Jon Brodzik

Want to be a Venture Capital Scout? Scout for Syndicate leads. I’m biased, but I think SPV/Syndicate leads are some of the best connections for VC scouts. As a syndicate lead, I’ve leaned into working with VC scouts the past 3-4 years. It's been a great way to gain unique access to deal flow and many of my most exciting portfolio companies have come from various “scouts”. Given the deal by deal investing strategy and ability to share carry with those who support sourcing & diligence, it’s become increasingly common for syndicate leads to actively partner with scouts and share carry or upside in the SPV. What’s in it for the scout? Deal x deal carry. While there are multiple traditional VC scout models that exist, the syndicate scout model is pretty straightforward. If you source a deal and support diligence, the syndicate lead is going to share some of the carry with the scout, and likely a more meaningful amount than a traditional venture fund. This is of course an SPV, so you are getting carry for the specific deal you sourced and not fund-level carry. A little more background on why the SPV model aligns with VC scout deal sourcing… Syndicate leads are structured (and many times set up) to invest in more companies than a traditional venture fund. In order to consistently bring LPs high quality deals, it makes sense to partner with folks in your network who have strong deal flow. Most times the carry split from syndicates will be more generous than that of a traditional venture fund. Syndicates do not necessarily have a certain number of portfolio companies they can invest in, meaning as long as they are getting access to quality deals that LPs want to participate in, then they will: 1) Be more likely to say yes and run the SPV into that investment and 2) Be more willing to provide a higher carry split, especially if you as a scout show you can repeat this with more future access In summary, if you are going to scout for venture funds, you might as well explore doing so with syndicates and capitalize on deal by deal carry/upside. Disclaimer: If you are scouting deals because you want to get into VC, working with traditional VCs is likely better from a networking standpoint, but if you are scouting to capitalize on carried interest/upside, I think the SPV lead route can be more attractive, and more frequently. -- Interested to see if you are a fit for our new Deal Sheet accredited investor product? Explore Deal Sheet to access 100-200+ of the best SPV startup (pre-seed to pre-IPO) investment opportunities per year. Deals are curated by Zachary Ginsburg & Alex Pattis (deployed > $200M across 750+ SPVs) across 50+ syndicate leads.

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If you're building a fintech startup, you likely know of this investor, but just in case... This week's findfunding.vc spotlight is on Neil Kapur from TTV Capital. He: 🛫 Is based in SF & Atlanta 💲 Has spent time at Google in consumer-facing payments & at two fintech startups  🏔️ Loves alpine mountaineering and has climbed Kilimanjaro, Denali, Rainier, and more!! Amongst founders, Neil and the team at TTV Capital , including Gardiner Garrard, Mark Johnson, Sean Banks, Lizzie Guynn, and Laney Lewis are known for saying “lift, not lean.” They believe that their job as investors is not to create work for founders, but instead ask the right questions and help navigate to the best outcomes. Knowing Neil well personally, he's not only my go-to person for anything related to fintech but I can also highly recommend having him on your cap table - he's the kind of human you want to have in your corner during both good times and bad. Make sure to: ✉️ Pitch him at nkapur@ttvcapital.com ➡️ Follow TTV Capital on LinkedIn For more, check out our funder spotlight card below along with TTV Capital's profile on findfunding.vc (link in comments).

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Carta’s valuation could be cut by $6.5 billion – partially due to a LinkedIn post. Carta is a cap table management software company that tried to expand into a platform for private stock transactions. Its valuation over the years: 2019: $1.7 billion 2020: $3.1 billion 2021: $7.4 billion 2022: $8.5 billion In early 2023, Carta was accused of using their customers' data without permission to sell shares. This forced Carta to leave the secondary trading business. Combined with lawsuits, toxic work culture accusations, and an unprofitable fund administration business resulted in a $65 million loss, despite $380 million in revenue. Carta is looking for a secondary sale at a valuation of $4 billion, but they’ll be lucky to get $2 billion.

