Nick Payton

We believe in extreme vetting of our founders. You can't build a unicorn if you spend time on silly stuff, like seeing family and friends. Grow up, and focus on investor returns. #vc #startups #investment

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Make sure your investors and funding partners don’t inadvertently kill your business. Beyond just putting cash into your company your funding partners need to fall into one of the three following buckets: 1. SWEET MONEY: funding that’s such a sweet deal you can’t possibly turn it down. Supportive grant programs with non-onerous funding requirements fall into this bucket. 2. SMART MONEY: people who can make connections, add legitimacy, guide you, and know how to execute investments with standard terms. Savvy angel investors and professional investors fall into this bucket. 3. SHHHHHH MONEY: silent investors who want to support you and are willing to lend a hand when asked fall into this bucket. Funding partners can create bad corporate structures, distract you from your customers, or create burdensome requirements and kill your company if you’re not careful. We’ve been very fortunate to have amazing funding partners, when I looked at why it’s so easy to work with them it’s because they fall into one of these three buckets.

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Do you know how many hyper-growth public software companies are growing by over 40% this year? According to the latest June Guggenheim report… Zero. Not a single public SaaS company is growing over 40%. Do you know how many are growing their next twelve months (NTM) revenue over 30%? Also, zero! With that context, I was strategizing with my team on the most impactful ways companies can change their growth trajectory, and one thing we landed on solving immediately was time to integrate. If a company growing at 30% can pull in all net new integrations and thus revenue by just 1 month over the course of the year, it can increase its growth rate by almost 5%. For simplicity, assuming a $100M annual revenue, a 10% discount rate, and a 5-year valuation period, using a DCF, the company’s present value would not be 5% more valuable, but closer to 20% more valuable for all shareholders. The power of compounded growth rates. Game changer, and with just the smallest adjustments. That’s why smart companies are investing heavily in new customer onboarding and no-code, low-code technologies, like lightweight agents, hosted or embedded UIs, and more. The Socure team is ahead of the curve—ask our people about what we’re building and how we can help you accelerate your revenue growth.

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If you missed key insights from Matt McIlwain(Madrona) at Seattle Venture Day I took some time to summarize a few of the key points! How should small startups or emerging companies think about partnering with enterprises? Enterprises are very motivated to have better solutions, Early stage startups have to think differently and think outside the existing structure silos that the current SaaS applications represent, think outside the generally structured data that lives in databases. Think more about data lakes and unstructured data and crossflows, flows that live across current Saas and structure application. Matt thinks its in the crossflows with the differently structured data that’s where some of the big breakthroughs are going to come with breaking into working with big enterprises at the agentic layer. Overlaps between the current AI boom and the .com boom in Seattle? Less GTM talent than Engineering talent here in Seattle. A lot of corporate capital here, Microsoft and Amazon market cap is over 5T today so a lot of the experts that helped build these companies and worked on cloud technologies, applied AI, Robotics, etc.. have helped grow the startup ecosystem here in Seattle. What is Matts framework for selection companies that are investable in this AI boom? The chip layer is saturated with capital from big cloud and harder to return capital. Matt thinks the agentic and enabling layer there will be a lot more winners. Functional and domain specific solutions are great – Gradial is an example on the marketing side. Madrona wants to see founders who infatuated with the problem they see and are better suited to solve that problem than anyone else. Matts thoughts on the M&A and IPO markets? IPO markets have pretty much stayed soft this year, but M&A is going to pick up a good bit.  There is pressure on the Mag 7 and larger companies from the FTC but a lot more happening in the middle market like Atlassian and Docusign, etcc. Companies that are between 20b and 100b in market cap have to figure out how to increase their market position/AI talent through acquisitions. PE is also hungry to put their capital to work and very aggressive at putting their capital to work. Matt believes he will see VC groups getting bought up by PE groups in different forms. They may allow VCs and founders to keep some of their capital and to re-up in some of those deals. What should founders look for from investors? Matt believes having a consortium of investors is largely a good thing and having great early investors are important in helping you grow. It’s also valuable to have someone who is your lead champion and will roll up their sleeves with you every week. Madrona loves founders who are coachable but not too coachable – If the investor has all the best ideas something is not right. The founder should be leading the way! Pablo Casilimas Justis Mendez OneSixOne Ventures

