Kison Patel

💡Benchmarks in the investment industry serve as a standard for measuring the performance of securities, mutual funds, or investment managers. They provide a reference point for analyzing allocation, risk, and return of a portfolio, enabling investors to make informed decisions. Thanks Peter Walker for keeping us all informed!! Can’t wait for this!! Follow and get on the waitlist for this one! #benchmarks #fundraising #Capitalraise #founders #womenshealth #femhealth #medtech #wellness

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Venture Studio model to build cash flow companies? It can beat VC IRR with fast cash return. 👇 Let’s unpack a hypothetical studio focused on building consulting companies. How might a startup studio that builds consulting firms work? Let’s start with a model of a single firm. The studio invests $500k for 50% share of the profits (founder salary included in costs), providing dedicated support in building, launching, and growing the firm. The goal is to become cash flow neutral in 18 months. If not, assume failure and zero funds are returned. Assume $1M in revenue by the end of year 3. Assume a profit margin of 60%. Assuming success and ZERO growth above the $1M in annual revenue, from year 3 on, the studio would receive $300k for it’s share of the $600k in profits. IRR for the 10 year span? 36% What happens if you factor in an annual growth rate of 25%? At the end of year 10, the consulting firm would have an annual revenue of $4.768M, profit of $2.861M, a distribution that year of $1.43M for an IRR of 49%. ❗49% IRR❗ But this is for building ONE firm with 100% success rate. Let’s apply the studio model and add in a failure rate. The studio raises a $5M fund to build 10 companies in 3 years on the same terms as above. Let’s keep the 25% annual growth with a year 10 revenue of $4.768M. Assuming a failure rate of 50% that return no money. Let’s assume 3 companies created in the first year with 2 surviving, 4 companies created in the second year with 1 surviving, and 3 created in the third year with 2 surviving. Returns to the studio begin in year 3 at $300k and growing to $5.836M in year 10. Total IRR? 25%. ❗25% IRR ❗ Interesting? 25% is on par with VC funds. Better than average VC fund returns too. Now imagine a more realistic $250k to start each company -> Double the IRR to 50%. Now Imagine using this approach with a focus on industries, demographics, or geographic areas -> Targeted Economic Development. Now imagine this with an evergreen investment fund to cycle the returns and continue building consulting firms with what would amount to a lucrative annuity payment to investors. Focusing on the VC path is not the only option for venture studios. 🤫BTW. This type of studio has been built and operated before. Successfully. If this model is of interest to you, let me know in the comments! #startupstudio #familyoffice #lp #entrepreneurship

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The #1 Factor to Determine Max Valuation in Micro SaaS...is debt financing. Here's why, plus a free valuation calculator... Most buyers in the $500,000 to $2 million valuation range use SBA loans, which come with specific requirements. The SBA requires a Debt Service Coverage Ratio (DSCR) of 1.25, meaning the company needs $1.25 of income for every $1 of debt payments. In simpler terms, the key question is: Can the business afford itself? Does the Micro SaaS firm generate enough income to cover the loan needed to buy the business? As the valuation rises, so do the loan and debt payments. At some point, the valuation requires a loan that breaks the DSCR requirements. The upper limit of a Micro SaaS valuation is ultimately determined by the maximum loan a buyer can secure based on the company's income. Here's a simple calculator to illustrate this concept, helping us all determine valuation more accurately based on the real world 👇 #microsaas #acquisitionentrepreneur #saasgrowth

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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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Paying rational prices in venture capital matters (now)! Here is a good explanation on why:

