Which VCs Open Cold Emails? Keith Rabois. Aileen Lee. David Sacks. Satya Patel. And More.


This post is by Jason Lemkin from SaaStr

A little while back, we did a great digital event, The New New in Venture.  We explored how venture has changed since Covid with many of the best, and many I look up to, from Aileen Lee of Cowboy Ventures to Satya Patel of Homebrew to Keith Rabois of Founders Fund and so much more.

I took advantage of the format to ask every VC I interviewed one question: Do You Open Cold Email?

And you know, it’s not just me.  (I love a great cold e-mail).  All of them do.  You can catch up on the sessions here:

I asked again and again, clearly.  Do you open cold emails?  How often?  And have you funded deals from them?  The answers were consistently yes, most of them, and yes I’ve funded them.

I learned:

  • Keith Rabois prefers a deck, and he reads most of them.
  • Aileen Lee or her partners read every email pitch that comes into Cowboy Ventures.
  • David Sacks of Craft prefers a short email pitch that summarizes the opportunity.
  • Satya Patel of Homebrew reads everything sent to him

Personally, I do get behind on email, but I love an amazing cold email and have funded maybe ~50% of my investments from them.  I like an email pitch that is so amazing, that I’d fund it just based on the email alone.  More on that here:

2 Cold Emails I Funded For Millions

So yes, is a perfect warm intro better?  Well, maybe.  But even the top, most famous Seed VCs are hunting.  Hunting unicorns and decacorns.  And they can’t wait for them all to come from their networks.

So put together the very, very best cold email you can.  Make it awesome, in every way.  And send it to your top VCs.

They may not respond.  But if it’s awesome, including the title, I bet they open it.  And if it’s super awesome, you have a better chance than you might think of getting a meeting.

Just don’t ask for coffee or to compare notes.  Selling stock in sales.  Make it count.  And it will work.

Here’s one of the best SaaS companies in the world, worth $3b+.  That I funded from an A+ cold email.  The email’s even shown in the video:

The post Which VCs Open Cold Emails? Keith Rabois. Aileen Lee. David Sacks. Satya Patel. And More. appeared first on SaaStr.

And the Winners of Startup Grind’s First Global Pitch Battle Are…


This post is by Aayush Jain from Startup Grind - Medium

And the Winners of Startup Grind’s First Ever Global Pitch Battle Are…

Startup Grind hosted its first-ever virtual Global Pitch Battle Competition in late September 2020 where startups from all around the world battled it out to win amazing prizes, global recognition, and of course, bragging rights.

The competition took place in two phases. The first taking place in August, where Startup Grind Chapters from over 40 cities around the globe hosted local pitch battles to select the best startups from their respective cities. The top 3 winners of each chapter level pitch battle were then given the chance to compete with each other in the SG Global Pitch Battle Competition.

The second phase was the global competition which was hosted by Startup Grind’s Startup Program. In Round 1 of the global competition, winners of all the local pitch battles plus members of the startup membership program submitted a 1-minute elevator pitch to us. These pitches were then reviewed and the Top 10 pitches were selected to take part in the finals, which was a live streamed event where each of the ten finalists pitched one after the other to a live panel of three expert judges: Amy Jin, Sonny Mayugba and SC Moatti. Over 100 people including VCs, entrepreneurs, and SG chapter directors attended the event.

The Finalists

After carefully reviewing all the pitches, the following 10 startups were selected to pitch live at the Global Pitch Battle Finals on the 24th of September:

  1. YData
  2. HR KIT
  3. DUCKT
  4. Bioo
  5. Upside
  6. Fashwire
  7. A.D.A.M.
  8. AR Market
  9. Science Retail Inc.
  10. Mercku

You can learn more about each of these startups and find their elevator pitches here.

The competition was stiff and each of the pitches were of a high quality with the margins being extremely fine. This made the decision for our judges extremely challenging, but in the end the following three startups were announced as the Top 3 for Startup Grind’s Global Pitch Competition.

The Winner of Startup Grind’s Global Pitch Battle Competition: Fashwire

Fashwire’s global platform, a 2-sided marketplace, provides its portfolio of 300+ designers from 30+ countries vital data and actionable insights into consumer shopping behavior patterns. For the consumer, the app provides an engaging experience and empowers them to give designers real-time feedback, creating a real dialogue that helps designers make intelligent production decisions to improve margins and increase profitability.

Fashwire’s CEO, Kimberly Carney, shared: “To pitch, present and be awarded the first-place prize in front of the world’s largest community of startups, founders, innovators, and creators is one of the greatest honors Fashwire has received to date since our launch in 2018.”

First Runner-Up: A.D.A.M.

A.D.A.M. is an on-demand personalized tissue manufacturer with full scope of related services (software, equipment, certification, digital platform etc); remotely or on site (in hospital). The company’s proprietary technology includes 3D printing of different tissues (initially bones), made of organic materials, which can be scalably and cheaply produced and used.

A.D.A.M.’s CEO, Denys Gurak, had this to say about the experience: “It’s great that events like the Global Pitch Competition keep happening during these challenging times. The world is thirsty for transformational ideas, especially in healthcare. We appreciate the positive feedback and are happy that our vision was unveiled to the global community”.

Second Runner-Up: Upside

Upside aims to help people start saving. Not by just moving their own money, as round-up or auto-save apps do, but by finding them new money. Helping customers find money that they never had. Frictionless money, like cashback.

CEO, Andries Smit, who pitched Upside reflects: “It was the best organised online pitching event we’ve been to. Standards were high and the judges asked hard questions and gave candid feedback. This felt very much like real VC conversations — which is great, and very different to most other competitions. We are delighted to have been selected as one of the winners. Thank you SG!”

More Pitch Battles Coming!

The event was a great way for the startups to practice their investor pitches and see where they stand in comparison to the other startups around them and learn from each other. While the startups were practicing and polishing their pitches, another major takeaway for them through this event was exposure. During the finals, while the ten startups were pitching to a panel of three judges, there were over 100 others including investors and other entrepreneurs witnessing them pitch.

Events like these can help startups get global exposure they need to grow, which is always extremely valuable. In fact, one of the startups was even approached by two separate investors over a potential investment as a result of witnessing their pitch during the event!

Interested in Getting Involved?

Startup Grind has many such events for all the amazing startups in its global community. To be a part of the future ones, apply to our Startup Program where you get to be a part of an exclusive community of over 1000 startups and investors. Read more about the Startup Program and apply here.


And the Winners of Startup Grind’s First Global Pitch Battle Are… was originally published in Startup Grind on Medium, where people are continuing the conversation by highlighting and responding to this story.

Designing a Fundraise: Lessons Learned from Flatfile’s Successful Investment Rounds


This post is by Eric Crane from Startup Grind - Medium

While 2020 will go down in history as memorable (we’ll leave it as “memorable”), Flatfile had reason to celebrate this year with a $7.6 Million seed round that we officially closed in April, just a few months after our pre-seed in July of last year.

Given the sizable seed round, I’m often asked questions about our fundraising and specifically, how we accomplished pulling together a seed round in such a short timeframe (about a month), right at the onset of the current global health crisis.

Below I’ve outlined a few of my lessons learned from Flatfile’s first two investment rounds.

Find creative solutions in the early days

At Flatfile, we created a new category: data onboarding. Any company that has ever had to import customer data understands the struggle of getting usable data into their system. When David (my co-founder) and I worked together at Envoy, we were frustrated by the data import experience, and further, that we had to build yet another bespoke solution to a problem we had solved before. So we started simple with the first version of Flatfile Portal: a drop-in data importer for your web app.

We were encouraged by the dozens of signups we saw after the first couple of months of 2018, but we also weren’t 100% certain if what we had was a standalone product that we could build a business around or simply a feature. We needed to develop our idea further and get help.

Find creative solutions in the early days

The biggest expense for any startup is hiring brilliant operators. We wanted talented people to help us launch, but we simply didn’t have the cash. So David came up with the idea of issuing SAFE notes: not to investors, but employees. We asked them to invest their time to get us up and running and that, in return, gave them a future equity stake in our business. Typically early capital from investors means you can then build your team; we circumnavigated that step.

We didn’t have capital but wanted to move the business forward between our founding and a pre-seed round. This creative solution required zero dollars, and earned us the most valuable resource of all: time.

Fundraising as part of a go-to-market motion

Speaking of time, when is it time to raise money? Just search on YouTube and you’ll find hundreds of videos, each with a slightly different point of view. My point is: it should always depend on your business.

For us, it meant proving two core theses of the business: that the market need for data onboarding was broad and that we could solve that need with our software. So we simply included fundraising as a part of our go-to-market strategy. We spent late 2018 focused on product development and user research. January was focused on positioning and customer acquisition. In February we publicly launched. And by March of 2019, we knew we were onto something: 25 paying customers, about as many unique use cases within that group, and a strong core team.

We kept our pitch deck simple and easy to iterate on. This slide is from the first of about 50 iterations.

But we didn’t go slinging decks across VCs’ inboxes. Cash is a means to an end, so we defined our end result first. We had proof of a broad market opportunity, willingness to pay, and a repeatable customer acquisition motion. What we were lacking was the ability to bring on a full-time team and fuel for our customer acquisition tanks.

That ruled out the accelerator route, as it’s largely designed to prove things we already had. Simply raising from angels by issuing notes over a broader period of time meant less market signaling and not enough cash to bring the team on all at once. Our ACVs at the time were too small to rely on customer dollars to achieve those objectives.

With this information, we knew that institutional VC was the best route for us. Those investors would be engaged with how we built our customer acquisition model, provide more capital at once, and take a more meaningful stake in the business.

Designing our first raise

By April 2019, we were ready to start pitching, but neither David or myself had any experience raising institutional capital. Given our product backgrounds, we approached fundraising with a product-oriented approach. Our planning broke down the steps as if we were creating or planning a product.

Right before pitching a “lead user” in San Francisco.