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I recently sat down with a group of Forum Ventures founders about to go out to fundraise and the topic of SAFE rounds came up. The context focused on the pros/cons of raising a priced vs a SAFE round and the conversation notably shifted toward the dilution implications of a SAFE round. Founders are keenly aware of the top line dilution of any funding round - ie selling 20% of their startup for $3M at a $15M cap - but very few fully grasp the implications of doing a SAFE round vs a priced round. The universal standard for institutional VC investors is a post money SAFE. This document essentially outlines ownership that an investor will have in a startup just prior to the execution of a priced round. Most importantly though, it is structured so that an investor in that SAFE will not be diluted by subsequent SAFE's that are issued. This is where founder education around the implications of this structure are not fully appreciated. In a situation where a founder continues to stack subsequent SAFEs, they don't actually convert until the first priced round and the net dilution they are taking is actually more than they realize. Here is a practical example - take a situation where a founder has already sold 15% of their business on a post money SAFE in a pre-seed round, and is now choosing to sell another 20% in a seed round. If the founder opts to raise this money on SAFEs, the dilution of that additional 20% will come entirely from common equity holders- meaning they will now own 65%. If SAFE holders were also diluted by that round, as they would be in a priced round, the founder would own 68%. This dynamic becomes more dramatic the more capital a founder raises on SAFEs. Note - this is a high level example and does not include an option pool carve out or other round nuances. Almost universally, when a founder raises their first priced round, there is some degree of sticker shock at the outright dilution on their cap table, particularly when options pools are factored in. This pain is even more acute when a founder has raised a fair amount of capital on SAFEs along the way. There are certainly benefits to raising SAFE round, mainly cash in hand 6-8 weeks faster and not having to decide on board seats too early, but I encourage all of our founders to run through cap table modeling and correctly account for the implications of SAFE rounds before they make fundraising decisions.

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I'm officially launching my new business today: Early Stage Labs. We help Seed and Series A startups level up with fractional execs in finance + growth. If you need the horsepower and execution of an experienced operator but don't want to add heavy FTE burn to your runway, I'd love to see if we can support you. We have been quietly building in 2024 and are up to 11 CFOs and 5 growth folks on the team. We can't wait to roll up our sleeves and get into it. Learn more about what we're doing here: https://lnkd.in/eddDSWCn -- I was out on a walk with my wife back in 2018. I had been running a bootstrapped startup for a few years and was talking to her about a pivot we were making. She asked me what it was that I loved about the business I was building. Simple question, but I paused and had to spend a few days thinking about it. I remember coming back to her and telling her how much I love the art and the act of creating something from nothing. How it’s difficult and nuanced and sometimes even feels impossible. But how - when you get it right - man, it can feel like magic. I’ve built and sold a few businesses since then. We sold our last one to Healthline in 2021. I then jumped to the other side of the table and I’ve been the General Partner of a seed-stage venture fund since 2022. I love deals. I love getting into the hard and dirty parts of a business that can really move the needle. And I love delighting customers. I’m a scrappy, gritty founder who loves finding high impact + low burn ways to move businesses forward, and I think I’ve found that here. I think we’re really doing that for our customers. Early Stage Labs is a love letter, of sorts, to this beautiful, treacherous, wondrous world of startups that I’ve - for some strange f’ing reason - made my home over the last two decades. Here’s to the ride.