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Guide to Angel, Venture Capital, and Private Equity: Whether you're a founder seeking early-stage investment or an entrepreneur looking to scale up with private equity, this guide provides a comprehensive roadmap through the stages of equity financing. Key Highlights from the Guide: 1) Sources of Equity Financing: Learn about the distinctions and roles of angel investors, venture capital funds, corporate venture capital, and private equity funds. 2) Investment Criteria: Understand the specific criteria each investor type considers when evaluating startups and how to position your business accordingly. 3) Stages of Company Growth: Differentiate the financing needs at various stages, from seed capital and Series A funding to late-stage private equity investments. 4) Business Plan Essentials: Tailor your business plan with the information investors look for, including market potential, competitive advantage, and financial projections. 5) Exit Strategies: Explore the variety of exit options available, such as IPOs, strategic sales, or founder buybacks, and how to prepare for them. PS. check out 🔔 for a winning pitch deck the template created by Silicon Valley legend, Peter Thiel https://lnkd.in/ejp-Bhnu

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🚀 VC Outlook 2024: Why Emerging Managers are a Must-Invest 🚀 As we approach 2024, the venture capital landscape is ripe with unique opportunities, especially within the realm of emerging managers. Here's why Limited Partners should be paying close attention: 1. Innovation Post-Pandemic: As Emerging managers, we are at the forefront of capitalizing on the rapid innovation triggered by recent global shifts. Our proximity to nascent technologies and markets positions us well to leverage new trends and consumer behaviors for superior returns. 2. Technological Disruption: With advancements in AI, biotech, and blockchain accelerating, as 2024 vintage managers we are poised to tap into these areas before they hit the mainstream. Our agility and access to massive global deal flow makes us ideal partners in navigating these fast-evolving sectors. 3. Diversified Investment Strategies: More than ever, LPs are looking for funds that offer not just returns but innovation in investment strategy and management. As Emerging managers we bring novel perspectives and methodologies that can differentiate and enhance a portfolio, such as our AI driven equal opportunity screen and monitoring across 560K companies, with real time feedback to both LP and Founder to capitalize on the opportunities to accelerate and for our LPs to double down. 4. Sustainability and ESG Integration: Reflecting a broader investment shift, as emerging managers we are at the forefront of embedding ESG and GLI considerations into our investment philosophy, aligning with LPs' growing commitment to responsible investment. 5. Global Reach: The globalization of VC means new geographic markets are opening up, many of which are best accessed via managers with local expertise and networks—qualities that many emerging managers inherently possess, given our global venture partner teams built to support geographic arbitrage from small markets to large markets. 6. Resilient and Adaptable Leadership: Starting funds in the volatile post-crisis era has equipped us with exceptional resilience and adaptability, traits highly valued by LPs looking for managers with proven track records across 3 economic cycles. 💡 Why This Matters for LPs: As Emerging VC managers we not only offer potential for high returns but also provide the strategic advantages of diversification, innovation, and alignment with global investment trends. As we head into 2024, we represent not just an investment in funds, but an investment in the future of industries and technologies, massive access to high-quality dealflow and diversification, and a generational shift with fresh insights. 🔗 Check out the evaluation and selection promoted by Ryan A. Bailey CFA, FRM, CAIA, CMT: Paradigm Investment Group. R3i Capital welcomes all LPs who wish to invest in Applied AI and Frontier Tech. R3i supports LPs to capture the full spectrum of opportunities in an industry growing at 25% CAGR+

