Doug Cunningham

There's a massive disconnect between VCs and Founders and it boils down to a differing perspective on two critical things: Timeline and Success Outcomes Timeline: VCs: Venture Capitalists typically think in timelines of 5-10 years. Their job is to understand various markets, where they're headed and then make decisions on what will be the key infrastructure in those spaces. They understand that there are going to be big shifts in their portfolio over the life of a fund and don't really get too bogged down on week to week things (unless they have to put a term sheet in!) Founders: Founders are flying by the seat of their pants, trying to make big things happen every day. They'll make projections for a few years but often think tactically about what's in front of them. They are often so busy putting out fires and operating on day-to-day basis that they don't have time to think about the next 2 years. Success Outcomes: VCs: Many VCs expect 75%+ of their portfolio to end up being worthless in the long run. The reason it's sometimes hard for them to care as much is because the success of their fund is not predicated on any one startup success (unless it 100x in which case it can return the fund in its entirety). I've heard of scenarios where VCs have acquired other fund's stakes in startups only to ignore founders because they didn't think those companies would be successful. Founders: This is their baby! They don't view failure as an option and want desperately to succeed. If it fails they likely will have spent years of their lives and hundreds of thousands on their dream to end up having to shut it down. VCs don't feel this pain nearly as viscerally as founders. When it comes to making an investment decision, this disconnect can drive a wedge between founders and investors because neither truly sees the other's perspective. VCs can be wildly successful being right 30% of the time. Founders get maybe a few chances to make it happen. #founders #startups #vcs

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Blueprints of a $4B success story: How focusing on the right team, structured employee integration, and a strong cultural foundation can propel your startup 👇 ➡ 𝗜𝗻𝘁𝗲𝗿𝘃𝗶𝗲𝘄𝗲𝗲: Garrett Langley, Founder & CEO of Flock Safety 🔌 𝗜𝗻𝘁𝗲𝗿𝘃𝗶𝗲𝘄𝗲𝗿: Logan Bartlett, Managing Director at Redpoint Ventures ✏ “The $4B Tech Startup Solving Crime with AI” ⭐ 𝗙𝗼𝗰𝘂𝘀 𝗼𝗻 𝗯𝘂𝗶𝗹𝗱𝗶𝗻𝗴 𝗮 𝗴𝗿𝗲𝗮𝘁 𝘁𝗲𝗮𝗺, 𝗮𝘀 𝘁𝗵𝗲𝘆 𝘄𝗶𝗹𝗹 𝗳𝗶𝗻𝗱 𝗴𝗿𝗲𝗮𝘁 𝗺𝗮𝗿𝗸𝗲𝘁𝘀 𝗮𝗻𝗱 𝗯𝘂𝗶𝗹𝗱 𝗴𝗿𝗲𝗮𝘁 𝗽𝗿𝗼𝗱𝘂𝗰𝘁𝘀: "I am a staunch believer that people and products trump market. I think great teams build great products and find great markets. I don't know any other way to do it... And so I've just always believed if you have a great team, the rest comes with that." ⭐ 𝗨𝘀𝗲 𝗮 𝟵𝟬-𝗱𝗮𝘆 𝗽𝗹𝗮𝗻 𝗳𝗼𝗿 𝗲𝘃𝗲𝗿𝘆 𝗻𝗲𝘄 𝗲𝗺𝗽𝗹𝗼𝘆𝗲𝗲 𝘁𝗼 𝗱𝗿𝗶𝘃𝗲 𝗮𝗹𝗶𝗴𝗻𝗺𝗲𝗻𝘁, 𝘀𝗲𝘁 𝗲𝘅𝗽𝗲𝗰𝘁𝗮𝘁𝗶𝗼𝗻𝘀, 𝗮𝗻𝗱 𝗲𝗻𝘀𝘂𝗿𝗲 𝘁𝗵𝗲𝘆 𝗺𝗮𝗸𝗲 𝗮𝗻 𝗶𝗺𝗽𝗮𝗰𝘁 𝘄𝗶𝘁𝗵𝗶𝗻 𝘁𝗵𝗲𝗶𝗿 𝗳𝗶𝗿𝘀𝘁 𝟯𝟬 𝗱𝗮𝘆𝘀: "What we tend to do is put together a very actionable 90-day plan for every new employee. Are people actually gonna make an impact? Is the plan actionable? And what that does is it drives this deep level of alignment between a new employee. Because you're effectively telling them this is how I'm going to keep score…" ⭐ 𝗪𝗿𝗶𝘁𝗲 𝗱𝗼𝘄𝗻 𝘆𝗼𝘂𝗿 𝗰𝗼𝗺𝗽𝗮𝗻𝘆 𝗰𝘂𝗹𝘁𝘂𝗿𝗲 𝘁𝗼 𝗺𝗮𝗶𝗻𝘁𝗮𝗶𝗻 𝗶𝘁 𝗮𝘀 𝘁𝗵𝗲 𝗰𝗼𝗺𝗽𝗮𝗻𝘆 𝘀𝗰𝗮𝗹𝗲𝘀, 𝗲𝘀𝗽𝗲𝗰𝗶𝗮𝗹𝗹𝘆 𝗶𝗻 𝗮 𝗿𝗲𝗺𝗼𝘁𝗲 𝗲𝗻𝘃𝗶𝗿𝗼𝗻𝗺𝗲𝗻𝘁: "If you don't write your culture down, it is inherently weak. In the absence of a written culture, your culture will just fade away. And in a remote environment, even harder, right? Because you don't see these people, you don't interact with people." ⭐ 𝗘𝗻𝘀𝘂𝗿𝗲 𝘁𝗵𝗮𝘁 𝗲𝘅𝗲𝗰𝘂𝘁𝗶𝘃𝗲𝘀 𝗮𝗿𝗲 𝗱𝗼𝗶𝗻𝗴 𝗿𝗲𝗮𝗹 𝘄𝗼𝗿𝗸 𝗮𝗻𝗱 𝗻𝗼𝘁 𝗷𝘂𝘀𝘁 𝗺𝗮𝗻𝗮𝗴𝗶𝗻𝗴 𝗽𝗲𝗼𝗽𝗹𝗲 𝗯𝘆 𝗵𝗮𝘃𝗶𝗻𝗴 𝘁𝗵𝗲𝗺 𝗼𝘄𝗻 𝗢𝗞𝗥𝘀 𝗮𝗻𝗱 𝗽𝗿𝗼𝘃𝗶𝗱𝗲 𝗱𝗲𝘁𝗮𝗶𝗹𝗲𝗱 𝘂𝗽𝗱𝗮𝘁𝗲𝘀 𝗼𝗻 𝘁𝗵𝗲𝗶𝗿 𝗽𝗿𝗼𝗴𝗿𝗲𝘀𝘀: "I expect anyone pretty much VP and above to own at least one if not two OKRs. One of the ways we're able to do that is every two weeks when we do a check-in, whoever is the owner is actually the one writing the update and it goes to the entire team." ───── 👉 Follow me, Alexander Small, for tactics and strategies for building startups from industry-leading Founders, Operators and Investors

