The Capital Raising process for Venture Capital

Am excited to be going on the VC journey with referron - am starting to look for a factory to make more customers happy !! 

(Shameless plug- download the app on Google Play or Appp store  - create a business card - connect by sending your vCard and making a referral and warm introduction - and track your activity - (would love your feedback:) 

 (Go to  www.referron.com.au to download and have a play - it’s free  )

  

Michael Ho focuses on 3 main milestones when describing the Capital Raising process for Venture Capital

1️⃣ Find something that works

2️⃣ Do it more often (and keep getting better)

3️⃣ Then keep finding more things that work 💪

1️⃣ Find something that works

Pre- Seed  funding - EXPERIMENTS

Find a problem worth solving  and  find a solution that’ll deliver value - not a solution that is just a vitamin - a solution that is a painkiller!!

→ this is your pre-seed use of funds

Seed funding - PROBLEM SOLUTION FIT 

You’re often left with a bunch of things that 'almost' work.

So you’re looking for a model with a set of features - that will solve that problem  that is repeatable and scalable  - that will make your customers happy! 

And now that you can prove happy customers...

you build a factory to find more happy customers

→ which is your seed use of funds

2️⃣ Do it more often (and keep getting better)

Series A - GO TO MARKET FIT

Now happy customers don't bring venture scale

So you’ll need to run different gtm experiments until you find a repeatable & scalable motion that works

→ and this will usually unlock your series A round - which will allow you to spend $10M to add $10M plus in net new (logo) revenues in less than 24 months

→ which is your series A use of funds

→ and the definition of early venture scale

Series B - SCALE MARKET FIT

Execute and stay on the venture scale path

→ which will usually unlock your series B

3️⃣ Then keep finding more things that work 💪

Series C, D E and F. - PRODUCT MARKET FIT 

You have de-risked and starting to  scale - making acquisitions to fit your customers needs 

→ which is your series B use of funds (part 2)

to get to $40M, then $80M and past $100M in revenues  to your Unicorn 🦄 

Onwards and upwards

Insights from a world leading Venture Capitalist - Tim Draper

As an entrepreneur playing with a few tech ideas over the years (such as www.referron.com ) (a shameless plug:))

(Download and have a play - it’s free)   , and a strong believer in technology - I am in awe of what Tim Draper has done ! 

Below is an extract of some of his ideas as he talks about 

- his investment philosophy - what and who he invests in 

- a war story or 2

- the future being a Decentralised World being  driven by Blockchain AI and Genomics 

- Bitcoin, Crypto, Blockchain and Decentralisation 

- AI and Genomics 

Tim Draper a technology futurist , innovator and  venture capitalist of note. An advocate of digital currency which is driving decentralisation! 

Investments include  Baidu, Hotmail, and Tesla. Founder of Draper Fisher Jurvetson (DFJ), Draper University, Draper Venture Network, and Draper Associates and of course Bitcoin 

What has been  your worst investment decision 

Not investing when I had an opportunity to do so … in the likes of Facebook, linked in , eBay and a whole heap more! 

If as a VC , 20pc of your investments are good and a few are home runs - you are far ahead! 

If you believe in the person - back him/her - they may fail a few times but they will pivot into something good

What is your investment philosophy - what are your triggers when investing? 

• We look for uniqueness. 
• We look for people who are uniquely qualified to do what they are doing. 
• We look for unique uses of new technology to apply to markets that are getting lazy and bureaucratic 
• We look for an x-factor, something where the startup can create an edge to wedge into an established market with a new look that turns the industry sideways.

What was your  decision-making process when making an investment like Hotmail  ?

The Hotmail founders, Sabeer Bhatia and Jack Smith came to us with a pitch to become website designers, and as we were showing them the door, they said they had a wild idea for free web-based email. We brought them back in and decided it was interesting enough to make a small investment.

At the first board meeting, Jack Smith proudly stated that the web-based email was up and running. I asked how they were going to market this amazing phenomenon, and they suggested TV, radio, billboards… expensive alternatives that we and the company didn’t have the budget for.