We found lead users — investors outside of our target list — to provide feedback on our MVP — the first iterations of our pitch deck. Growth funds and Series A/B specialists were excited about taking low-expectations meetings with us, and their feedback was invaluable.

Our growth engine for the fundraise was network driven, but highly intentional. We built a CRM in Airtable, where we took notes, advanced stages, and noted key value points for each fund and partner. We designed “forward emails”, making it easy for mutual connections to introduce Flatfile to investors without an obligation to take a meeting. And we also iterated constantly; after every comment, pitch, or dinner we took feedback and adjusted our messaging.

When we had a short list of institutional investors who were interested in Flatfile, we took a formulaic approach to deciding our partner. We leveraged our product experience again during this stage, prioritizing investors based on the business case each one made for us. I created a simple weighted average ranking model in Google Sheets, listing key attributes by how much they mattered to us. Geography, fund size, partner engagement, and brand recognition were amongst the factors. Message me if you’d like a copy.

Fundraising can be an emotional and stressful endeavor. The more you can create a logical, steadfast approach, the more you can outsource small decisions. Build your intuition into the process and the process will reach the right conclusion for you. We closed our $2.1M pre-seed in 6 weeks of pitching, then got back to building the business.

Don’t obsess about timing — it’s not everything

We dedicated our pre-seed funding to prove out product-market fit as well as scalability of customer acquisition. So we planned our spend not around a “standard” 18–24 month runway, but rather around optimally deploying cash to prove out those value points.

By September of 2019, we got our first validation point. In one month we bumped our paid acquisition by 10x. We spent nearly 5% of our total cash on hand just on a single month’s worth of campaigns! But that doesn’t matter, we got to see results of that spend: 20x more signups that month than we had ever seen.

And by January of 2019, our second point was proven. After gathering feedback from all those signups, including the prospects that never activated, we adjusted our product commensurately. In 3 weeks, we bumped our ACV nearly 6x. And further, we realized what we were missing, which ultimately became our new Concierge product.

Our first pre-emptive offer came during the SG Global conference in February.

The process of proving both of these points naturally led up to another fundraising round. In this case, the round was pre-emptive. All those later-stage funds we had pitched the first time around were still close, and after a handful of meetings to share the results of our proof points from the last round, we had our first offer by mid-February.

To take back control of the fundraise, we designed the process, albeit much more quickly than before. We listed our needs, defined clear criteria for ideal investment partners, and pitched forward to refine our messaging. As a result, we built a $7.6M seed round in less than four weeks. Our last in-person meeting was on March 3; by the time we closed the round at the end of the month, the world was very different. But COVID was never a significant concern during the round: we had identified the right partners with our process, and they helped us pull even more capital into the round than we had planned.

If you build (your business), they will come

The lesson here is to focus less on standard timelines and more on building evidence that you’re operating your business successfully. We made the key evidence of success well known amongst current and prospective investors and let the performance of the business make our pitch for us.

We’re a bit obsessed with first principles here at Flatfile, and that has served us as well during fundraising as it has during product development. I would urge you to do the same for your business, and don’t be afraid to eschew standards if they aren’t the right fit.

Learn even more about Flatfile’s experience in a recent interview with Startup Grind. Check out the full video below. 👇


Designing a Fundraise: Lessons Learned from Flatfile’s Successful Investment Rounds was originally published in Startup Grind on Medium, where people are continuing the conversation by highlighting and responding to this story.

Navigating Raising Funds and Advice for LatinX Founders


This post is by Max Tuchman from Startup Grind - Medium

LatinX is the second-largest population in the U.S. and the fastest-growing group of entrepreneurs. And yet, less than two percent of Venture Capital goes to Latinx founders and less than one percent goes to women of color.

Raising funds as a woman and Latina is challenging. The odds were (and still are!) stacked against me. Over the years, plenty of investors told me to give up. It had nothing to do with my idea, they just didn’t want to take on the risk because I didn’t fit their preconceived mold of a successful entrepreneur. But, as a Latina, giving up isn’t in my DNA.

Fast forward four years and my startup, Caribu, a family-focused video-calling app, is thriving. To date, we’ve raised over $3M in funding and have been the winner or finalist in over 30 international and national pitch competitions. While it hasn’t been easy, I have picked up a few best practices for pitching investors over the years that have helped me along the way:

Get creative with how you fundraise

When I first started the fundraising process, many venture capitalists turned me down because I wasn’t a 15-time founder or based in Silicon Valley. I realized that venture capital isn’t the only route to raise the funds I needed to run Caribu. There is a federal law, called Regulation Crowdfunding, that makes it possible for private companies to raise money not just from investors, but also from friends, customers, and anyone else interested in owning an early piece of your startup.

In addition to leveraging equity crowdfunding on platforms like Wefunder, in 2018 I cashed in my travel points to compete in pitch competitions around the country. This combination helped us close Caribu’s $3M Seed round in 2019. The best way to fund your company is by generating revenue, but it takes money to make money. Looking for alternative sources of capital when you don’t have access to the “old boy’s network” is extremely important. Not only are equity crowdfunding and pitch competitions more entrepreneur-friendly than traditional VC funding, they also give your company a fighting chance against the better-capitalized startups of founders that receive less bias and underestimation.

Challenge the gender biases

Even though I was leading Caribu’s pitch meetings, I realized that my male co-founder, Alvaro Sabido, was questioned about the future vision, while I was pressed on the potential risks and downfalls. Women face far greater scrutiny than men when pitching their startup and there is research to back this up. Most women get asked “preventative questions”, while men get asked “promotion questions” and it affects how much funding they receive. The difference is that promotion questions get you to talk about a favorable future and the prevention questions make you focus the conversation on mitigating risk and losses.

You can’t fix this bias but, as a founder, make sure you’re able to identify a preventative question and respond promotionally, with a plan for how you are going to achieve future growth and capture the massive opportunity.

Stay true to yourself

Studies have shown that most Latinos in the U.S. do not feel that they can bring their whole selves to the office. This isn’t surprising to me, as I’ve been told time and time again to modify my appearance, body language, and communication style. But, when you peel away your culture, you deny your company and your customers of that magic. And when engaging with investors, you want people to invest in who YOU are and your vision. That is truly the greatest competitive advantage you have, and you rob your customers, your growth potential, and the world of your magic if you strip that away.

For example, it’s always a fine line when women founders are asked to speak in front of male investors about the experience of being a woman in male-dominated spaces. Unfortunately, many men feel attacked or interpret your lived experience as an excuse or cop-out. I still sit on these panels because it’s incredibly important that male investors hear our stories so they can amend and improve their behaviors and intrinsic bias. It’s also a GREAT way to weed out potential investors. If someone walks away uncomfortable from a conversation like that then you dodged a bullet. On the flip side, I met my lead investor after a FemaleFounder panel who showed me that he’d support me and appreciated my feistiness as I built my company the way I wanted to.

There is nothing worse than bringing on an investor who doesn’t support you or respect your values. Another example of this is a meeting I had with a potential angel investor in San Francisco. We were meeting at a Starbucks and I put in a mobile order for us in advance. My mobile order name has been “Black Lives Matter” since 2015, so when they called out “two lattes for Black Lives Matter,” I grabbed our coffees. The investor asked why I used that name and I said it was a small way that I could support the movement with an everyday activity, and that I would change the name when police stopped killing unarmed black men. After that interaction, he didn’t end up investing, and I’m not upset about it.

Leverage the power of storytelling

People invest for three reasons: they love the founder, the company mission, or the numbers. Until you have numbers investors can fall in love with, you need to leverage storytelling about yourself and company vision to raise money, hire talent, and sell your product. To be a good salesperson, you have to listen for someone’s pain points and then share a story of how your product or service will lessen or eliminate that pain point. Recently participating in the Google for Startups’ Sales Academy helped me realize that at the end of the day, your job as CEO is to be the Chief Storyteller. Honing this skill is equally as important, and quite frankly essential, for those looking to improve how they pitch their business to investors.

Latinx founders are everywhere. We’re building game-changing companies and, in many cases, real solutions for our communities. If you have an idea that will change the world and make it a better place, drop everything you’re doing, jump in chancletas first, and make it happen.


Navigating Raising Funds and Advice for LatinX Founders was originally published in Startup Grind on Medium, where people are continuing the conversation by highlighting and responding to this story.

Drive the Meeting


This post is by Rob Go from Blog – NextView Ventures

One thing I strongly believe is that founders should drive the agenda of a fundraising meeting. This is something that is easy to do, but only happens a minority of the time.

What does it mean to not drive the meeting? To me, it’s showing up and relying on the investor to tell you how they want to structure the conversation. There is nothing inherently wrong with this. And I can see how an inexperienced founder would like to defer to the investor on how they want to use their time.

But here’s the thing – this immediately puts the founder in the position of “I’m asking for money” as opposed to “I’m telling you about my business”. While investors may have their own preferences, what we really want is to learn about you as a founder and how you articulate your mission and vision. Part of this is your ability to inspire and sell, whether that means  future investors, customers, potential employees or execs down the road. It’s also our privilege to learn about your business, and so I am usually more than happy to have you drive the conversation.

The other thing is that we are looking to back founders who will be strong leaders and can knock down walls to achieve their goals. These folks tend to show their leadership in fundraising discussions as well. They may ask for feedback on what the audience will want to see beforehand, but when the time comes to actually pitch the business, they are driving the agenda.

There are simple ways to do this in a way that isn’t too overbearing. I think it’s quite effective to say “this is what I plan to talk about (or how I want to do it). But please tell me if you think we should approach this differently. 9/10 times, the investors will be happy to hear this plan, and might just add one or two things. Very rarely will they say “no, I want to do it this way instead”. Even if they do, I think you’ll generally be better off for having shown leadership of the conversation.

Some investors are really waiting for this. They are more than happy to have a meandering conversation that seems positive, but doesn’t actually go anywhere. Don’t let that happen. You want to use the time well, and also show that you treat your own time as valuable and are on a mission to get things done.

The post Drive the Meeting appeared first on NextView Ventures.

