Aditya Reddy

Fin Capital’s Fintech CEO Pulse Report is out! We surveyed over 50 CEOs and C-suite leaders of private companies from our portfolio and the broader fintech industry during June and July 2024 to get a quick pulse on what’s top of mind for fintech’s leaders. Here are some key takeaways: Optimism in the Air: More than 60% of CEOs reported being bullish or highly bullish on the fintech industry for the second half of 2024. Regulatory Changes on the Horizon: CEOs identified Cryptocurrency, Open Banking, and Buy Now Pay Later as the top three sectors likely to see increased regulation by the end of 2024. CEOs Want Business Development Support: Beyond capital and fundraising, business development support emerged as the top area where CEOs seek investor assistance.For more insights, including comments from my colleagues Ren Riley, Logan Allin, Matthew D. Mann, CFA, and Stephanie Perez, check out the full report here: https://lnkd.in/euHK8-9B

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The latest on YC valuations has been making headlines, so here's what I'm seeing as an early-stage fund manager investing at the pre-seed/seed. I’ve spoken to a couple dozen YC companies in the last year, all raising at $15M-$30M valuations regardless of traction or founder background – it could be a 20-year-old with a duct-taped MVP that pivoted eight times in the cohort. Compared to Techstars or other accelerators, that is 2x-6x higher than most valuations. Even for multi-time exited founders, the high bar is generally a $15M valuation regardless of product or traction. That said, YC companies could be considered de-risked due to the network effects of YC and historical data on YC producing ~10% of unicorns. Fundamentally, it makes sense if the valuation is higher because the expectations are that it’s less risky and the future outcome is bigger. There has to be a line drawn between what is fair and excessive. As an investor, I’m willing to pay a premium for opportunities that we believe can produce outsized returns regardless of the cost. Today, single-stage funds struggle to invest in YC companies because valuations are higher and therefore, the ownership is lower. For early-stage funds, without the ability to maintain future dilution, obtaining venture returns while consistently investing in YC companies is harder. The returns start reverting closer to public equities without the risk/reward matching typical venture returns.  For multi-stage funds, typically larger multi-hundred million to billion dollar funds, you can continue buying company ownership as your portfolio companies grow. A $1M-$3M pre-seed check is a drop in the bucket, so larger funds are less sensitive to valuations and look at YC investments as an option to fund a $10M+ check in the future. Whether YC is meant to create these dynamics or not, their newest model, a larger investment that carries an MFN, naturally incentivizes all the YC companies to take on investments at a higher valuation. In turn, this method coincidentally hinders emerging funds or single-stage funds from participating. Was this structured by design to pent-up deal flow for some of the tier 1s and maybe even LPs in the Bay Area? I guess you can index YC if you have a billion-dollar fund…..

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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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👻 Phantom Equity in Venture Capital: A Spooky Reward or Just Smoke and Mirrors? 🎃 Phantom equity may sound like a Halloween trick, but it can be a real treat for analysts and associates in venture capital—if you know what you’re getting into! 🍭 The Treats: - Skin in the Game: Phantom equity gives you a stake in the firm’s success without having to put up capital yourself. - Less Risk Than Real Equity: Avoid real-world risks of owning actual equity—no exposure to losses, just potential upside. - Deferred Compensation Without Tax Nightmares: No scary surprise tax bills until payout. 🎭 The Tricks: - Uncertainty of Payout: Phantom equity might never materialize, leaving you holding an empty trick-or-treat bag. - Sacrificing Immediate Compensation: Giving up higher salary or bonuses today for a payout that could be years away. - Less Control: Your payout might depend on factors outside your control. 💸 At the end of the day, phantom equity can be a valuable incentive from your founders if you believe in the firm’s long-term success. But sacrificing current compensation on a promise can feel like a scary leap of faith. 🤔 So, ask yourself: Does this phantom promise fit my current financial and career goals, or am I chasing a ghost I may never catch? 🏆 What’s your take on phantom equity? Have you ever taken the leap?

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💰Sharing a List of 80 Black-led VC funds (US based): About this list: I realized that I couldn’t find a current list of Black-led funds as of 2024 when a lot of new funds have launched over the last couple of years including GPs Sydney Paige Thomas, Terri Burns and more. I have been gathering a list of these funds in my network, and that I could find publicly over time so wanted to share with the ecosystem. Only 2% of VC funds are Black-led: I found 80 funds (maybe there’s more!). There are 3,417 VC firms in the US (according to NVCA). Founders - These funds invest from pre-seed through growth, some with a focus on diverse founders, others more broadly. ⅔ of them have OPEN funding applications that I’ve linked in the sheet. LPs - As mentioned, a number of these funds might not be in the databases used for tracking, so hope to get some more Black-led funds on your radar! VCs - maybe there are some funds you should get to know for deal sharing, etc 👉🏾Link to full list here: https://lnkd.in/gktBhY-W

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Just touched down in Miami for the VC Platform Summit Here’s what I’m most interesting in discussing with peers (and press!)… - hybrid VC service models & the Dragonfly SLA - platform’s role in the future of fractional work - a16z sizing themselves out of the early stage game (and the opportunity that creates) - the marginalization of crypto founders in the startup vendor ecosystem - the difference between platform in APAC and the US Reply or DM to link up!

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Go Gaurav Sharma and Capitalize! If you have a 401k from a previously employer, check out Capitalize.

