Founder Feedback Session

Got connected to an awesome founder this week who was asking for some advice on their upcoming financing. Thought I would share the feedback I gave - btw I am a HUGE Kim Scott Radical Candor? fan - so know these comments were made because I care personally (3x founder) and challenge directly (because "long maybes kill companies") - putting me in the #RadicalCandor quadrant (follow Kim and Radical Candor for more detail)

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A couple high level comments / bullets for feedback:?

• Institutional Investors / VCs don't sign NDAs. My legal bill would be hundreds of thousands of dollars a year if I had to have our team review each NDA and we don't have time to steal other companies' ideas - we invest. That said there are angels/farse funds out there and non-transparent firms who aren't as public about what they do because they do this but that is less than 1% of all VCs. Unfortunately we have seen startups have to deal with that which pains me as human and as an investor that these nefarious actors exist. Quick googling will tell you how transparent the VC is and/or talk to other founders in their portfolio or space if you get any spidey senses that tell you otherwise.?
• Subpart to the point above all VCs you are talking to should loudly and proudly be able to connect you to their portfolio as you get deeper in the pipe and feel free to reach out ahead of time to to other founders in their portfolio which should be either public on their website - like ours at https://www.render.capital/ - or via crunchbase/pitchbook. VC's should also proudly declare when they wrote their last check and how much dry powder they have left to invest. AND (again as you get deeper into diligence) what their capital calls should come. I think I mentioned this but I put out a capital call on Monday and by the next business day was already receiving wires. Now that doesn't always happen that fast there are various timing pieces that come into play like bank holidays (ie today Juneteenth) or LP's being out of the country - we had another capital call that was slightly delayed because one of our LPs was across the figurative pond and didn't have great cell coverage for a phone/verbal wire confirm with their asset manager but those should be cleared up in the next 4-5 business days.?
• A $20M valuation for a company with zero revenue and zero prior capital raised is largely out of the question for most firms at your stage. Some coastal VC's might take that bet (although in today's market many VC's are realizing that the midwest valuations and step ups are more in line with where they should have been investing in 2021 but they were handing out $45M valuations for companies with $0 revenue and now those companies can't raise). I caution you there because most Series A investments that we have seen have monthly recurring revenue north of $100k per month and growing 30-40% quarter over quarter are typically the ones that warrant closer to a $20M valuation. The back of napkin math and near term reasoning for this is funds have to have markups every 12-18 months - meaning your valuation step up in your next round 18 months from now needs to be double or triple that $20M valuation (or whatever valuation you and the lead investor land on) in order to meet their criteria which would necessitate a monster revenue pipeline and close rate to get to that scale.
• Subpart to the point above each and every alphabet soup round (Series A,B etc) you raise you will likely give away 10-30% of equity in your company. There are some exceptions to this - down rounds, later stage rounds, bridge rounds, stacking venture debt / other capital vehicles etc but this is the general "rule of thumb"
• final note you are an AMAZING technologist - I got that from slide 2 - spend more time on your deck and in the pitch about how you will lever the technology to make money and less time around the "features" of the platform. That reducing friction piece is key. Ideally, you are also telling that story around how consumers or corporates are currently spending in their own budgets re: corporates read - how in their current P&L and how you are going to align your technology/platform/budget spend.?

If you are ever interested in partnering with us at Render once you open up your round feel free to learn more how we invest here - https://www.render.capital/how-we-invest and apply for funding here - https://i3zpofdouud.typeform.com/to/TPTGKxJ3

That said - as former founders and operators here at Render we understand that fundraising can be difficult so we've created a Founder Toolkit that has fundraising resources, investor databases, and more as an attempt to be helpful. Feel free to continue to keep us updated at [email protected] as you go and grow and we wish you the very best in your venture!