What is MassLight's "Build For Equity" Program?

MassLight provides technical teams to build products for startups. We receive equity in return.  Our primary focus is partnering with full time, non-technical co-founders who have deep domain experience in a vertical market.

We look for founders who can use their industry contacts and experience for client acquisition, sales, and marketing. We are especially interested in founders in highly regulated markets or verticals that require specialized knowledge.

We generally avoid consumer-facing or advertising driven companies, two-sided marketplaces, social networks and network-effect businesses, unless the founder has a proven track-record growing such businesses profitably.  We prefer startups that have unit economics such that each additional user is incrementally profitably at any scale.

Are there any fees involved?

There are no fees. We invest engineers and cash in startups in exchange for an equity stake.

How is the investment structured?

It is a capped YC SAFE with a pro-rata side letter.
‍https://www.ycombinator.com/documents/

Do you work with companies outside the United States?

For now, we are only able to support startups that are based in the US.

What stage companies do you work with?

Idea to post-seed. We are typically the lead investor, but it's not a requirement. We are unusual in that we will work with startups pre-launch.

How much equity does MassLight receive?

This varies depending upon the size of the team we provide, the amount of time our team is engaged, the maturity/valuation of the startup, and the number of follow-on agreements. The equity we receive is vested over the life of the agreement, and accrued monthly.

The equity formula for the entire agreement is the value of the services provided divided by the valuation. Typically our fully vested stake is 10-30% prior to dilution in formal funding rounds.

How does the development process work?

We provide both the team and the infrastructure necessary to launch a product using a mature software development methodology and stack that has been perfected over many repetitions and launches. This includes a suite of tools, multiple deployment environments, dedicated engineers, PMs, and testers, and a scalable, secure production environment.

We build highly secure systems compliant with standards in highly regulated vertical markets using a technical architecture that can rapidly scale.

How does the application process work?

Founders submit details about their startup using our intake form. If followup is needed, we'll contact the founders and set up a meeting. If both sides are interested in proceeding, we'll conduct a short assessment and diligence process and offer founders the opportunity to present a more formal pitch.
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We review startups in two ways. The first is similar to many seed investors. We look at the founding team, the market opportunity, the competitors, and the go-to-market strategy. Our outlook tends to be longer term than most institutional capital, as we don't have LPs or a fixed time window for return of capital. We are content to hold a business demonstrating favorable returns on equity forever.

Separately we assess the technical requirements. We need to scope the level of effort necessary to complete the project and ascertain whether we have the technical expertise and background to make an optimal partner for the founders.

Do you do marketing too?

While we are able to provide some marketing and best practice support as part of our build-for-equity service, we expect founders to have the background and contacts necessary to sell the product.  We view our contribution as primarily technical, and look for non-technical founders who have a demonstrated ability to sell the product.

What does the Build for Equity process look like? Do you require a pitch first? How do I know my idea is protected?

We go through a diligence process and recommend you provide as much information as possible so we can make an informed decision. This includes using the application form, sending a pitch deck or demo if available, and follow on discussions where warranted.  

As a company policy we don’t sign NDAs at this stage, something we have in common with almost all investors (which is effectively what we are when we agree to build for equity).  We talk to hundreds of companies and it is likely we have spoken to a competitor or company within your vertical.  However, we do our best to treat sensitive information appropriately.

How long can I expect to wait until things get started?

We are only able to accept a small fraction of the companies that apply for build-for-equity service.   We tend to make that decision fairly quickly, usually no more than a month, often sooner.

What does the collaboration/communication process look like?

We work closely and iteratively with founders using industry standard toolsets for managing the software development process.  Our goal is to get interim builds into founders hands rapidly and frequently to course correct early, and for founders to get to production quickly to build a collaborative feedback loop with users.

Are you able to work with part-time founders?

No.  We devote ourselves full-time to each startup and we expect founders to do the same.