Founder Fridays No. 48
Helping startup founders and operators scale smarter.
I hope wherever you are, you’re finding a way to beat the heat. Stay cool my friends.
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New York Tech
The New York Times had a piece this week suggesting that tech will no longer be a growth engine for NYC and the surrounding metro area as it has been for the last 20 years. Fred Wilson disagrees. 1) Office leases to tech companies are down. The tech sector has embraced remote and hybrid workforces, and their office space needs reflect that. 2) Rank-and-file tech workers in NYC are roughly flat as many workers have left the NYC metro area, but just as many have come here from other locations. 3) Top talent in tech has massively increased in NYC since the pandemic as people with in-demand skills can now work anywhere and don’t have to be in the Bay Area anymore. There are significantly more USV portfolio company leaders in NYC today than there were before the pandemic. AVC (5 minutes)
Generative artificial intelligence (AI) is revolutionizing startups by enabling small teams to scale software-centric businesses to over $100 million in revenue through automated workflows. By setting up AI systems for various aspects of their business, these startups can let them run continuously while periodically improving and optimizing them. With the help of AI dev co-pilots, they can develop software faster and more efficiently; automate sales prospecting; marketing campaigns; customer service; accounting; legal processes; and analytics. With fewer employees, startups experience easier operations, faster decision-making, less overhead and reduced need for fundraising. Could we see a three-person company valued at $1 billion soon? NFX (5 minutes)
This advertisement from Orange, the French telecom company, about the French national football team is one of the best commercials I've seen recently. I don't want to tell you too much about it because the impact of it comes from watching it, so just watch it and you'll see. YouTube (1 minute)
Founder FAQ: What are protective provisions?
Protective provisions allow investors to have influence on some major decisions without taking a majority stake in the startup. A typical Series A term sheet includes a set of issues that require approval from a majority of preferred shareholders. These seven issues mainly relate to corporate actions that could affect the value of the preferred shares. While protective provisions provide added security for investors, they have a negative impact for founders in the following ways: (1) Loss of Control: All of the protective provisions take decisions out of the hands of the board or management team. Now, in order to take any of the seven decisions above, they need the permission of the preferred shareholders. (2) Complexity: Keeping track of the decision rights required for any given decision can get complex, especially as more protective provisions are added in subsequent rounds. Managing who has to approve what decision can be challenging. Furthermore, gathering the requisite consent can often slow down progress on an essential decision. It’s important for founders to carefully consider these potential drawbacks or risks before agreeing to protective provisions in their funding agreements. While they provide added security for investors, they can also impact a startup’s ability to operate effectively. 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.
Move Fast. Don’t Break Things.
Hi! I’m Kyle. This newsletter is my passion project. When I’m not writing, I run a law firm that helps startups move fast without breaking things. Most founders want a trusted legal partner, but they hate surprise legal bills. At Westaway, we take care of your startup’s legal needs for a flat, monthly fee so you can control your costs and focus on scaling your business. If you’re interested, let’s jump on a call to see if you’re a good fit for the firm. Click here to schedule a 1-on-1 call with me.