Founder Fridays No. 98
NYC Seed Funding Report -- AI Insights From the Magnificent 7 -- 7 Principles of Persuasion
Happy Friday.
NYC Seed Funding Report
In Q2 2024, the NYC seed fundraising ecosystem saw fewer—but larger—deals. 135 startups raised a total of $606M, with an average deal size of $4.4M. Despite deal volume declining by 6%, total funding saw a 10% rise, highlighting a trend towards larger investments per deal. This is further evidenced by the 17% increase in the average round size compared to Q1 2024. AI deals showed notable momentum, with a 17% increase from 12 to 14 deals this quarter. AI, SaaS, and Fintech dominated the landscape with 14, 25, and 18 deals each, respectively. Despite the overall decrease in deal volume, the increase in total funding suggests a more selective and strategic approach by investors, aiming for quality over quantity. This quarter's trends underline a robust and adaptive fundraising environment in NYC, poised for further evolution as new technologies emerge. Primary (5 minutes)
AI Insights From the Magnificent 7
The Magnificent 7 tech giants have set the gold standard for successful artificial intelligence (AI) integration in modern business strategy, redefining industry norms, transforming business models and fueling unprecedented innovation. Key takeaways for startup founders include fostering a culture of innovation, prioritizing ethical AI deployment, bolstering AI capabilities through strategic acquisitions and investments, and driving AI innovation through platform development and open-source contributions. Founders can also learn from the Magnificent 7's approach to investing in talent, cultivating agility and adaptability, forming strategic partnerships, aligning AI investment with business initiatives, and focusing on niche expertise. While these tech giants possess vast resources, startups can still extract valuable lessons from their strategic approaches to business expansion and AI integration, adapting them to their unique circumstances. Forbes (8 minutes)
7 Principles of Persuasion
The science of persuasion reveals seven universal principles that guide human behavior and decision-making. 1) Reciprocity: People feel obligated to give back to others who have given to them first. 2) Scarcity: People want more of what they can have less of, so highlighting the unique and limited aspects of your offering can be persuasive. 3) Authority: People follow the lead of credible, knowledgeable experts, so signaling your expertise before making an influence attempt is crucial. 4) Consistency: People like to be consistent with their previous actions and commitments, so asking for small initial commitments can lead to bigger, consistent changes. 5) Liking: People prefer to say “yes” to those they like, and factors such as similarity, compliments and cooperation can increase liking. 6) Social Proof: People look to the actions and behaviors of others, especially similar others, to determine their own, so pointing out what others are doing can be a powerful influence. 7) Unity: People are more likely to be influenced by those they perceive as part of their own group or team, so fostering a sense of shared identity can enhance persuasion. Influence at Work (10 minutes)
Founder FAQ: What Is an 83(b)?
To understand what an 83(b) election is, it’s important to have a basic understanding of Internal Revenue Code Section 83. This section governs property transfers (in our case stock in the startup) in exchange for services rendered. Startup equity typically has a vesting schedule. Normally, an employee will report only the value of the stock that vested in a given tax year as taxable income. For example, if employees have a four-year vesting schedule, they will report the value of the stock vested in each of those four years. However, under section 83(b) of the tax code, an employee may choose to include the value of restricted stock as income at its fair market value on the date it was granted rather than when it vests. This option can be valuable for employees who believe that their company’s stock will appreciate significantly over time. Westaway (7 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
Saving Time and Money on Legal
When we met this Series B startup, they were frustrated with their law firm's slow turnaround and high fees. Contract reviews took four to six weeks, and they charged $250K annually for basic work. The startup wanted to reduce sales cycle times and legal spend. They switched to General Counsel at Westaway. In year one, we 1) saved them about $200K in legal fees; 2) shortened their sales cycle by about four weeks; and 3) our streamlined processes saved their ops team eight to 10 hours per month that was previously spent managing legal. By switching to Westaway, they expedited deal closures, saved hundreds of thousands in legal bills and regained one day per month in productivity. If you’re curious if we could save you time and money, let’s talk.
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