Drive the Meeting


This post is by Rob Go from Blog – NextView Ventures

One thing I strongly believe is that founders should drive the agenda of a fundraising meeting. This is something that is easy to do, but only happens a minority of the time.

What does it mean to not drive the meeting? To me, it’s showing up and relying on the investor to tell you how they want to structure the conversation. There is nothing inherently wrong with this. And I can see how an inexperienced founder would like to defer to the investor on how they want to use their time.

But here’s the thing – this immediately puts the founder in the position of “I’m asking for money” as opposed to “I’m telling you about my business”. While investors may have their own preferences, what we really want is to learn about you as a founder and how you articulate your mission and vision. Part of this is your ability to inspire and sell, whether that means  future investors, customers, potential employees or execs down the road. It’s also our privilege to learn about your business, and so I am usually more than happy to have you drive the conversation.

The other thing is that we are looking to back founders who will be strong leaders and can knock down walls to achieve their goals. These folks tend to show their leadership in fundraising discussions as well. They may ask for feedback on what the audience will want to see beforehand, but when the time comes to actually pitch the business, they are driving the agenda.

There are simple ways to do this in a way that isn’t too overbearing. I think it’s quite effective to say “this is what I plan to talk about (or how I want to do it). But please tell me if you think we should approach this differently. 9/10 times, the investors will be happy to hear this plan, and might just add one or two things. Very rarely will they say “no, I want to do it this way instead”. Even if they do, I think you’ll generally be better off for having shown leadership of the conversation.

Some investors are really waiting for this. They are more than happy to have a meandering conversation that seems positive, but doesn’t actually go anywhere. Don’t let that happen. You want to use the time well, and also show that you treat your own time as valuable and are on a mission to get things done.

The post Drive the Meeting appeared first on NextView Ventures.

My Top 8 Mistakes Investing in SaaS Startups


This post is by Jason Lemkin from SaaStr

Q:  What are some of the most costly mistakes done by novice investors?

A few of mine in investing in SaaS start-ups. They actually in the end haven’t been truly costly because, in the end, power laws mean your winners overwhelm your losers if you do it right.

But here they are:

  • Confusing non-recurring and recurring revenue. The one time I did this, the start-up ended up going from $1m “ARR” to $0.1m “ARR” pretty quickly. Because it was all really transactional revenue. I should have done better diligence here.
  • Investing when the CEO was a bit of a B.S. artist, and/or made something up. Being confident is good. Making things up is bad. Claiming something without knowing it correctly … about a customer I knew personally … was a flag. I shouldn’t have invested in this one. Even though the metrics were very impressive.
  • Investing in a founder/CEO not better than me. I haven’t lost money here, but I won’t do this again because it limits returns. Being a founder-CEO is so hard. If you aren’t better than me, you’ll probably sell early or get burnt out.
  • Investing when the CEO didn’t honor their commitments. I invested twice in start-ups where the CEO didn’t honor a commitment from the past. A big flag. Even when the commitment itself was fairly minor.
  • Investing based on a good deal / cheap price. I did several investments that, due to special circumstances, were truly cheap. In both cases, I made money — 3x at least. But I didn’t make enough money for it to be worth it. Cheap isn’t a reason to invest.
  • Not investing due merely to a high price. OK every investor can tell you this story. But not investing at $300m and seeing it worth $3b just a few years later … every investor has this story. You have to invest in your winners. Almost, at any price in Cloud / SaaS.
  • Not just agreeing to a fair deal with 1 quick handshake. I course-corrected here early and quickly. Now, I just ask the founder what they want in terms of price, terms, etc. If it’s fair, I try to just agree to it. No upside to negotiating really in earlier-stage investing. At least, not for me. If it’s not a fit, it’s just not a fit, and that’s OK.
  • Not buying every share I could. I haven’t made this mistake often, but often enough. I now buy every single share I can. I just ask “How many shares can I buy? I’ll take them all.” Because you really can only lose what you invest. But not buying every share you can in a winner is the #1 thing that caps your returns.

An earlier look at the topic here:

The Top 8 Mistakes I Made In My First 18 Months As a VC Partner

The post My Top 8 Mistakes Investing in SaaS Startups appeared first on SaaStr.

The Intersection of Angel Investors and Revenue-Based Financing


This post is by Stephanie Luebbe from Startup Grind - Medium

It’s new. It’s different. It might work for you.

Why I got rejected from YC and what I learned


This post is by Luba Yudasina from Startup Grind - Medium

Sharing my experience getting rejected after two interviews

How to Land and Expand Your Corporate Partnership — A Startup’s Playbook


This post is by Arttu Närhi from Startup Grind - Medium

How to Land and Expand Your Corporate Partnership — A Startup’s Playbook

We talked to three collaboration veterans about their startups’ experiences working with global industry leaders. Here are their views on negotiations, proposing expanding a successful partnership and working with multiple partners.

Let’s not mince words: the world is a highly unpredictable place for today’s startups. With the enduring pandemic and volatile global economy, competition is fierce. The situation has Founders and Operators searching for new opportunities, branching outside the familiar tech ecosystem.

In recent years, large corporations have enacted elaborate digitalization agendas to become more competitive in the 21st century. New avenues for startup-corporate collaboration are now open, but how does one navigate this space? Uncertainty about corporate procurement processes, for example, may stand in the way.

Startup-corporate collaborations is what Combient Foundry is all about. We employ the Venture Client Approach to solve corporate business needs with the best-in-class startup companies. The aim of these scalable projects is to decrease the time-to-market and build new growth with novel tech solutions.

To get a holistic perspective on what startups can do to get their foot in the door, we sat down with three people from our partnering startups. In each interview, we pinpointed some of the common concerns startups have about engaging with large corporations and drew solutions from past experiences to share with you. Dividing the findings into three topics, this playbook opens up what makes collaborations successful.

Getting Started: How to Land a Corporate Partnership?

Every partnership starts with the right approach. Kristian Rode, CCO of SHUTE, a fiber-optic sensor company, spearheaded the talks with their Combient Foundry partner KONE, a global elevator industry leader. He emphasizes the importance of talking to the right people.

“It depends on where you are in the product life cycle,” Rode begins. “In the past, we’ve been quite successful in getting through to the Head of R&D or the CTO. This is because our state-of-the art technology intrigues an engineer’s mind.”

If your startup is closer to the final product, Rode explains contacting the procurement team might be a better idea. In other words, be mindful of the stage you are in, but don’t be afraid of reaching out regardless. For a hardware company like SHUTE, product development can be costly, so having a partner providing income and know-how can make a difference in the competition.

“SHUTE’s first corporate partnership began when we had been active for a couple of years,” Rode recalls. “We had sorted out all the basics at that point. It was a good time for us.”

With a channel of communication open, you need to consider how you’ll catch the other side’s attention. Rode has one solid piece of advice for these discussions.

“It often boils down to money,” he says. In his experience, corporate teams search for advantages that make their offering cheaper, better in another way, or add an entirely new feature. Here’s where the first difficult topics might come up, namely the time at hand and the scale of the corporation.

“You need to understand that large corporations have long chains of command,” Rode continues. Factors independent of the partnership, like budget barriers and other projects, can surprisingly slow down negotiations. The only way through this is patience.

“Corporations working with startups do know that scale is not necessarily a priority for the team,” he explains. “However, they will challenge you on scalability and volume right from the beginning.” Again, one should not be discouraged. In the end, even negotiations will have provided your team with plenty of insight into what opportunities are out there.

Working with Combient Foundry and KONE, SHUTE’s small, flexible, and durable sensors to improve KONE’s predictive maintenance solutions sealed the deal. Beyond the suitable tech behind SHUTE’s offering, Rode believes team chemistry made a lot of difference in the negotiation process.

“People want to work with people, not products,” he summarizes.

Doubling Down: How to Upsell an Expanded Partnership?

Foundry’s goal is to establish partnerships that stand the test of time. The greatest benefit is gained when the end goals are aligned with both parties’ long-term strategies.

Natalia Rincón is the Co-Founder and CEO of CHAOS, an urban forecasting startup. Their initial work began with examining KONE Corporation’s data. They created an index and from there, expanded their partnership to work with KONE global R&D. Rincón advises to dive right into the deep end, when you realize you’ve struck gold.

“Large companies and startups have strengths that complement each other,” she says. “Corporate expertise, market value, and established processes are fantastic alongside a startup’s lean structure, ability to iterate fast, and fresh perspectives for the market. If both sides’ strengths are used, the results can be an entirely new business model and high ROI.”

Laying the groundwork for continuing the partnership is important from the start. With set expectations and clear KPIs, it is easy for both parties to confirm the pilot or proof-of-concept has worked out and there is cause for moving forward, together.

Rincón explains the goal is to find your partner’s unmet needs. For example, the real estate industry has forecasting needs related to rental housing market prices and sustainability. To fill the demand, CHAOS’s indexes allow their clients to understand how specific locations will perform based on different parameters like footfall and sentiment of crowds, land development, services, and many more factors.

“When dealing with large enterprises, it is important to understand who buys and uses the end product,” Rincón elaborates. She indicates this to be the most difficult part of proposing an expanded partnership.

“To get more insight, you need to think of the questions like who uses the product daily, what is their greatest pain, where is the wow-factor? In our experience, if the end-user loves the product, getting buy-in further from the corporation is a lot easier.”

CHAOS and KONE are in continuous dialogue about changing needs and where to continue development. Rincón reports that the work with KONE has helped expand their offering for other customers and partners too.

“Working with KONE helped us think of our value proposition and how we can offer the same feature to others with similar needs,” she explains. “It was clear from the beginning: understanding one another’s needs means both sides benefit from the work together.”

Spreading Out: Why Work with Multiple Corporations?

Working with multiple partners is a cornerstone for satellite intelligence company Overstory, formerly known as 20tree.ai. Their corporate engagement strategy is a testimonial to this.

