Ranjan R Reddy

Allocate just released an analysis on a dataset of 253 venture funds, with only pre-2019 vintage years being included. The analysis shows a clear negative correlation between high risk / high reward investment profiles and size of venture fund, i.e. the smaller the funds, the higher the performance, but also the higher the risk. Two ways that LPs can mitigate the higher risk of smaller funds: 1. Diversify across more emerging managers, and 2. Invest across vintages with said managers. Here are the details: Small Funds (0-100MM): Mean TVPI: 4.3 Standard Deviation: 2.4 Median Portfolio Companies: 26 Mid-Sized Funds (100-250MM): Mean TVPI: 3.6 Standard Deviation: 2.0 Median Portfolio Companies: 24 Mid-Large (250-500MM): MeanTVPI: 3.0 Standard Deviation: 1.2 Median Portfolio Companies: 35 Large (500MM+): Mean TVPI: 2.7 Standard Deviation: 0.9 Median Portfolio Companies: 43

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Truly inspiring to listen to Dax Dasilva tell the story of Lightspeed Commerce on 20VC. With $900M in ARR I was thrilled to learn that Dax bootstrapped the company for 7 years to get to $10M in ARR. I hope it doesn't take us 7 years to get Liquid360 there but it makes me feel better about the 3.5 years we've put in to date. For me these stories are deeply encouraging. When you're building something very big it can take time to get to launch. A couple of weeks ago we met with a global player in the VC world. They were looking to invest $5M - $10M and we said we weren't there yet. We'll get there but it wouldn't be the right move today. They then jumped to another conclusion. The wrong one. I get it. They have a multi-billion dollar fund and capital to deploy. We have a company to grow and too much cash will not help us do it right. We've made good decisions being lean. Our customers are starting at $500K. This is an enterprise/gov't product. We have to satisfy a very discerning customer. No bugs, no glitches. A dependable and reliable product. We are excited by the feedback. We are making the world safer. Harry Stebbings suggested that Lightspeed is one of the most misunderstood companies. It's market cap is $2.6B which seems really low relative to the ARR. Very interesting episode.

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Navigating Seed-Stage Fundraising: Key Insights Understanding seed-stage fundraising is crucial for any startup founder. Here’s a concise look at the landscape, based on data from 1,271 priced seed rounds between April 2023 and March 2024. Top Players: - SaaS leads in deal volume, showing strong investor interest. - Healthtech and Fintech are also in the spotlight, with Healthtech now surpassing Fintech. High Valuation and Cash Raised: - HR startups stand out with the highest median pre-money valuation and cash raised. - Transport and Renewable Energy also show high valuations, indicating significant potential. AI’s Impact: - AI influences multiple sectors and would top every chart if tracked separately, highlighting its transformative potential. Benchmarks: - Median pre-money valuation: $13M. - Median cash raised: $3M. Industry Clusters: Analytics, SaaS, and Healthtech form significant clusters around median values. Biotech and Cybersecurity also perform strongly. Lagging Sectors: DTC Retail, Food, and Personal Products lag in both valuation and cash raised, potentially exploring alternative funding methods. Deeper Insights: -Industry Disparities: Significant variations exist, with Healthtech showing increased investor confidence. -AI’s Dominance: AI offers diverse investment opportunities across industries. Decline in Seed Volume: -Most sectors see reduced seed funding, except for AI. -Alternative Funding Strategies: Some founders are exploring revenue-based funding instead of traditional VC routes. Takeaway: Navigating the seed-stage funding landscape requires strategic understanding and adaptability. This evolving environment offers unique opportunities and challenges for both investors and founders. If you're on this journey, let’s connect. I’m here to help you navigate these complexities and improve your chances of securing funding. #startups #entrepreneurship #venturecapital #investing #finance #crossborder #inovexus #startup #VC #earlystage #angleinvestor

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Between April 2023 and March 2024, the top category in seed rounds in both capital raised and valuation was (gasp!) HR. Despite the typical skepticism around HR tech, data from 1,271 priced seed rounds show that HR startups outpaced other industries with the highest median pre-money valuation and the highest median cash raised. This trend contradicts some investors' perceptions and highlights the growing importance of human resources technology and its potential to drive significant value and attract substantial investment. h/t Peter Walker and the always insightful Carta data.