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Fundraising Insights for Early-Stage Startups 🚀 Reflecting on my time at YC and beyond with Parker, I've noticed a counterintuitive truth that shapes successful fundraising strategies for startups at pre-seed and seed stages - at early stages, investors often care way more about your story over traction or growth metrics. So, here are some key takeaways to nail your investor conversations: #1 Clear Communication: Cut the jargon and buzzwords. Create a pitch that anyone can grasp immediately. For instance, rather than making vague claims, be direct. Here is a Hypothetical example. Bad example: “We’re revolutionizing the electric car industry by creating unique, best-in-class vehicles that democratize electric travel.” Better example: “We are building electric vehicles that are more affordable and have longer range than anything on the market.” Remove abstraction until anyone can understand your pitch. #2 Founder Fit: Showcase why YOU are the right person to build your startup. Do this by highlighting relevant achievements and experiences that show your capacity to realize your vision. Keep in mind that a traditional background isn’t always the highest-leverage thing to mention, for example: • An investor might care a little bit that you went to Stanford. • They might care a lot that, during your time at Stanford, you built a $50k/mo business. #3 Leverage Social Proof: Boost your credibility by sharing achievements like customer numbers, growth rates, and notable investors backing your venture. Give investors solid reasons to believe in your potential. Use whatever you have available. Example: Famous investor? Great. Famous employee? Great. Notable experience on your founding team? Great. Investors have no idea who you are, in most cases—give them a reason to care. For a detailed look into fundraising advice, check out my essay. https://lnkd.in/g6B6kSdN

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One of the biggest challenges for improving performance on Meta is teams beeing held accountable for daily (and sometimes hourly) results. This isn't enough time to try new strategies or products. So by optimizing towards a daily ROAS goal in the short term, might hurt performance in the long run as you could be missing out on new solutions.

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📊 After working with hundreds of startups on their finances, I know how challenging it is to balance competitive compensation with runway. That's why we dug into our actual client payroll data to create real compensation benchmarks. 💡 The most interesting finding? Technical roles often command higher compensation than CEOs at seed stage. See the full analysis in Kruze Consulting's original post and TechCrunch article! 🎯 #StartupCompensation

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Once you’re in it, you’re in it. #Startup #founders don’t just take financial risk - they invest years of their lives. For many, it’s absolutely worth it. To me, the first task is the most important one: to define your target and make absolutely sure it’s one worth that level of investment.

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Fundraising founders, don’t be too hard on yourself—it’s a tough fundraising environment, and that’s no secret. But remember to keep raising your standards because the bar for VC funding is getting higher, and you’ve got to meet it. As the venture capital landscape tightens, competition for dollars is fiercer than ever. At Startup Ignition Ventures, we’re seeing this shift firsthand, every day more and more apparent. In 2021 and 2022, many startups could secure VC checks despite being loosely thrown together and rough around the edges. Fast forward to 2024, and those same startups wouldn’t make the cut. That's not a knock on yesterday's startups as much as it is a contrast to today’s fundraising environment being completely different. Today, the founders getting funded are buttoned-up, detail-oriented, and operating at a much higher level. Everything has to be top-notch to catch a VC’s attention. Why the change? The number of active investors has dropped by 38% from 2022 to 2024 (PitchBook), meaning fewer deals are being made. VC funding is also down over 30% year-over-year (GlobalData). This means the standard has tightened, and startups must rise well above the average “2022 or 2023 fundability status” to secure 2024 investment. Startups now need to show exceptional business models, traction, products, and teams to stand out in a shrinking pool of opportunities. The landscape may be tough, but it’s also ripe for startups that prove they’re exceptional. Now is the time to build, to gear up, and then be ready for further opportunity as the market begins to turn. Which I personally think is around the corner in 2025.

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Founder friends - if you're thinking about raising this year, Jason's approach is the most genuine and pragmatic one I've come across in a while. He's relaunching the program in a new format - check out the sesh to learn more! ✨ LAUNCH EVENT for Adamant Fundraising I've taken everything we learned working with over 200 founders and helping raise $311M across 3 years of a cohort-based course, and made it better. The new program is called Adamant Fundraising and it is far more accessible than our old cohort-based training. -- Timing - instead of only offering it 3 times a year, we've made it rolling enrollment so you can join at any time of the year. -- Cost - we changed our pricing significantly to make it affordable for the earliest stage founders. -- Community - we've enhanced the community element to make it even more impactful The Event: On Tues, May 28 at 1pm PST, we're hosting a free streaming event to launch Adamant Fundraising and help teach founders what holds them back from fundraising successfully. On top of that, we will be giving away some incredibly valuable gifts to everyone who attends live so make sure to RSVP and hold the time on your calendar. https://lnkd.in/eyHZ_CF7