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Juniper Square recently released their look back at the state of venture in Q2 2024, and the data is interesting. 👉 The liquidity drought continues to stifle fundraising, with $37.4B committed to 255 funds YTD. 👉 In the current climate, established managers are securing 77% of fund value YTD, the highest concentration in the last decade.  👉 Over 63% of capital raised in 2024 so far is in funds of $500M+, the second-highest percentage in the last decade. 👉 Q2 reflects an uptick in US venture deal momentum, with quarterly deal count climbing to the highest level since Q2 2022. 👉 Q2 data shows a third consecutive upward quarter in both exit value and the total number of exits.  👉 Q2 hit a 9-quarter high in total number of exits, and the total exit value recorded was the second-best quarter since Q1 2022. The data shows that the landscape is especially competitive for emerging managers. When it comes to generating returns though, a fresh perspective can help find the most interesting deals. I wrote a bit about this last week, if you’re curious to dig into stats on unicorns at the seed stage, and the funds they’re raising from. You can check out the full report from Juniper Square here: https://lnkd.in/eN6VnY-k #emergingmanagers #stateofvc

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In a sea of middle market private equity firms, it’s vital to differentiate. Here's what our portfolio companies say gives TCP its edge. 1. We speak their language 2. We don’t have ego 3. We are strategic partners with resources Traub Capital Partners Co-Managing Partner, Brian Crosby, tells us how...

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M&A isn’t just an opportunity for the target or buyer. For publicly traded companies, M&A announcements also bring profit-making opportunities for investors. Investment strategies are designed around the probability of a successful deal. 👉 Merger Arbitrage Merger arbitrage is a strategy where investors buy a target company's stock after an M&A announcement. The goal is to profit from the difference between the current market price and deal price. Say Company A announces it will acquire Company B at a share price of $25. Assume Company B, at the time of announcement, is trading at $20/share. If the market is 100% sure the deal will occur, the concept of efficient markets dictates that the share should trade at $25 right after the announcement. However, there are risks involved in every deal. This arbitrage spread occurs between the announcement and the merger's completion periods. The target company's stock usually trades at a discount after a merger announcement - presenting an arbitrage opportunity. Gradually, the price will convert to the offer price set by the acquirer once the completion risk diminishes. Several studies have indicated excess positive returns with this investment strategy. However, there are also signs of returns decreasing over time as markets become more efficient. Some factors that determine the successful completion of a deal: - Does the buyer lack credibility? - Does the financing source lack credibility? - Is the deal non-definitive? - Is the regulatory risk too great? - Is there a buy-side vote? Arbitrage strategies are usually carried out by sophisticated investors, i.e., financial institutions. Have you ever successfully pulled off a merger arbitrage? Share your experience 👇 . . . 𝙄𝙣𝙩𝙚𝙧𝙚𝙨𝙩𝙚𝙙 𝙞𝙣 𝙢𝙤𝙧𝙚 𝙈&𝘼-𝙧𝙚𝙡𝙖𝙩𝙚𝙙 𝙘𝙤𝙣𝙩𝙚𝙣𝙩? 𝙈𝙖𝙠𝙚 𝙨𝙪𝙧𝙚 𝙩𝙤 𝙛𝙤𝙡𝙡𝙤𝙬 𝙢𝙚. #entrepreneurship #venturecapital #startup #mergers #acquisitions Serial Entrepreneur & Investor Helping Startups Become Unstoppable – David Hauser

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New Private SaaS M&A data available for Q1/24! 📊 Software Equity Group just released its latest quarterly report for 1Q/24 on the private SaaS M&A space.* It is packed with interesting insights into buyer types, valuations, preferred segments/verticals, etc. _____ 📄 Brief summary: ➡️ Software Industry M&A Trends The first quarter of 2024 (1Q24) saw steady M&A activity with 823 deals, consistent with last year and significantly higher than pre-pandemic levels. This trend reflects a sustained interest in the software sector. ➡️ SaaS Sector Dynamics SaaS M&A experienced a slight dip recently, influenced by economic factors and interest rate hikes. Nevertheless, activity remains robust, showing a 50% increase from early pre-2022 averages. ➡️ Valuation Insights M&A valuations have stabilized, with a median EV/TTM Revenue multiple of 3.8x and an average of 5.1x. As interest rates are expected to drop, we may see an impact on future valuations. ➡️ Vertical Market Focus Vertical SaaS made up nearly half of the Q1 deals, dominated by Healthcare and Financial Services. There’s growing interest in sectors like Hospitality, Retail, and Manufacturing, indicating a diversification in investment focus. ➡️ Private Equity Influence Private equity continues to drive SaaS M&A, involved in 59% of the deals this quarter. This is driven by PE-backed strategics (48%) that continue to leverage an ideal mix of product synergies and capital allocated to M&A _____ Doesn't look so bad after all. If you ask me, there is cause for slight optimism. What do you think, are we through the worst? *Link to the full report below! 🙂 #saas #startups #vc #venturecapital #funding #exit #valuation #mergersandacquisitions #privateequity

