Nico Gimenez

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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Everyone's talking about PE and VC. But do you really know the difference? Here's the truth: They're both about investing in companies. But that's where the similarities end. Let's break it down: 1. What they actually do: PE: Buys established companies VC: Funds early-stage startups 2. Risk appetite: PE: "Let's make this good company great." VC: "This could be the next unicorn... or total bust." 3. Ownership mindset: PE: "We're taking the wheel." VC: "We're along for the ride." 4. Investment size: PE: Dropping $100M+ like it's nothing VC: Starting small, maybe $1M-$10M 5. Return timeline: PE: "See you in 3-7 years." VC: "Talk to you in a decade... maybe." 6. Exit strategy: PE: IPO, sell, or reshuffle the deck VC: IPO or get bought out 7. Day-to-day involvement: PE: "We're basically running this place." VC: "Call us if you need advice." 8. Industry focus: PE: "We'll buy anything that makes money." VC: "Tech, innovation, disruption. That's our jam." Here's the kicker: PE is like buying a fixer-upper house. VC is like betting on a racehorse. Both can make you rich. Both can lose it all. But remember: PE plays it (slightly) safer. VC swings for the fences. Which would you choose? P.S. Next time someone confuses PE and VC, send them this. You're welcome. 😉 P.P.S Check out my Newsletter for Founders to Raise Capital and Grow Revenues Here: https://lnkd.in/ejecDs9Z #BrainDumps | BrainDump #97

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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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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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Survey results: Would you invest in an emerging VC's fund 1 who's already wealthy but no VC experience or someone who is fiscally stable and experienced in the VC industry but is a fund 1 rookie? 90% Rookie with experience 41 people surveyed. I thought it would be the reverse because the wealthy person already has capital and can just go hire people with experience and build the firm around that talent. Very interesting 🤔

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Well-written and sourced article describing what's going in seed-stage venture market. At 9point8 Collective we tend to orbit the seed-stage (both ideating and developing companies to reach seed and helping post-seed companies refactor and scale in anticipation of A) and for many companies it's a critical inflection point which determines their long term success or failure. The main takeaways I was able to gather: 1️⃣ Many startups that raised seed rounds in 2021-2022 are struggling to secure Series A funding due to tighter market conditions and increased investor expectations. 2️⃣ Seed investors are becoming more cautious, leading to longer diligence processes and a preference for startups with strong traction or experienced founders. As a result, valuations have stayed relatively high even as deal flow reduces. 3️⃣ Startups are adopting various strategies to navigate this challenging environment, including cutting costs, raising bridge rounds or convertible notes, and M&A/acqui-hires. 4️⃣ Despite the challenges, there are opportunities for both startups and investors in this new landscape, particularly for those who can adapt to the changing market conditions. Investors are accumulating dry powder -- and with rates on the decline -- will be looking to deploy into companies with stronger fundamentals than their 2021-2022 counterparts.

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YC is usually considered one of the tastemakers for downstream investors. They de-risk companies at the earliest stages so that seed funds can pour more into the companies that find true PMF later. Having invested in 75+ YC companies and now focusing on Lobster Capital, I've seen this repeatedly - their batch composition often signals where markets are heading 6-12 months time. When YC starts funding a category, pay attention. But don't follow blindly. If you're looking for an idea on where future capital, talent, and business goes, follow the tastemakers, then decide for yourself what's real or not.

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How to invest like a VC? ☕️ Ask a founder to brew coffee for you. If s/he doesn’t select maximum grind amount, pass If they can’t even max grind with you, what hope do you have when they are alone?

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As an economist, I obsess (probably a little too much) about profit, cash flow, and IRR. It's one thing to see gains in paper valuations, but those are just a proxy. Sure investors will vary in their preferences for liquidity, duration etc. but in the end they all require the same thing -- realized returns. There are a ton of companies in limbo right now where they can't quite exit nor are they in a position to generate a dividend. For investors, this is a tough spot to be in, and even more so when it's a systemic trend affecting their whole portfolio rather than a one-off.

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A lot of Founders chasing VC money don't understand how VC works, what they can invest in and what they can't invest in. To be able to utilize the VC exemption, VC's are bound to a specific set of rules and standards like only having up to 250 LP's for sub $10 mil. fund sizes, 100 for anything over $10 mil., 80% of the fund must be "VC qualified" investments which basically means straight equity, convertible notes and SAFE's... Here's a great little article that goes into it more in detail. Know the rules before you play the game... https://lnkd.in/eqhjU6rd