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Impactful Biz, Ops & Investment Roles at Early Startups & VCs: • Chief of Staff to Ex. Head of Product at Google • Founding GTM at the most YC product used by other YC companies in the past four years • Chief of Staff to a Partner at a Top-Tier VC Fund • Head of Platform of a NY State Backed Accelerator • Investment Associate at a Seed Stage Fund Investing in Category-Defining Companies • Partner at a Defense-Focused VC Fund • Chief Revenue Officer of a New Space Company in El Segundo • Venture Capital Analyst at a fund investing in overlooked geographies • Investment Associate at a Spirit-Focused Fund • Strategy & Ops Lead at a Company Focused on Helping Improve Autism • Senior Product Manager at a Company Focused on Building Shopify for Content Creators • Program Manager for a Space Security Company • Open-ended Investment Position at a Top-Tier Accelerator • Biz & Ops Lead for One of the Most Loved Digital Consumer Products 💸 All companies are well-funded and backed by top-tier investors. ⬇ You can find links to the roles above, plus many more, in the comments.

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Super helpful article and accompanying doc with a #Startup #Equity Calculator to determine the equity for early hires, thanks to Pear VC head of talent Matt Birnbaum! Thanks for sharing Pejman Nozad! 🙏🏼 You can read more here How to structure startup equity for early hires: https://lnkd.in/ggmpT5-Y Google Doc: https://lnkd.in/gjsvths6

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Great analysis by the AGC team on SaaS public company comps. It's worth a look as we recalibrate mid-way through earnings season. The analysis aligns with the broader Nasdaq equity performance, where the Mag 7 (or fab 4 now :-)) have shown more resilience than the rest of the market. #AGC #SaaS #EarningsSeason #Nasdaq #EquityPerformance

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Insightful breakdown from my great Partner Omri Amirav-Drory on the simple factors that really separate the top 1% of investors from the rest, and how more operators should become investors! https://lnkd.in/gEiZdT2h

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After the first deep dive discussion w/ founders I often hear a comment "I wish I had heard about this alternative [to all-in must-become-a-unicorn] way to build a startup earlier as I have wasted years in pursuing the wrong thing". Our mission is that no founder would ever need to say that again as it is such a waste. Us preaching the gospel 1:1 just doesn't scale, hence we use mass media to multiply our efforts - that's how Gorillacast came to be. The 1st episode is out, featuring yours truly. "How can you know what food you like unless you taste everything" said a chef. How can founders make informed choices about the best strategy for them to follow unless they know of all alternatives? This might not be of interest to you but pls spread the word so that the founders who should hear it can find it. I have a dream!

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Early-Stage Startup Success Cacheflow’s CEO, Sarika Garg, shares key advice for early-stage founders on how to prepare for acquisition: Get a Part-Time CFO Early: Don’t rely solely on a bookkeeper; a part-time CFO can keep your financials clean without taking up your time. Invest in Organization from Day One: Use simple tools like Google folders, ClickUp for project management, Zendesk for support, and a well-structured CRM like HubSpot. Be Prepared for Opportunities: You never know when a potential buyer might reach out, so keep your books and reports ready-to-go. Being organized early saves time and headaches later—how prepared is your startup for that unexpected opportunity?

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Since early 2021, VC quarterly exit values have plummeted to $50B or below, a stark contrast to the six consecutive quarters of $100B+ exits before then. With IPOs dwindling and M&A activity slow, the future of venture industry exits appears uncertain. Will we see a surge in private venture-backed company acquisitions? This could be a crucial and innovative strategy to boost VC exits. Increased private acquisitions might offer a much-needed lifeline, providing a creative solution to the current exit drought in the venture capital market. #venturecapital #inspireglobalventures

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I met Hersh Tapadia and Darrell "Jeremy" Freeman in late 2016 at NC IDEA LABS (formerly Groundwork Labs). We were a bunch of kids working on startups. We thought we had it figured out. You know the rest of that story....we had no clue! But Hersh and Jeremy did have it figured out. Not the specific thing they were working on. They pivoted a few times out of Groundwork Labs. But what they knew how to do as well as any founders was to be curious and listen to their customers. They WERE their customers. They were engineers building for engineers (leaders and teams). They were humble and knew what to ask. They were great at learning. Then they brought on Adam Dahlgren and the founding team felt complete. "Off to the races" means something different to every company. In Allstacks' case, it meant taking the disciplined, thoughtful, thorough approach to growth. And while the team is way more focused on executing for their customers than cheering about a funding announcement, it's also important that they do get their cheers. This is day 1 for these guys. They're building something incredibly big and incredibly impactful. And they're doing it the right way. And as a final side note, when I think of people I want in my corner - to confide in, to learn from, to grow with - I think of Hersh. He's a founder's founder. A CEO's CEO. And one heck of a guy.

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If I was to do a monthly podcast epiosde segment called This Month in VC 1) Who should I invite as a guest for this segment? 2) Any VC's who would be down to come on and share their stories + insights on this? Basically recapping what happened in that month in VC - It would be an under 30 minute discussion - Recorded remotely using Zoom, Riverside DM me or reply to this if interested Inspired by Harry Stebbings This Week in SaaS to try out a different format

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Attention investors: you can now refer your portfolio companies for qualified small business stock (QSBS) attestations from Carta. The benefit? Potentially paying zero federal capital gains tax on your holdings in these companies, up to 10X of your investment when selling your shares. Plus, peace of mind knowing you can provide an attestation letter in the event of an audit. #investors #QSBS #portfoliocompanies #venturecapital #VCs More here: https://lnkd.in/eshMn_hS

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