“We do not develop a product that is specific to one customer,” says Anniek Schouten, Co-Founder and COO of Overstory. “We develop products that solve challenges for entire industries.”

Finding new potential partnerships to complement their portfolio has a scrutinous process within Overstory. Two must-have aspects must be satisfied with each new partnership.

“First, our product must solve a real issue for our new partner,” Schouten explains. “We don’t want to be part of a ‘nice-to-have’ project. Rather, we are looking to help corporations with something that is critical to their strategy and operations.”

Second, Overstory makes sure the potential partner shares their long-term objectives and expectations. Long-term collaboration offers benefits in cost-saving, safety and reliability development, and environmental benefits.

“We know our technology can benefit a broad market of companies and organizations. But focus is key to succeed,” Schouten says. To keep focus, Overstory might have to pass on deals that risk sidetracking them.

“We have come across situations where we chose not to pursue a potential partnership, as it would stray us away from our core focus, meaning the financial gains would not help us in the long-run.”

Overstory’s approach might be challenging, but has a crystal clear reason. Creating a product that does not have the potential to become an industry leader means they are not getting the big picture of what the market wants.

“When working with many partners, you understand the priorities that are relevant for everyone in the market,” Schouten says. She elaborates that partnerships have and will always be key for Overstory.

“Finding and validating our product-market fit, maturing the product, and growing recurring revenue: all these stages have benefited from long-term partnerships,” she continues. Overstory’s partners have also benefited from innovating and iterating fast, finding new solutions for pain points, as well as implementing them in operations to gain efficiency.

The Ovestory team takes each partnership as a learning experience. Beyond commercial ones, they also engage in data, satellite, and NGO partnerships across the board. Lessons learned working with these segments complements what the corporate circuit has brought in.

“Very strict and fast qualification is key,” Schouten goes over their learnings. “Also, talking about a commercial model and pricing must be done early, just like setting critical success criteria.”

Sometimes You Need to Say ‘No’

Some of the examples above show the benefits of being open to requests from corporate partners. However, customizing for the sake of it is not the way forward. Schouten’s experiences demonstrate well where the line should be drawn.

“Requests came to us from the forestry companies, initially,” she says. “By working with a massive amount of data from many corporations and organizations, we built products to automatically extract these insights.”

Schouten recalls an example from working with electric utilities. Overstory’s information proved relevant to deal with their substantial costs and risks when managing vegetation around power grids. Overstory built a strong product for this market as well and are continuously developing it.

Overstory does receive plenty of feature requests from partners. Schouten says they are useful data points when managed successfully, as they help Overstory map out market needs. Not all requests are qualified, though.

“We first ask: is it already in our roadmap? If yes, it’s a matter of managing expectations or moving it up as a priority,” she explains. “Even if it is not, we make a point of adding it when and if it does qualify.”

CHAOS’s experiences echo those of Overstory’s. Rincón goes a step further to say there are potential partnerships, which promise profitability, but risk curing into scalability. Serving specific customer needs is not worth the trouble, if it hurts chances of long-term success.

“If you notice during the pilot phase that the visions are not aligned with one another, it might be a good idea to evaluate the partnership goals,” Rincón says. It is a choice that the team must make at that point.

Each of our interviewees emphasized end-goal alignment between them and their partners. It is one of the things that ensures the partnership begins on equal footing. Remembering this right at the beginning of partnership negotiations is crucial, and will make sure all other agreements are easier to come by in the future. SHUTE’s early work with the KONE team had both parties impressed with one another, and set the stage for working on mutual goals as equals.

“Even though you are a small growth company and they are a large corporation, you should enter the cooperation as equal partners,” Rode summarizes. “You need their funding and reference, but remember that they need your tech and know-how. It is way more cost effective for them to work with you than to develop everything themselves. That is the basis for an equal partnership.”

Some of the experiences covered here are drawn from participating in Combient Foundry’s Venture Client Cycle. Check out our website to learn more about the approach and how to get involved in the ongoing cycle: www.combientfoundry.com.


How to Land and Expand Your Corporate Partnership — A Startup’s Playbook was originally published in Startup Grind on Medium, where people are continuing the conversation by highlighting and responding to this story.

How to Land and Expand Your Corporate Partnership — A Startup’s Playbook


This post is by Arttu Närhi from Startup Grind - Medium

How to Land and Expand Your Corporate Partnership — A Startup’s Playbook

We talked to three collaboration veterans about their startups’ experiences working with global industry leaders. Here are their views on negotiations, proposing expanding a successful partnership and working with multiple partners.

Let’s not mince words: the world is a highly unpredictable place for today’s startups. With the enduring pandemic and volatile global economy, competition is fierce. The situation has Founders and Operators searching for new opportunities, branching outside the familiar tech ecosystem.

In recent years, large corporations have enacted elaborate digitalization agendas to become more competitive in the 21st century. New avenues for startup-corporate collaboration are now open, but how does one navigate this space? Uncertainty about corporate procurement processes, for example, may stand in the way.

Startup-corporate collaborations is what Combient Foundry is all about. We employ the Venture Client Approach to solve corporate business needs with the best-in-class startup companies. The aim of these scalable projects is to decrease the time-to-market and build new growth with novel tech solutions.

To get a holistic perspective on what startups can do to get their foot in the door, we sat down with three people from our partnering startups. In each interview, we pinpointed some of the common concerns startups have about engaging with large corporations and drew solutions from past experiences to share with you. Dividing the findings into three topics, this playbook opens up what makes collaborations successful.

Getting Started: How to Land a Corporate Partnership?

Every partnership starts with the right approach. Kristian Rode, CCO of SHUTE, a fiber-optic sensor company, spearheaded the talks with their Combient Foundry partner KONE, a global elevator industry leader. He emphasizes the importance of talking to the right people.

“It depends on where you are in the product life cycle,” Rode begins. “In the past, we’ve been quite successful in getting through to the Head of R&D or the CTO. This is because our state-of-the art technology intrigues an engineer’s mind.”

If your startup is closer to the final product, Rode explains contacting the procurement team might be a better idea. In other words, be mindful of the stage you are in, but don’t be afraid of reaching out regardless. For a hardware company like SHUTE, product development can be costly, so having a partner providing income and know-how can make a difference in the competition.

“SHUTE’s first corporate partnership began when we had been active for a couple of years,” Rode recalls. “We had sorted out all the basics at that point. It was a good time for us.”

With a channel of communication open, you need to consider how you’ll catch the other side’s attention. Rode has one solid piece of advice for these discussions.

“It often boils down to money,” he says. In his experience, corporate teams search for advantages that make their offering cheaper, better in another way, or add an entirely new feature. Here’s where the first difficult topics might come up, namely the time at hand and the scale of the corporation.

“You need to understand that large corporations have long chains of command,” Rode continues. Factors independent of the partnership, like budget barriers and other projects, can surprisingly slow down negotiations. The only way through this is patience.

“Corporations working with startups do know that scale is not necessarily a priority for the team,” he explains. “However, they will challenge you on scalability and volume right from the beginning.” Again, one should not be discouraged. In the end, even negotiations will have provided your team with plenty of insight into what opportunities are out there.

Working with Combient Foundry and KONE, SHUTE’s small, flexible, and durable sensors to improve KONE’s predictive maintenance solutions sealed the deal. Beyond the suitable tech behind SHUTE’s offering, Rode believes team chemistry made a lot of difference in the negotiation process.

“People want to work with people, not products,” he summarizes.

Doubling Down: How to Upsell an Expanded Partnership?

Foundry’s goal is to establish partnerships that stand the test of time. The greatest benefit is gained when the end goals are aligned with both parties’ long-term strategies.

Natalia Rincón is the Co-Founder and CEO of CHAOS, an urban forecasting startup. Their initial work began with examining KONE Corporation’s data. They created an index and from there, expanded their partnership to work with KONE global R&D. Rincón advises to dive right into the deep end, when you realize you’ve struck gold.

“Large companies and startups have strengths that complement each other,” she says. “Corporate expertise, market value, and established processes are fantastic alongside a startup’s lean structure, ability to iterate fast, and fresh perspectives for the market. If both sides’ strengths are used, the results can be an entirely new business model and high ROI.”

Laying the groundwork for continuing the partnership is important from the start. With set expectations and clear KPIs, it is easy for both parties to confirm the pilot or proof-of-concept has worked out and there is cause for moving forward, together.

Rincón explains the goal is to find your partner’s unmet needs. For example, the real estate industry has forecasting needs related to rental housing market prices and sustainability. To fill the demand, CHAOS’s indexes allow their clients to understand how specific locations will perform based on different parameters like footfall and sentiment of crowds, land development, services, and many more factors.

“When dealing with large enterprises, it is important to understand who buys and uses the end product,” Rincón elaborates. She indicates this to be the most difficult part of proposing an expanded partnership.

“To get more insight, you need to think of the questions like who uses the product daily, what is their greatest pain, where is the wow-factor? In our experience, if the end-user loves the product, getting buy-in further from the corporation is a lot easier.”

CHAOS and KONE are in continuous dialogue about changing needs and where to continue development. Rincón reports that the work with KONE has helped expand their offering for other customers and partners too.

“Working with KONE helped us think of our value proposition and how we can offer the same feature to others with similar needs,” she explains. “It was clear from the beginning: understanding one another’s needs means both sides benefit from the work together.”

Spreading Out: Why Work with Multiple Corporations?

Working with multiple partners is a cornerstone for satellite intelligence company Overstory, formerly known as 20tree.ai. Their corporate engagement strategy is a testimonial to this.

“We do not develop a product that is specific to one customer,” says Anniek Schouten, Co-Founder and COO of Overstory. “We develop products that solve challenges for entire industries.”

Finding new potential partnerships to complement their portfolio has a scrutinous process within Overstory. Two must-have aspects must be satisfied with each new partnership.

“First, our product must solve a real issue for our new partner,” Schouten explains. “We don’t want to be part of a ‘nice-to-have’ project. Rather, we are looking to help corporations with something that is critical to their strategy and operations.”