So I asked if they could just blast it out to all those people on the internet. They said that that would be spamming. Then I said, “You are giving this away for free, why not put a message at the bottom of each email that says, “P.S. I love you. Get your free email at Hotmail.” They thought I was crazy, but eventually, I convinced them to put the message at the bottom, just no ‘P.S. I love you.’” 

The product was the fastest-growing consumer product in history. It grew to 11 million users in 18 months. We eventually sold it to Microsoft for a lot! 

What qualities do you believe are essential for a successful entrepreneur

Entrepreneurs have to be resilient and  believe that what they are doing is more important than anything else they could ever do, whether they become financially successful or not. 

Our Student Oath at Draper University is for them  to make good, effective long-term choices. They also need to feel free to innovate without government or other intervention.

An entrepreneur belongs to “club fear” and one of the credos of Draper University is, 

“I will fail and fail again until I succeed.”

You have to be willing to take the heat or just say, “Hey, we screwed up. We’re gonna try to do it this way next time.” That will save you countless troubles, trials and tribulations. And then explain your thinking about how you got to where you made that decision.

You don’t fail - you learn 

What initially drew you to cryptocurrency and bitcoin how do you see its future role?

I was playing around with blockchain add nfts when Bitcoin showed up. I thought there was something in this non fungible token!  I bought 40,000 bitcoins for $250k from Peter Vincennes at CoinLab. 

It had many teething problems - but eventually it became more than a token forvbuying pizzas, and illegal substances, Bitcoin was being used for some life-changing applications. It was used for remittance, for paying people overseas, and for allowing the unbanked to become a part of the world economy, and it was trusted without a bank or government as an intermediary. At that point, I knew it was going to be big.

How do you see decentralization and blockchain technology. shaping industries like finance and healthcare in the coming decade?

I believe that Bitcoin will decentralize finance in all forms. It is decentralized, open, global, transparent, keeps perfect records, and is accepted everywhere by anyone, which the banking/government system cannot say. 

Eventually, great technologies eclipse existing antiquated oligopolies, but it takes time and constant pressure. 

Healthcare decentralization is simple. While people do want every healthcare provider to have access to all their health data, people would like that data to be in their control.

You are a prolific investor in AI, blockchain, and genomics. How will they  address global challenges in sectors like finance, healthcare, and government?

AI is already outperforming the average doctor in diagnosing diseases, and I expect that with more data, that difference will only become wider. 

Eventually, I can imagine a time when AI runs the diagnostics, and develops the therapeutics in real-time for each individual. 

Genomics will play a great role in finding specific cures for diseases for each individual and will play into the computational biochemistry that is advancing at an extraordinary rate. 

Finance, of course, will operate more in Bitcoin than in banking, and government currencies, since with Bitcoin, people can operate all over the world, and the accounting, auditing, bookkeeping, and ownership transfers can all be done instantly on the blockchain without the need to pay professionals to keep track.

I think AI will enable governments to be far more efficient, fair, and effective - and of course decentralised . We are playing with the creation of Draper Nation 

What is your advice to a budding venture capitalist?

Ask yourself why you want to do this ? It is a wonderful job with many ups and downs. You learn about people and the world and the future around us.

What are some gems that you give to entrepreneurs?

💎 Some of Tim’s  gems 💎 

💎 Always give that extra 10pc - Tharshan where the magic happens

💎 Arrive before a  forum and stay after the end / that’s  when you meet the relevant people and get the real gems

💎 I like people. I like the idea that we’re all interconnected. I like the idea that people can help each other. I also like being out there.

💎 I strive to be a lifelong learner 

💎 I do enjoy what I do and I think that maybe that’s what people are feeling when they see me.

💎 As an entrepreneur, you can’t really worry about what people are thinking today because what you’re really trying to do is something that’s kind of gonna blossom five or 10 years from now.