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Most Pioneer Fund companies send monthly updates (some quarterly), and we read every update across the portfolio of 500+ companies. I actually still personally read every update. Most startups send updates with these sections, and it works well: - High level metrics (revenue, maybe another key metric or two like GMV or MAU, growth since last month, cash in bank, burn rate, runway). Many of the most consistently-growing or fastest-growing companies also include a revenue graph. - Highlights - Lowlights - Investor asks - Maybe a couple investor shoutouts from last month - Some short commentary on what the current priorities are, what's coming next, etc. Some founders like to include a special section or two. A few of my favorites: - Photos or videos of technical progress for hardware companies - One of our founders sends a self rating on a scale of 0-10 for the month, along with detailed explanation. Pretty impressive. - A zoomed out view of how the mission/vision/strategy is specifically evolving - Some have very detailed additional sections that are specific to their business. E.g. manufacturing updates, distribution updates, regulatory updates, etc. Each investor update may only take a few minutes to read, but they are the summary of the hard work of an entire team for an entire month, often fighting uphill or sprinting downhill or exploring the idea maze. We're always grateful reading them.

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Why #PY6 is All-In on Vertical Fintechs At Pygma, we’re shaping the future of vertical SaaS by embedding financial services directly into industry-specific software. Vertical fintech isn’t just the future; it’s the now. This approach enables startups to: 1. 10x their revenue by integrating services like payments, lending, and insurance. 2. Build stronger customer loyalty by addressing specific industry needs. 3. Create an impenetrable moat around their business, securing long-term growth. If you're a fintech founder ready to scale, this is your moment. Our program is designed to help you grow faster and dominate your niche market. 👉 Join our waiting list and secure your spot in PY6’s exclusive fintech cohort! https://tally.so/r/mRRPRP #Fintech #VerticalSaaS #Growth #VC #Pygma

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Based on the recent data signals from Carta, 2Q24 offers a glimmer of improving stability within the VC ecosystem, underpinned by a drop in down rounds, resilient valuations, and a return to more founder-friendly deal terms - signaling a continuation in gradual recalibration 🎯 👇 Down Rounds 1Q24 saw a staggering 24.2% of rounds being down rounds, a five-year high that painted a grim picture for startups. However, 2Q24 flipped the script with a drop to 17.4%. This shift isn’t just a statistical blip; it reflects a broader recalibration of valuations post-2020-2021’s inflated peaks. With startups now more likely to have raised their last rounds post-bubble, this trend suggests a healthier, more sustainable funding environment moving forward 📉 📊 Valuations Across the board, valuations are showing resilience, particularly at the seed and Series A stages. 2Q24 even saw seed valuations surpassing 1Q22 levels, despite a significant drop in deal volume. The story here is one of quality over quantity—fewer, larger rounds as investors zero in on startups with strong fundamentals 💪 While Series C and D stages haven’t fully bounced back, the trend across all stages points to a gradually rebounding market where valuations are increasingly decoupled from sheer deal volume, hinting at a more strategic and selective investment approach 🌱 🤝 Deal Terms 2Q24 also saw a decline in investor-friendly terms like participating preferred stock and cumulative dividends, which had previously surged during the uncertain times of 2021-2022. This move toward simpler, more founder-friendly deal structures indicates growing investor trust in startup valuations and their long-term prospects 📑 However, liquidation preferences over 1x remain relatively heightened, highlighting a focus on distribution activity amidst a liquidity drought (~33% and 43% of 2017- and 2018-vintage funds having yet to return any money to LPs, respectively) 👀 🌎 Regional Activity Trends The West remains the dominant force in VC activity, but 2Q24 saw its share dip to 59% from 63% in 1Q24. Meanwhile, the Northeast staged a strong comeback, increasing its share from 20% to 25%. This resurgence is led by New York's robust SaaS and FinTech scene, with key players like CoreWeave, Wiz, AlphaSense, Cyera, Ramp, and Semperis driving significant investment. Boston, on the other hand, is seeing a resurgence driven primarily by biotech, with companies like Obsidian Therapeutics, Diagonal Therapeutics, Seaport Therapeutics, and Ajax Therapeutics leading the charge. These shifts underscore a recalibration in regional activity, with the Northeast reclaiming its influence in the VC landscape🗽 #VentureCapital #VC #PrivateMarkets #Technology #Innovation #Investment #Startups

