Vinyl Equity is a next-generation transfer agent building critical, modern infrastructure and services for publicly traded companies in share registry, dividend plan management, proxy voting and compliance. The Company was founded in 2022 by Rob Schoder Jr. & Poorna Udupi and has raised from Spark Capital, Infinity Ventures, Cambrian, and strategic angels.
I oversaw portfolio operations (systems and processes from capital deployment to liquidity) at AngelList, where our portfolio had grown from 8,000 active investments to 35,000 active investments during COVID. As a result of the fund’s growth, AngelList essentially broke every fund support mechanism that existed in the industry.
During 2021 / 2022, AngelList funds participated in about 230 IPOs. We ran into the same problem in each IPO - we couldn’t navigate legacy transfer agents in a way that was scalable and efficient. We were in a unique position in that there weren’t many funds that had gone through 230 IPOs in a year, so we had widespread exposure to all of the incumbents and noticed the same thing: Everything was paper and customer service driven.
It became really apparent when Buzzfeed’s lockup was lifted after their SPAC. Their transfer agent didn’t share login information with former employees and the share price dropped 80% in the ten days it took to resolve the issue. All of these people that had put their blood, sweat and tears into building this business were left out in the cold.
The final straw was that I held shares at the market leader and had recently moved to a new home, so needed to change my address on their platform. I had forgotten my password and after going through the password reset flow, was told that they had mailed a temporary login code to the address on file. It took me 2.5 hours to have a customer service representative tell me that they’d have someone call me in 3-5 business days. That person, ultimately, changed my address in their system… and sent me a piece of paper in the mail. The entire process took 21 days end to end!
And these businesses are massive! The biggest player in the space is a $10B business and there are a number of other multibillion dollar enterprises that making up the market, and a long tail of smaller transfer agents that all operate on the same software.
I started interviewing public company executives, equity administrators and their service providers - banks, lawyers, back office employees, even regulators, and found that they all felt similarly. At that point, I knew I had to start Vinyl.
Most people that will read this are familiar with Trading, Clearing and Settlement as the functional pillars of the capital markets, but they’re missing the fourth: Registration.
When you’re a private company, you know everyone on your cap table and you communicate with those shareholders directly. But when you’re public, that changes quite a bit. And because that changes, and shares are trading hands every day, you need some way to understand who owns your shares and need some mechanism to communicate with them.
Transfer agents provide the platform for companies to do that. This takes on a number of different shapes and sizes in a public company’s lifecycle - it enables you to aggregate proxy voting records, to pay people when you want to issue a dividend and to pay people when businesses are acquired.
None of that would be possible without transfer agents.
Because transfer agents are the register for publicly traded companies, they’re uniquely licensed by the SEC to issue publicly marketable securities in the United States (there are other regulatory bodies globally that oversee transfer agents). Critically, the SEC mandates that every publicly traded company in the United States retains a transfer agent in perpetuity, making them a very real foundational element of the capital markets.
Precisely because they’ve been around at scale for 30-50 years. Market infrastructure is slow to change because it facilitates the flow of assets through the global economy. A single line of poorly written code can have a billion dollar impact. On a micro level, remote, paperless password reset is a problem we solved 20+ years ago and that’s just scratching the surface.
And when you’re doing that with a system built on COBOL or any other decades old coding language, like many of our competitors, pushing daily batch updates and using AS400 machines while entering data manually, it is extraordinarily complex and expensive to innovate. It is also extraordinarily prone to human error and highly variable, human dependent outcomes.
The advantage we have is that we’re starting with a clean slate, so we have the luxury of leveraging the incredible technology that has been built in the last five decades - cloud infrastructure, APIs and, more recently, AI.
We’re building Vinyl to leverage all of that to ensure that our systems automate as many of the tasks as we can (we think it’s somewhere in the neighborhood of 80% of the operational work a transfer agent performs), and we can do it in a way that ingrains compliance into the fabric of the product - delivering more scalable, efficient solutions that actually help issuers maintain compliance rather than putting them at risk. And we can do it with a really clean, intuitive UI that ensures we eliminate as many questions as possible.
The beauty of this is that we sit in a place in the markets where our job is literally to record information and facilitate the issuance and transfer of shares - all of that is extraordinarily rich data on how companies operate. There are an immense number of ways that we can utilize that data to deliver a drastically differentiated offering when compared to our competitors.
We look at this space as having two core customer sets that favor two very different preferred user experiences.