Source : The connect Group 

http://bsivc.blogspot.com/2021/09/one-of-most-successful-vcs-tim-draper.html?m=1

The BSI Eco System

Helping you create your Generational Legacy by Connecting Entrepreneurs and Organisations to People and Money 

21 Years in the making!! 

Figma raised a $3.8M Seed + a $14M Series A all pre-revenue

Michael Ho - who focusses on preparing seed stage founders for series A - has an amazing insight!!!

❌raising money isn’t about revenue ❌

In fact it was 3+ years before Figma had any of the common traction metrics (users, revenue, growth)

Sandvine, the first startup Michael worked for raised a $19.5M seed round pre-traction / pre-product right after the dot-com crash…

And Kinde raised $11.5m a few years back on a piece of paper !!!

So clearly it’s not always about traction either

Okay then… So what is it about?

🤩 Raising money is about investors believing in your (future) ability to hit Venture Scale

Does (historical) traction help? 

Sure - but not always!!!

The key is to clearly articulate the 10X factor 

There’s only a very few that’ll be able to raise with zero traction which is usually about 

→ the team or 

→ some crazy breakthrough

Traction doesn’t always equal funding 🤯

Many Starrups were sold a story

→ if you get to X traction = you’ll be able to raise

→ Growing 2-3x yoy = successful raise

→ $3M ARR = Series A

And so they put their heads down, burn through their runway, hit those metrics to eventually pop their heads back up and realize only then that it’s not enough

But now they’re almost out of runway 😞

Michael’s company , Sandvine  doubled revenue, had big customers with thousands of users and finally crossed $5M 🙌 - 

But then struggled to raise their next round

→ they had traction??

VCs look for leading indicators vs lagging indicators 

To have belief that they will get  the $1M to $100M in 7 to 10 years venture scale curve

What are some of the leading indicators 

It’s not always about month on month growth 

→ grow at 10% mom for 24 months straight

→ and 6% mom for the next 3 years 🚀

It could be 

 ICP, 

growth tactics,  

stage ,  

opportunity and industry , 

belief in the team , 

gut & intuition on the investors side ,

 belief by those who have influence ! 

The golden nugget 

Find out what those leading indicators are and use that as your roadmap 💪

What are some of your Leading Indicators? 

Typical revenue requirements at each stage of Vc

Michael Ho clearly defines the steps in VC capital raises 

→ Pre Seed - 0 to $1m - Discovery 

• you understand a wicked problem - and you have the engaged team who are looking to find the pain killer 

→ Seed- 250k - 1m - Problem - Solution fit 

• it’s about acquiring happy and engaged customers 

→ Series A - 1m - 50m - go to market fit 

• you have a repeatable scalable factory that can find and win lotsa customers 

→ Series B - 50m plus - scale product market fit 

• You break the $10m barrier 
• You’ve derisked and ready to scale 

→ Series C-E - scale 

• You’ve broken  the $30m  barrier and looking for new products and new markets 

--

♻️ Repost to help a founder in your network

Where are you in the process ?

Never give up !!!

The dude was 65c  broke and living in a tiny house with a beat-up car, relying on $99 social security checks. 

Armed with a mouthwatering chicken recipe, he set off to sell it to restaurants across states.

There were over 1000 rejections, but he persisted - he had no choice!!!

On the 1009th try, he heard his first yes. 

That man was Colonel Harland Sanders, and with that yes, Kentucky Fried Chicken (#KFC) was born. 

Never give up and always believe in yourself, even in the face of 1000 no’s !!!

Relaunching #referron after 1000 no’s - am I crazy? 

What does it take before VCs will look to invest pre seed or seed capital in your start up ?

My friend, Chris Flavell,  shares an interesting article piste by Michael Ho , former Vc and exited founder -   with some interesting stats around how much revenue you need before a fund will look to invest  pre-seed and seed round in your startup 

This is really interesting for me - as we look to raise a pre- seed or seed round for referron! 

⁉️ How do you first get traction and contract revenue followed by  a path to scale in USA, Asia, India or the UK?