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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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🔹SaaS leaders, business owners, founders, do you ever stop selling? From my experience, I haven't come across a success story of a business with $0-10m ARR where the founder wasn't selling. Early sales leaders must sell alongside founders to grasp what works and what doesn't. Replicating the founder's passion and product understanding can be challenging. Even the best are no replacement. Paired together, they can be a powerful team building scale together. What's your take on this? How did it go? 📸: New Orleans- random factory street art #BusinessOwners #Founders #SalesLeaders #Entrepreneurship #SaaS

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Successful ventures that have achieved Product-Market Fit and have scaled their operations will probably face this new reality: 𝗧𝗵𝗲 𝗻𝗲𝗲𝗱 𝗳𝗼𝗿 𝗹𝗶𝗾𝘂𝗶𝗱𝗶𝘁𝘆 𝗳𝗿𝗼𝗺 𝗽𝗿𝗼𝗳𝗲𝘀𝘀𝗶𝗼𝗻𝗮𝗹 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀. As explained by Mark Suster, this liquidity is most likely to come from Private Equity firms, who have the expertise to evaluate companies based on long-term fundamentals, much like the approach taken by Warren Buffett (rather than the speculative one from crypto-traders 😉). Valuation is not a one-time event but a dynamic process that follows a chain-like logic, where each link is interconnected. An irrational (high) valuation early in the chain can have significant repercussions later on, leading to fewer financing or liquidity options - as professional investors will not accept it. You may avoid this by establishing a clear valuation roadmap that demonstrates a consistent risk/return rationale for each type of investor, from business angels and venture capitalists to Private Equity firms and the Public Market, spanning from the first funding round to the eventual public offering. #EntryPriceMatters #ValuationRoadmap #PrivateEquity

