Ari N.’s Post

During a session on funding methods at Creative Destruction Lab Super Session today, the presenter asked what the audience believed is the chief motivation for VCs. One founder quipped that it's raising their next fund. I actually think this is a brilliant observation. Here's an example: a founder raises a good series A and sees a path to profitability without raising again. It'll be a little slower but ultimately more sustainable and a better exit for early investors. But... The series A lead is raising their second fund and needs to show a positive track record. With no exits yet, that track record will be built on the back of portfolio company markups, which can't happen without new, higher valuations from subsequent rounds. So we have a conflict of interest that can lead to substantial friction, and possibly serious problems for the founder if they don't still have a majority stake. Food for thought for founders.

Capital Primacy 101 1) Operating Cash 2) Debt 3) Equity Sale There's nothing wrong with selling "equity" (VC or PE), but only if there are very good reasons why you don't have cash and can't borrow. If you jump to equity then don't expect to be in charge of your company. #venturecapital #entrepreneurship

This article is another example of why founders need to be clear about their goals before accepting investment from anyone. Without alignment around goals, the investment may be more trouble than it is worth. #RationalCapital

Most VCs don’t add as much value as they think https://lnkd.in/gKXfFKMZ almost 3000 impressions - 33% of founders said that they felt VCs simply weren’t honest about the expertise they could offer - 65% said VCs missed mark delivering beyond cash  - Female founders rated value-add as twice as important than males - Value-add includes connections to partners, customers, talent, sharing knowledge Lean AI startups are the new black so bootstrap with $500K - $1M from friends and family, angels, pre seed VC on a SAFE to standup functional MVP with paid early adopters then close $3M - $4M seed funding at 2X - 3X valuation on SAFE then get to $5M ARR in 2 years and no more funding needed then perhaps do do small Series A once you hit $10M ARR and your cap table is awesome where VC's just own 30% - 35% 😉 Cheers.....Steve AI startup advisor 'force multiplier'  https://lnkd.in/g38mWcs 

Thanks for sharing Charles! Growth / venture debt can be a good tool for founders to find their exit off the "VC train." This works best for mid/later stage companies (>$10m in revenue), especially when coupled with a credible path to profitability. Early stage business with little to no commercial traction won't have much luck finding a lender without another round of fresh VC funding. We've helped close to 40+ companies with this objective in mind. #venturedebt #growthcapital #venturecapital

This is an interesting read, and something that has been a discussion topic at BlueTreeVC. The big question we ask founders to consider before they take money (or take more money) is what goal are they trying to achieve. For some they want to build a large company fast and seek venture capital to accelerate their ability to capture the market. In fact, this is the traditional VC model and described as the VC Train in this article. But for others, they are developing a niche solution that addresses a key need for a portion of a larger market that is currently not being served by the solutions that currently exist. They can build a strong business that is ripe for acquisition by larger players because they are attacking a known problem in a philosophically novel way. These founders do not measure their success by their ability to raise more funds, but instead by their ability to achieve a strategic exit. This is where BlueTreeVC and other funds like us differ from the traditional VC model. Neither solution is right all the time. Instead, founders need to be clear about what they want to achieve, and why. And then reach out to like-minded investors. #RationalCapital #BlueTreeVC

This is such an important post from my friend Charles Hudson. It prompted me to share his post with a handful of my founders together with this message of my own: The upper right quadrant is great margins, great growth and a large TAM. That’s when venture dollars are most valuable. However, VC dollars become a burden if any of these three things aren’t in play. This is why optimizing the machine, e.g., margins at sufficient scale, is Job #1. My hypothesis is if you can prove out the model, e.g., the margins, and can then ramp revenue as scaling brings both benefits of scale and profits, this will help check off the growth and TAM boxes. And if either of those aren’t true, you can still build a very good business and have a very profitable, life changing exit. Not every business needs to be a billion-dollar exit, but having that as the goal flushes out which, if any, of the three requirements aren’t present. And that’s ok. What isn’t ok is raising a lot of money, losing a lot of money and having no proof points related to great margins - because without those, who cares about growth rate or TAM? You’re just losing money at a faster rate. So your head is in the right place. Don’t think about competitors - think about making your business the dominant business by building a great machine and scaling it.

DON'T build a business that needs capital, build a business that capital NEEDS. This is the biggest learning for me from the last couple years of being a founder. Like many naive founders, we wen't chasing venture capital from the outset. With no tangible proof points to speak of, this was such a waste of time. The right to raise MUST be earned. So, we stopped fundraising to focus on building a business that can sustain itself and we picked up a few great angels along the way. We got tired of chasing investors. So instead, we'll let our unrelenting forward momentum leave investors chasing us (we send an update to a list of highly targeted investors EVERY MONTH). They might not chase us at first, but it doesn't matter. Until they do, we'll have a sustainable business that doesn't need their capital. I WISH we took this approach from day 1️⃣ Hindsight eh 🤷♂️

Why is Summer a Bad Time to Fundraise? Our friends at Panache Ventures gave some insights that we have summarized here for your convenience. Conventional wisdom suggests that July and August are tough for fundraising due to vacations. While true to some extent, VCs are still active. The key lies in understanding the nuances of VC operations during this time: - Meetings take longer to schedule and complete. - Diligence processes are extended due to team vacations. - Building momentum for competitive dynamics becomes more challenging. Why does this matter? Because you’re trying to build momentum. Despite these hurdles, many funds continue to close deals in summer. Preparation is key: refine your pitch, build relationships, and focus on growth metrics. Read More Here: https://lnkd.in/gH3yh5qm #StartupLife #VentureCapital #SummerFundraising #Entrepreneurship

What 🚩red flags 🚩do investors hone in on at early-stage pitches? We interview 7 active investors for their candid insights on the do’s and don’ts of startup fundraising. Download our free guide to discover:  🧠 What makes a founding team investable 🧲 How to find and attract investors 🔐 Common due diligence pitfalls Download the free guide 👉 https://lnkd.in/eVdGDEg3 for more insights from Edward Stevenson from SFC Capital SFC Capital is UK's most active early-stage investment firm and the winner of SeedLegals 2024 SEIS Fund of the Year. Don’t miss this chance to get the inside scoop on what the experts really think when you pitch. #investors #founder #education #startup #investortips #learn