Second, Overstory makes sure the potential partner shares their long-term objectives and expectations. Long-term collaboration offers benefits in cost-saving, safety and reliability development, and environmental benefits.

“We know our technology can benefit a broad market of companies and organizations. But focus is key to succeed,” Schouten says. To keep focus, Overstory might have to pass on deals that risk sidetracking them.

“We have come across situations where we chose not to pursue a potential partnership, as it would stray us away from our core focus, meaning the financial gains would not help us in the long-run.”

Overstory’s approach might be challenging, but has a crystal clear reason. Creating a product that does not have the potential to become an industry leader means they are not getting the big picture of what the market wants.

“When working with many partners, you understand the priorities that are relevant for everyone in the market,” Schouten says. She elaborates that partnerships have and will always be key for Overstory.

“Finding and validating our product-market fit, maturing the product, and growing recurring revenue: all these stages have benefited from long-term partnerships,” she continues. Overstory’s partners have also benefited from innovating and iterating fast, finding new solutions for pain points, as well as implementing them in operations to gain efficiency.

The Ovestory team takes each partnership as a learning experience. Beyond commercial ones, they also engage in data, satellite, and NGO partnerships across the board. Lessons learned working with these segments complements what the corporate circuit has brought in.

“Very strict and fast qualification is key,” Schouten goes over their learnings. “Also, talking about a commercial model and pricing must be done early, just like setting critical success criteria.”

Sometimes You Need to Say ‘No’

Some of the examples above show the benefits of being open to requests from corporate partners. However, customizing for the sake of it is not the way forward. Schouten’s experiences demonstrate well where the line should be drawn.

“Requests came to us from the forestry companies, initially,” she says. “By working with a massive amount of data from many corporations and organizations, we built products to automatically extract these insights.”

Schouten recalls an example from working with electric utilities. Overstory’s information proved relevant to deal with their substantial costs and risks when managing vegetation around power grids. Overstory built a strong product for this market as well and are continuously developing it.

Overstory does receive plenty of feature requests from partners. Schouten says they are useful data points when managed successfully, as they help Overstory map out market needs. Not all requests are qualified, though.

“We first ask: is it already in our roadmap? If yes, it’s a matter of managing expectations or moving it up as a priority,” she explains. “Even if it is not, we make a point of adding it when and if it does qualify.”

CHAOS’s experiences echo those of Overstory’s. Rincón goes a step further to say there are potential partnerships, which promise profitability, but risk curing into scalability. Serving specific customer needs is not worth the trouble, if it hurts chances of long-term success.

“If you notice during the pilot phase that the visions are not aligned with one another, it might be a good idea to evaluate the partnership goals,” Rincón says. It is a choice that the team must make at that point.

Each of our interviewees emphasized end-goal alignment between them and their partners. It is one of the things that ensures the partnership begins on equal footing. Remembering this right at the beginning of partnership negotiations is crucial, and will make sure all other agreements are easier to come by in the future. SHUTE’s early work with the KONE team had both parties impressed with one another, and set the stage for working on mutual goals as equals.

“Even though you are a small growth company and they are a large corporation, you should enter the cooperation as equal partners,” Rode summarizes. “You need their funding and reference, but remember that they need your tech and know-how. It is way more cost effective for them to work with you than to develop everything themselves. That is the basis for an equal partnership.”

Some of the experiences covered here are drawn from participating in Combient Foundry’s Venture Client Cycle. Check out our website to learn more about the approach and how to get involved in the ongoing cycle: www.combientfoundry.com.


How to Land and Expand Your Corporate Partnership — A Startup’s Playbook was originally published in Startup Grind on Medium, where people are continuing the conversation by highlighting and responding to this story.

Churn is Dead. Long Live Net Dollar Retention Rate


This post is by Amelia Ibarra from SaaStr

SaaStr attendee favorite Dave Kellogg recently shared with us his thoughts on why churn is dead, and what’s driving many companies to turn to net dollar retention.

In today’s B2B world, one thing so many companies struggle with time and time again is understanding how to grow their SaaS business — for real. Why is this?

Understanding a SaaS Business:

The usual suspects for confusion include…

  • Sales commissions amortized
  • Public companies don’t disclose ARR engine
  • Revenue is a lagging indicator
  • Must impute “billings”
  • ARR needs to be implied
  • Churn is not disclosed

However, the main culprit is it’s usually two different businesses:

  1. Recurring business (existing customers)
  2. Customer acquisition (bringing in new customers)

One main way Kellogg likes to think of SaaS companies is “a leaky bucket full of ARR”. Once you can see and understand the ARR engine of a company, then calculate core SaaS economic metrics. Be sure to include Metrics such as…

  • CAC ration
  • Lifetime value
  • LTV to CAC ratio
  • CAC payback period

Three Fatal Flaws of Churn:

Kellogg, along with many other business owners, has become increasingly skeptical of churn rates within the last few years. Churn is not quite dead YET, but definitely wounded.

#1 Too many ways to calculate it

There are four ways to calculate churn rates:

  1. Gross vs. Net
  2. ARR vs. ATR
  3. Will produce very different results
  4. The net problem

#2 Churn rates blow up LTV

Four different churn rates, mean four different LTV rates. A warning sign this may be happening is if the churn rate falls below .02

#3 Churn ARR itself can be non-obvious

Not only are their four different rates, but even defining the numerator is ambiguous.

A helpful way to look at this is “ARR is a fact, and churn rate is an opinion.”

The solution? Zoom out.

A perfect problem that cohort analysis can solve

How do you do it?

  1. Grab a cohort (typically all customers)
  2. What were they worth a year ago in ARR? Now?

The best part of using this method is it’s easy to calculate, easy to understand, and hard to game. However, beware of the bad apples. There are a few deceitful companies who will exclude customers who chose to no longer do business. This is essentially looking at what customers were worth a year ago and ignoring the now.

You want to make sure your net cohort expansion is put into a single, benchmarkable, regression-able number. Having a good net dollar retention is crucial, and the average good NDR rate falls around 115%.

Three Quotes to Ponder

As you move forward, you may want to reflect on these inspirational quotes provided by Kellogg.

  1. “If you cannot measure it, you can not improve it.” -Lord Kelvin
  2. “What gets measured gets managed”. -Peter Dracker
  3. Goodhart’s Law: When a measure becomes a target, it ceases to be a good measure.

Where should you go from here?

Moving forward, pay attention to multi-year contracts, and RPO. It’s always best to get ahead of the curve.

  1. Build-in net dollar retention to multi-year contracts:
    1. Offer your customers a three-year plan, for example, with a 10% buffer. They’ll be saving money, and you’ll be securing it. Double win!
  2. The next frontier is RPO:
    1. The remaining performance obligation gets second billing after revenue. Kellogg predicts this will be one of the next most important measurable aspects.

Key Takeaways:

Did you get all that? Just in case… we’ve summed it all up!

  • A SaaS company is the sum of two businesses (recurring, acquisition)
  • SaaS unit economics are great for understanding SaaS business
  • But churn rates can be problematic and often lack credibility
  • Flawed churn rates impact LTV and LTV/CAC ratios
  • The solution is to do cohort-based analysis which take you above the fray
  • Net dollar retention is a cohort-based customer expansion/shrinkage metric
  • A good NDR is around 115%
  • If NDR is so important, why not build into multi-year deals?
  • Going forward, startups will increasingly track RPO

The post Churn is Dead. Long Live Net Dollar Retention Rate appeared first on SaaStr.

No Money, No Problem — 6 Ways to Get Capital for Your Startup


This post is by Luba Yudasina from Startup Grind - Medium

Some common ways to approach scaling your business.

No Money, No Problem — 6 Ways to Get Capital for Your Startup


This post is by Luba Yudasina from Startup Grind - Medium

Some common ways to approach scaling your business.

VC Corner: Sarah Ko-yung Lee of Peak State Ventures


This post is by The Startup Grind Team from Startup Grind - Medium

Sarah Ko-yung Lee is a a former education startup founder with 17+ years of experience scaling innovative education programs/schools, coaching founding teams of EdTech Startups globally, and investing in future-of-learning/future-of-work companies (seed-Series C). She’s currently a partner at Peak State Ventures.

— What is Peak State Ventures’ mission?

We help great entrepreneurs build legendary companies. We are experienced entrepreneurs, operators, advisors, and investors with multiple successful exits looking for future category leaders. We will work with seed stage entrepreneurs to bring a product to market and support a company through Series A+ rounds and later stage of growth and expansion.

— What was your very first investment? What struck you about them?

One of my first investments at Peak State Ventures was in an esports company that connects pro players with aspiring gamers — a MasterClass for Fortnight if you will. For context, we don’t even have a television in our home, so the gaming space was a new, but truly fascinating space to dive into from an edtech/educators perspective.

The more I learned about the games themselves and the massive market, the more clear my conviction about esports as an important future-of-learning play. Of course the founders were awesome, ambitious, and ridiculously smart.

Once I could clearly map skills from gaming to skills obtained in traditional academic or after-school program settings, the potential to reach that many eyeballs for that many hours of a day was powerful. The fact that esports was formalizing within high schools and universities and an official sport in the Asian Olympic games further validated this sector as much more than pure entertainment, but rather, a gateway drug for tech pathways and as evidence of how to straddle parallel lives — digital and IRL.

This investment was a tangible example of how I define edtech — a technology that facilitates learning and human development, agnostic of content, geography, language, age, or socioeconomic status. To me, ProGuides confirmed that edtech certainly does not need to be contained within the four walls of a school or focus on reading, writing, and arithmetics.

— What’s one thing you’re excited about right now?

I am thrilled that educators, teachers, parents, digital learning, early childhood care workers, edtech are all getting some well-deserved, overdue time in the startup/VC spotlight. It’s about time. Now, how do we (investors and founders in learning) make the most of this moment?

— Who is one founder we should watch?

