George Arison

Here’s a question investors are often asked: When evaluating early stage companies, how much time do you spend on due diligence around future exits? It’s not surprising we hear this question a lot. Also not surprising: it’s got a wide range of answers depending on the firm. Some don’t spend much time here at all. Others make it a point to put meaningful time in as part of their process. Our current thinking: take the time to do the work on public market comps. At Alpaca VC, we spend significant time understanding how public market investors will  realistically value a business based on margin profile, product, business model & TAM. In short, we want to know: how will this company be valued at scale when we get taken out? Yes, we can acknowledge that the journey toward exit is a windy road and that there may be pivots along the way, but there are still public market companies that have a business model similar to the early stage company you're evaluating. And you can always look at gross profit multiples if you think the margin profile will change over time. So we still do the work on the comps. Quantitative metrics we look at when making the comparison to public market comps include EBITDA multiple, revenue multiple, Gross Profit multiple or all of the above. As part of this process, it’s also important to factor in the public market company’s year-over-year revenue growth as this will also significantly impact the multiple it trades at. Simple example: if you have two public market companies with similar business models and similar margin profiles, but one's growing 100% year over year, and one's growing 50% year over year, then obviously the DCF (discounted cash flow) analysis is going to spit out a very different valuation for the one that's growing faster. Why this matters: When you take all of that information into account as you evaluate an early stage business, you can begin to create a realistic picture of how this company will be valued in the public markets at exit - or how an acquirer will value the company for an acquisition. Strategic acquirers may, of course, pay a premium, but we won’t underwrite for that. This allows us, for example, to form conviction around valuation based on revenue and gross profit predictions. If we think they can do $100M of revenue five years from now, we use this diligence process to form a thesis about whether the characteristics above (product, margin, business model, etc.) will cause the company to be valued at $200M vs. $500M vs. $1B at exit. Curious how other early stage investors think about underwriting an exit and how much time they’re spending on public market comps even though these companies are in their infancy.

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It was a real honor to interview Brad Burnham co-founder of Union Square Ventures and partner Placeholder on the history of hype cycles in technology and the value they bring to capital and market formation. Brad has had tremendous success across decades investing at the frontier - when it was the frontier/ before it was obvious. Crypto is still the underdog and his views on the opportunity and its nuances are prescient. Specifically it is both a technical and financial innovation which can lead to excess volatility and a unique muscle as it relates to being a venture manager. But the returns are real. And the innovation is real despite some of the the common narratives. No one debates the breakthrough applications in AI at M13 we have been very active. It is also very clear that incumbents have massive data and distribution advantages which can make it challenging to find the right pockets to invest. AI is on its own hype cycle and as always the best teams (typically with contrarian takes) win. Very exciting times to be a venture investor.

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🌟Innovative VC Firm Overcomes Exits Drought with Secondary Sales🌟 ⛵Navigating a challenging landscape where exits are scarce, Santa Barbara Venture Partners (SBVP) has pioneered a novel approach to sustain its growth and attract investors for its second fund: secondary sales. Instead of waiting for traditional exits like IPOs or acquisitions, SBVP opted to sell shares of its portfolio companies, demonstrating its ability to generate returns for investors and stand out in a competitive market. 🎤According to Dan Engel, founder and managing partner of SBVP, these secondary transactions have been a game-changer, sparking investor interest and bolstering the firm's credibility. By leveraging its recent successes, including a lucrative stake in sports-betting company DraftKings Inc.' acquisition of digital lottery app Jackpocket, SBVP seized the opportunity to return profits to its limited partners (LPs) and pave the way for its second fund. 💡Engel highlighted the challenges faced by young VC firms in raising subsequent funds, particularly amid a downturn in exit activity and heightened investor scrutiny. With traditional exit routes becoming increasingly elusive, the pressure is on for firms to demonstrate tangible returns and establish a track record of success. ✨"For us, secondary sales have been a game-changer. They've helped us return profits to our LPs and attract investors for our second fund," said Dan Engel. 💰For SBVP, the decision to pursue secondary sales was driven by the need to provide liquidity to LPs and validate its investment thesis in the eyes of prospective investors. By strategically offloading portions of its holdings in high-performing portfolio companies like Bark Technologies and Rad AI, SBVP not only generated substantial returns but also bolstered investor confidence in its ability to deliver results. ⚠Despite the complexities and potential stigma associated with early share sales, Engel emphasized the importance of prioritizing investor returns and seizing opportunities to unlock value for stakeholders. With a focus on profitability and transparency, SBVP remains committed to its mission of delivering sustainable growth and maximizing returns for its LPs. 🔍 "Returning profits to our investors is our top priority. By strategically selling shares, we're proving our commitment to delivering results and driving value for our stakeholders," added Engel. As SBVP continues to explore secondary transactions and expand its investor base, the firm stands as a testament to innovation and resilience in the face of market challenges. 🚀 ✅ Looking to raise capital for your #fund and increase the international pool of your LP #investors?   🤝 Need warm #LP introductions?   📝 Selling #secondaries to increase liquidity?   🧐 Looking for co-investments?   ▶ G+QUANT's link for inquiries and fund decks: https://lnkd.in/gjC_EuTE #VCInnovation #SecondarySalesSuccess #InvestorReturns #ValueCreation 