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“this guy reminds me of Michael Ovitz, a f*cking DEAL making machine” Someone said this about me in a YouTube video. This is definitely one of those things where in my opinion, the role of a syndicate lead is different from a traditional VC fund manager. I do view myself as a high volume investor, where we are consistently bringing high-quality deals to our LP-base to invest via SPV’s. The beauty here is that our LPs can decide where and how much to invest. There is no commitment upfront unlike an LP in a traditional venture fund. That being said, it is important to understand the volume of deals we invest in per year as it’s more than (most) traditional VCs. Some may disagree, and there are multiple strategies to run a syndicate, but I do think that bringing 50+ deals a year provides for an optimal LP experience. These syndicate LPs are here to get access to some of the best startups and need to see a number of deals to find those that check all the boxes for what they are looking for as investors. There’s nothing wrong with doing 4-5 high conviction bets as a syndicate lead per year, however the LP experience in that syndicate is weaker in my opinion. Especially if we are talking early-stage deals. One syndicate you get 5 deals to review to invest in, and the other you get 50 deals to review and invest in… Of course, quality is more meaningful than # of deals. Whether I see 1 deal a quarter or 2 deals a week from a syndicate, each deal they push forward has some impact on their brand or how an LP thinks of the lead going forward. So yes, consistently getting into competitive, high-quality deals is more important the # of deals, but LPs are here to see a bunch of deals to find those to invest in. They do not back 100% of the deals you put forward nor should they. My Last Money In Media partner Zachary also put out a great piece on “📊LP Strategy – Why You Should Take an Index Approach to Startup Investing” that I’d urge folks interested to read. -- Powered by Sydecar, Last Money In Media is the most actionable venture capital newsletter. Written by Zachary Ginsburg and Alex Pattis who have deployed > $200M across 750+ SPVs.

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OpenAI just wiped out hundreds of startups again. VC's and Angel Investors are in shambles. Here's what they're missing... The models will continue to get better at ingesting data from any modality (text, video, images, sensor data, etc.) and generating outputs in any modality. The output quality will continue to improve in every way possible. So if a startups entire value proposition is in their ability to achieve some higher quality output, they will become obsolete. The real play (for VC's) is to invest in startups that uniquely captures data in high value environments. Invest in the inputs. What does this mean? Assume a highly intelligent LLM with perfect memory already exists. It can ingest live video, voice, text, images, recorded video, podcasts/audio, etc. It's ability to generate relevant results to the user relies completely on the input data it receives. This is why prompt engineering is a thing. Look for startups that are building a solution to collect the users data that is more than simple text prompting. Fitness Watch -> send the data to ChatGPT for analysis Lead List -> send the data to ChatGPT to enrich the list Emails -> send the data to ChatGPT to write in your style Live Video Glasses -> send the data to ChatGPT for daily breakdowns Screen Recorder -> send the data to ChatGPT for SOP creation Etc. The large LLM providers will continue to improve their models, but it will be hard for them to compete on customization. You achieve customization by inputing custom data. The more methods you have for collecting data, the better the LLM will perform for your use case. Trying to compete on the actual output is doomed to fail. Our approach: Give the LLM tools via API's that allow them to collect, analyze, manipulate, and generate data autonomously within an organizations workflow. Essentially, building AI Agents. It's answering the question 'okay I'm collecting all of this data within my organization, now how do I use it?.' We're letting the LLM providers build us the 'brain' and we're letting the VC backed startups build us the input channels... While we glue it all together to optimize processes with Agents. Our Agents get better as we feed them a stream of data about the organization. Every sales call, client call, internal meeting, etc. needs to be recorded and saved. Every email, slack message, social media interaction, etc. needs to be saved. Literally everything that happens inside your business, needs to be saved in a database. When we give your AI Agents access to this data, they can perform their tasks as good as, if not better, than a real employee. If you're a VC, stop investing in GPT wrappers that aren't collecting data from unique sources. #ai #aiagents #chatgpt #gpt4o #startups #investing

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One of the earliest questions we ask of founders is: what milestones do you hope to achieve with funding? The reason we ask that question is that it's next to impossible to raise your next round of financing without having delivered some level of quantifiable progress. And most importantly, that progress must be sufficient to attract the next round of funding. If you can't get there, you're looking at an extra 50-65% dilution if you have to raise a bridge round. But here's the key, even bridge investors, who are generally already invested in the company, want to see progress that trends to the next round. So, in order to avoid having to raise a bridge, raise enough capital to hit meaningful milestones (with some cushion). That extra 2-5% dilution stings far less than an extra 15% later.