The first is small-cap businesses that are not capitalized in a way that enables them to have significant equity plan administration operations. Today, those people are interacting with transfer agents largely by email and fax, and there are generally single points of failure or single points of contact.
In the case that the day to day user is the CFO of the company, they may get asked by 30 people each month to help them solve transfer agency related questions, which is a serious drain on their time, resources, and energy.
The second type of business we’re serving are more mature, larger public companies ranging from small cap to the largest companies in the world. They’re looking for a solution that eliminates the need to send faxes and emails and, in some cases, allows them the opportunity to eliminate their day to day interaction with transfer agents entirely.
We see a huge opportunity in this space because we can literally do that. As we abstract away operations from paper and fax, we can take an industry that has historically functioned as a reactive (if you don’t start a workflow until the paper hits your desk, you’re already behind) paper-based and human driven services industry and turn it into an infrastructure component on which a number of different services and software solutions operate. We’re connecting the equity ecosystem in a way that treats all stakeholders as first class participants and that will be a novel approach that generates operating leverage throughout the entire stakeholder chain.
The beauty of what we’re building is that it is entirely API driven, so we can leverage the services we’re building for the UI components and very quickly build integrated API functionality.
Most of these incumbents were built in the 70s, 80s, and early 90s on COBOL frameworks - mainframe systems that push batch updates on a daily basis and make real time data, visibility and reporting completely impossible. It also makes integrating and partnering with other businesses nearly impossible to do.
Additionally, as these businesses have scaled with cost models that are dependent on humans, which scale linearly, they've seen margin degradation. Human capital output is so highly variable - so quality control degrades alongside the business’ margins, forcing them to look outside of their core business for other opportunities.
As it happens, looking outside actually invites a lot of channel conflict, which disincentivizes partnership. We’re taking a neutral, facilitator approach in a lot of these verticals, and will open up an ecosystem that makes it easier to collaborate.
Between our technology stack and lack of channel conflict, we’re well positioned to work with other stakeholders in the ecosystem and become this central registry component that enables others to be more efficient.
The collaborative nature of the equity administration community has been a shock. We really thought we’d build a business catering to the microcap world and engage in a standard startup growth story eventually getting to the enterprise, but we’ve found the appetite for what we’re building to extend well beyond the microcaps.
When we started building this business, we knew there was something deeply broken about the user experiences that incumbents were delivering. But what we found was that it’s so deeply broken and has been for so long, that when we talked to industry insiders about what we were building, more often than not, we’re met with comments like “Thank god. This should have been done 20 years ago. Who do you want to meet?”
The Corporate Secretary of a $5 billion publicly traded business once told us they have “absolutely zero faith” that their transfer agent would do what they needed correctly and within an appropriate time frame. They said the only reason they hadn’t switched was that they knew that there wasn’t anything better, or differentiated, in the market!
Because of where I sat at AngelList, I saw a lot of variability in fund quality. Capital is just a commodity in the absence of strategic partners, so it was really important that we found an investor that understood the problem and could add value in our pursuit of changing the landscape.
To that end, our investors have been remarkable. We’ve found extraordinary leverage from their strategic guidance, facilitation of introductions and the elimination of a lot of the work I would call “not forward progress stuff.” We need to be focused on building product and spreading the word, and they’ve helped us with a lot of the foundational and important things that don’t necessarily accomplish those two goals.
I could go on for days about the value that the Infinity team has added to our business - and I’d love to speak with anyone considering taking an investment from them.
I think the next decade will be about creating efficiencies in the capital markets, and we’ll play a big role in making that a reality.
Notably, the SEC is mandating that everyone move to t+1 settlement and we’re hearing that the vast majority of the transfer agents in the market have told people that they can’t make any promises. Vinyl is built for T+0 (instant) settlement and we’ll lean heavily into that kind of efficiency - both because we see an opportunity to be a market leader and because, frankly, the modern shareholder expects the Amazon experience out of everything. Share transfers shouldn’t be any different.
When we look at the business and the opportunity set, it doesn’t start and end with transfer agency, though. There are tangential opportunities in payments and managing funds flows for corporate actions like dividends and M&A. In M&A, you can touch public and private markets and we’ll work to bring both sides together more seamlessly by building some things ourselves and by working with partners on others. We look at proxy as a huge opportunity to improve visibility for corporate boards and we’re going to deliver solutions leveraging technology to inform customers in ways they never thought possible.
Because transfer agents serve as the foundational recordkeeping pillar of the capital markets, we have unique access to data to enable us to create and drive functionality for our customers. In doing so, we can play a central role in increasing the fluidity of the capital markets.