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𝗛𝗼𝘄 𝗱𝗼 𝗜 𝘃𝗮𝗹𝘂𝗲 𝗮 𝗽𝗿𝗲-𝗿𝗲𝘃𝗲𝗻𝘂𝗲 𝘀𝘁𝗮𝗿𝘁𝘂𝗽? (𝗧𝗵𝗿𝗼𝘂𝗴𝗵 𝘁𝗵𝗲 𝗹𝗲𝗻𝘀 𝗼𝗳 𝘁𝗵𝗲 𝗕𝗘𝗥𝗞𝗨𝗦 𝗺𝗲𝘁𝗵𝗼𝗱) 𝗪𝗲𝗹𝗰𝗼𝗺𝗲 𝘁𝗼 𝗗𝗮𝘆 𝟭𝟭 𝗼𝗳 𝘁𝗵𝗲 𝗮𝗻𝗴𝗲𝗹 𝗶𝗻𝘃𝗲𝘀𝘁𝗶𝗻𝗴 𝗰𝗼𝘂𝗿𝘀𝗲: 𝗦𝘁𝗮𝗿𝘁𝘂𝗽 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 - 𝗕𝗲𝗿𝗸𝘂𝘀 𝗠𝗲𝘁𝗵𝗼𝗱𝗼𝗹𝗼𝗴𝘆 This method was devised by a Venture capitalist, Dave Berkus, in the 1990s. It is based on the principle that a startup's value is based on its potential rather than its actual performance. This makes it different from other valuation methods that focus on historical data and current financials. What kind of startups is this for? This is strictly for startups with some of the following properties: - Idea stage/pre-revenue startups - Uncertain markets - Unproven team - May or may not have an MVP (Minimum Viable Product) - Limited or no history It emphasizes 5 parameters (which can be changed) for valuation: -Idea -Prototype -Team -Strategic relationships -Got to Market/Sales Strategy Each of these parameters has 20% weightage, and basis of one's evaluation of a startup, one needs to give them a rating on the scale of 0-$1M/$2M. Let's take an example to understand how this method works: Assume I came across a startup that pitched to me recently, and I have my sheet with the below 5 parameters where I need to rate them on a scale of 0-1. Basis my interaction, research, and homework, I give them the below points, which translate into their valuation - 1) Idea -> Good idea -> 0.5  2) Prototype -> Have a working prototype and beta testing phase on -> 0.75 3) Team -> Good team on paper with amazing referrals -> 0.75  4) Strategic relationships -> Need to build a good network required for the startup -> 0.25 5) Got to Market/Sales strategy -> Clear GTM -> 1 Total - 0.5+0.75+0.75+0.25+1 = 3.25 As this was on the scale of $0 to $1M, the score of 3.25 - > $3.25M pre-money valuation. If it was on a scale of $0 to $2M, the score of 3.25 - > $6.5M pre-money valuation. Pros - Super quick, high level, and easy to arrive at, doesn't rely on any forecasts/revenues Cons - -Equal weightage to all 5 parameters - Many other parameters left out - Dependent on choosing the right benchmark value to set the maximum valuation ($2.5M vs. $5M vs. $7.5M vs. $10M) - High-skilled task as one needs to know how to score each of these parameters Many times, investors use a combination of methods to value a pre-revenue company, like the Berkus + VC Method or Scorecard + VC method (which we will cover in future posts). TDV Partners #valuation #startups #angelinvesting #funding #venturecapital

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Great question by Jason Long on a previous thread ( link in comments below): """ I'd be curious to understand the SECs rationale for making sub-$1B valuation IPOs so difficult. The US public market might be losing its agility by effectively barring small-caps from having a fighting chance. As you mentioned, plenty of great companies IPO'd below the $1B range. """ Here's the 3 U.S. Securities and Exchange Commission mandates with roughly # of employees devoted to each. 1. Investor protection -- Think securities police -- 2,500 2. Maintaining efficient markets -- think regulators -- 2,500 3. Capital formation -- think helping businesses raise capital -- 2 Why? The SEC has an impossible task of policing a $100 Trillion stock and bond market with 2,500 cops. So, they focus on the big banner cases that are most likely to get the rest of the market to pay attention and change behavior. Congress isn't going to ask the SEC commissioners to testify as to why small businesses struggle to IPO. But they do ask them to testify when stock markets collapse or we have derivatives crisis like 2008-09. And, so they work very hard to make sure investors don't get screwed, and that we have efficient public markets. But as a result, compliance to be a public company costs between $2-5 million a year. This is why there's half as many public companies as there were 20 years ago. Crowd-funding is a thing, but only a couple hundred companies take advantage of that every year, because if a crowd-funding investor buys stock in a small business, where can they resell the stock and take a profit? There's no stock exchange available to do that. So, small business capital formation is left to the venture capital community. VC's funds are structured so they and their investors can only make money on their fund when they invest in future unicorns.

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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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That’s very accurate. PE Buyout Funds. Publicly traded parent companies with corporate VC arms scooping up the most profitable sector-specific subsidiaries. Fund of Funds get more popular and much more strategic. Family Offices dominate the landscape. Not investment advice.

