Imtiyaz Basharat 伊迪

How do investors price pre-seed rounds?  This is perhaps one of the most misunderstood aspects of fundraising.  Oftentimes, founders want some framework to better understand what market value is when raising capital into their business.  Public equities and later stage privates have a well defined matrix of revenue/margin profiles that dictate valuation, surely there must be some framework for arriving at a pre-seed valuation. So how do investors price startups that are pre-revenue, or have maybe one of two early customers? In reality, pricing is more a byproduct of a VC fund’s portfolio construction model than any metric of the underlying business.  VCs model out portfolios to include a certain number of companies with an ownership target in each startup.  There are variations to portfolio construction, and the chosen strategy will have a direct impact on the types of rounds a fund will participate in. For example, an early stage fund might raise a $60M fund to lead investments in 30 companies and target 12.5% ownership.   After management fees, there is ~$48M in investable capital.  Assuming a fund holds back ~30% for reserves(this number varies across funds) that leaves ~$30M to invest in initial checks.   In this case a fund must average $1M checks at $8M valuations to reach their intended ownership target of 12.5%.   When you are in diligence with a fund, they are first and foremost trying to get to a yes on the investment opportunity.  When arriving at a valuation though, the math outlined above is the determining factor, more so than any multiple of revenue on the business, or the stated desires of where a founder wants to raise capital.  At the end of the day, a VC is trying to arrive at a valuation that works within their portfolio strategy. This means they are very unlikely to price a deal at $15M cap given the aforementioned portfolio construction, as they would either not own enough($1M = 6.67% ownership) or have to cut too large a check( $1.875M = 12.5%). The thing that is most likely to move an investor off their target valuation is another investor in the picture that is driving the price higher, but even then there are upward bound limits of how high an investor is willing to price a deal. I always advise our port cos to ask an investor early in conversations what their ideal check size/valuation is to make sure there is alignment with the founder's objectives.    

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Some seed-stage VC firms give up their pro rata rights due to lacking capital to meet the high capital requirements of a late-stage round and competition from larger VC firms. Alpha Partners, SignalRank, and SaaS Ventures are now stepping in to help seed-stage VC investors exercise their pro rata rights to maintain their ownership percentage. VC firms like Alpha Partners, SignalRank, and SaaS Ventures specialize in providing capital for pro rata investments for Series B and beyond funding rounds. #VentureCapital #Startups

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Balderton's €1.3bn raise for European startups sparks debate: Does a bigger VC fund lead to better outcomes? First, consider: 💲 Larger rounds demand bigger funds, but returns get harder at scale 💲 $100M fund needs $1bn exit at 10% ownership for a single 1x return 💲 Most early-stage VCs target 3x returns, investing in 30+ companies 💲Management fees (typically 2%) grow with fund size Plus, the current landscape: Giants like Balderton, Index, and Accel are raising massive funds, while smaller firms stick to sub-$200M and focus on early-stage startups. Many VCs have maintained their previous fund sizes, while others are downsizing or struggling to raise new funds (or even returning un-invested capital to investors, as CRV recently announced they will do). Thus, weigh up the trade-offs: Larger funds (≥$500M): 📈 More firepower, full-cycle support 📉 Risk: Pressure to deploy capital, potentially lower returns Smaller funds (≤$200M): 🔍Agility, focused support, higher potential multiples ❌ Limited late-stage participation The future of European VC may not be one-size-fits-all. As the ecosystem matures, perhaps there's room for both Davids and Goliaths. What's your take? Would you bet on a nimble $150M fund or the muscle of a €1B+ vehicle? Source: Sifted #EuropeanVC #FundStrategy #StartupInvesting PS 🔔 Follow me for strategies and resources for startups and VCs! There's a better, streamlined way to raise capital: 💸https://foundersuite.com/ for startups 💸https://fundingstack.com/ for VCs and investors

