Kuan Huang

Dan Primack had some pointed criticism for #VC yesterday in his Axios Pro Rata newsletter (a daily must read IMO 😤). In short, the model doesn't work if it can't produce exits for LPs. Don't blame public markets (which are at all-time highs) for the lack of liquidity either. 📈 💸 Instead, this is a "liquidity drought of your making" where "...swinging for the fences on every pitch, rather than taking the single or double that's available" is the only way out when you invest at "sky high valuations." 😰 "A whopping 37% of "unicorns" are being held for at least nine years by VC funds, including 13% that are past the 12-year mark." 😳 ⌛ Is he right? Is VC at a dire inflection point? Or is Primack prematurely hitting the panic button? 🚨 https://lnkd.in/dts92pXr

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Did you know that YC founders get a secret weapon… and it’s not what you think. “Bookface” is YC’s internal social network. It was needed because YC had funded larger batches and the hardest part of a community is knowing who is in it and who you can trust and ask for help. On the platform, founders share real methods and advice that would break if it were shared widely It’s secret knowledge shared with a trust-first community - answering 80% of the questions a founder can have about building and selling a product, be it to clients, candidates or investors. Before the platform, if you had a B2B startup, you had to reach out cold to potential customers. Now there are over 1000 YC companies you can sell your service to and all of their contact information is in Bookface. As a result, YC alumni companies are often over 50% of your new sales during YC. It’s superpowers like this that make YC deals so attractive compared to the norm. You are investing in a founder with a 10x network already!

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The state of venture capital is wild right now. We are witnessing a surge of innovation across the spectrum: - Funds merging - VC doing PE - PE doing VC - Secondary funds - Buyout funds - Spin-out funds - Debt funds - Continuation funds - Infrastructure funds - GP turnover - Hard Tech surging - Family Office uptick

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Seed VCs are turning to new ‘pro rata’ funds that help them compete with the big firms Alpha Partners, SignalRank and now SaaS Ventures help seed VCs pay for shares when big VCs try to price — or push — them out Lee Edwards, partner at Root VC, has a saying at his firm that “pro rata rights are earned, not given.” That may be a bit of a stretch since pro rata refers to a term that VCs put in their term sheets that gives them the right to buy more shares in a portfolio company during consequent funding rounds to maintain an ownership percentage and avoid dilution. Still, while these rights are not exactly “earned,” they can be expensive. One of the latest trends in VC investing these days are funds dedicated to helping seed VCs exercise their pro rata rights. https://lnkd.in/dRM3RvdA By Christine Hall

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What Dave McClure is building resonates well what we are doing with our Siena Secondary Fund. Although one focuses on fund stakes and the other company positions, the journey is the same - need to educate the market about what is #VC #secondary and how to benefit from it...

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Been thinking about this a lot recently: the J-curve for gaming investments. Takes more capital and more time to launch a game compared to a consumer app or LLM-wrapper. This is more similar to biotech or hardtech investing but with less moats (no patents, no capex, Tencent/Netease might fast follow you). A few ideas to ease the curve: - Move faster with AI-enabled production (sfx, vfx, code, 2d assets, video) - Bootstrap to more before raising - Earlier liquidity through pre-sales (kickstarter or NFTs) - Go after high-leverage, multiplayer genres - Playtest earlier to get to retention earlier What else?

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I recently saw this metric from Carta’s 1Q24 VC Fund Report, which is very concerning. DPI... is nowhere to be found in earlier vintages that probably should start showing DPI. Funding early-stage projects is great, but ultimately, these venture dollars need to exit their investments and pay back their limited partners. That’s where the metric Distributed to Paid-In Capital (DPI) comes in. While managing a fund, we get interim measures during the life of the fund (e.g. IRR, MOIC), but ultimately, “you can’t eat IRR.” If you want to build a lasting venture capital organization, you need to start showing DPI for your fund. Keep in mind that this is traditional VC data from Carta, and is not strictly crypto venture. Crypto venture tends to get liquidity earlier (tokens) and things tend to go parabolic sooner (faster, more unicorns) - but I’d wager that the data here is somewhat similar for Crypto VCs… Not as much DPI as there should be from these earlier vintages. Read the full article, as well as a recap of all the crypto fundraising rounds for August, here: https://lnkd.in/g3eVJ-iF

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When a seed stage company hits $2M in ARR, they control their destiny: (a) default alive (b) default a Series A target Either choice is great and it’s all in your control. $2M in ARR should be the default goal at seed.

