Founder Fridays No. 59
Founder Fridays No. 59
Helping startup founders and operators scale smarter.
Happy Friday. Hello from Vegas! I’m here to see U2 play the Sphere tonight and I can’t wait! If you’re here, shoot me a note.
NYC Seed Funding Report
In New York City, as in most of the country, Q3 revealed a slower fundraising environment. Across deal stages in the U.S., 2023 is on pace to see the lowest total fundraising since 2017. NYC seed deal volume, at 137 total, decreased by 8% compared to Q2, and the average amount raised, $3.7 million, declined by 16%. Summers are often slow for fundraising, but volume is down 26% and total raised is down 41% year over year. This quarter, we saw a spike in healthcare seed rounds. HCIT deals are up 35%, from 14 in Q2 to 19 in Q3. Those deals saw an average seed round of $4.5 million—close to $1 million higher than the average round size overall. 21% of those companies self-classify as AI companies, tying into the buzzy narrative of AI solutions disrupting the clinical landscape. But overall, AI saw a slowdown to the fundraising frenzy. AI deals are down this quarter by 53%, from 15 in Q2 to 7 in Q3. Deal sizes remained high, however, with 43% of those deals greater than $5 million, while only 25% of overall deals fell into that range. Primary VC (6 minutes)
What Builders Are Saying About AI
A16z asked leading builders in AI what their take on AI's potential is. Here are some key takeaways: 1) This wave of generative AI has the sort of economics that drive market transformations. 2) For "copilot" tools, correctness improves as humans use them. 3) Integrating AI with biology could accelerate new approaches to treating disease and have a profound impact on human health. 4) Your AI friend's memory is about to get much better. 5) We're at the beginning of the third epoch of compute. a16z (6 minutes)
Qualifying the Yes
I’m a big fan of the power of “no.” Understand the core problem your startup is solving and don’t get distracted. Yet, sometimes deviating can drive revenue. So... how are you supposed to explore other ideas if you’re also supposed to be saying “no” to anything that diverges from the plan? Never say “no,” but carefully qualify your “yes.” So the principle is easy: Set the conditions of “yes” such that: If they say “yes,” you’re happy because the terms or money are so good, it more than compensates for the distraction, perhaps funding the thing you really want to do. If they say “no,” you’re happy because it wasn’t a great fit anyway; it’s not a worthwhile return on your time and effort. A Smart Bear (7 minutes)
Founder FAQ: What is the difference between an S-Corp and an LLC for startups?
Here are some factors to consider when deciding between an S-Corp and an LLC: (1) Liability Protection. Both S-Corps and LLCs offer liability protection. However, the level of protection may differ depending on your business needs. (2) Tax Implications. Significant differences in tax implications exist between S-Corps and LLCs. Consult with a tax professional to determine which structure offers the most favorable tax treatment for your business. (3) Ownership and Management Structure. If you want more flexibility in ownership and management, an LLC may be the better choice. However, if you prefer a more rigid management structure with limited ownership options, an S-Corp may be more appropriate. (4) Future Goals. If you plan on seeking venture funding or going public in the future, an S-Corp may be more attractive to investors due to its stricter governance requirements. On the other hand, if you’re looking for flexibility and ease of maintenance, an LLC may be a better choice for long-term success. Westaway (4 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
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.
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