April 2, 2025
Hello there,
Welcome again to any newcomers!
This is our biweekly newsletter where we talk venture capital, Connetic, data, and sometimes funny stuff. Hope you enjoy and read to the end!
Two full months down and onto the next conference. After successful trips to Arizona and Michigan, I find myself once again in a warm climate, Fort Lauderdale & Miami, Florida. I headed down for a conference while visiting some friends along the way. I have to say, two cities so close together could not be more different. For my tastes Fort Lauderdale is much better, I think the intercoastal waterways are super fun. Its my preferred method of transportation. You can buy an annual pass for $240, much cheaper than Uber, and seems at least mentally safer than my Waymo trips in Arizona. For those of you out there, thinking, “Oh tough life, SE Florida, what a life”, hey on one hand you are not wrong, there are worse places to be, but this is the 4th weekend I have been away from home, not just normal work hours, and weekends. The last time I ended up in the hospital and its pretty lonely at night. Why do I do it then? Because conferences are a great way to get the word out about our fund. The last conference has produced 4 advisor tickets, that is 4 more than the prior quarter and I expect at least 1 more very soon (fingers crossed Mr., yeah you know who you are!) This trip I am taking better care of myself. While no trips to the hospital, I did stop by a Prime IV for some IV therapy. If you have never tried it, I highly recommend it for hydration and vitamins! Here’s some pics of conference life! Much more to come below on our YTD activity and a look ahead, read on!
In today’s update:
- The Galaxy’s Guide of Life Insurance for Founders
- Data: Record Put Options on S&P 500
- Portfolio News
- Connetic Corner: Tax Returns & A Monster
- Interesting Reads:
- Horan Wealth: Private Markets & Risk Management
- The Best Gains Have Been Had: Steve Cohen: Significant Correction
By: Brad Zap, CFP®
Portfolio Manager
The Galaxy’s Guide to Life Insurance for Founders
The Startup CEO’s Guide to Life Insurance: Because Your Investors Don’t Want You to Die (Yet)
Alright, startup CEOs, let’s talk about life insurance. Yes, I know you’d rather be closing deals, raising capital, or stress-eating protein bars while praying your runway doesn’t run out. But hear me out—life insurance isn’t just for suburban dads in minivans. It can literally save your business, keep your investors from panicking, and even set you up for a nice little golden parachute when (not if) you eventually make your great escape.
We’re going to break down three main types of life insurance every startup CEO should know: Key Man Insurance, Buy/Sell Agreement Funding, and Collateralized Life Insurance for Investors. Plus, we’ll explain how you, yes YOU, can use collateralized personal life insurance to create a financial safety net that follows you wherever you go—because let’s be honest, your business might not.
- Key Man Insurance: Because You’re Kind of a Big Deal
Key Man Insurance is basically your company’s way of admitting that without you, things could get bad, very fast. This policy ensures that if something happens to you, the company gets a financial cushion to keep running instead of, you know, imploding.
Why is Key Man Insurance Important?
- Investor Anxiety Reduction: Investors need to know their money won’t go poof if you suddenly vanish.
- Keeping the Lights On: The payout helps your company survive while they work to find your replacement.
- Loan Security: Many lenders won’t even talk to you unless you’ve got this in place. Apparently, banks like getting their money back—who knew?
- Buy/Sell Agreement Funding: Because Your Co-Founders Will Fight Over Your Equity
If you and your co-founders are best buds now, great! But if one of you exits—by choice or by force—things can get ugly fast. A Buy/Sell Agreement makes sure that if one partner leaves (voluntarily or via the Grim Reaper), the company or remaining partners can buy back their shares smoothly instead of battling it out Hunger Games-style.
How Life Insurance Funds Buy/Sell Agreements
- Co-founders take out life insurance policies on each other. Morbid? Yes. Smart? Also yes.
- If one partner departs this world (or just the company), the payout helps buy back their shares.
- This keeps ownership from falling into the hands of an uninvested spouse or that one cousin who suddenly thinks they should be the new CTO.
- Collateralized Life Insurance for Investors: Show Me the Money!
Raising capital is tough. But did you know life insurance can actually help you secure funding? No, really. Some investors want more than just your word that their money is safe—they want collateral. And what’s more valuable than your very existence?
What is Collateralized Life Insurance?
- You take out a whole life or indexed (IUL) policy.
- That policy builds cash value, which can be used as loan collateral.
- Investors or lenders see it as a safety net, meaning they might be more willing to part with their precious cash.
Why Investors Like Collateralized Life Insurance
- Extra Security Blanket: If things go south, there’s a guaranteed payout.
- Better Loan Terms: Less risk for the lender = better rates for you.
- You Retain Control: Even if used as collateral, you still own the policy.
It’s basically a financial cheat code that allows you to raise money while keeping your startup equity intact. Neat, right?
- The CEO’s Personal Benefits from Collateralized Life Insurance: Your Backup Plan for Life
So far, we’ve talked about how life insurance can protect your company. But let’s talk about YOU. Because let’s be real—startups are risky, and you need a Plan B (and maybe Plan C and D, too).
How it Works for You Personally
- Set up a life policy that builds cash value.
- That cash value grows tax-free and can be borrowed against when you need it.
- Use it for whatever you want—business expenses, an early retirement, or finally taking that trip to Italy you keep putting off.
Why This is a Game-Changer for Startup CEOs
- Tax-Free Access to Capital: Need money? Just borrow from your policy—no tax bill, no nosy bank.
- Asset Protection: In many states, life insurance cash value is protected from creditors. A shield against potential financial disaster.
- Portable Wealth: When you leave your startup—whether it’s a glorious exit or an unexpected implosion—you take this asset with you.