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Shifting Fundraising Landscape: Should Founders Reassess the VC Path? For years, founders were advised to raise enough capital to last 18-24 months. But recent data from Carta suggests this is changing. Time between rounds is growing, and raising capital is becoming more difficult and costly. The VC Playbook: A One-Size-Fits-All? When capital was cheap and abundant, founders gravitated toward a model focused on rapid, top-line growth. The trade-off? (Significant) dilution in exchange for the potential of eventually owning a small slice of a large business. But as the economic landscape shifts, several critical challenges have emerged: Extended Fundraising Cycles: The growing gap between rounds means founders need to stretch capital longer, which can stall growth or lead to decisions around scaling back which in itself may impact the ability to raise again. Rising scarcity and higher Costs of Capital: Inflationary years and market corrections have made it more expensive to achieve the same milestones. The capital that seemed sufficient two years ago may now fall short. And capital is harder to access. These realities prompt an important question: have founders fully assessed the risks associated with the venture capital path? The truth is, not every business can—or should—scale at the aggressive rates that VC funding demands. Is There Another Way? A more sustainable approach is gaining traction—one that prioritises profitability earlier in the life cycle. For many founders, this could lead to a better risk-adjusted outcome. The Transition Challenge However, shifting from VC to a more private equity-style model isn’t easy. Many companies find themselves stuck—too slow for VC but not profitable enough for PE. At Resurge Growth Partners, we’ve noticed that more and more founders are asking these very questions and re-evaluating which path is best. We’re increasingly working with founders who are navigating this shift, helping them find the right balance between growth and profitability. It’s a conversation worth having. #ventureequity #privateequity #venturecapital

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About to go live... Startup Studio portfolio VC fund. $8.5 mil. with room to oversubscribe. All deals warehoused and ready to allocate. Built in equity on day 1. Low 1 time management fee. $35k minimum investment. 506c so accredited investors only. GP's are personally invested. Multi tiered exit strategy in place. Liquidity options available at year 2. *** This presentation of Sidecar Portfolio Fund (the “Company”) is for information only and shall not constitute an offer to buy, sell, issue or subscribe for, or the solicitation of an offer to buy, sell or issue, or subscribe for any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.***

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And my second investment at defy is in 🐶 zeroETL puppies 🐶... I mean PuppyGraph, which is all the beauty of a graph database, none of the data migration or continuous upkeep of a graph database. Sounds like magic? So are puppies 🐶 . Puppygraph is NOT a graph or a database. It is graph analytics engine that answers graph questions on your existing data warehouses, whether that is a Databricks datalake, Google BigQuery or postgres. Compared to SQL, it's faster, handles way more complexity, scales and has almost no upkeep. How did I get to conviction? 1. Tailwinds - 🌊 Lakehouses 🌊 have helped enterprises put all their data in one place, enabling Puppygraph to unlock insights previously unavailable. - 📚 LLMs! 📚AI and RAG cannot easily traverse fragmented data. Puppygraph's Graph RAG unlocks insights with their Knowledge Graph and spoonfeeds to the LLMs. 2. 👯 Team 👯 We have graph experts from Google, LinkedIn, Databricks, Tigergraph, and Instacart who are uniquely able to build this solution. 3. 💸 Customers 💸 . My alma mater Coinbase is a proud user. The feedback from my former colleagues was off the charts! A blockchain is very much a graph database and Puppygraph tracks down fraudulent transactions that go through mixers and helps identify patterns. Huge congrats to Weimo Liu Danfeng Xu Lei Huang Zhenni Wu Gary Hagmueller, defy.vc is proud to be an investor!!

