Founder Fridays No. 168
Valuation Caps Aren’t Standard -- Your Customer Dictates Speed -- You’re A Company Now
Happy Friday!
Valuation Caps Aren’t Standard
The outlier $50M valuation cap deals dominate headlines, but actual first-round SAFE data reveals a massive spread across all price points with no “correct” number. Your valuation cap gets determined by founder credibility and market demand for your specific business, not industry benchmarks—hot companies command premium valuations while geography and sector (like AI) create predictable modifiers. Fundraising operates as a three-sided equation where cash raised, valuation cap, and dilution are locked together, so anchoring expectations on one variable constrains the others. The market paradox right now: mega-funds are moving earlier into seed deals, some “pre-seed” investors now expect revenue, VCs want more founder experimentation before raising, yet the entire process remains simultaneously frenzied and difficult. LinkedIn (3 minutes)
Your Customer Dictates Speed
AI startups are hitting $2-5M ARR in year one, but here’s what the benchmarks miss: a product-led tool like Cursor can scale instantly through self-serve motion, while an enterprise AI platform selling to healthcare still faces 6-month procurement cycles no matter how good the product is. The limiting factor isn’t your technology or team—it’s your customer’s buying process, and investors need to stop comparing companies with fundamentally different GTM motions. Two critical risks lurking beneath the hype: 1) founders need sophisticated GTM expertise earlier than ever, and 2) experimental AI budgets are churning faster than traditional SaaS, meaning that early revenue may be far less sticky than it appears. GTMnow (4 minutes)
Career In Beta
The most valuable career asset isn’t your job title—it’s treating yourself as a one-person business where every skill is a product and every project either strengthens or weakens your portfolio. Adopt five mindsets to build leverage: 1) run yourself like a CEO evaluating each action as an investment, 2) stay in “permanent beta” through constant micro-learning, 3) anchor decisions to a personal philosophy that survives job loss, 4) diversify your skill portfolio like an investor hedging against market shifts, and 5) take full ownership by refusing to blame bosses or economies for your trajectory. The minute you stop treating your career as something that happens to you and start running it like a business you own, you create the only security that matters: control. Fast Company (6 minutes)
New Comp Playbook
Early-stage founders are often overly generous with equity out of desperation. I see this all the time. But your first ten hires shouldn’t exceed 10% of the total pool—remember that late-stage companies give 1% to incoming CEOs, so you have more leverage than you think. Break these “rules”: don’t blindly pay top-of-market just because you raised cash (let stock appreciation reward performance), don’t wait for review cycles to bump comp for standout performers, and don’t copy big tech’s formulas without understanding your stage-specific constraints. Follow these instead: define a clear comp philosophy with salary tiers before you hit 15 employees, consider contract-to-hire to test mutual fit while conserving cash, be radically transparent about how compensation works to avoid endless negotiations, and calibrate incentives by function—sales thrives on commission, customer success on retention bonuses, and product on equity tied to measurable outcomes. First Round (11 minutes)
Founder FAQ: Why an unique terms of service is needed for a startup?
If you’re running any online service, a Terms of Service agreement isn’t optional paperwork—it’s the contract that protects you from liability, secures your intellectual property, and gives you grounds to ban bad actors or enforce payment terms. At minimum, cover seven critical sections: who can access your product and how accounts work, confirmation that you own all platform content while granting users a limited license, rules for user-generated content plus your right to remove violations, transparent payment and refund policies if you charge money, a link to your privacy policy, limitation of liability and indemnification clauses that cap your legal exposure, and dispute resolution terms that specify jurisdiction and potentially require arbitration over litigation. Don’t copy-paste a competitor’s ToS—hire legal counsel to draft custom terms that reflect your specific product, comply with regional laws, and evolve as your startup scales. Westaway (8 minutes)
Startup Funding Guides
I’ve put together a series of guides to equip founders to excel at fundraising. These guides break down the deal term-by-term and give you negotiation tips so that you can speak to investors with confidence.
Convertible Note: Guide / Video
An Innovative Law Firm?
Being listed among Fast Company’s “Most Innovative Companies” is an honor for our law firm, yet we believe innovation matters if it actually produces better outcomes for startups. Here’s how we’ve innovated to better serve startups:
Clear Pricing. Traditional billable hours can lead to misaligned objectives and unexpected fees. We’ve replaced this with straightforward, flat-rate pricing.
General Counsel. Most entrepreneurs want a trusted legal partner, but they hate surprise legal bills. At Westaway, we take care of your startup’s legal needs for a fixed, monthly fee so you can control your costs and focus on scaling your business.
Automation and Artificial Intelligence (AI). We’ve streamlined our operations through automation and AI (where appropriate), ensuring efficient, high-caliber results.
If you’re an innovative startup looking for an innovative law firm, let’s talk.