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Month: October 2019

Hidden First Rounds

by Ian Hathaway
This post is by Ian Hathaway from Blog - Ian Hathaway

One of the drawbacks of venture capital databases is that they are dynamic. Information trickles in, often with significant time lags. This is especially true at the earliest stages, where rounds are often unannounced and many startups are too small for anyone to notice. It’s a structural challenge that I’m not sure will ever be fully resolved.

The underreporting and time lags associated with very early deals has become further compounded in recent years. Many startups in Silicon Valley and other leading startup hubs have increasingly relied on unpriced rounds (SAFEs or convertible notes) for their first or even second rounds of financing. Because these rounds are unpriced, they don’t appear in a company’s cap table until after it has raised a priced round later (and further, announced the deal—see above).

Combined, there are structural and cyclical reasons that the underreporting of very early venture rounds is especially acute now and fraught with severe reporting delays. This matters because people want to understand the market trends in near real time.

To test how much of a problem this has become, I grabbed data on first financings from an analysis I did last year and compared them to first financings from a data pull today. The chart below shows the number of first financings in US companies between 2005 and 2017, as reported 14 months ago in August 2018 (light bars) and as reported today (dark bars, residual). The green line shows the percentage increase in reported deals between these (Read more...)

Hidden First Rounds

by Ian Hathaway
This post is by Ian Hathaway from Blog - Ian Hathaway

One of the drawbacks of venture capital databases is that they are dynamic. Information trickles in, often with significant time lags. This is especially true at the earliest stages, where rounds are often unannounced and many startups are too small for anyone to notice. It’s a structural challenge that I’m not sure will ever be fully resolved.

The underreporting and time lags associated with very early deals has become further compounded in recent years. Many startups in Silicon Valley and other leading startup hubs have increasingly relied on unpriced rounds (SAFEs or convertible notes) for their first or even second rounds of financing. Because these rounds are unpriced, they don’t appear in a company’s cap table until after it has raised a priced round later (and further, announced the deal—see above).

Combined, there are structural and cyclical reasons that the underreporting of very early venture rounds is especially acute now and fraught with severe reporting delays. This matters because people want to understand the market trends in near real time.

To test how much of a problem this has become, I grabbed data on first financings from an analysis I did last year and compared them to first financings from a data pull today. The chart below shows the number of first financings in US companies between 2005 and 2017, as reported 14 months ago in August 2018 (light bars) and as reported today (dark bars, residual). The green line shows the percentage increase in reported deals between these (Read more...)

197. The DNA of Startup Success (John Vrionis)

by Nick Moran

John Vrionis of Unusual Ventures joins Nick to discuss The DNA of Startup Success. In this episode, we cover:

  • Backstory/path to venture.
  • Talk about your experience at Lightspeed and your decision to leave.
  • Where/when did you first meet Jyoti Bansal, the founder, AppDynamics?
  • What's unusual about what you do?
  • 'Unusual Academy' and 'Get Ahead Platform' -- what are they and what's the difference?
  • You’ve spoken about your team at Unusual being focused on redesign the early-stage VC market and giving founders a distinct advantage. What about your approach gives founders a distinct advantage?
  • You've spoken about founder focus on "How it works" vs. "Why it matters" -- what's the disconnect you've observed with early-stage founders?
  • You've covered your own experience of learning through suffering -- is that also a quality/characteristic you look for in founders?
  • Arrogance vs. Humility -- have you invested in founders displaying these traits? What's been your experience?
  • 3 must-haves that you look for in a new investment?
  • If there's one common theme in failed investments -- what is it?
  • Is there anything unusual about your approach to sourcing? If so, what is it?
  • What are some best practices for founders when picking a VC?
  • Over the past year or so the percentage of total VC dollars invested in early-stage deals fell to the lowest levels the industry has seen in five years. Why do you think this is the case?
  • You've talked a lot about the seed funding gap and challenges to get to Series A. (Read more...)

