LA Venture: Arrowroot Capital’s Kareem El Sawy On Navigating Structured Equity

Minnie Ingersoll
Minnie Ingersoll is a partner at TenOneTen and host of the LA Venture podcast. Prior to TenOneTen, Minnie was the COO and co-founder of $100M+ Shift.com, an online marketplace for used cars. Minnie started her career as an early product manager at Google. Minnie studied Computer Science at Stanford and has an MBA from HBS. She recently moved back to L.A. after 20+ years in the Bay Area and is excited to be a part of the growing tech ecosystem of Southern California. In her space time, Minnie surfs baby waves and raises baby people.
Kareem El Sawy
courtesy of Arrowroot Capital

In this episode of the LA Venture podcast, Arrowroot Capital’s founding General Partner Kareem El Sawy discusses how to navigate structured equity.

Founded in 2014, Arrowroot helps enterprise software companies “that are past the VC stage not quite at [the] buyout stage” that are looking for capital to help them reach profitability. The private equity firm offers bespoke growth capital options, usually cutting checks between $10 million to $40 million. It’s now approaching $700 million in assets under management (AUM), El Sawy said.


Structured equity can assist venture capital-backed companies that have fallen off the venture path for one reason or another.

“The reality is most software companies have burned $300 million, $50 million, $10 million, $70 million—all over the place,” he said. “They're on Series G. They're on Series A. They're on Series C. They're on Series one. It's really never a straightforward path.”

Arrowroot is looking for these under-resourced “Cinderella” companies that El Sawy says exist overlooked in many venture portfolios. Arrowroot sifts through a massive pipeline to identify these companies and then offers them capital that may come with liquidation preferences, dividends, warrants or other governance that gives Arrowroot downside protection to their investment.

“A lot of our growth capital goes towards a one-time transition of some sort,” El Sawy said. “Maybe it's an old product, a new product—maybe it's an invisible transition where the market finally came.”

Unlike many private equity investors, Arrowroot is not a control investor–they often take an ownership stake of around 30% to 35%, El Sawy said. Because their term sheets are not “vanilla” term sheets, El Sawy says that their investments take some time to talk through with management. Arrowroot’s track record and references are useful for teams trying to understand how to think about what are often unique investment terms.

El Sawy says that they are seeing many more deals in their pipeline nowadays as the gap between venture capital and private equity has gotten wider. There are many companies that don’t exactly fit the model for an investment from either group and that is where Arrowroot is able to step in.

“We're the bridge,” he said. “We’re the tour guide through that bridge”.

Prior to joining Arrowroot, El Sawy was in private equity at L.A.-based OpenGate Capital. He joined founder Matthew Safaii in 2014, during Arrowroot’s first few months. Initially, he said the firm focused on providing smaller growth checks, but has grown rapidly. Arrowroot’s portfolio includes mParticle, ParkHub and SocialChorus, and it has guided companies like Evergage to big exits. Overseeing this portfolio has helped the firm gain a reputation for being able to navigate to long-term success, he said.

“We're known at this point as that kind of guide for these companies and saying, ‘Look we've done it before’,” El Sawy said. “‘We've taken it to huge exits. We're gonna do it again for you.’”

Click the link above to hear the full episode, and subscribe to LA Venture on Apple Podcasts, Stitcher, Spotify or wherever you get your podcasts.

This podcast is produced by L.A. Venture. The views and opinions expressed in the show are those of the speakers and do not necessarily reflect those of dot.LA or its newsroom.

dot.LA reporter Kristin Snyder contributed to this post.

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LA Latino/a Founders On Why Authenticity Matters in Tech

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

LA Latino/a Founders On Why Authenticity Matters in Tech
Decerry Donato

As one of the most diverse cities in the world, Los Angeles is home to almost 5 million people who identify as Hispanic or Latinx. Yet, many feel they still lack representation in the city’s tech space.