🤔 A survey with 110 seed and pre-seed VCs by Right Side Capital Management about  their revenue expectations for 2024 showed that the sweet spot seems to be $300k - $600k 

💥 for a $4M Seed

→ 17% are okay with pre-revenue

→ 29% want to see $150K to $500K

→ 28% are looking for $500K to $1M

→ and 24% say they're looking for $1M+

💥 for a $1.5M Pre-Seed

→ 46% will invest pre-revenue

→ 27% are looking for $0 to $150K

→ 15% want to see $150K to $500K

→ and 10% are looking for $500K to $1M

What are some other things a VC look for? 

The Right People maybe? 

The technology?

The exit strategy ?

What else ?

Surround yourself with people who care about you and want you to do better

When I left PwC to run VentureCrowd full time, the head of our largest institutional investor told me I didn’t have what it takes to be the CEO. That crushed me for a long time and served as the most extraordinary fuel for the imposter syndrome I’d been struggling with for years. Most founders I know deal with this very challenge every day.

What I didn’t realise at the time, and I guess he didn't either, is that that one comment would become the single most motivational thing anyone has ever said to me. 

Last year we generated over $6M in revenue at a gross margin of 51%, clocked over $330M in capital raised for over 150+ venture capital, property and private credit deals, and distributed over $23M to investors across a range of funds … and I am absolutely pumped for what is coming this year! 

These days, I surround myself with people who are always prepared to challenge me, because while it's nice to be told you’re doing a good job, it just doesn't help make you better

BSI Launches AI Academy in Australia

Facilitated by the legendary Technology Guru in Australia , Tony Surtees, BSI Digital Learning has partnered with Silicon Valley’s Scott Galloway’s Section School to launch an AI Crash Course and AI Academy in Australia. 

What does the AI academy do?

The AI  online programs are aimed at upskilling business professionals in AI amid a skill shortage in the sector.

Just this week the Tech Council of Australia released a jobs report that prophesied 200,000 AI jobs in the country by 2030. 

However, the report also strongly highlighted the need to address the skill shortages across businesses for this to happen.

The Crash Course, priced at $600 is tailored towards professionals. It involves one hour of learning per day over five days and includes video learning, live workshops, in-depth coursework, hands-on activities and access to support tools.

The course aims to introduce participants to AI in business and enhance their personal productivity by leveraging AI to manage workflows and save time.

The Academy is positioned more as an online portal, offering a 12-month subscription priced at $1000. This provides access to AI courses and business workshops, both live and on-demand.

It features AI resources, downloadable materials and members-only discounts on an upcoming Mini MBA program. 

The Academy is designed to build AI literacy, capability, and targeted skills for specialist roles and functions, with courses updated every 30 days to keep up with AI developments.

Who are the facilitators?

The Section School facilitators come from big tech companies such as Google, Meta, Apple, and Amazon – with the idea that the curriculum is being led by experts who use AI daily and is grounded in real-world application.

The launch of these courses comes at a time when a plethora of AI training programs are being spun up globally. 

According to Simon Dewar, the group CEO of BSI Learning, its offerings are unique as they offer a flexible learning environment aimed at businesses.

”Unlike traditional academic courses, Section School focuses on practical, blended and digital approaches, that enable busy professionals to access both live and on-demand forms of learning,” Dewar said.

Dewar also said it’s important for businesses to skill up sooner rather than later.

“AI experimentation and pilot projects are currently underway in most sectors, as companies search for ways to learn about, and then capitalise on AI,” Dewar said.

“Typically, the biggest beneficiaries are those who are able to adapt to these changes first and deliver a first mover advantage to businesses and individuals that get onboard early.”

This news comes just one day after Redactive AI — founded by Atlassian Alumni — secured $11.5 million for its enterprise-grade AI solutions platform for businesses.

 

Thanks for an amazing article @smartconpany (here is a link to the article 

Here are 8 great quotes on success, action and failure

As a friend of mine said

Action without vision is hallucination 

Vision without action is chaos 

But vision with action, my friend is the key to success !! 