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❤️ this from Mattias Ljungman - thanks for expanding on my Inception stage investing framework, no pun intended, with what comes after Inception with "Seed Expansion". Yes, seed is so confusing as everyone from pre-seed firms to multi-stage firms are writing checks. Hopefully founders can get some clarity with Mattias' post below on where to go for their early rounds. Also check out my initial post on what's happening in the venture market, The Race to Be First and What is Inception Investing? https://lnkd.in/eJhEsZ4s

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If you’re a founder building at the intersection of Games & AI, or just interested in what’s happening at the bleeding edge of the future in Silicon Valley, the new episode of /all chat is worth a listen.👇 Link in comments below. Hot takes from Patron portfolio founders Rick Ling of Rascal Games and Nico Christie of Altera with my partners Brian Cho and Jason Yeh! #games #ai #founders #seedfunding #startups

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What Is a Venture Studio Why are Studios on the rise (60% IRR, 33% Faster Exits, Etc…) What are some notable Studio Startups (Snowflake → $43B, Slack → ???, Etc…) How are they different from other support systems (Accelerators, Incubators, Venture Capital, PE firms) All wrapped in 1 post P.S. The Venture Studio model can significantly  reduce the risks associated with entrepreneurship (This information is backed by data) Leave a reaction so more investors, founders, and  operators can learn about the studio model as well And follow me (Matthew) for daily studio insights

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We’re returning to the age of the leaner seed startup. The average company raises a seed round with 5 people on payroll – the same as in 2019. That's ~2 fewer people than in 2021, according to Carta. At Kyber Knight Capital, we’ve noticed this trend when meeting with founding teams. One contributing factor is undoubtedly GenAI-assisted software development. It’s easier to do more with less. We’re seeing teams use AI companions to accelerate time to market, sprint velocity and overall productivity. Within these smaller teams, I’m also encouraged to see more focus on GTM. I’ve previously written about how distribution is paramount and that as many as 4 in 5 employees should be GTM-focused at the early stages. Seed-stage companies are increasingly prioritizing roles that help drive revenue and forge partnerships. No matter the size of your team, harnessing the power of AI and distribution is key. #VC #venturecapital #SiliconValley #fundraising

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🔮 What's the future of developer platforms? ☠ Or the death knell for open core companies? Get the answers (and more) from Ethan Kurzweil; longtime partner at Bessemer Venture Partners and soon-to-be founder of a new, early stage venture firm. In his time at Bessemer Ethan invested in Launchdarkly, Twilio, PagerDuty, Intercom, Twitch, SendGrid, HashiCorp and npm. He's seen it all, you won't want to miss his takes on what's next and what isn't going to work. I'm sharing our closing lightning round questions here, but the full interview (which is much juicer) can be found at calyx.substack.com. ⚡Lightning round questions!⚡ *What's the developer platform that you respect most?* 🔶 Zapier. It's the ultimate democratizer of development for 4,000 different esoteric use cases and some not so esoteric use cases. And they built it in a way to allow anyone to use it. *Who is a developer GTM leader you respect?* 👨 Adam FitzGerald at HashiCorp. Disclaimer - he’s a Bessemer operating advisor. He is the best thinker to help companies structure developer evangelism programs at scale. *Unpopular opinion re: dev tools?*  💼 That a lot of dev tools shouldn't be businesses. Many should be free or part of a larger developer platform offering. The difference between tool and platform can make a big difference as to whether you have a sustainable business. *How do you feel like you’re able to uniquely work with developer-first companies?* ⚾ I’ll keep it to one for the lightning round: I’ve gotten lots of experience with false signals. If you’re a founder working on a startup sometimes you’ll respond to a false signal and it’s hard to go back and unwind those choices—we have lots of experience with developer platforms and can help founders avoid those pitfalls. Disclaimer: Ethan would never use emojis like this. He actually...doesn't use emojis!? I've just added them in an attempt to improve readability on LinkedIn... enjoy!

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I really enjoyed breaking in our new studio to sit down with Temporal Technologies Co-Founders Samar Abbas and Maxim Fateev for the latest episode of Founded & Funded. Temporal was founded in 2019 based on an open-source microservices orchestration engine project but is the result of a more than decade-long partnership between the two co-founders that spanned their time working on different iterations of the same thing at AWS, Microsoft, and Uber. In this episode, Samar, Maxim, and I dive into the challenges of building an open-source ecosystem while also working on a commercial offering and scaling a successful company, how to navigate and adjust a product roadmap in an ever-changing world of AI and large language models, and how to successfully build an early startup team, navigate through a CEO transition, and bring on a startups first independent board member. It's a very compelling conversation and a must-listen for every builder out there. Watch the full episode on YouTube: https://lnkd.in/gymf9sES Find other platforms and the transcript on our website: https://lnkd.in/ggRtnKtM Be sure to subscribe to our channel for more deep dives into cutting-edge technologies and the minds behind them. Don't forget to like, comment, and share this conversation if you found it valuable!

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