“I can safely say that last year’s LA tech week hosted all of the events on the west side, and very few were focused on telling Latino and Latina entrepreneurial stories,” said Valeria Martinez, investor at VamosVentures. “We wanted to change that this year.”

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LA Tech Week Day 3: Social Highlights
Evan Xie

L.A. Tech Week has brought venture capitalists, founders and entrepreneurs from around the world to the California coast. With so many tech nerds in one place, it's easy to laugh, joke and reminisce about the future of tech in SoCal.

Here's what people are saying about day three of L.A. Tech Week on social:

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LA Tech Week: Female Founders Provide Insights Into Their Startup Journeys

Decerry Donato

Decerry Donato is a reporter at dot.LA. Prior to that, she was an editorial fellow at the company. Decerry received her bachelor's degree in literary journalism from the University of California, Irvine. She continues to write stories to inform the community about issues or events that take place in the L.A. area. On the weekends, she can be found hiking in the Angeles National forest or sifting through racks at your local thrift store.

LA Tech Week: Female Founders Provide Insights Into Their Startup Journeys
Decerry Donato

Women remain a minority among startup founders. According to Pitchbook, even though women-led startups in the United States received a record $20.8 billion in funding during the first half of 2022, U.S. companies with one or more female founders received less than 20% of total venture funding in 2022. U.S. companies solely led by female founders received less than 2% of the total funding.

The panel, titled Female Founders: Planning, Pivoting, Profiting, was moderated by NYU law professor Shivani Honwad and featured Anjali Kundra, co-founder of bar inventory software Partender; Montré Moore, co-founder of the Black-owned beauty startup AMP Beauty LA; Mia Pokriefka, co-founder and CEO of the interactive social media tool Huxly; and Sunny Wu, founder and CEO of fashion company LE ORA.

The panelists shared their advice and insights on starting and growing a business as a woman. They all acknowledged feeling pressure to not appear weak among peers, especially as a female founder. But this added weight only causes more stress that may lead to burnout.

“The mental health aspect of being a founder should not be overshadowed,” said Kundra, who realized this during the early stages of building her company with her brother..

Growing up in Silicon Valley, Kundra was surrounded by the startup culture where, “everyone is crushing it!” But she said that no one really opened up about the challenges of starting your own company. .

“Once you grow up as a founder in that environment, it's pretty toxic,” Kundra said. “I felt like I really wanted to be open and be able to go to our investors and tell them about challenges because businesses go up and down, markets go up and down and no company is perfect.”

Honwad, who advocates for women’s rights, emphasized the value of aligning yourself with people with similar values in the tech ecosystem. “[Those people] can make your life better not just from an investment and money standpoint, but also a personal standpoint, because life happens,” she said.

Moore, who unexpectedly lost one of her co-founders at AMP Beauty, said that entrepreneurs “really have to learn how to adapt to [their] circumstances.”

“She was young, healthy, vibrant and we've been sorority sisters and friends over the past decade,” she said about her co-founder Phyllicia Phillips, who passed away in February. “So it was just one of those moments where you have to take a pause.”

Moore said this experience forced her to ask for help, which many founders hesitate to do. She encouraged the audience to try and share their issues out loud with their teams because there are always people who will offer help. When Moore shared her concerns with her investors, they jumped in to support her in ways she didn’t think was possible.

Kundra said that while it is important to have a support group and listen to mentors, it is very important for entrepreneurs to follow their own thinking and pick and choose what they want to implement within their strategy. “At the end of the day, you really have to own your own decisions,” she said.

Kundra also said that while it is easy to turn to your colleagues and competitors and do what they are doing, you shouldn’t always follow them because every business is different.

“When I was in the heat of it, I kind of became [a part of] this echo chamber and that was really challenging for us,” Kundra added, “but we were able to move beyond it and figure out what worked for us [as a company] and we're still on a journey. You're always going to be figuring it out, so just know you're not alone.”

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