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I really like this PMF Framework from Sequoia. https://lnkd.in/gT2nWttx

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Let's finally get rid off the "VC alphabet song" and redo the system to become more founder friendly. "The benchmarks set by funding stages are often arbitrary and not necessarily aligned with the actual development needs of individual startups." #vc #venturecapital #founder #fundraising #startups #fundingstages #funding #fundingrounds #pitchbook

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In our latest episode on the Practical Nerds podcast, Patric and I talk about our earned learnings on how founders (and other VCs) should choose the right (Co)Investors for their startup (Construction-tech or otherwise). Which of these do you agree with ? What did we miss ?

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Greed and Fear, AI (adoption) style. In investments we're used to talking about greed vs fear, now we're seeing this same pendulum applies when it comes to consumer sentiment towards AI adoption. Concern is fear, that's obvious, and if you think about it a bit excitement comes from a form of greed in this case: the excitement for AI is because people hope it will help them do more with less time and effort invested - a greed for precious resources (which can be translated to money as well). Consumers need to invest some time, effort, as well as money in order to come up the AI learning curve (learning the right tools and how to prompt them). Playing around with AI is one thing, seriously using it professionally or personally is a bigger step that will be affected by the greed vs fear. It's too bad Pew Research Center didn't separate out professionals' opinions in a professional capacity (link to findings in the first comment), but still they find that for the first time the majority of Americans are concerned. The increase in concern (fear) happens just as research is starting to demonstrate that AI is making people more productive, which should have fueled excitement (greed). According to Ipsos, two thirds of people think AI will profoundly change their daily life in 3-5 years. Almost half say it already has (link in second comment). Interesting... And now this entire post rewritten by LI's AI: Greed and fear are familiar concepts in the world of investments, but did you know that they also apply to AI adoption? Consumer sentiment towards AI is swinging back and forth between concern and excitement. Concern is fear, and excitement is a form of greed. People hope that AI will help them do more with less time and effort invested, a greed for precious resources. However, investing in AI requires time, effort, and money to learn the right tools and how to use them. Playing around with AI is one thing, but seriously using it professionally or personally is a bigger step that will be affected by the greed vs fear pendulum. According to Pew Research Center, for the first time, the majority of Americans are concerned about AI. This increase in concern happens just as research is starting to demonstrate that AI is making people more productive, which should have fueled excitement. Ipsos reports that two-thirds of people think AI will profoundly change their daily life in 3-5 years, and almost half say it already has. What are your thoughts on the fear vs greed of AI adoption? Share your opinions in the comments. #AI #fear_greed #investment #genAI

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Interesting concept to rename rounds by milestones. But "Series Client Expansion Extension" just doesn't have the same ring to it 😋 . Maybe we can start incorporating it into a descriptor to add context, "Series Seed Extension: client expansion." #startups #venturecapital

