Animal Spirits Podcast — "Talk Your Book: Investing in Start-Up Equity"
Episode Date: October 18, 2025
Hosts: Michael Batnick and Ben Carlson
Guest: Dave Thornton, Co-founder/CEO/CIO of Vested
Episode Overview
In this episode of Animal Spirits, Michael and Ben sit down with Dave Thornton, the co-founder and CEO of Vested. The discussion revolves around Vested’s unique approach in helping startup employees exercise their otherwise expiring stock options—and the opportunity this presents for investors to access a specific, diversified segment of venture capital. The conversation covers how Vested’s model works, the challenges and opportunities in this market, how they structure their funds, and the nuances of investing in private company equity through employee options.
Key Discussion Points & Insights
1. The Genesis and Purpose of Vested
- Vested started as an education platform to help startup employees understand equity and avoid costly mistakes.
- The platform evolved after founders noticed overwhelming demand from employees needing capital to exercise stock options within a limited post-employment window.
"The first version of Vested was a website with free content and free tools... then we started to get a bunch of inbound demand from our own user base coming back to us... we ended up seeing almost exclusively one use case, which was, 'I just left my startup... I have 90 days within which I have to exercise my vested stock options or else I lose them.'"
— Dave Thornton (A), [06:56]
2. The Market Problem
- Many startup employees are compensated with stock options but can’t afford to exercise them after leaving, risking a total loss of hard-earned equity.
- Existing solutions primarily serve senior employees at late-stage "unicorn" startups, ignoring the vast "rank and file" needing smaller ticket amounts (e.g., $50k–$100k).
"The people that need 50 grand cannot find anybody to pick up the phone because what investment house or bank is going to pick up the phone and like write a ticket that small?"
— Dave Thornton (A), [06:06]
3. Vested's Solution — How It Works
- Vested provides the capital for employees to exercise options, in exchange for a proportionate share of the future equity.
- The process is managed via forward contracts that minimize hassle for the startup and the employee.
Example:
- Employee has 100,000 options at $1 strike. If value per share is $3, Vested buys ~33,000 shares for $100k to fund the exercise.
- Upon liquidity event (IPO, M&A, etc.), Vested collects their agreed-upon portion.
"The specific thing that we do... We're buying the minimum number of their future shares necessary to help them come up with all the money to do the entirety of their exercise..."
— Dave Thornton (A), [07:48]
4. Employee Perspective: Tradeoffs
- The alternative for many employees is a "zero or something" decision—either get some value, or their options expire worthless.
- Vested fills the gap, even if it means giving up part of the upside.
"Yes, I'm giving up some of my upside, but the alternative is potentially nothing."
— Michael Batnick (C), [11:36]
5. Enforcement and Trust
- Despite the reliance on contracts and employee honesty, Vested hasn't experienced defaults or enforcement problems due to strong incentives and proactive monitoring.
- Most companies prefer this approach to avoid complications with their cap table.
"Please don't make this an issue for us. It's such a pain in the butt."
— Dave Thornton (A), relaying company response, [12:28]
6. Deal Selection and Risk Management
- Vested built a proprietary, machine learning-based company selection model using extensive data from startup employees and public signals, filtering for growth prospects, quality of backing investors, and company health.
- They "reprice" 15,000 companies daily, narrowing their target investment universe to a top 20%.
"We built a machine learning based private company selection model that governs the companies that we choose to help their employees from... We reprice 15,000 companies every morning with yesterday's data..."
— Dave Thornton (A), [14:01–15:54]
7. Market Size and Opportunity
- The opportunity is "monster" sized, with a minimum of billions in annual addressable market, and potentially hundreds of billions in aggregate employee equity at risk.
"Employees own like 10 to 15 points of the cap stack of most private companies... This is like hundreds of billions of dollars that will end up going in smoke over the course of a market cycle."
— Dave Thornton (A), [17:41]
8. Fund Structure and Investor Relations
- Vested runs annual vintage funds with the classic "2 and 20" structure plus an 8% preferred return hurdle.
- Their investor base is primarily independent wealth managers and high-net-worth individuals who historically haven’t had VC access.