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Venture returns, especially in cleantech, can take more than a decade to get to a DPI of over 1x, and it’s getting worse. This is part of why large LPs choose to invest more of their alternatives allocation into PE or real estate rather than VC.    https://lnkd.in/g96HKUSt

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Valuation multiples step down at each new round …and that’s completely normal 👀 These drops are not a sign of weird times or a broken system ARR multiples are supposed to go down over time Because eventually they have to trend to the public multiples ✅ Now… As long as your revenue stays on the venture scale path → your revenue multiples will keep dropping → but your overall valuation will go up So if you’re going to raise capital… I think it’s important to understand that the multiple you raise at isn’t what you’re actually worth TODAY ❌ It’s the multiple you’re worth assuming you hit those FUTURE venture scale expectations (once you hit $1M ARR, can you get to $100M ARR in 7 to 10 years?) Which basically means that once you hit $1M ARR... You’re growing at 10% month over month for the next 24 months straight before starting to slow down to 2x year over year growth So even though Seed to Series A sees the biggest drop in multiples, that 10% mom growth will still drive up your valuation ----------------- But here’s the thing… If you’re growth slows to less than 2-3x between Seed and Series B → or sub $10M in ARR Your multiple doesn’t just drop to the Public Index (currently at 6.4x) It’ll actually fall below that index (closer to a 1-3x multiple) Because the acquirer is now arbitraging between they pay for you (1-3x multiple) and what they’re worth (6.4x multiple) ----------------- So what can you do? Focus on the milestones that’ll fuel your growth → instead of fundraising rounds or paper valuations And keep your cap table as light as possible until you’re ready for step 3️⃣ 1️⃣ Problem Solution Fit 2️⃣ Go to Market Fit - unlocks Series A 3️⃣ Scale PMF #1 - Series A use of funds 4️⃣ Scale PMF #2 -- ♻️ Repost to help a founder in your network Click 'visit my website' at the top of this post to register for my free Unlock your Series A session on how to navigate VC expectations in this market

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Great presentation of the laws of gravity in Venture Capital and startups

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Your sourcing game is the lifeblood of a syndicate Notably Zachary & I have very different sourcing models as do different funds. Funds like Summit are notorious cold calling machines to find great deals. Some funds like Proof built their model as a co-investment / pro-rata fund and work with VC funds directly to source the best opportunities. Another fund we’re close with leverages their deep technical network founders to get introductions into the companies on the bleeding edge of tech. Zachary's sourcing is almost entirely done through partners including other syndicates and VCs; while mine is similar, I do leverage a bunch of deals through direct relationships and VCs in the ecosystem. Point being there is not one size fits all for sourcing. Notably your sourcing may evolve over time. Zach hesitated initially on starting his own venture firm because candidly he didn’t understand how to source. At his prior fund he worked at, his sourcing was built primarily around a lot of cold emailing. When he started Calm that was his primary avenue for deal flow as well - unapologetically emailing any company that looked interesting and filtering/diligencing from there. It worked and he got some extremely strong access through cold and warm introductions. But the model evolved, quite organically, with now his sourcing done primarily through ongoing partners. How did it evolve to this? Well it turns out that there are a lot of network effects built into this ecosystem. The more you’re involved in finding and executing investments, the more people you meet, the large reputation you get, the more people that want to work with you and so on. And that’s more or less how Zach shifted to a network driven firm. In general I’d play to your strengths when it comes to sourcing deal flow. Do you have deep talent networks - if so leverage those. Are you a sales / hustling machine, then perhaps cold/warm introductions are your best bet. Do you have extreme value add - find the best companies that need your skills to win deals. Do you have a media presence and public brand - leverage it to build PR for founders you invest in. Whatever your strength and value adds are - play to them. -- Powered by Sydecar and Forge, Last Money In Media is the most actionable venture capital newsletter. Written by Zachary Ginsburg and Alex Pattis, the global syndicate leaders with 800+ SPVs invested.