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🚨 Bookkeeping is HARD - a Lesson from Synapse's Collapse 🚨 I was recently quoted in Mary Ann Azevedo's TechCrunch article on the bankruptcy of Synapse, a banking-as-a-service startup. As someone who works at a CPA firm that does bookkeeping for clients, the Synapse situation really resonated with me. Synapse had essentially one job - to sit between fintech startups and banks, and keep track of where each end-customer's funds went. Sounds simple, right? WRONG. Bookkeeping, especially in the highly-regulated world of finance, is incredibly complex. When Silicon Valley tries to "move fast and break things" in fintech without truly understanding the accounting complexities, people can actually get hurt. Supposedly, Synapse's collapse has impacted up to 10 MILLION consumers who now can't access their money. 😱 That's a lot of ordinary people who are going to have problems paying their rent or getting groceries. I'm seeing a similar wave of unkept promises hitting the small business accounting space. Startups saying that they can "automate" complex accounting tasks, but not really understanding what they actually need to do. And not taking into account how their mistakes will impact their small business customers. The last time this happened there were a lot of business owners who ended up losing a lot of their hard-earned cash when their supposed expert accountants messed up or dropped the ball. 😞 I'm sure that will happen again, and it bums me out. I'm all for moving fast and breaking things, but not if it hurts other people. https://lnkd.in/g6p_5viM?

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Want a front-row seat to the frontier of tech? We’ve got the role (or two) for you! We’re expanding our frontier-tech team at Blackbird by hiring a Frontier Tech Investments Associate and Foundry Fellows! Got questions? We've got answers... 1️⃣ What are the roles? 🧪 Associate = a full-time VC investment gig in our Blackbird Investments team, working directly with me. We’re looking for someone with a science and/or engineering background and more curiosity than they can handle. You’ll grow your own investment brand and practice, support our portfolio founders, and will help build Foundry, our early-stage frontier-tech accelerator. ✨ Foundry Fellow = a casual/contract gig in our Blackbird Investments team, ~15h per week for 3 months. The Fellowship is ideal for PhD students and ECRs who want to learn more about startups and VC. You’ll go deep on emerging areas relevant to your expertise (or curiosity!), get a front-row seat to groundbreaking companies in those areas, build out your non-academic network, and develop a solid writing practice. 2️⃣ Why are you hiring? We love frontier tech, and we’re ready to grow our team. 3️⃣ Wow, it’s so great that you’re starting to look at deep tech! Look, we get it: we don’t make a lot of noise about our frontier tech investing. Buuuut we’ve been deep-tech investors since we backed Tim Kentley-Klay to found Zoox back in 2014—we’ve been on incredible journeys with PsiQuantum (building the world's first utility-scale quantum computer right here in Australia!), Inventia Life Science (transforming drug discovery with high-fidelity cell models), Remedy Robotics (surgical robots for remote endovascular procedures), Opto Biosystems (minimally-invasive neural implants to treat cancer), and more. We believe that frontier technologies, and great frontier-tech investing, will be part of the solutions to the greatest problems humanity faces today. 4️⃣ When do applications close? May 31st at 11:59pm AEST. 5️⃣ I have more questions! I’m sure you do! Clare Birch and I are hosting an AMA to answer any and all questions about these roles. Want to know what a week in the life of our team looks like? What’s keeping us up at night? What our ideal candidate looks like? Come along and find out - registration link in the comments 👇 Apply for these roles: Associate - https://lnkd.in/gCfj4EUJ Foundry Fellowships - https://lnkd.in/gj6ATZVZ If you know anyone that we should meet, send me their details! Cameron Elise Ben Andrew Robin Joseph Adelaide James Olivia Lucinda Raghav Jesse Christie Mohamed Tom Amee Pablo Haya Loong Hon Joshua Benjamin Megan Harry Denzil Matthew Diana Daniel Tom Deanna Justin Amar Lilly Stone Thomas

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As we dive into 2024, the Series A fundraising landscape is becoming increasingly daunting. Investment standards are soaring, and fewer startups are making the cut. Series A investors are finding many seed stage companies too premature. The median valuation jump from seed to Series A skyrocketed from $19.5 million in Q1 2022 to $28.7 million in Q1 2024. Investors now demand stronger revenue performance, targeting $2 million to $3 million in ARR, up from $1 million to $2 million. Alarmingly, only 12% of Q1 2022 seed startups secured Series A funding within two years, down from 31.8% in Q1 2020. #venture #earlystage #seedtoseriesa #seed #seriesa #inspireglobalventures https://lnkd.in/gW4bkcNy