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📣 Focal powered by HSBC Innovation Banking, is back! 🚨 Applications for Focal’s W24 demo day are open to startups raising in the next 6 months. Go apply here 👉 www.gofocal.vc Even those who don’t make it to demo day can get introductions to over 250 leading VC fund partners, including Techstart Ventures LLP. #focal #startup #fundraising #vc #demoday

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What Works for First-Time VCs in the US Doesn't Always Apply in Emerging Markets VCLab is an excellent program with significant potential for first-time venture capital managers. However, its advice on fundraising structures and pitch decks doesn't always align with the realities in emerging markets, where there is less understanding of venture capital principles and potential. Let's delve into these elements. First of all, to start a venture fund, you need to raise money by obtaining soft and hard commitments from HNWI, IFIs, family offices, and others. Before fundraising, you need a clear fund strategy and thesis. Demonstrating your ability to effectively deploy the fund, achieve tangible results, and outline potential outcomes is crucial. However, the primary challenge is whether you can successfully raise funds. During the program, I began fundraising for a small $5 million fund to make meaningful investments and have operational resources. This would typically require fifty investors (Limited Partners) each contributing $100K. While investor contributions can vary, VCLab advises against seeking smaller amounts less than ($100K) and emphasizes having a substantial number of LPs. In the VCLab program, you're expected to organize several LP meetings per day, streamline your process, and identify your potential LP archetype. After 40 meetings, I secured only one potential hard commitment, highlighting a very low conversion rate, even with my background. Fortunately, alongside establishing a VC fund, I've been researching behavioral economics and cognitive and social psychology. This knowledge led me to realize that it's not the optimal time for a VC fund in my region; investors aren't ready to use VC funds as diversified investment tools. They prefer traditional investments like real estate or the HORECA sector, often overlooking the risks associated with these areas. New ideas typically progress through stages: Unthinkable, Radical, Acceptable, Sensible, Popular, and Policy. In countries like Georgia, investing in startups via a VC fund is still in the Radical stage. Recognizing this, I considered ways to make VC investments more acceptable to potential investors. Lowering the minimum investment check makes it more palatable. Investors may be more willing to invest in you as a manager and support the startup ecosystem, especially when the potential loss is minimized. If structured correctly, a VC fund can offer significant benefits, making the investment process more acceptable. My recommendation for first-time VC managers in emerging markets is to find the appropriate fund and min. check size that shifts the investment from Radical to Acceptable for LPs. Simultaneously, design a structure that can deliver potential returns by investing in a sufficient number of startups, leveraging the Power Law (80/20 Principle) to achieve high returns. The results of the first fund will be crucial for future fundraising. Future Laboratory Ventures

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The next 3-5 years in venture capital will be a Hunger Games-style showdown between the mega funds and emerging managers. The rich get richer, and the rest get crushed. The biggest funds will hoard capital, scoop up the best deals, and keep the gates locked. VC is evolving into an oligopoly where a few behemoths control the game. The rest? They fight for scraps or die quietly. For LPs, it means one thing: if you’re not in with the biggest players, you’re out. Top-tier VCs get the money, deals, and returns, while newer, smaller players are left behind. This means fewer exits, more stagnation, and less excitement. The romantic vision of venture capital—backing scrappy founders in a garage—is being replaced by institutional checks and thinking. Risk aversion is at an all-time high, and innovation is dictated by the big dogs, not driven from the bottom up. But the role of emerging managers isn’t dead—it’s just getting harder. While the big guys stick to safe bets, as emerging managers we dig into niches, find overlooked founders, and chase moonshots. We must be creative, flexible, and aggressive because we play without a safety net. That hunger often leads to spotting opportunities the mega funds miss, keeping the spirit of venture alive. Downturns? They’re a crucible for us as emerging managers. With valuations down and competition clearing out, we can shine. Historically, some of today’s most iconic venture firms were forged in the fires of a downturn because they had the guts to invest when others didn’t. For LPs, it’s about guts too. Sure, follow the herd into the largest players, but if you want asymmetric returns, emerging managers have the upside. You just have to take the risk. The future of venture is a two-speed game. On one side, mega funds—stable, rich, and playing it safe. On the other, emerging managers—scrappy, driven, taking risks that move the needle. The smartest LPs will do both: park capital with the big dogs for steady returns and also back emerging managers with fresh perspectives. Because if VC turns into a sanitized, predictable machine run by a few firms, we all lose. Innovation dies, entrepreneurship becomes a monopoly, and venture’s whole purpose evaporates. The dream of democratizing innovation is under threat, but it doesn’t have to die. Venture’s future depends on supporting both mega funds and bold emerging managers still willing to take risks. We all need to keep pushing boundaries and reminding ourselves why venture capital was exciting in the first place. It always takes a village. Together, we rise!