197. The DNA of Startup Success (John Vrionis)

by Nick Moran

John Vrionis of Unusual Ventures joins Nick to discuss The DNA of Startup Success. In this episode, we cover:

  • Backstory/path to venture.
  • Talk about your experience at Lightspeed and your decision to leave.
  • Where/when did you first meet Jyoti Bansal, the founder, AppDynamics?
  • What's unusual about what you do?
  • 'Unusual Academy' and 'Get Ahead Platform' -- what are they and what's the difference?
  • You’ve spoken about your team at Unusual being focused on redesign the early-stage VC market and giving founders a distinct advantage. What about your approach gives founders a distinct advantage?
  • You've spoken about founder focus on "How it works" vs. "Why it matters" -- what's the disconnect you've observed with early-stage founders?
  • You've covered your own experience of learning through suffering -- is that also a quality/characteristic you look for in founders?
  • Arrogance vs. Humility -- have you invested in founders displaying these traits? What's been your experience?
  • 3 must-haves that you look for in a new investment?
  • If there's one common theme in failed investments -- what is it?
  • Is there anything unusual about your approach to sourcing? If so, what is it?
  • What are some best practices for founders when picking a VC?
  • Over the past year or so the percentage of total VC dollars invested in early-stage deals fell to the lowest levels the industry has seen in five years. Why do you think this is the case?
  • You've talked a lot about the seed funding gap and challenges to get to Series A. (Read more...)

What Does Your City Say?

by Ian Hathaway
This post is by Ian Hathaway from Blog - Ian Hathaway

This morning a friend reminds of a Paul Graham article from 2008 titled Cities and Ambition. It’s excellent. For those of you who don’t know, Paul is the outspoken founder of Y Combinator—a prominent early-stage startup investor in Silicon Valley.

The general thesis of Paul’s article is simple yet elegant. Cities speak to us. They influence our behavior. They shape who we are. It matters where you live. A lot I would argue. The essay leads with this:

Great cities attract ambitious people. You can sense it when you walk around one. In a hundred subtle ways, the city sends you a message: you could do more; you should try harder.

The surprising thing is how different these messages can be. New York tells you, above all: you should make more money. There are other messages too, of course. You should be hipper. You should be better looking. But the clearest message is that you should be richer.

What I like about Boston (or rather Cambridge) is that the message there is: you should be smarter. You really should get around to reading all those books you've been meaning to.

When you ask what message a city sends, you sometimes get surprising answers. As much as they respect brains in Silicon Valley, the message the Valley sends is: you should be more powerful.

That's not quite the same message New York sends. Power matters in New York too of course, but New York is pretty impressed by a (Read more...)

What Does Your City Say?

by Ian Hathaway
This post is by Ian Hathaway from Blog - Ian Hathaway

This morning a friend reminds of a Paul Graham article from 2008 titled Cities and Ambition. It’s excellent. For those of you who don’t know, Paul is the outspoken founder of Y Combinator—a prominent early-stage startup investor in Silicon Valley.

The general thesis of Paul’s article is simple yet elegant. Cities speak to us. They influence our behavior. They shape who we are. It matters where you live. A lot I would argue. The essay leads with this:

Great cities attract ambitious people. You can sense it when you walk around one. In a hundred subtle ways, the city sends you a message: you could do more; you should try harder.

The surprising thing is how different these messages can be. New York tells you, above all: you should make more money. There are other messages too, of course. You should be hipper. You should be better looking. But the clearest message is that you should be richer.

What I like about Boston (or rather Cambridge) is that the message there is: you should be smarter. You really should get around to reading all those books you've been meaning to.

When you ask what message a city sends, you sometimes get surprising answers. As much as they respect brains in Silicon Valley, the message the Valley sends is: you should be more powerful.

That's not quite the same message New York sends. Power matters in New York too of course, but New York is pretty impressed by a (Read more...)

Investor Stories 124: Post Mortems (Clavier, Tusk, Kupor)

by Nick Moran

On this special segment of The Full Ratchet, the following Investors are featured:

  • Jeff Clavier
  • Bradley Tusk
  • Scott Kupor

Each investor discusses a portfolio company that did not survive and why it was that they failed.

To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes.

Also, follow us on twitter @TheFullRatchet for updates and more information.

Investor Stories 124: Post Mortems (Clavier, Tusk, Kupor)

by Nick Moran

On this special segment of The Full Ratchet, the following Investors are featured:

  • Jeff Clavier
  • Bradley Tusk
  • Scott Kupor

Each investor discusses a portfolio company that did not survive and why it was that they failed.

To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes.

Also, follow us on twitter @TheFullRatchet for updates and more information.