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7 RECOMMENDATIONS FOR HARDWARE STARTUPS It’s hard to understate the difficulty of the v1 launch of a consumer hardware company. I see a ton of new HW startups coming out. Here are some counterintuitive recommendations… 1) Target a small market for v1, not a large market. You need a small number of people to love your product and this will earn you the right to build a v2. You have to understand your v1 will not make you a successful company. Your v1 needs to prove that you deserve to exist in the first place. In the case of WHOOP, we started with pro athletes who were willing to put up with our v1’s short battery life and flaky Bluetooth connections because they so desperately needed Sleep and Recovery data. A broad consumer base would have rejected it. 2) Be great at no more than 1-3 things. If you try to be great at more than that, you will build a hardware that is mediocre at a wide range of things. You won’t think it’s going to be mediocre, but it will be. 3) You want a small launch. Not because you want small sales but because you want to have a steady ramp. It’s much better to do 100k of sales steadily over 12 months than in 2 months with a huge drop off. Keep in mind you need to manage your manufacturing partner and that there’s nothing better or more efficient than steady and predictable. 4) CAC is your enemy. Referrals are gold. The magic of referrals is that they signal high NPS and they help you grow steadily. Again everything that helps you have a steady HW manufacturing plan is good. Building a referral program for v1 launch is a good use of your time. 5) Be excellent at Software. Turns out being good at both Hardware and Software is a hard thing and something that your BIG COMPANY competitor is actually not great at (excluding Apple here). For some reason, there’s such a magnifying glass on the Hardware development, that Software is then overlooked by consumer startups. Don’t make that mistake. You can be great at both. 6) You should spend an unreasonable amount of time and money on ONE aspect of your Hardware. Could be the design or a technical breakthrough. But something needs to be SPECIAL. In our case, we designed a modular battery pack that allowed Whoop to be charged without taking it off your body. This made our development timeline much longer, but it allowed us to achieve something that no other wearable has achieved since: 24/7 health data. 7) Finally, have an unrealistic belief in yourself and your team. You are not supposed to succeed and the odds are stacked against you. Building hardware takes confidence and you’re up against big players who will rip you off. We went so far as to leave a message for our competitors on our circuit board (pictured below). In the case of Amazon and others, the prophecy came true. If you’re building consumer hardware, I wish you nothing but success. It will be super hard, but super rewarding. Good luck 👊🏼 #consumer #hardware #wearable #startup #whoop

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Let's look at valuation multiples for Seed, Series A and Series B to E Using the latest Q2 2024 data from Peter Walker 🙌 Starting with Carta’s valuation data, adding in the time between rounds and then mapping both to the definition of venture scale to get (an estimate of) Valuation Multiples for each stage 😃 In Q2 2024.... → Seed reached new highs → While Series A was largely flat  → Multiples trended towards the public index until Series C → And then Series D and E+ saw huge bumps on a low # of deals Let's take a look 👀 -- ♻️ Repost to help a founder in your network Click 'visit my website' at the top of this post to register for my Seed to Series A session

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Startup decks vs Business plans. It's accepted that a startup needs a deck. Dax Dasilva of Lightspeed Commerce made an important point on 20VC. Writing a business plan - including financial projections - is an important step. It requires discipline. It provides a rigorous framework for thinking deeply about the problem you're trying to solve. Harry Stebbings countered that he doesn't even want to see a deck since it's all dreams. We spent a lot of time and energy on our business plan with the expectation that we would show it to no one ever. The business plan was part of our roadmap for the company. We researched customers - including having 50+ conversations. We wanted to understand them: their background, their interests, their presence on social media. We also wanted to understand how they were evaluated by leadership and how integrated they were with the business of the company they were protecting. We researched pricing both with potential customers and other products in our industry to find out if OpEx or CapEx was a better fit. How did they buy today? How would they like to buy? We did market research to understand the verticals and map the right entry point - we were wrong but that doesn't reduce the value of the research. We looked at competitors in depth to understand what they were seeing that we weren't. Dax is right. This is an invaluable document that should be updated every year - the company is changing, the market is changing, there's more feedback about price and ICP. It's not for sharing with the outside world. It's a map for driving forward. Decks won't get you investment - VCs invest in people. We make decks but we know they don't tell our story. The deck is a calling card. Dax and Harry are both right. https://lnkd.in/e25M82xY

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Interesting observations for those tracking the growth of the startup ecosystem across MENA