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🚀 Antler UK’s Latest Investments: 7 Startups Shaping the Future Curious to get an inside view into Antler's latest investments in the UK? We've made seven investments following our Spring residency in London. Check out their one-liners and latest traction below. Comment "Invest" if you want to book time with the founders, and I'll message you a link privately. 1. AI-powered post-trade processing: Running pilots with UK financial service providers and already raised follow-on funding from VCs, angels, and industry experts. 💹 2. Transforming hotel communications with conversational AI: Pilots with prominent hotel groups, will cover over 900 rooms by October, a waitlist of over 1,500 rooms. 🏨🤖 3. The automated data stack for early stage companies: Already revenue-generating, and saving their customers thousands of pounds weekly on analysis and data maintenance work. 📊💼 4. AI property manager: Pipeline of 13,000 units, 1,700 actively using the platform. Strategic partnerships with leading UK property developers. NPS of 91 from early users. 🏠🧠 5. Automating the back-office admin of trades businesses: Gained first paying customers, and signed strategic partnerships for access to 29,000 UK trades professionals. 🛠️📋 6. Business development automation for recruiters: Within weeks of being onboarded to their MVP, early customers generated over £60,000 in additional revenue. 💼💰 7. AI-powered insect rearing system for pest management: A sustainable alternative to chemical pesticides, running 2 pilot trials with farms that operate in the UK, Europe, and Africa. 🌍🐜

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Climate financing is going to the wrong places! Really insightful snapshot into the relationship between emissions and Climate tech VC by Daria Saharova (partner at World Fund) She states that: “85% of emissions receive only 52% of funding” And interestingly: - personal behavior change will reduce only 4.3% of emissions - technologies already in the market will account for 49.8% - technologies under development and in need of investment will need to fill in the rest. “46% of emissions will be reduced by technology that’s yet to be developed, and this is the tech we desperately need. Thanks for this Daria Saharova, really insightful.

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I posted last week about the shift in sentiment from LP's regarding secondaries. It used to be that GP's were told to hold their winners forever but more recently a lot of LP's are recommending pre-seed & seed stage VC's get good at navigating secondary transactions as early as Series B rounds. Obviously a lot of factors go into these decisions such as where you are in the life of the fund, how the rest of the portfolio is performing and the performance of the underlying company in question. But in this new reality, entry price and ownership relative to fund size really matter in order to still generate top decile funds by selling into later stage rounds; and that tends to be at odds with many seed fund strategies I see out there today. According to Carta, the average seed round valuation is $15M and I see some seed funds doing seed deals at $20M - $30M valuations. Many seed funds between $40M - $75M in size (avg of $50M) write seed checks at $15M valuations and probably invest $1.5M into each company to get 10%. The portfolio construction in this scenario is probably 20-25 companies given the check size. Assuming 50% dilution (probably low), you need a company to get to a $1B valuation to return your fund and you have less shots on goal to do that at a time where I think the probability of hitting a winner at seed for any single seed fund is going to go down per my post last week. It also means the opportunities to sell secondaries in later rounds in order to drive meaningful DPI is harder because it likely won't get to that sort of valuation until Series C or later; and you probably don't want to consider selling until the position is worth even more than your entire fund. Alternatively, if you write a $1M check into a deal at a $8M valuation out of a $50M fund, you are getting 12.5% ownership and probably investing in more like 30-35 companies given the initial check size. Higher ownership and more shots on goal. Assuming 50% dilution again, you get there with a $800M valuation. At even lower valuations, $1B outcomes would return multiples on the fund and it really opens up the options when it comes to selling in secondaries in order to manufacture liquidity. Given the current dynamics in the market, I wonder if more funds will start to focus on sub $10M valuation rounds.