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Aro’s shift to a software-led company is complete. For all you founders out there, here are a few things I learned (maybe the hard way): - Never be afraid to pivot - Sunk costs are just that, sunk costs - When your customers keep saying similar things, listen - Bundling hardware and software into a single price is confusing to customers - Software opens up unique opportunities that are impossible with hardware - Our customers still love the Aro Box. 🗃️ That’s why Aro is a software-led company versus solely software. The App makes sense for some customers and the full platform for others. We’re learning… #pivot https://lnkd.in/e5viE2cS

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Big rounds are back. VC Funding is flowing. In April, there were 28 fundraising rounds announced with >$10M in funding. We've seen private market (pre-launch) deals valued >$3B recently. Private Markets are hot. Public Market comps (FDVs) are hot. But who will buy our multi-billion dollar bags? Deal Flow Digest April w/: - Recap of largest web3 funding rounds - Airtable with ALL the data - Hackathons & Demo Days - VC Fundraises Read more here: https://lnkd.in/g7V4KrAj

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To help bridge the information gap between founders & investors, Nick Khormaei & I built a comprehensive map of the Seattle venture ecosystem. Check out the slide deck below for a breakdown and reach out to us if you'd like to see our full data-set!

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I saw a founder share their thoughts on the seemingly obvious decision to accept an investment from Y Combinator — even though the $125k investment diluted the founders by 7% The rationale being that the 7% dilution is more than offset by the value boost that any company gets when they go through YC While dilution is an immensely important metric for founders to manage, it is also surprising to me that more founders don’t consider it in the cost/benefit context presented above If an investor can help increase enterprise value, revenue, etc. for your business at a level that surpasses the dilution event, then why wouldn’t you, as a founder, accept that investment every time (assuming fair terms)? That’s what we, at BankTech Ventures, strive to deliver with our 100+ bank LPs who effectively serve as buyers of the technology we’re investing in — we aptly refer to it as our value-creation flywheel!

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Big news, Friends! 🎉🎉 I’m thrilled to announce the launch of Chapter Two Consulting, along with my longtime friends and partners Ray Zambroski, Phillip Grove, and Don Fleming.  These guys are Seattle tech veterans, with long track records of helping numerous Seattle startups and fast scalers build business-critical software and great engineering teams. Chapter Two Consulting is a culmination of decades of building trusted relationships, hard-won experience (and a few hard lessons), and great admiration for those who get up every morning and enter the arena. I’ve worked with some of you for many, many years.  Some measured in decades!  It’s been my absolute pleasure and honor; I look forward to many more. Ready to write the next chapter in your story?  Don’t go it alone; we’re here to help! Dan Sr. Partner and Co-founder, Chapter Two Consulting https://chapter2team.com ------------------- Announcing the Launch of Chapter Two Consulting: Your Engineering Powerhouse. At Chapter Two, we believe engineers are the architects of innovation—building the products, technologies, and infrastructures that shape our future. With roots in the Pacific Northwest’s hub of creativity, and deep technical prowess, we’re here to connect bold thinkers with the resources, talent, and strategy they need to make a lasting impact. Seattle’s engineering community is our home. From early-stage startups to scaling enterprises, we recognize the challenges engineering leaders face when assembling teams, launching breakthrough technologies, and scaling with purpose. We’ve built Chapter Two to empower innovators with a tailored recruitment and consulting service designed specifically to address these kinds of problems. Our team brings deep expertise across technical disciplines and industries, enabling us to align your organization’s vision with the right talent and strategies. Whether you’re solving critical technical challenges, refining your product roadmap or scaling an R&D team, we’re your partner every step of the way. We work flexibly and collaboratively to support your growth, offering: - Consulting engagements that tackle immediate challenges while building frameworks for long-term success. - - Engineering recruitment to match you with exceptional talent across software, hardware, and interdisciplinary domains - - Long term partnership for emerging technical leaders navigating complex and changing team growth requirements. At Chapter Two, we’re not just recruiters or consultants—we’re a part of your team. We’re inspired by the builders and innovators who call Seattle home, and we’re dedicated to helping you engineer your vision into reality. Let’s connect and explore how we can drive your success together.

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