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Consumer VC Landscape 2024: Your Ultimate Playbook Even with a market cooldown, consumer VCs are investing. They’re fueling the next wave of tech, marketplaces, and D2C startups at seed and pre-seed stages. Here's the kicker: Zehra Naqvi at Headline has mapped most of the power players in this space. Making it easier for founders to cut through the noise and find the right partners. Whether you're building in consumer tech, prosumer tools, marketplaces, or D2C, these firms are actively writing checks and supporting visionary founders. The Heavyweights in Consumer VC 1. FJ Labs: → Focus: Marketplaces and consumer-facing startups. → Investment Stage: Seed to Series A. → Ticket Size: $50k–$5M. → Highlighted investments: Coupang, Momos, Flexport. 2. True Ventures: → Focus: Early-stage technology startups, with +$3.8 B under management. → Investment Stage: Pre-seed to Series A. → Ticket Size: $500K –$3M. → Highlighted investments: Peloton, The Way, Fitbit. 3. Forerunner: → Focus: Consumer-first startups, especially in the D2C and lifestyle sectors. → Investment Stage: Seed to Series A. → Ticket Size: $1M–$10M. → Highlighted investments: Glossier, Daydream, MindTrip 4. Pear VC:  → Focus: Software, AI, healthcare, IT, and SaaS startups, with additional focus on consumer tools. → Ticket Size: $100K –$3M. → Highlighted investments: Heap, OnRamp, Orby AI. Why This Matters - Founders: If you’re building something bold in the consumer space, these are your go-to doors to knock on. - Investors: This map helps you spot trends and future opportunities in the sector. < Save this post. Share it. Bookmark it.> Navigating the consumer VC landscape in 2025 starts here. Big thanks to Zehra Naqvi for creating a resource that helps founders find funding and the right partners. 🐼 Follow Suad Fakih for more insights! 👻 Repost for others interested in the space!

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If this is true, it’s going to have massive implications on VC investments flowing into consumer facing health startups. Meta is still the most reliable and efficient GTM channel for an early stage consumer facing startup and this would disrupt unit economics majorly. Source: Cory Dobbin on X/Twitter

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📝 FOUNDER fundraising hack = write an investment memo for VCs (template linked below). Raising VC is a multi-step sales process. First you need to convince a single partner to invest, and then that partner needs to bring your deal to Investment Committee (IC) to convince the other partners. The initial VC partner (aka deal champion) will write an investment memo to convince the other partners to vote for your deal during IC. If a VC will write their own memo, why write one for them? Three reasons: 1. Control the frame = dictate how your story is told 2. Signal insider status = show you understand how VCs think 3. Reduce friction to $$$ = VCs will copy/paste from your memo to theirs 😂 🪟 Control the frame There are good ways and bad ways to frame your startup. It's possible that a well-meaning VC will write a memo that frames your startup in sub-optimal ways. The less experience and domain knowledge a VC has, the higher the risk. You want to arm your deal champion with ammo to tell a bullet-proof investment story. Don't leave this up to chance. Write a memo and share it with the VC to make sure they hit the right talking points in their own memo. 🥼 Signal insider status I love when founders provide a written memo alongside the usual pitch deck and financial model. It shows they're clued in to the game. They understand how VC firms work. They're an insider. VCs want to invest in insiders, because insiders are more likely to raise subsequent financing and get to an exit. Outsiders are learning how the game works for the first time and will make rookie mistakes on the VC's dollar. Don't be an outsider. 💵 Reduce friction to $$$ You know how great product companies obsessively reduce the # of clicks a customer needs to make before paying for the product? Speed matters. A 2006 Amazon study found that every 100ms in added page load time cost them 1% in sales. VC is no different. The faster you can make the diligence process, the more likely you'll be able to raise capital. Your fundraising collateral is your product, and a memo is a key way to reduce time to funding (TTF). Every VC will have a set of questions during diligence. Answer them up front in a memo, and watch your prospective investors eyes light up. Deals can be a grueling process involving several late/all-nighters, so the deal team will be thankful if you save them work and make their lives easier. Here is a link to the investment memo template I use. Feel free to repurpose for your own needs: https://lnkd.in/ekGBjGWs