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Could not agree more. Operations & Sales Operations must be scaled in order to set up a CRO for success. Hiring a CRO without understanding the basics of what they need to succeed is too common and a waste of 18 months. Great post.

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A simple way to understand seed venture capital: a founder needs to build a company worth roughly 20x the size of the VC that invests in it. Here’s why: A typical seed stage fund has a 10-year life and will pitch its investors 12% a year (compounding) returns. That means it needs to 3x it’s fund over 10 years. Statistically, it’s likely going to achieve most of that from a single investment, which it will likely own roughly 15% of at exit. So for founders the math is simple. You need to convince a VC that you can build a company that is worth the Venture Capital Fund Size x 20 (or 3/15%) I.e. A $100mm seed fund will be betting you build a $2bn company. The bigger the fund the bigger the number. Keep this in mind when you are pitching.

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Greed and Fear, AI (adoption) style. In investments we're used to talking about greed vs fear, now we're seeing this same pendulum applies when it comes to consumer sentiment towards AI adoption. Concern is fear, that's obvious, and if you think about it a bit excitement comes from a form of greed in this case: the excitement for AI is because people hope it will help them do more with less time and effort invested - a greed for precious resources (which can be translated to money as well). Consumers need to invest some time, effort, as well as money in order to come up the AI learning curve (learning the right tools and how to prompt them). Playing around with AI is one thing, seriously using it professionally or personally is a bigger step that will be affected by the greed vs fear. It's too bad Pew Research Center didn't separate out professionals' opinions in a professional capacity (link to findings in the first comment), but still they find that for the first time the majority of Americans are concerned. The increase in concern (fear) happens just as research is starting to demonstrate that AI is making people more productive, which should have fueled excitement (greed). According to Ipsos, two thirds of people think AI will profoundly change their daily life in 3-5 years. Almost half say it already has (link in second comment). Interesting... And now this entire post rewritten by LI's AI: Greed and fear are familiar concepts in the world of investments, but did you know that they also apply to AI adoption? Consumer sentiment towards AI is swinging back and forth between concern and excitement. Concern is fear, and excitement is a form of greed. People hope that AI will help them do more with less time and effort invested, a greed for precious resources. However, investing in AI requires time, effort, and money to learn the right tools and how to use them. Playing around with AI is one thing, but seriously using it professionally or personally is a bigger step that will be affected by the greed vs fear pendulum. According to Pew Research Center, for the first time, the majority of Americans are concerned about AI. This increase in concern happens just as research is starting to demonstrate that AI is making people more productive, which should have fueled excitement. Ipsos reports that two-thirds of people think AI will profoundly change their daily life in 3-5 years, and almost half say it already has. What are your thoughts on the fear vs greed of AI adoption? Share your opinions in the comments. #AI #fear_greed #investment #genAI

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Key takeaways from VC Goat - Vinod Khosla podcast. - The firm cares more about working on interesting problems with large technical solutions rather than just maximizing IRR. The team is there because they believe in the mission. - Khosla assumes they've lost the money the day they invest, and then maximizes for the upside opportunity. He calls it "option value investing" rather than IRR investing. - Khosla has contrarian bets in AI (neuro-symbolic computing, probabilistic approaches), biotech, robotics, crypto, and more. - He believes aviation fuels, fusion energy, new transit systems, and other contrarian areas ignored by most investors will be huge opportunities. - Most large innovations come from outsiders, not industry insiders. Khosla looks for founders who can learn a business rapidly rather than have deep domain expertise. The Future Impact of AI - AI will be deflationary and increase productivity growth to 4% annually vs the typical 2% forecast. This will cause great abundance but also increasing income inequality. - Bipedal robots will take over most manufacturing and manual labor jobs within 20-25 years. This will free humans to be more creative and pursue their passions. - Education will shift from job training to creativity. Uniquely human elements like taste and curation will be most valued in an AI-enabled world. https://lnkd.in/gqBsmbks

