at an $18.8m post-money valuation,?led by Entrée Capital and Mubadala. At this point, Hala Insurance was live, growing rapidly in top-line (but not bottom line) and inching closer to being a licensed?insurance agency. During the round, we offered existing investors a chance to exit as secondaries at 3x their entry point, three of whom opted in but changed their mind upon the round's completion.

Winding down the business: we wound down the business with $1.5m in the bank due to regulatory constraints, an extremely competitive and crowded landscape, difficult unit economics, and an inability to price our own policies. Our underwriters - who priced our policies - viewed us as a digital distribution channel, while our vision was to become an underwriter ourselves. Hala came close to a couple of acquisitions that did not materialize, and we agreed with the board to return investor funds in February 2023. Some in the ecosystem have labeled the decision as giving up, while others found it admirable. To us, it didn't matter. Our fiduciary duty was to our shareholders and respecting their money came first.

2. Looking back, what would you have done differently?

• I would have definitely used an SPV for all of my angel investors. Having 23 investors at the holding company level - half of whom were angels - can be cumbersome, especially when securing an equity round or changing anything that requires shareholder approval.
• I would have tried my best to have equal liquidation preferences for all investors throughout my rounds.

3. What worked well on your cap table?

Choosing sophisticated angels, VCs and lawyers was paramount to?proper cap table management. It was of absolute importance for us to trust our lawyers and stick to?standard shareholder agreement and subscription agreement wordings, despite pushback by some investors. Shout out to L&W.

4. Any Advice to founders on managing their cap table?

• Do not skimp on hiring the right lawyers.
• Don't overvalue your company too soon if you don't want a down round when your metrics don't match your market valuation in the next round.
• Invest in cap table management software
• Don't get too creative with your share classes
• Fight back against absurd and aggressive warrants at early stages
• Do not cheap out on ESOP for your team members
• Divide equity fairly between your co-founders at the early stages.

5. Which investor would you welcome back to your cap table next time? Why?

I would work again with every single one of the 23 investors. I'm still in frequent conversations with most of them.