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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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The Art of the VC Pitch: A Brief Guide to Maximizing Your Chances With Venture Capital Through Giving Better Pitches Pitching to a Venture Capital firm is different from any other kind of pitch. It's not like a sales pitch, a product pitch, or any other kind of presentation. This guide is a road map to the nuts and bolts of maximizing your opportunity when you manage to get in front of VCs

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The right bank is crucial for startup success. Here are the banks Ursa recommends for startups (in no particular order): 1) Bridge Bank 2) Stifel 3) Silicon Valley Bank 4) Mercury Which one do you use?

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VC is more dangerous to founders than PE VCs will risk your company’s survival for 10-100x returns PE will protect your company for 3-5x returns VCs have a bigger incentive misalignment than PE Most founders and PE want the same thing

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📊 The Differences: Private Equity vs. Venture Capital 💡 🚀 Venture Capital: • Focus on early-stage startups with high growth potential 🌱 • Smaller investments, usually $1M to $10M 💸 • Equity or convertible debt structure 🔄 • Minority investments, often with a group 👫 • Higher risk with potential for high returns or losses 📈📉 💼 Private Equity: • Invest in more mature companies 🏢 • Larger investments, typically $5M to billions 💰 • Combination of equity and debt structure ⚙️ • Control investments, often >50% 📈 • More stable returns with less volatility 📊 Startups seeking funding might consider venture capital to fuel their growth and innovation. Check out the detailed infographic for more insights! ………….. Infographic Source: Nexea ♻️Repost to inspire your Startup Network💡 Interested in Startup Business Strategies, Venture Capital & Fundraising? Let's connect!🤝 LinkedIn: Dr. Michael Tadros Agile | PMP® | cPgM® | BSc. | MSc. | PhD. #startup #startups #michael_theprofessor #startupfunding #success #research #partnerships #fundraising #investing #entrepreneurlife #innovation #founders #projectmanagement #smallbusiness #entrepreneurship #entrepreneur #entrepreneurs #venturecapital #investment #venturecapital #siliconvalley #technology

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Sonoma, Ca - Women in CVC Summit! 65 women in CVC gathered together for real, honest conversations about the challenges and complexities in CVC investing versus traditional venture capital. CVCs face challenges such as aligning the interests and expectations of the corporation and the startup, managing the relationship and communication between the two parties, and balancing the trade-offs between strategic and financial returns. But what's truly inspiring is the impact women are having in this space! Female-founded companies exit faster but make up a smaller share of total exit activity. CVCs participated in 17.5% of all female-founder deals in 2023, while more CVC firms have majority female checkwriter representation. Furthermore, female founders closed a record of 22.8% of total VC funds in 2023. We are thrilled to support this vibrant community of women alongside our friends and partners, Counterpart Ventures. Tanvi Narain and Abbie Wolf, congrats on curating such an impactful event. Special thanks to Annemarie Donegan from PitchBook for the data and research she shared with the group. The phenomenal lineup of speakers from corporate and traditional venture capital funds included: ​Amy Daniels Burr, President, JetBlue Ventures Danielle D'Agostaro, Partner, WVV Capital Vivien Ho, Partner, Pear VC Betty Lee (Lee) Bryant, Principal, Woven Capital, Toyota's Growth Fund Savannah Greene, Principal, Workday Ventures Heather Reginelli, Ventures Manager, State Farm Ventures Marie-Christine Razaire, Principal, Northwestern Mutual Future Ventures Beth Devin, Scout, Investor & Advisor, HearstLab Priya Saiprasad, Co-Founder and General Partner, Touring Capital Agustina Sartori, Founding Managing Director, Prisma Ventures #WomeninBuisness #VentureCapital #CVC #CorporateVentureCapital #WomeninLeadership TriNet Abbie Wolf Tanvi Narain Patrick Eggen David Haraburda Kim Thomas Matt Mahoney Samantha Santaniello-Lawrence

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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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