Founder Fridays No. 95
Pre-Seed & Seed Valuations - How VCs Become Assholes - Generating Content Marketing Ideas
Happy Friday.
Pre-Seed & Seed Valuations
Valuation debates for pre-seed and seed funding feel so unproductive. Both founders and investors are essentially pulling numbers out of the air. Founders should keep a few things in mind: 1) Every investor has target ownership stakes (lead institutional investors are usually between 10%–20% per round). 2) If you feel like you’re being over-diluted, your option is to raise less money or find a higher valuation. Raising less means (most likely) accomplishing less and having less time to do it. 3) High valuations seem like a godsend initially, but you have to grow into them. So many startups raised monster first or second rounds in 2021, and then took a down round or simply could not raise capital after (and failed). 4) Simple Agreement for Future Equity (SAFEs) and convertible notes with caps are tantamount to pricing the company. And if you stack SAFEs on top of each other through a few rounds, the math gets crazy; you’ll have a hard time knowing what the dilution actually looks like. Check out this article for more tips on raising pre-seed/seed funding. Focused Chaos (17 minutes)
How VCs Become Assholes
Venture capitalists (VCs) can unintentionally become "assholes" — despite their good intentions — due to several factors inherent to their profession. Being overwhelmed by negativity is a major contributor, as the high rejection rate and constant exposure to failed investments can lead to jadedness and cynicism. Additionally, the emotional toll of experiencing heartbreak from failed investments can cause VCs to put up emotional barriers and become less invested in their founders' success. Other factors, such as falling into a reality distortion field and constantly being on the defensive, can further exacerbate this problem. The VCs that are able to overcome these issues are present, speedy and foster open communication. NFX (8 minutes)
Generating Content Marketing Ideas
Generating great B2B content marketing ideas involves tapping into various sources of inspiration. 1) Digging into customer feedback, including frequently asked questions and common pain points, can provide valuable insights for creating content that addresses their needs. 2) Collaborating with industry influencers and employees can bring fresh perspectives and unique expertise to your content creation efforts. 3) Finally, leveraging artificial intelligence (AI) tools like ChatGPT can help jumpstart the creative process by brainstorming ideas based on your target audience, content type and desired themes. Top Rank Marketing (4 minutes)
Founder FAQ: What’s the Difference Between an NSO and ISO?
Issuing stock options in a startup can be surprisingly complex. There are two forms of stock options for U.S. companies: incentive stock options (ISOs) and non-qualified stock options (NSOs). ISOs qualify for special tax treatment under the United States Internal Revenue Code whereas NSOs do not. If the grant is an NSO, the recipient pays federal income taxes on the difference between the fair market value (FMV) of the shares at exercise and the original exercise price, even though the employee has not sold any shares. On the other hand, if the grant is an ISO, there is no federal income tax due at exercise until/unless those shares are sold. Westaway (6 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.