Atif Mahmood, founder and CEO of Teacherly, is truly one of the only companies I have come across that is 110% focused on building professional, high-quality, easy-to-use, beautiful tools and community specifically for educators. Tools that are of the same quality as the products/services we have come accustomed to in the white collar corporate world and provide teachers, coaches, senior care providers, early childhood guides, and now parents with the dignity these jobs warrant. Why should educators of any stripe have to settle for cobbled-together tools to do their jobs?

— What are the 3 top qualities of every great leader?

1. Discernment — to take in and juggle immense quantities of input of varying quality and make decisions.
2. Conviction — to turn ambition into vision and inspire people to pay attention..
3. Humility — to extract genuine joy and pride from the success of others as you succeed.

— What’s one question you ask yourself before investing in a company?

Does this technology fundamentally speed up learning, productivity, or human development in significant ways? And can the company scale this impact really fast?

— What’s one thing every founder should ask themselves before walking into a meeting with a potential investor?

How does this partner and fund fit into my short- and long-term strategy for growth?

— What do you think should be in a CEO’s top 3 company priorities?

  1. Do I have the right people around me and are they empowered to exceed expectations?
  2. Do I have a framework / set of values for making tough decisions and prioritizing resources?
  3. Am I striking a healthy balance between unflinching adherence to the vision and flexibility, openness to the evidence coming from the market/customers?

— Favorite business book, blog or podcast?

I’m inspired by a lot of contemporary content including Malcom Gladwell, Howard Schultz, and Masters of Scale. However, I am often drawn to thinkers from prior eras who provide lasting wisdom: Sun-Tsu, Aristotle, and especially Dr. Maria Montessori. Montessori wrote, “Only through freedom and environmental experience is it practically possible for human development to occur.”

— Who is one leader you admire?

Maria Klawe, President of Harvey Mudd College, has long been implementing specific changes to increase the number of women in STEM. She is an admirable example of using her position and platform to execute tactical strategies — positive action, not just nice words matter.

— What’s one interesting thing most people won’t know about you?

I was born in Taipei, but spent my early childhood living in Costa Rica before immigrating to the United States. I spoke Mandarin Chinese and Spanish when we arrived and thus spent the first two years of California public school education mostly in ESL classes.

— What’s one piece of advice you’d give every founder?

You are always raising two rounds at the same time.

Ready to make a pitch? Startups looking for an opportunity to pitch Peak State Ventures can apply here!


VC Corner: Sarah Ko-yung Lee of Peak State Ventures was originally published in Startup Grind on Medium, where people are continuing the conversation by highlighting and responding to this story.

5 Things that Kill Startups with Y Combinator


This post is by Amelia Ibarra from SaaStr

Y Combinator CEO Michael Seibel is featured in one of our most-watched SaaStr videos of all time — so we were delighted to have him back during our SaaStr at Home event to share the top 5 things that kill startups after their seed rounds, and how to avoid them.

In this tactical session, he highlights the trends he’s seen most commonly seen in startups that die and offers insights on the causes, symptoms, and solutions.

#1 Fake product-market fit

You’re company building before product building.

This is one of the most common symptoms of “impending death” for post-seed companies. So why do founders believe they have market fit, even if they don’t?

Causes:

  1. Raising money from impressive people
  2. Raising a series of pre-product market fit
  3. Magical thinking (ignoring the obvious!)
  4. Lack of strong technical talent

There is a common misconception that product-market fit means you’ve conceptually built what buyers want. However, this is not the case. Reality is, this concept reflects more on numbers.

Signs:

  • Lot’s of hiring
  • More business people than engineers
  • No metrics dashboards
  • Too many nice things
  • Flat graphs
  • Missing estimates but coming up with excuses
  • Changing your KPI’s

How do you fix it?

  1. Pick honest KPI and stick with it
  2. Track retention carefully
  3. Cap your burn
  4. Consider raising less money in your seed round
  5. Start with strong technology co-founders
  6. Have a three month essential rule when hiring
  7. Force revenue generating employees to pay for themselves
  8. Learn about your investors previous bad investments (this could determine your fate!)

#2 Investor = Boss

You’re allowing your investor to tell you what to do.

Your investor can only use one thing… WORDS. If you don’t follow a piece of advice or guidance they give you, we promise they won’t kidnap your family and ransack you for money.

Causes:

  1. Fear and self-doubt
  2. False assumption there are 100 repeatable paths to victory
  3. Lack of talking to customers

Signs:

  • Feeling pressured to spend more than you want
  • Hiring faster than you thought or created a plan for
  • Burning more money, while your KPI remains the same
  • Locking in one investor and cutting off all communication with others

How to prevent this?

  1. Talk to more customers
  2. Have real KPI and real metrics
  3. Track retention
  4. Keep a low burn
  5. Startup in a space you have organic insights in
  6. Remember, you’re the one who gives investors power over your business

#3 Co-founder conflict

Too much relationship debt is another way to look at this failure leading situation. The truth is, if you don’t have a good relationship with your investors and co-founders, you will crash and burn.

Causes:

  1. Weak previous relationship
  2. No clear roles or responsibilities
  3. Lack of trust
  4. Unrealistic expectations

Signs:

  • Lots of fighting
  • No conversations

How to prevent this:

  1. Have the tough conversation about how you’re feeling- let it all loose in a safe space.
  2. Establish explicit roles and responsibilities in a conversation.

#4 Ordinary vs. extraordinary

If you expect to be able to copy those around you and be astronomically successful, you are sadly mistaken. In other professions such as doctors, or lawyers if you have a good mentor you’ll most likely be able to copy their path to success. However, in the business world, what works for some may not be the path for others.

How do you reach to be extraordinary?

Causes:

  1. Understand people around you are the floor and not the ceiling
  2. Not believing you can be better than the people around you and having no confidence in yourself

Signs:

  • No numerical goals
  • Ignoring the obvious signs of a lack of progress
  • A good sign- you’re just happy to be alive
  • You’ve stopped learning
  • Blaming outside factors for your lack of success or “luck”

How to prevent this:

  1. Embrace the idea you can always improve over time if you try
  2. Think about habit formation
  3. Have a jedi counsel (aka a set of people you can receive advice from who are more extraordinary than you)
  4. Set measurable goals

#5 Slow product development

Your features, iterations, and bug fixes don’t ship.

If you’re constantly changing paths or projects, and feel you’re too busy to interact with customers; LISTEN UP!

Causes:

  1. No process for deciding what to build
  2. You have no deadlines
  3. You don’t write specs
  4. Engineers aren’t involved in park decisions
  5. No metrics
  6. No customer interaction
  7. Bad co-founder relationships
  8. Low quality product or technology founders

Signs:

  • Deadlines always missed or no deadlines
  • Release schedule is becoming longer
  • Discouraged or disengaged engineering team
  • Half done features piling up

How to prevent this:

  1. Have a product development cycle
  2. Always be collecting qualitative and quantitative feedback
  3. Write Specs
  4. Use product management software
  5. Small team= everyone’s included in product brainstorms
  6. Give all team members access to customers and access to customer data
  7. Understand motivation is a multiplier effect on talent
  8. Understand whoevers leading product is responsible for making sure that product is released

The post 5 Things that Kill Startups with Y Combinator appeared first on SaaStr.

What Do Your Customers Want to Buy?


This post is by Rob Go from Blog – NextView Ventures

After building NextView for almost 10 years now, I’ve been having more conversations recently with first time managers looking for some tactical advice. Raising one’s first fund is hard, and there are always a plethora of voices that will tell you that it’s impossible for many different reasons. I am by no means a sales or fundraising expert, but I’ve learned a bunch of lessons going through this process several times now. And one important lesson that I’ve internalized is that you don’t want to just pitch “what you have to sell.”. You want to think about “what your customers want to buy” and then adjust your pitch accordingly.

At first glance, you’d think that all LPs pretty much want to buy the same thing. Wouldn’t they all just want superior returns delivered by a trustworthy team? That’s kind of a given, but it’s insufficient. Every fund pitching an LP is pitching this as a baseline. And yet, LP’s get to “yes” in a few cases and get to “no” in most cases.

It turns out that different LPs are “buying” slightly different things depending on their own situation and incentives.

 

Some LPs are very focused on long-term returns and relationships.

They tend to prioritize stability that they can count on for decades. Their processes tend to be long and very relationship and team oriented. You are more likely to get quirky questions around team dynamics, decision-making, etc. These firms want stability for their institution, and they in turn “sell” their track record of stability to the best funds that they have access to. This tends to be how endowments and large foundations operate, for example.

 

Some LPs are buying unique access.

This tends to be the perspective of fund-of-funds who themselves are working on behalf of clients that are paying a fee for their services. They need to show their clients that their fees are justified in a market where it takes a long time to show outperformance. So in the near-term, they want to show that they are getting into funds that their clients would have trouble getting access to directly. In some cases, this is because these funds are oversubscribed. And in other cases, it’s because these funds are in new areas or pursuing new strategies that the underlying clients don’t have the time or expertise to explore and diligence. Examples of these would be seed funds 10 years ago, crypto funds 3 years ago, or international funds. If you are raising money for a strategy that is in a relatively new and very trendy market segment, Fund of Funds are more likely to be intrigued.

 

Some LPs are buying access to direct investment opportunities.

This is the case for some fund of funds as well as some family offices. These groups are investing in funds to get a good return, but perhaps more importantly, to be able to track their portfolios and be able to deploy more dollars in later rounds directly and with lower fees. There firms often have direct investment teams that are as big if not bigger than their fund evaluation teams and love the idea of VC’s sharing their downstream pro-rata rights in the form of SPVs or direct investment opportunities.

 

Some LPs (mostly family offices) are making investments opportunistically.

A new fund may just be the most interesting new investment opportunity that crosses their path in the moment, or it may happen to pique the interest of the decision-maker for personal reasons. This capital is often very quick to unlock but might not be very sticky over multiple funds. A lot of this may be timing or relationship driven with the principal or a family member.