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Valuations are a VERY intimidating topic for most Micro SaaS Founders / Sellers and Acquisition Entreprenuers. And rightfully so. There is almost no publicly available data to inform benchmarks and assumptions (think: what similar firms sold for and the performance metrics of those firms), and most deals come with unconventional deal structures (seller’s notes, earnouts, etc.). To make matters worse, other valuation methods rely on complex financial topics and require solid modeling skills. Oh ya, and the stakes are HIGH. For most, these transactions represent a life’s work or life’s savings. To demystify the topic, I'm excited to explain conventional valuation methods and discuss the challenges unique to Micro SaaS. Let's start with multiple-based valuations: Imagine you're valuing a house. You wouldn't just pull a figure from thin air. Instead, you'd consider similar properties, their sale prices, the size, the amenities, right? The same principle applies to multiple-based valuations – consider it the "real estate appraisal method" for businesses. For instance, you have a SaaS company earning $1 million ARR. Your industry's average ARR multiple is 2.5x. Your company's value? $1 million * 2.5 = $2.5M! Simple, isn't it? But, here's where we halt: DO NOT wholly rely on ARR multiples! Yes, ARR offers insights into growth potential and customer retention, but Micro SaaS is all about acquiring and growing profitable businesses to yield income. Hence, EBITDA multiples are your true marker. Be mindful, though, of limited public data, fluctuating market sentiments, and overhyped growth prospects—all these can sway your valuation, often unfavorably.

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Great insights about exits the next few years

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Marc Andreessen, cofounder of a16z, on the most common fundraising mistake that founders make: "The single biggest thing entrepreneurs are missing on fundraising and how they run their companies is the relationship between risk and raising cash." - Marc Andreessen The lesson? Understanding risk and its impact on your ability to raise funds is crucial. As entrepreneurs, it's vital to not just chase cash but to build a business model that intelligently manages risks. A clear and impactful message, encouraging entrepreneurs to reevaluate how they approach the crucial stages of building and funding their companies. By aligning risk management with your fundraising strategy, you open the door to more sustainable growth and success. PS. Check out 🔔 for a winning pitch deck template created by Silicon Valley legend, Peter Thiel! https://lnkd.in/ejp-Bhnu

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DO NOT listen when the world tells you to 'do the biggest deals possible' because they provide the greatest return on effort. Scale does not equal greater performance and productivity in SaaS. As of now, we're punching like a $50M ARR Private SaaS firm. #microsaas #acquisitionentrepreneur #saasgrowth

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Perfect summary of current market conditions from the legendary Mark Suster. The best businesses you can build today are bootstrapped and highly profitable.

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VC exits next 10 years - much fewer IPOs - much smaller strategic M&A - PE will become the norm I explain in this clip how it will affect VC Full episode: https://lnkd.in/gaJ-TWZE

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If you expect to include VC platform professionals as a part of your VC GTM, you should ask yourself these questions. 1️⃣ Where does the firm focus? This may sound obvious, but at the very least you must be thinking about stage and geo of the firm before engaging. Ideally, you will have also vetted the portfolio for your ICP. 2️⃣ What is the team structure? A two-partner firm with an Associate who supports the portfolio is very different from 25-person team with a Platform team lead and 2-4 direct reports, not to mention the larger teams of 100+. As always, a well-managed team of any size will be more preferable to work with than a platform lead or team who doesn’t have much internal influence. 3️⃣ Does the firm offer support to its portcos that aligns with your product? “VC Platform” encompasses several disciplines: community, talent, bizdev, marketing, and investor relations. Be careful not to make assumptions, especially if someone has a more general title (e.g. “Platform Manager”). Oftentimes, firms will show some intent re: differentiation in their marketing, which can give you a general idea. 4️⃣ Is there a partner who is only focused on platform? Some firms with several years of platform under their belt are elevating their veterans to partner. This is a value-add choice on the part of the firm that is intended to signal to potential investments but can also signal to you that there’s someone to truly level with on the other side. 5️⃣ What goals does the platform lead or team have this quarter? This year? Firms are idiosyncratic and on their own respective trajectories, so you need to ask this directly. If you assume it’s something general like “portfolio growth” or “making intros” you’re missing out. A great platform lead and team is worth their weight in gold. But even the best team won’t be smart for you to work with if there’s not broader alignment. I suggest focusing on what seems like a high-potential corner of the market for you and building out from there. #vc #vcplatform #saas #fintech #gtm #partnershipleaders

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