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"Platform" in VCs often feels undefined, and different at every firm. But one thing is clear: firms with dedicated platform teams are seeing higher investment returns. What is 'Platform' in VC? Think of it as a support engine for portfolio companies. Platform teams accelerate growth by providing: 1) Strategy & Growth 2) Talent Partner 3) Marketing & Brand Partner 4) Business Development & Partnerships Lead 5) Community Manager 6) Operations & Scaling Partner 7) Fundraising & Capital Advisor Platform in Venture Studios vs. VC Funds: The big difference? Timeframe. Venture Studio Platform: Involved from concept to exit, guiding startups from the very first spark of an idea. VC Platform: Steps in after the startup is funded, focusing on scaling and growth but not the initial concept phase. Both play critical roles—but understanding these distinctions helps founders and investors make the most of their platform relationships.

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Our regional VC market has hit a pivotal moment. 🌊 The lack of returns/DPI reported threatens its growth. LPs from earlier funds are hesitant to reinvest, and new LPs are cautious.  Capital is crucial for startups, and reducing it now could cripple our maturing ecosystem. There are some teething issues with our region: -The VC model’s reliance on large outcomes doesn’t suit our fragmented market.  -Unlike singular markets like the US, building large companies quickly is challenging here.  -Plus, we lack a strong regional exchange to support major tech exits. Thus, our investment strategy must align with our region’s specific needs. At Tin Men Capital, Instead of following the power law, we adopt a PE-style approach within VC: 1. Enhance Success Rates: Invest in capital-efficient businesses with high unit economics and a direct path to profitability. Invert the power law model. 2. Mitigate Reliance on Massive Exits: • Exits between US$50 and US$250 million can deliver 4 to 15x returns. • Exits at are already happening (e.g. Shopmatic, Viki, Stamped etc.). • Higher exit valuations restrict options. Tin Men executes this strategy by: • Invest in highly capital-efficient B2B businesses. • Broaden our exit strategies to include strategic and financial buyers. In time, our infrastructure will support the growth of large companies.  Until then, let’s play to our strengths. Building regional businesses in SEA is tough due to fragmentation,  But this also creates a protective moat.  Those who understand the region will thrive. Strategics are eager to enter our market,  And speed to market is driving them to acquire rather than build. The stars are aligning, but we need to make a choice to write our own play book and navigate these choppy waters. Who’s with me?

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This is what true venture funding is: about picking the winners qualitatively, and not out of FOMO; growing the venture with competence rather than with "coincidence"; most importantly- knowing when to exit. Thanks Sajith Pai for sharing this podcast Avi Eyal Entrée Capital #venturecapital #investing #vc

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What’ the right KPI to measure the performance of PE and VC Funds? It depends on the time frame, but probably on a 10 years period the DPI (Distributed to Paid-In Capital) is the best way to measure performances. Using PitchBook data, I analysed the performance of different Fund categories using the 2014 Vintage. - Best in class (not surprising) are North American PE Funds with a median DPI of 1.37x - Worst in class: -  The Global Funds of Funds category performs particularly badly, with a median DPI of 0.92x (after 10 years in business they still didn’t return at least the capital invested); -Non-US PE Funds, with a median DPI of 0.86x; - Both Debt Funds and Secondary Funds don’t seem a great investors cluster either, with a median DPI of just 1.1x and 1.05x; - Global PE and Global VC Funds have a similar median DPI, around 1.18x. - A 1$ invested in the ETF S&P 500 in 2014 would have return $2.7 (2.7x)..