In addition to thinking about the LP overall, it’s important to think about the decision-maker. What is the person’s seniority and tenure? Are they a principal or an agent? Agents that are new are trying to prove themselves and not get fired, so they are less likely to take risk on an unproven team. Deeply tenured folks or principals might be more willing to take fliers or make non-consensus decisions.

As our firm has matured, we’ve had an evolution in terms of our LP base. We’ve added a few new LPs with every subsequent fund, and I’ve found that the profile of LPs that we’ve brought in have been slightly different based on the dynamics above.

We were lucky to get institutional LPs in our first fund. But the individuals that championed us were folks who were deeply tenured within their organizations. They weren’t worrying about job security and could take some risk on a new team and strategy they believed in.

Our second cohort of new institutional LPs were largely folks who had studied our space closely and had a concerted focus on finding new seed specific managers. There are firms had done extensive analysis of our entire landscape and were making early commitments to the space even though the data was early.

Our third cohort of new institutions have been those focused on stability and long-term returns. They’ve been able to watch our story unfold over time and are less focused on the seed strategy specifically. They are generally committed to early-stage venture for the long term and are focused on whether they believe that we’d be great stable partners and that our performance will persist over multiple market shifts and economic cycles.

We are very grateful for all the LPs that have chosen to trust us with their capital over the years. Even though what likely piqued their interest initially may have been different, their long-term goals of great sustained performance are the same. So ultimately, delivering on “what we had to sell” was the most important thing. But in the search for true believers early on, it was really important to understand how that fits with what prospective LPs were looking to buy. That seems obvious, but that’s a lesson that has really stuck with me, and is probably pretty relevant to any fundraising or enterprise sales effort.

The post What Do Your Customers Want to Buy? appeared first on NextView Ventures.

My thoughts on Rolling Funds


This post is curated by Keith Teare. It was written by samir kaji. The original is [linked here]

Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape

This post was original posted on my substack; subscribe to my newsletter to get updates on new posts and releases of the Venture Unlocked Podcast.

Recently, AngelList’s Rolling Fund product has been a frequent topic of discussion within early-stage investing circles. Over the last few weeks, I’ve had dozens of conversations with LP’s and GP’s to get their thoughts on the product.

There have also been some great Rolling Fund articles; Minal Hassan wrote a great early summary here, and Winter Mead penned a very thoughtful and balanced piece from an LP’s perspective in weighing the pros and cons from his perspective.

Before I provide a few of my thoughts on Rolling Funds, here are a couple of refresher points.

– The Rolling Fund product is an evergreen master series LP structure, where each quarter represents a separate “cell”. Less marketed but currently also available, is a traditional venture fund set up through the AngelList platform. For this post, I’m primarily focusing on the former.

– Rolling Fund managers raise funds using the 506(c) provision of the JOBS Act, enabling general solicitation for private securities offerings.

General thoughts:

  • Innovation within the venture fund world is rare. Despite being an industry that focuses on backing innovation, very little real invention has occurred in the venture funding ecosystem. However, that seems to be changing as we have seen meaningful innovations over the last 15 years, specifically Y Combinator, First Round Capital, and A16Z. The emerging manager sector has also given rise to models like venture studios and the use of software in investing (Goodwater, SignalFire, Tribe). While it’s too early to predict the scale of significance for Rolling Funds, I’m hard pressed to believe that it won’t be an essential and lasting innovation.
  • It’s an excellent alternative for newer managers. However, it won’t displace traditional venture formations: Despite what you may read (particularly on tech/VC twitter), Rolling Funds will not “roll” over conventional venture capital. This chatter is anti-VC rhetoric and unfortunately distracts from what the product’s incremental benefit to the industry. The not so secret truth in venture is the high degree of friction of starting and raising a proof of concept fund, with fundraising acting as the main material friction point. Before Rolling Funds, aspiring venture investors had to go down the singular path of a traditional firm/fund set up, thus signing up to a very long term endeavor (including all the many responsibilities that come pre/during/post raise). Running a venture firm isn’t for everyone, and I’ve met many early managers over the years that decided to pull the plug during or after the fund 0/1 raise because they realized they lacked the passion for running a multiple decade venture firm or didn’t feel they could personally operate financially with the series of small funds they would likely have to settle for before achieving scale in fund size. Rolling Funds allow these individuals to build track records and act as “Super Angels” (remember this term?) before launching firms.
  • Rolling funds will accelerate diversity to founders. Despite the renewed interest in backing diverse managers, the number of actual checks written to underrepresented managers by conventional check writers is still lacking. Rolling funds can help aspiring investors in the under-represented category quickly get off the ground and become check writers, thus quickly helping to drive needed diversity to cap tables. The successful ones on the platform can bring the type of momentum necessary for more institutional raises later on.
  • AngelList was smart to recognize that emerging venture brands are more often than not a direct reflection of the GP’s personal brand. Several Rolling Funds have launched successfully from managers that have built strong online and offline personal brands. Due to the power of branding online in venture, the product perfectly aligns with the 506c general solicitation rules that allow managers to leverage these same online channels to quickly and continually raise capital. Currently, the Rolling funds I’ve seen and heard about have been mainly raised by those from the tech community, but I would not be surprised the product to be leveraged by strong personal brands in other industries (sports, film, media, etc.).
  • Expect higher volatility in return performance. As with traditional venture capital, there will be a large skew in return distribution amongst Rolling Fund managers, with top managers dramatically outpacing the lower performers. I think the lower entry barriers of raising a rolling fund (and the level of experience of many) will result in an even more sizable gap between the top and bottom performing managers. Further complicating things is the unique quarterly model that may result in an LP investing in one quarter having a top-decile outcome and an LP that starts investing in the next quarter getting a bottom-decile outcome. Power law is an immutable truth in venture, and the chance of investing early in a company that achieves a billion-dollar exit is less than 0.5%). This makes the timing of investments critical as the difference between a 3/31 close and a 4/1 close on a deal can materially impact a cohort of LPs’ performance.

Can Rolling Funds scale? Right now, the clear product-market fit for Rolling Funds is proof of concept funds or those that are part-time investors (both of which place the most value on speed and convenience). Can Rolling Funds become a product used by investors looking to raise larger, institutionally run firms? I think a few things will need to be fleshed out, notably:

  • The role of LP churn. LP churn likely will be much higher than traditional funds given that Rolling Funds will have predominately high net worth LP bases, many of whom the manager will have no relationship with. Note that traditional venture funds don’t experience much in-fund churn or defaults due to strong incentives that protect against these issues. Churn may also be higher given that the Rolling Fund structure allows LPs to stop backing a manager in a subsequent quarter if they opt to do so.
  • The walled garden of preset service providers. Using the platform, AngelList takes care of all of operations, including tax, legal set up, fund admin, etc. This is great “VC in a box” feature, but it’s important to note that many larger LPs prefer that managers use brand name audit/tax/fund admin firms. Additionally, some of these independent third party service point providers offer strategic advice and help that can be very useful to emerging fund managers.
  • How will follow-on financings be executed on if LP appetite dries up for the manager in future quarters?
  • Whether institutional investors will gain comfort in backing managers on the platform. I think Managers on the system will likely go one of three directions for scale (assuming they continue investing) 1) Continue to perpetually scale AUM through the Rolling Fund evergreen structure 2) Switch to a traditional fund structure on AL 3) Move to a conventional fund structure with hand-selected service providers (although I do think AL will place pricing pressure on these providers). It’s difficult to estimate right now what the %’s will be, or what manager archetype will stay on the platform over time, but it will be interesting to follow.

Having covered emerging venture for the past ten years (and venture as a whole for 20+), I think this is an enormous innovation for the industry. And while I believe there are some “bugs” that give credence to some very well placed concerns relating to potential GP/LP areas of economic misalignment, many of these (and others) are also present in traditional venture capital. I’m personally excited to see how this product evolves over time.

My thoughts on Rolling Funds


This post is by samir kaji from Stories by samir kaji on Medium

Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape

This post was original posted on my substack; subscribe to my newsletter to get updates on new posts and releases of the Venture Unlocked Podcast.

Recently, AngelList’s Rolling Fund product has been a frequent topic of discussion within early-stage investing circles. Over the last few weeks, I’ve had dozens of conversations with LP’s and GP’s to get their thoughts on the product.

There have also been some great Rolling Fund articles; Minal Hassan wrote a great early summary here, and Winter Mead penned a very thoughtful and balanced piece from an LP’s perspective in weighing the pros and cons from his perspective.

Before I provide a few of my thoughts on Rolling Funds, here are a couple of refresher points.

– The Rolling Fund product is an evergreen master series LP structure, where each quarter represents a separate “cell”. Less marketed but currently also available, is a traditional venture fund set up through the AngelList platform. For this post, I’m primarily focusing on the former.

– Rolling Fund managers raise funds using the 506(c) provision of the JOBS Act, enabling general solicitation for private securities offerings.