Here are 8 gurus that say  sort of the same thing! 

1. "All our dreams can come true if we have the courage to pursue them." - Walt Disney

2. "Success is walking from failure to failure with no loss of enthusiasm." - Winston Churchill

3. "Try not to become a person of success, but rather try to become a person of value." - Albert Einstein

4. "It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change." - Charles Darwin

5. "I have not failed. I've just found 10,000 ways that won't work." - Thomas Edison

6. "The whole secret of a successful life is to find out what is one's destiny to do, and then do it." - Oscar Wilde

7. "Don't be afraid to give up the good to go for the great." - John D. Rockefeller

8. "I find that the harder I work, the more luck I seem to have." - Thomas Jefferson

Square peg backs an Indonesian B2B payments platform - Paper.id

Paper.id an Indonesian business-to-business (B2B)fintech company founded in 2016 by Yosia Sugialam and Jeremy Limman has raised an a Series B fundraising led by Square Peg after having already raised $12m to date.

Investors include 

• SMBC Asia Rising Fund, a corporate VC co-founded by the Sumitomo Mitsui Banking Corporation and 
• Incubate Fund, participated in the round.
• Argor Capital also re-upped in the latest round.
• Singapore VC firm Golden Gate Ventures
• Funding Societies, also called Modalku in Indonesia.
• Indonesian fintech firm Xendit, which became a unicorn in 2021 is also an investor 

What Paper.id does 

Paper.id is the go-to platform for business owners to manage and process their transactions efficiently and help users manage their cash flow. 

It simplifies invoice creation, automatic reconciliation, and precise document matching. It also provides access to various payment methods, including credit cards, offering extended terms for payers. 

To date, Paper.id has served over 600,000 clients, and is now  one of the largest B2B fintech payments in Indonesia, having processed $2 billion in annual payment volume in 2023 - with transactions growing  by more than 30 times compared to 2021.

Innovations include enabling cross-border payments, complemented by robust business verification capabilities, and will facilitate  installment payment by partnering with banks and fintech lenders.

See also 

https://www.techinasia.com/paperid-nabs-series-funding-30x-transaction-growth?utm_source=li&utm_medium=social&utm_campaign=news_article

https://pitchbook.com/profiles/company/234879-67#overview

https://www.squarepeg.vc/blog/investment-notes-paper-id-series-b#:~:text=Meet%20the%20team%20behind%20Paper,next%20phase%20of%20their%20journey.

Kinde - the next Unicorn?

Kind  is about being constantly curious, nimble, and experimental - and total focus on servicing both customers and all stakeholders - says Ross Chaldecott from Kinde !

 At Kinde, we have two core team focuses - alignment and autonomy.

We take it to the extreme - says Ross 

Weekly

“Every Friday we have an all hands where we openly take the team through everything that has happened in the week, followed by a QA session. This includes all financials and everything else that seems important for the team to know - completely candid and open

.

Monthly 

Monthly we send a shareholder update. Our team are all shareholders so this goes to them too. And quarterly, after our board meeting, we take them through the entire board deck and every bit of discussion that happened. 

To some this is heretical. 

To us it's critical.

Quarterly

It means that our team knows how we are doing. They know what is going well. And they know what is not going well.

It’s all about  Alignment.

A team that is highly aligned needs the space to make decisions.

Ownership 

 At Kinde, autonomy feeds off ownership. Every member of our team is an owner. They have equity in the company. They act like owners and think like owners. This is the same as treating them like adults. And it's incredible what happens when you give people the benefit of being treated like adults.

Never feel Failure 

On top of this, they never fear failure. Mistakes are a part of a high performance culture. A team too afraid to take risks will never achieve anything great. We hire well. Every one of our team members is incredibly smart and capable. After that we get out of the way and let them get on with it.

Trust

This takes a remarkable amount of trust. I think that's probably the real magic.

Kinde