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Instacart is a market leader when it comes to leveraging AI tools to boost productivity at work. I had an amazing conversation with JJ Zhuang, Instacart’s Chief Architect, who has shepherded over 50 AI-driven initiatives to market across the org. We explored what catapulted Instacart to the forefront of AI integration, supporting radically diverse use cases across various functional areas. One striking insight (echoed by Ethan Mollick and others elsewhere) is that you often don't need specialized tools for specialized work. Frontier models like GPT-4 can seamlessly adapt to a wide range of functions and use cases. They're not just for engineers; they're incredibly versatile tools used by marketing, comms, and legal teams. From generating code to proofreading and ideation, GPT-4 empowers every department to leverage AI for enhanced productivity and innovation. By integrating LLM’s like GPT-4 into their workflows, teams can streamline processes, automate repetitive tasks, and unlock bandwidth for new creative possibilities. How can you harness the power of AI in your own work to boost productivity? Share your thoughts below 👇 Want to hear more insights from JJ? Check out the full podcast episode by clicking the link in the comments.

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GPTZero has skyrocketed to profitability within 18 months, raking in millions. With 500% ARR growth in six months and user growth from 1 million to 4 million in a year. While many AI-detection companies struggle with accuracy, GPTZero excels, leveraging vast data and advanced LLM models using the latest open-source tools. Initially celebrated for helping teachers spot AI-generated student work, GPTZero's clientele now includes government agencies, grant writers, hiring managers, and AI training data labelers. One founder noted, "We have a big data advantage with millions of examples of human versus AI-generated text," proving the quality of data fed into AI models is crucial. https://lnkd.in/gREnQ2ps #ai #sustainabledevelopmenttechnology #emergingtechnology

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One of the earliest questions we ask of founders is: what milestones do you hope to achieve with funding? The reason we ask that question is that it's next to impossible to raise your next round of financing without having delivered some level of quantifiable progress. And most importantly, that progress must be sufficient to attract the next round of funding. If you can't get there, you're looking at an extra 50-65% dilution if you have to raise a bridge round. But here's the key, even bridge investors, who are generally already invested in the company, want to see progress that trends to the next round. So, in order to avoid having to raise a bridge, raise enough capital to hit meaningful milestones (with some cushion). That extra 2-5% dilution stings far less than an extra 15% later.

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Lesson for first time founders. "As much as they want to be your friends, the fund comes first (as it should)." As hard as it sounds the VC business evolves around a fight for survival first and being friends as a distant second. #openvc #investmentmanagers #assetmanagers #fundmanagers #venturecapital #assetallocation #limitedpartners #returnoninvestment #pitchdeck #fundraising #vc #vcrelationships

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What do VCs actually look for in pre seed deals, particularly given the recent wave of AI startups? As a B2B SaaS focused investor, I have the opportunity to evaluate thousands of software businesses, and invest in 100+ each year. One of my favorite parts of my job is meeting exceptional founders and learning about problem spaces that are completely new to me, but the investment team at Forum Ventures spends a lot of time discussing focus areas and opportunities where we see the most promise and are actively looking to invest. In the coming weeks, I'll be sharing a series of market opportunities where I am looking to back exceptional founders solving challenging problems.  * Automation of complex, legacy workflows within enterprise, particularly across regulatory and compliance use cases. * Application of AI across the defense and broader government sectors, specifically related to operational efficiencies, the infrastructure stack required to leverage cutting edge AI advancements, and the development and adoption of autonomous systems. * Manufacturing/hardware design and production, spotlighting modern manufacturing - robotics, aerospace, alternative energy, medical devices, etc. * Complex manufacturing supply chains- from extraction to processing and refining, and ultimately through manufacturing and distribution.  If any of the above sounds like something you are building, let’s connect. #GenerativeAI #VentureCapital #EarlyStageStartups #Innovation #TechTrends #AI

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Starting a new fun project with Victor Lee - an AMA series with early stage founders. There are many podcast shows featuring successful, famous entrepreneurs. But what about those who are still relatively early in their journey, perhaps just one step ahead? The zero-to-one founders who have recently cracked the product-market fit and raised Seed or Series A capital. They may not have figured out everything yet, but they have fresh, relatable tips and advice to share. We’ll invite early-stage founders for a one-hour AMA session. Afterwards, we’ll create a public webpage featuring each Q&A session with media clips and transcriptions. This will be 100% free and open to the public. Our first AMA (June 11 1pm PST) will feature Will Drewery, whose company (Diagon) recently raised $5.1 million in Seed funding. We’ll get to know Will better and cover topics such as tips on raising funding in this tough environment. It will be a fun AMA, and you can register for free using the link below. RSVP now!

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