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Here’s a question investors are often asked: When evaluating early stage companies, how much time do you spend on due diligence around future exits? It’s not surprising we hear this question a lot. Also not surprising: it’s got a wide range of answers depending on the firm. Some don’t spend much time here at all. Others make it a point to put meaningful time in as part of their process. Our current thinking: take the time to do the work on public market comps. At Alpaca VC, we spend significant time understanding how public market investors will  realistically value a business based on margin profile, product, business model & TAM. In short, we want to know: how will this company be valued at scale when we get taken out? Yes, we can acknowledge that the journey toward exit is a windy road and that there may be pivots along the way, but there are still public market companies that have a business model similar to the early stage company you're evaluating. And you can always look at gross profit multiples if you think the margin profile will change over time. So we still do the work on the comps. Quantitative metrics we look at when making the comparison to public market comps include EBITDA multiple, revenue multiple, Gross Profit multiple or all of the above. As part of this process, it’s also important to factor in the public market company’s year-over-year revenue growth as this will also significantly impact the multiple it trades at. Simple example: if you have two public market companies with similar business models and similar margin profiles, but one's growing 100% year over year, and one's growing 50% year over year, then obviously the DCF (discounted cash flow) analysis is going to spit out a very different valuation for the one that's growing faster. Why this matters: When you take all of that information into account as you evaluate an early stage business, you can begin to create a realistic picture of how this company will be valued in the public markets at exit - or how an acquirer will value the company for an acquisition. Strategic acquirers may, of course, pay a premium, but we won’t underwrite for that. This allows us, for example, to form conviction around valuation based on revenue and gross profit predictions. If we think they can do $100M of revenue five years from now, we use this diligence process to form a thesis about whether the characteristics above (product, margin, business model, etc.) will cause the company to be valued at $200M vs. $500M vs. $1B at exit. Curious how other early stage investors think about underwriting an exit and how much time they’re spending on public market comps even though these companies are in their infancy.

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Founders out here..Want to raise VC funding? Nail these 6 criteria, or don’t bother.👇 Quick context: Before John Hu raised $5M for his own startup, he spent years at Northwest VC evaluating countless startups. The ones that got funded? They all aced this checklist. ▪️Team: -The strength of the team is critical. -Do they have the right mix of talent, industry expertise, and drive? -And how well does the team align with the market? -The Founder-Market Fit must be rock-solid. ▪️Market Size: -Investors want to know if the market has serious potential. -Does the startup operate in a space with billion-dollar growth opportunities? -What’s the TAM? ▪️Competition: -Every startup faces competition. -How fierce is it in this particular market? -Is there enough room for the startup to capture meaningful market share? ▪️Differentiation: -What makes the product or service unique? -Investors need to see a clear competitive edge – something that will help the startup rise above the noise in a crowded market. ▪️Metrics: -Early traction matters. Are there any key performance indicators (KPIs) showing strong growth? -Metrics like revenue, customer acquisition etc be compelling to catch investor attention. ▪️Exit Potential: -VCs always have an eye on the exit. -How many potential buyers are in this space? -Is there a clear path to a lucrative exit for the investors? It’s a tried-and-tested approach to evaluate a company’s true potential. Would your startup pass the test? #startups #checklist #fundraising

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Participating Vs Non-Participating Liquidation Preference. This is a topic that a lot of folks don't understand very well, explaining via a simple example below: Assumptions: Investor 1 - Owns 10% of the company for $10 Founders - Own 90% of the company Total share value and price - $100, $1 per share Purchase offer for company - $20 Participating Liq Pref: Investors receive $10, being their investment amount. $20 - $10 leaves $10 to be split. Investors receive a further $1 (10% of $10) Founders receive $10 - $1 = $9 Non-Participating Liq Pref Investors have an option of exercising their preference, receiving $10 OR Investors can convert and receive $ equal to shareholding, 10% of $20 = $2 Investors will choose to receive $10 Founders receive $20 - $10 = $10 This is a base example of how non-participating is significantly more founder friendly, especially for non-exceptional exit outcomes (also the defacto at Artha Group) #venturecapital #startups #founders

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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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ARR abuse, while obfuscating true GAAP revenue is a real issue. In VC pitch decks, I am noticing an increasing confusion in how the founders share the Annualized Recurring Revenue (ARR), Booked Revenue, and the GAAP Revenue. This recent WSJ article on this topic, as applied to #Crowdstrike, makes this point very well. Thanks Jonathan Weil Krishna Kunapuli, Dr. Pallab Chatterjee Rajiv Roy Sumanth Channabasappa #crowdstrike #accounting #saas #ARR #GAAP #Revenues

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Despite the headwinds many software companies (even public ones) are facing today, there are still those that are delivering great results. Check out how the top decile companies in our Beyond Benchmarks survey are performing. And don't forget to review the full report for many more insights on the state of private software businesses.

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CRV is doubling down on early stage investing. Returning the remainder of our late stage “Select Fund” to focus our efforts on high risk and high multiple early stage investing. Venture capital is as crowded a market as it has ever been. Competition has moved later stage with their dollars and focus drifting to multiple products and geographies, fragmenting their investing talent. We’ve also seen talented investors retiring or putting their feet up. This leaves our home turf of early stage open for the taking. CRV offers one product to our entrepreneurs & LPs (early stage) CRV is one geo (Bay Area) CRV is one team (flat and equal partnership) This picture goes hard.

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