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Want to get funded in 2024? 🚀 Here are the benchmarks you must focus on (according to research): Based on the State of the Cloud 2023 by Bessemer Venture Partners, here are the fundability benchmarks you should be focusing on this year: 1️⃣ CAC Payback: → Good: 12-18 months → Better: 6-12 months → Best: 0-6 months 2️⃣ Operational Efficiency (Bessemer Efficiency Score): → Good: <0.5X → Better: 0.5-1.5X → Best: 1.5X+ 3️⃣ Net Revenue Retention: → Good: 100% → Better: 110% → Best: 120%+ 4️⃣ Time to Cash Out (Runway): → Good: 12 months → Better: 18 months → Best: 24+ months 5️⃣ Revenue Growth: → Good: 75%+ → Better: 100%+ → Best: 125%+ 6️⃣Logo Retention: → Good: >85% → Better: >90% → Best: 95%+ So, what does this mean for you? 🔥 It's time to get laser-focused on your metrics. This isn't just about impressing investors; it's about building a fundamentally strong, scalable, and sustainable business. 💡 Reflect on each metric: How does your burn rate influence your fundraising requirements? ⤵ Is your roadmap to cash-flow break-even persuasive? ⤵ Do your SaaS metrics indicate strong unit economics and net expansion potential? ⤵ What does your CAC payback efficiency reveal about your marketing and growth plans? ⤵ How does your operational efficiency stack up against industry benchmarks? ⤵ Are you effectively retaining and expanding your customer base? ⤵ P.S. If you liked this post, feel free to repost it for your network, too! ♻ If you like my content give me a follow Jimmy Acton Credit to Chris Tottman for the great Brain Dumps!

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Small VC funds vs. Large VC funds by the numbers Takeaways (data in the post below): “…small funds can materially outperform, but there is a clear added dimension of risk that shouldn't be ignored…” “…each investor needs to assess their own constraints of time, risk, and return expectations to develop a portfolio of VC funds that makes sense for them…” Great insights Samir, thanks for sharing! 🙏🏼 Allocate #VentureCapital #InvestmentStrategy #PrivateMarkets #VCInsights #RiskManagement #PortfolioManagement #Allocate #portfolioconstruction #lp #funds

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Do you know how VC funds calculate the average deal size for each investment in a startup? 🤔💸 If not, this article will give you the answer! 🧐👇 Assuming the fund size = $100 million 💵 Number of companies projected for investment: 20 🚀 (This varies by fund, but this is a common figure) Average deal size (1) = $100 million / 20 = $5 million 📊 However, there’s also a 2% management fee on the total capital each year 💰 So, over a typical 10-year venture capital fund lifecycle: 2% * $100 million * 10 years = $20 million 🧾 Average deal size (2): ($100 million - $20 million) / 20 = $4 million 💲 But even $4 million isn’t quite accurate, as funds also set aside reserves to invest further in high-performing companies in future rounds. 🏆 Assume 50% of the fund is reserved for additional investments in existing portfolio companies: $100 million * 50% = $50 million 💼 So, the remaining amount is: $100 million - $20 million - $50 million = $30 million 🏦 Here, $20 million is the management fee, and $50 million is the reserve for follow-on investments. Average deal size (3): $30 million / 20 = $1.5 million 💸 Finally, based on the performance of each startup, fund managers may allocate a larger (or smaller) initial investment. Thus, the initial investment range is typically between $1 million – $2 million 🔍💵 This gives you an idea of the investment range VCs might allocate to your startup! 🚀✨ If you need to build a roadmap for raising capital and growing your business from $1M -> $25M revenue in 03 years, you can check out this solution: https://lnkd.in/gu_ET-WY  

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Carta’s new QSBS offering for investors is one of the most exciting launches of the year. How it works 1. Investors can refer their portfolio companies. 2. Carta will prompt companies to get a QSBS Attestation to determine qualification. 3. If a company qualifies and receives QSBS Attestation, investors will receive an Attestation letter highlighting which securities held are QSBS-eligible. It’s that easy. With QSBS, investors can save millions and have peace of mind knowing they can provide an attestation letter in the event of an audit. More here: https://lnkd.in/eyX4BU-7 #investors #portcos #investment #captable #QSBS #carta

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$1.7B: the valuation of Zuora, a profitable public SaaS company with $415M in ARR because, 4.25x multiple Also, $1.7B: a run-of-the-mill Series B valuation in Generative AI (revenue optional) because, vibes (I know, I know, low growth at Zuora, but still)

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