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The VC funding model when everything works out fine... In real life: Only a few startups make it! So if you are considering going the VC route: Have a backup plan!

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The list of new VC funds is below $200M in size. #fundmanagers #Venturecapitalists #fundraising #Limitedpartners #Generalpartners #VCs #LPs #GPs

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Founders: be careful about agreeing to side letters. Check if your existing financing documents contain a Most Favored Nation (MFN) provision. If they do, terms you grant one investor in a side letter may need to be granted to all investors with an MFN. Even if you don’t have an MFN, investors will ask about side letters during diligence and often request those same terms.

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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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Seed VCs are turning to new ‘pro rata’ funds that help them compete with the big firms Alpha Partners, SignalRank and now SaaS Ventures help seed VCs pay for shares when big VCs try to price — or push — them out Lee Edwards, partner at Root VC, has a saying at his firm that “pro rata rights are earned, not given.” That may be a bit of a stretch since pro rata refers to a term that VCs put in their term sheets that gives them the right to buy more shares in a portfolio company during consequent funding rounds to maintain an ownership percentage and avoid dilution. Still, while these rights are not exactly “earned,” they can be expensive. One of the latest trends in VC investing these days are funds dedicated to helping seed VCs exercise their pro rata rights. https://lnkd.in/dRM3RvdA By Christine Hall

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Raising? Here's a quick guide to some of the most common VC acronyms: AUM: Assets Under Management - The total value of investments a VC firm manages. LP: Limited Partner - Investors who provide capital to VC funds. ARPU: Average Revenue Per User - value each customer brings the business. MOIC: Multiple on Invested Capital - value or performance of an investment relative to its initial cost. MVP: Minimum Viable Product - The most basic version of a product that can be released to market. ARR: Annual Recurring Revenue - The amount of revenue a company expects to repeat annually. DPI: Distributions to Paid-In Capital - The amount of capital returned to investors divided by the amount of capital paid in. DD: Due Diligence - The process of investigating a potential investment opportunity. PMF: Product-Market Fit - When a company's product satisfies a strong market demand. TAM: Total Addressable Market - The total potential market size for a product or service. ROI: Return on Investment - The profit generated from an investment relative to its cost. Did I miss any?

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I used to think LPs only invested in emerging VC / PE firms for better returns. That’s true…sort of They obviously first and foremost want high returns, but in building our firm and studying the industry I’ve learned that LP motivations are more nuanced than that To understand why an LP really might invest in us, I start with the assumption that they could invest that $ in Blackstone (or a similar large PE firm with top quartile track record) What could we offer that is incremental, and how should we position ourselves in that way? 1. Smaller funds can be higher upside — LPs may be looking for higher risk / higher return opportunities, so we have to emphasize the path to outlier returns. This means discussing not only their expected value but also the distribution of outcomes, and how that might differ from the rest of their portfolio 2. Harder to partner with successful firms later — LPs are often looking to build long-term partnerships with firms that will be around for many fund cycles, and that is about more than just returns. It’s important to emphasize not just the strategy of this fund but also the vision of the firm we’re building 3. Co-invest opportunities — Some LPs don’t care about co-invest, others only invest in funds for co-invest. When speaking with the latter, we emphasize that we have a disciplined and repeatable process to generate and share co-invest opportunities (easy to say, harder to execute) 4. Learning and thought partnership — We have LPs that invested in us because they have conviction in or personal passion for health & wellness and want to learn more about the ecosystem. For these folks we might talk through investment opportunities they see that are in our industry, or invite them to industry events. We also spend a ton of time writing quarterly letters to help them track the industry and learn from our companies It takes years to know where our returns will ultimately shake out, and we’ll have no reason or permission to exist if they aren’t good In the meantime it’s crucial to recognize and deliver on these other needs of our LPs, to provide the experience that they signed up for

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