- Supplemental Retirement Fund: You can literally use this as a tax-free income stream later in life, as a benefit JUST FOR YOU.
- No Empty-Handed Exits: Whether your startup is a billion-dollar unicorn or a cautionary tale in a business school case study, wouldn’t it be nice to walk away with something? With a personal life insurance policy, you can.
This isn’t just about protecting your company—it’s about protecting YOU. Your investors may or may not love you, but at least you’ll love yourself for planning ahead.
Conclusion: The Right Life Insurance Strategy for Startup CEOs
Life insurance for startup CEOs isn’t just about avoiding financial disaster—it’s a powerful tool for business continuity, securing investments, and personal financial security. Whether it’s Key Man Insurance, Buy/Sell Agreements, or Collateralized Life Insurance, there’s a policy that can work for you.
So, while you’re busy disrupting industries and changing the world, make sure you’re also protecting yourself, your company, and your legacy. After all, your investors might not want you to die—but if you do, at least make sure it’s profitable.
Data – Record Put (options)* Volume on S&P 500
So…how does this make you feel about public markets? From my perspective, it looks like this is 2x worse than peak Covid. Whoa!
Source: The Rosen Report
*Put option is a type of financial contract that gives the buyer the right, but not the obligation, to sell a specific asset (like a stock) at a predetermined price (strike price) within a certain time frame.
Portfolio News 2025
2 months completed.
First off, 2 months down and 2 months of positive + returns (not forward looking just a fact). I’ve seen many funds fall off the rails moving from private to public or just de novo funds not being able to operate, well so far, so good. There is a new Fact Card on our website. If you don’t know we put a simple 3 page Fact Card on www.conneticventures.com/vcafx. This has the nuts and bolts of our fund, its strategy, holdings, allocation and performance. We post it for the public about the 20th of every month, so take a look.
We’ve had 1 portfolio company exit since launching this fund, Edwards, CO based AltExchange. Read more about the acquisition announcement here. We first invested $100,000 in January 2024 and exited in November 2024, generating a gross return of 138%1. We love finding great companies to invest in! We have made 8 new investments: Softdrive (Ontario, CA), Card.io (Austin, TX), ParkPay (Cincinnati, OH), 409.A (Toronto, CA), Abra (Charlotte, NC), Kigui (Mexico City, MX), Drypowder (Kansas City, MO), and MedicaidSoft (Farmington, UT).
We’ve made 6 follow on investments into existing portfolio companies: Base Social (Miami, FL), Cloud Range Cyber (Nashville, TN), Narratize (Covington, KY), Scription (Alberta, CA), 1Fort (New York, NY), and Passage (Detroit, MI). We have sold $1.18 Million shares in the fund versus our expectation of $0 until Q2 and have only had 1 redemption. We have 13 startups in our diligence pipeline and our portfolio is full of companies fundraising for new growth. The opportunity is very exciting.
Everyone reading this who is a fund investor should have online access.If you do not, please call me and lets get that setup. The online access is a great place to see your holdings, daily movements in price, add to your position and help us fund these opportunities. The highlight of the first 2 months other than AltExchange is: Abre (Cincinnati, OH), a local to us startup building better students outcomes with data, who is well on their way to DOUBLING their valuation in less than a year. Venture360 (Kansas City, MO), the first deal we’ve led since fund launch is fueled by our high conviction in their vision of the future of finance. As the public markets start to become volatile (and we may also) I simply want to point out a prior newsletter where I talk about the pricing differences in public and private markets (this is for all you Financial Advisors).
1 Individual investment return shown is for illustrative purposes only, is not a recommendation, and does not represent overall fund performance. Past performance is not indicative of future results. Returns shown are gross of fees and expenses.
The mention of specific securities should not be considered a recommendation. The specific securities identified and described herein do not represent all of the securities purchased or sold for the portfolio, and it should not be assumed that investment in these securities were or will be profitable. There is no assurance that the securities purchased remain in the portfolio or that securities sold have not been repurchased. For the top 10 holdings, please see the attached Fact Card.
2 months in and we have hit a major milestone. I think all current investors have now received any and all tax forms! Can I get an Amen and I told you so?! Look, I know this drives people crazy (although I don’t really know why, cause all my K1s from others are late), but we solved this issue. We are many weeks ahead of our prior best efforts. If you delay your tax returns, it likely isn’t due to us this year! If you don’t have what you need, or have questions do reach out to Brian on this. bmcdermott@wendal.com
Second thing, the good news! We hit a MONSTER milestone. In order to distribute to financial advisors we simply must be on custody platforms where they can easily buy, sell, and allocate across financial models electronically. Well, we landed a big one. Oh and to be fair and balanced so compliance won’t 86 this statement, I’ll say this, the Monster is not Schwab, it’s the other guy. 😊I’ll let you guess and next month I’ll officially announce it. This is about 12-14 months faster than we assumed we would get this accomplished. -All I can say is thank you to all the financial advisors requesting access to this market. The timing is great with the current market volatility and a move to the private markets could be a consideration as part of an overall financial plan. If you have not talked to me or Kyle lately on other corporate updates, now is the time!
Super Interesting Reads
Horan Wealth: Private Markets and Risk Management
Steve Cohen: BIG Correction: The best gains are behind us
Cool AF of the Week
Legends! When I saw this, it just warmed my heart.
Thanks for reading!
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Some statements herein may express future expectations and forward-looking views based on Connetic’s current assumptions. Statements about companies, securities, or other financial information represent personal beliefs and viewpoints of Connetic or the respective third party. These statements may involve known and unknown risks and uncertainties, potentially leading to different results than those implied or expressed. All content is subject to change without notice.
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