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🚨 Fundraising Alert 🚨 Top tier companies raising Pre-Seed to Series A in the next 6 months should apply to Focal where they can pitch almost all their prospective investors at once. Demo day is on May 16th. ✅ Applying takes 7 mins ✅ Previous applicants raised from funds like Sequoia, Balderton, Episode 1, Lightspeed and GV. ✅ Even if you find fundraising easy, this is a way to build added momentum. You can apply here: https://lnkd.in/eTdTtSw7

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❤️ INCREDIBLE. Fundie Ventures is the 13th Syndicate that I've had the opportunity to impact through Angel School. Personal learnings from Stuart Minnaar's success: 1/ Our 'north star' for admission is "Can this person be a successful syndicate lead?" --> 100% Yes from our 1st interaction. 2/ South Africa punches way above it's weight. Great energy and community. --> Shoutout to Lucien Peters Aidan Hurly Everyone Ventures Ryan Shub Stefni Bridges The Delta Cameron Bing Mathew Marsden Startup Club ZA 3/ Record GTM- 1st deal launched within the 8 week program. 4/ Advocacy from peers, connecting through Andreas Munk Holm David Cruz e Silva 🎙 EUVC I launched AngelSchool.vc because #angelinvestors and #syndicates are massively underserved. ...yet they move ~$10BN / yr of capital for venture ecosystems. If 1:50 angel investors aspires to start a syndicate in their career, that's a market worth building for.

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📣 Focal powered by HSBC Innovation Banking, is back!   🚨 Applications for Focal’s S24 demo day are open to startups raising in the next 6 months.    It takes 7 minutes to apply at gofocal.vc, and even those who don’t make it to demo day can get introductions to over 250 leading VC fund partners, including Techstart Ventures LLP.   Last demo day alone, applicants received over 1600 introductions from investors🤘   #focal #startup #fundraising #vc #demoday

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Some people are wondering why I've been so outspoken on the proposed M&A shakeup which, in my opinion, risks putting a dampener on startups exits at a crucial time in the ecosystem's development. So I put my thoughts down for SmartCompany. Short version: after a decade of unbelievable growth in the ecosystem it's time for a comprehensive policy approach, one that will help support the next decades of growth in what will be a very different market. These M&A reg changes come off the back of changes/proposals around significant investor thresholds, superannuation taxes, RDTI and visas, amongst others, all of which can chip away at confidence, capital flow and incentives. We have a golden opportunity to really cement our place on the world stage, let's take it. cc. Rampersand

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One of THE hardest parts of being a VC is sourcing. Especially for aspiring VCs. Sourcing is about figuring out where and how you can find the next unicorn founder and idea. If you were to ask the investors in unicorns like Airbnb, Uber, Stripe and DoorDash where they sourced those deals, every answer would be different. This is why sourcing is so hard. Everyone has a different approach and there is no right or wrong way. There are two ways to classify sourcing: 1) Outbound 2) Inbound Outbound - More active sourcing where you find and reach out to a founder Inbound- More passive sourcing where the deal comes to you directly or via your network The secret: LinkedIn is a goldmine for spotting promising companies - IF you know how to use it the right way. In my deep-dive this morning, I shared exactly how you can use LinkedIn to source new deals. Here’s a sneak peek of what it included: ✍️ How to tweak your profile so founders know what you’re focused on 👀 Advanced search techniques to find early-stage startups before others 📧 Tips for engaging with founders in a meaningful way to build connections 🧰 How to use tools like Sales Navigator and startup groups to stay ahead of the curve Check it out: https://lnkd.in/g9QRZVwK #venturecapital #vc #startup #founder #recruiting

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Striking: Zenobē, a UK climate tech startup, raised £600m from KKR and £270m from Infracapital, bypassing VC entirely. Zenobe captures excess energy from wind farms to stabilize the grid and reduce gas power reliance. This means: Zenobe secured one of 2023's biggest startup fundraises — without any venture capital. #battery #fundraising #venturecapital #energystorage #infrastructure #growthinflection Sifted: https://lnkd.in/g8wF-xA5

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