"We just stuck our finger in the air and said it's a VC fund. So we're going to make it 2 and 20 and put a preferred return hurdle..."
— Dave Thornton (A), [34:20]
9. Portfolio Construction and Return Profile
- Vested’s portfolios are diversified, focused on earlier and mid-stage companies, and avoid the excessive concentration of "mega-cap-like" private firms (e.g., Stripe, SpaceX).
- Aims to deliver returns that, while unlikely to be "20x funds," are less volatile and more akin to private equity in profile.
- Relies on being in the "top quartile" of venture, not average beta, and uses data to maximize odds.
"The good thing about the diversification is we're way less likely to miss the next Facebook... The bad thing is...so will a lot of other stuff."
— Dave Thornton (A), [28:46]
10. Liquidity and Lifecycle
- Investments are deployed quickly (within a year), but the liquidity events are unpredictable, with most happening 4–5 years out, though early M&A or random exits do occur.
- Funds are 10-year lifespan, with returns distributed upon liquidity (no reinvesting/recapitalizing).
"...Most of the mass of the liquidity is going to be in the like year four to five range, but it's going to have super fat tails where there's a lot of early random liquidity."
— Dave Thornton (A), [27:20]
11. Operational Aspects for Advisors
- Funds operate through mainstream custodians (Schwab, Fidelity, TD Ameritrade).
- Quarterly reporting is provided, and K-1s are typical.
- Constant fundraising is required to ensure Vested's brand stays relevant and its service is always available to employees.
"The reporting in general is quarterly so we'll kind of characterize the portfolio on its way... and we'll send out management letters along with statements every quarter."
— Dave Thornton (A), [35:22]
Notable Quotes and Moments
On Addressing a Market Failure:
"We provide them the capital to do so."
— Dave Thornton (A), [08:05]
On Vested’s Data-Driven Approach:
"We built a machine learning based private company selection model..."
— Dave Thornton (A), [14:05]
When Serving Startups, the Devil’s in the Details:
"Companies actually put us in this lane where they encouraged us...to use forward contracts. So we've gotten super comfortable with monitoring and delivery risk. It's actually never manifested..."
— Dave Thornton (A), [12:57]
The Venture Investment Game:
"The worst thing you could do in a venture portfolio is not be in Facebook...but as distinct from the later stage pre IPO names...in the earlier stage of the asset class it's way, way, way harder to pick winners and do it confidently."
— Dave Thornton (A), [22:57]
On Fund Economics:
"It's a VC fund. So we're going to make it 2 and 20 and put a preferred return hurdle..."
— Dave Thornton (A), [34:20]
On Not Competing with Giants:
"...The set of investors that are interested in the greatest names...are not getting out of bed for $50,000 tickets."
— Dave Thornton (A), [25:09]
Timestamps for Key Segments
- [03:34] Introduction to Dave Thornton & Vested
- [06:56] The gap in the market Vested discovered
- [08:05] Mechanics of funding employee option exercises
- [10:38] How payouts and process work upon exit
- [13:46] Data collection and selection model
- [17:17] Market size and opportunity
- [18:29] How Vested manages funds and the education challenge with investors
- [21:38] Portfolio construction and cap-weighting in private markets
- [27:01] Liquidity profile and fund lifecycle
- [28:43] How returns compare to traditional venture funds
- [29:41] Selection model targets—emphasis on top 20% of startups
- [34:18] Fund fees and reporting
- [35:48] Fundraising cadence and accessibility
Conclusion
This episode provides a deep dive into an innovative corner of the venture ecosystem—one that benefits both under-served employees and investors seeking diverse venture exposure. Dave Thornton articulates the problems facing “rank and file” startup talent, describes a practical and data-driven solution, and walks listeners through the mechanics and opportunity of investing in this layered, less crowded segment of private markets.
Listeners—especially advisors and investors interested in venture capital—will gain insight into a novel access point for the asset class, the risks and rewards involved, and how real-world capital flows and liquidity events shape actual returns outside the headlines.
Contact for Advisors:
For more on Vested’s investment products: investors@vested.co
Employee-centric product: vested.co
End of summary