General thoughts:

  • Innovation within the venture fund world is rare. Despite being an industry that focuses on backing innovation, very little real invention has occurred in the venture funding ecosystem. However, that seems to be changing as we have seen meaningful innovations over the last 15 years, specifically Y Combinator, First Round Capital, and A16Z. The emerging manager sector has also given rise to models like venture studios and the use of software in investing (Goodwater, SignalFire, Tribe). While it’s too early to predict the scale of significance for Rolling Funds, I’m hard pressed to believe that it won’t be an essential and lasting innovation.
  • It’s an excellent alternative for newer managers. However, it won’t displace traditional venture formations: Despite what you may read (particularly on tech/VC twitter), Rolling Funds will not “roll” over conventional venture capital. This chatter is anti-VC rhetoric and unfortunately distracts from what the product’s incremental benefit to the industry. The not so secret truth in venture is the high degree of friction of starting and raising a proof of concept fund, with fundraising acting as the main material friction point. Before Rolling Funds, aspiring venture investors had to go down the singular path of a traditional firm/fund set up, thus signing up to a very long term endeavor (including all the many responsibilities that come pre/during/post raise). Running a venture firm isn’t for everyone, and I’ve met many early managers over the years that decided to pull the plug during or after the fund 0/1 raise because they realized they lacked the passion for running a multiple decade venture firm or didn’t feel they could personally operate financially with the series of small funds they would likely have to settle for before achieving scale in fund size. Rolling Funds allow these individuals to build track records and act as “Super Angels” (remember this term?) before launching firms.
  • Rolling funds will accelerate diversity to founders. Despite the renewed interest in backing diverse managers, the number of actual checks written to underrepresented managers by conventional check writers is still lacking. Rolling funds can help aspiring investors in the under-represented category quickly get off the ground and become check writers, thus quickly helping to drive needed diversity to cap tables. The successful ones on the platform can bring the type of momentum necessary for more institutional raises later on.
  • AngelList was smart to recognize that emerging venture brands are more often than not a direct reflection of the GP’s personal brand. Several Rolling Funds have launched successfully from managers that have built strong online and offline personal brands. Due to the power of branding online in venture, the product perfectly aligns with the 506c general solicitation rules that allow managers to leverage these same online channels to quickly and continually raise capital. Currently, the Rolling funds I’ve seen and heard about have been mainly raised by those from the tech community, but I would not be surprised the product to be leveraged by strong personal brands in other industries (sports, film, media, etc.).
  • Expect higher volatility in return performance. As with traditional venture capital, there will be a large skew in return distribution amongst Rolling Fund managers, with top managers dramatically outpacing the lower performers. I think the lower entry barriers of raising a rolling fund (and the level of experience of many) will result in an even more sizable gap between the top and bottom performing managers. Further complicating things is the unique quarterly model that may result in an LP investing in one quarter having a top-decile outcome and an LP that starts investing in the next quarter getting a bottom-decile outcome. Power law is an immutable truth in venture, and the chance of investing early in a company that achieves a billion-dollar exit is less than 0.5%). This makes the timing of investments critical as the difference between a 3/31 close and a 4/1 close on a deal can materially impact a cohort of LPs’ performance.

Can Rolling Funds scale? Right now, the clear product-market fit for Rolling Funds is proof of concept funds or those that are part-time investors (both of which place the most value on speed and convenience). Can Rolling Funds become a product used by investors looking to raise larger, institutionally run firms? I think a few things will need to be fleshed out, notably:

  • The role of LP churn. LP churn likely will be much higher than traditional funds given that Rolling Funds will have predominately high net worth LP bases, many of whom the manager will have no relationship with. Note that traditional venture funds don’t experience much in-fund churn or defaults due to strong incentives that protect against these issues. Churn may also be higher given that the Rolling Fund structure allows LPs to stop backing a manager in a subsequent quarter if they opt to do so.
  • The walled garden of preset service providers. Using the platform, AngelList takes care of all of operations, including tax, legal set up, fund admin, etc. This is great “VC in a box” feature, but it’s important to note that many larger LPs prefer that managers use brand name audit/tax/fund admin firms. Additionally, some of these independent third party service point providers offer strategic advice and help that can be very useful to emerging fund managers.
  • How will follow-on financings be executed on if LP appetite dries up for the manager in future quarters?
  • Whether institutional investors will gain comfort in backing managers on the platform. I think Managers on the system will likely go one of three directions for scale (assuming they continue investing) 1) Continue to perpetually scale AUM through the Rolling Fund evergreen structure 2) Switch to a traditional fund structure on AL 3) Move to a conventional fund structure with hand-selected service providers (although I do think AL will place pricing pressure on these providers). It’s difficult to estimate right now what the %’s will be, or what manager archetype will stay on the platform over time, but it will be interesting to follow.

Having covered emerging venture for the past ten years (and venture as a whole for 20+), I think this is an enormous innovation for the industry. And while I believe there are some “bugs” that give credence to some very well placed concerns relating to potential GP/LP areas of economic misalignment, many of these (and others) are also present in traditional venture capital. I’m personally excited to see how this product evolves over time.

My thoughts on Rolling Funds


This post is by samir kaji from Stories by samir kaji on Medium

Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape

This post was original posted on my substack; subscribe to my newsletter to get updates on new posts and releases of the Venture Unlocked Podcast.

Recently, AngelList’s Rolling Fund product has been a frequent topic of discussion within early-stage investing circles. Over the last few weeks, I’ve had dozens of conversations with LP’s and GP’s to get their thoughts on the product.

There have also been some great Rolling Fund articles; Minal Hassan wrote a great early summary here, and Winter Mead penned a very thoughtful and balanced piece from an LP’s perspective in weighing the pros and cons from his perspective.

Before I provide a few of my thoughts on Rolling Funds, here are a couple of refresher points.

– The Rolling Fund product is an evergreen master series LP structure, where each quarter represents a separate “cell”. Less marketed but currently also available, is a traditional venture fund set up through the AngelList platform. For this post, I’m primarily focusing on the former.

– Rolling Fund managers raise funds using the 506(c) provision of the JOBS Act, enabling general solicitation for private securities offerings.

General thoughts:

  • Innovation within the venture fund world is rare. Despite being an industry that focuses on backing innovation, very little real invention has occurred in the venture funding ecosystem. However, that seems to be changing as we have seen meaningful innovations over the last 15 years, specifically Y Combinator, First Round Capital, and A16Z. The emerging manager sector has also given rise to models like venture studios and the use of software in investing (Goodwater, SignalFire, Tribe). While it’s too early to predict the scale of significance for Rolling Funds, I’m hard pressed to believe that it won’t be an essential and lasting innovation.
  • It’s an excellent alternative for newer managers. However, it won’t displace traditional venture formations: Despite what you may read (particularly on tech/VC twitter), Rolling Funds will not “roll” over conventional venture capital. This chatter is anti-VC rhetoric and unfortunately distracts from what the product’s incremental benefit to the industry. The not so secret truth in venture is the high degree of friction of starting and raising a proof of concept fund, with fundraising acting as the main material friction point. Before Rolling Funds, aspiring venture investors had to go down the singular path of a traditional firm/fund set up, thus signing up to a very long term endeavor (including all the many responsibilities that come pre/during/post raise). Running a venture firm isn’t for everyone, and I’ve met many early managers over the years that decided to pull the plug during or after the fund 0/1 raise because they realized they lacked the passion for running a multiple decade venture firm or didn’t feel they could personally operate financially with the series of small funds they would likely have to settle for before achieving scale in fund size. Rolling Funds allow these individuals to build track records and act as “Super Angels” (remember this term?) before launching firms.
  • Rolling funds will accelerate diversity to founders. Despite the renewed interest in backing diverse managers, the number of actual checks written to underrepresented managers by conventional check writers is still lacking. Rolling funds can help aspiring investors in the under-represented category quickly get off the ground and become check writers, thus quickly helping to drive needed diversity to cap tables. The successful ones on the platform can bring the type of momentum necessary for more institutional raises later on.
  • AngelList was smart to recognize that emerging venture brands are more often than not a direct reflection of the GP’s personal brand. Several Rolling Funds have launched successfully from managers that have built strong online and offline personal brands. Due to the power of branding online in venture, the product perfectly aligns with the 506c general solicitation rules that allow managers to leverage these same online channels to quickly and continually raise capital. Currently, the Rolling funds I’ve seen and heard about have been mainly raised by those from the tech community, but I would not be surprised the product to be leveraged by strong personal brands in other industries (sports, film, media, etc.).
  • Expect higher volatility in return performance. As with traditional venture capital, there will be a large skew in return distribution amongst Rolling Fund managers, with top managers dramatically outpacing the lower performers. I think the lower entry barriers of raising a rolling fund (and the level of experience of many) will result in an even more sizable gap between the top and bottom performing managers. Further complicating things is the unique quarterly model that may result in an LP investing in one quarter having a top-decile outcome and an LP that starts investing in the next quarter getting a bottom-decile outcome. Power law is an immutable truth in venture, and the chance of investing early in a company that achieves a billion-dollar exit is less than 0.5%). This makes the timing of investments critical as the difference between a 3/31 close and a 4/1 close on a deal can materially impact a cohort of LPs’ performance.

Can Rolling Funds scale? Right now, the clear product-market fit for Rolling Funds is proof of concept funds or those that are part-time investors (both of which place the most value on speed and convenience). Can Rolling Funds become a product used by investors looking to raise larger, institutionally run firms? I think a few things will need to be fleshed out, notably:

  • The role of LP churn. LP churn likely will be much higher than traditional funds given that Rolling Funds will have predominately high net worth LP bases, many of whom the manager will have no relationship with. Note that traditional venture funds don’t experience much in-fund churn or defaults due to strong incentives that protect against these issues. Churn may also be higher given that the Rolling Fund structure allows LPs to stop backing a manager in a subsequent quarter if they opt to do so.
  • The walled garden of preset service providers. Using the platform, AngelList takes care of all of operations, including tax, legal set up, fund admin, etc. This is great “VC in a box” feature, but it’s important to note that many larger LPs prefer that managers use brand name audit/tax/fund admin firms. Additionally, some of these independent third party service point providers offer strategic advice and help that can be very useful to emerging fund managers.
  • How will follow-on financings be executed on if LP appetite dries up for the manager in future quarters?
  • Whether institutional investors will gain comfort in backing managers on the platform. I think Managers on the system will likely go one of three directions for scale (assuming they continue investing) 1) Continue to perpetually scale AUM through the Rolling Fund evergreen structure 2) Switch to a traditional fund structure on AL 3) Move to a conventional fund structure with hand-selected service providers (although I do think AL will place pricing pressure on these providers). It’s difficult to estimate right now what the %’s will be, or what manager archetype will stay on the platform over time, but it will be interesting to follow.

Having covered emerging venture for the past ten years (and venture as a whole for 20+), I think this is an enormous innovation for the industry. And while I believe there are some “bugs” that give credence to some very well placed concerns relating to potential GP/LP areas of economic misalignment, many of these (and others) are also present in traditional venture capital. I’m personally excited to see how this product evolves over time.