Shehzad Khan

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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A really interesting and powerful performance management practice. "Use the “30-day test” to maintain a high-performance team. Create a reminder to ask yourself this question 30 days after someone joins the team: “Knowing what I know today, would I hire this person?” If the answer is yes, tell the person you’re excited about them and give them more equity—you’ll gain a lot of loyalty. If the answer is no, you need to fire them immediately, to avoid the inevitable damage they will cause to you, your team, and themselves." from Uri Levine Founder of Waze, via Lenny's podcast. https://lnkd.in/gyS2HzZP

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The state of venture capital is wild right now. We are witnessing a surge of innovation across the spectrum: - Funds merging - VC doing PE - PE doing VC - Secondary funds - Buyout funds - Spin-out funds - Debt funds - Continuation funds - Infrastructure funds - GP turnover - Hard Tech surging - Family Office uptick

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Summary: The article discusses tech mogul Vinod Khosla and his recent success as a prominent investor. Khosla's main focus is on AI and its potential impact on various industries. He also addresses concerns regarding AI regulation and competition with Chinese AI. Key takeaways: Khosla's recent $50 million investment in OpenAI has garnered attention and success. He is passionate about the potential for AI to disrupt and improve various industries. Khosla's focus on AI regulation and concerns about Chinese AI competition. Counter arguments: Some may argue that Khosla's intense focus on AI may overshadow other important areas of technology. Critics may question the sustainability of AI in certain industries and its potential negative effects on job displacement. #ai #artificialintelligence #tech #venturecapital #vc #startups

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🔎 This is a well done analysis. 🔎 I gave a founder pretty similar advice yesterday about what to target and expect at the seed. And while I'm seeing founders raise seeds w/o any revenue, those founder are either repeat founders or strong pedigree founders (like AI Phd's with time at Google etc.). So for the typical founder, shooting for at least $250k in true ARR with 300%+ growth or more is a good target. And the more the more likely you are to raise funding. 🎯

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Yesterday we launched the next chapter of Pocus to help companies run ALL go-to-market playbooks, powered by AI. After 3 years building with the best leaders in GTM, this launch is a realization of our founding vision to unlock data for GTM teams. Isaac Pohl-Zaretsky and I built Pocus because we saw that go-to-market teams were desperate for accurate & actionable data. We started with PLG companies, who felt this pain acutely with product usage data. As we dug in deeper we realized there was an entirely new GTM motion — Product-Led Sales — that companies needed help building. With our customers and community, we built PLS from a niche strategy to a standard GTM motion. It has been incredible. This next chapter is a natural extension of what we’ve built in Product-Led Sales. In this next chapter of Pocus, we unlock ALL data (not just product usage), to power ALL go-to-market playbooks (not just PLS). We help customers turn all data into revenue, powered by AI. We’ll do this with 3 key product investments 1/ Enrich: unify customer identity across various data sources 2/ Engage: helps sellers reach out to the right users with the right message at the right time 2/ Optimize: help leaders copy & paste their best reps’ workflows Check out the blog Isaac wrote highlighting new features launching today and what’s coming soon (hint - it’s a LOT). We’re also co-hosting a webinar in a few weeks to talk through the state of the market, the trends we’re seeing, and how Pocus will help our customers continue to thrive.  RSVP at the link below.

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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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Seed-stage fundraising looks very different depending on the startup industry. Valuation and cash raised typically move together (not a lot of tiny rounds at very high valuations), but the disparity between industries can be quite large. All data from 1,271 priced Seed rounds raised from Apr 2023 thru Mar 2024. Primary rounds only, US rounds only. Industries had to have 10 separate raises to be included. A note on AI - if you tracked it as a separate industry, it would at the top of every list. But it exists within many of these categories as well, so we displayed it in the chart below as a little red box. 𝗢𝘃𝗲𝗿𝗮𝗹𝗹 𝗞𝗲𝘆 𝗣𝗼𝗶𝗻𝘁𝘀 1. Healthtech overtook Fintech as the second-largest category in our data, a change from the last time we measured these metrics. 2. Seed volume is down across almost every category save AI (and even there, not up much lately). More seed deals are being completed on SAFEs (not shown in this chart) but the valuations and cash raised are very similar between SAFE and Priced rounds by industry. 3. The laggards in the chart (DTC Retail, Food, Personal Products) are essentially the same as last year. Are founders here turning towards other methods of funding, including revenue, instead of going the VC route? 4. Will many of these companies ever raise a Series A? Lots of talk lately about "venture stripping", "thin VC", "single round VC", whatever you want to call it - founders who explicitly set out to raise only 1 round and then fund their growth with revenue from then on. Very cool strategy! Remains to be seen if many $1B+ valuation companies can be built that way (though of course that isn't always the goal). Please share this post with a fundraising founder 🙏 #cartadata #startups #fundraising #seed #founders ---------- More data like this out every week in our Carta Data Minute Newsletter - subscribe at the link in graphic!

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Super helpful article and accompanying doc with a #Startup #Equity Calculator to determine the equity for early hires, thanks to Pear VC head of talent Matt Birnbaum! Thanks for sharing Pejman Nozad! 🙏🏼 You can read more here How to structure startup equity for early hires: https://lnkd.in/ggmpT5-Y Google Doc: https://lnkd.in/gjsvths6

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🚀 "We built Unloop Connect to support the founders who are really feeling the pinch," Michael Pignatelli reveals. As I dove deep into the everyday challenges that emerging brands face on Amazon with Michael Pignatelli, CPA, MAcc, Co-Founder of Unloop Accounting, it was clear that the path to simplifying e-commerce finance is more vital than ever. Michael's insights into accounting automation and the strategic use of Unloop Connect are game-changers for any brand looking to navigate the complexities of Amazon's marketplace efficiently. Michael's dedication to making high-quality accounting accessible reflects our mission at ExpertCPG Commerce—to empower brands with the tools and strategies they need to thrive on Amazon without getting bogged down by the details. How has automating mundane tasks changed the way you manage your business? What results have you seen from integrating new technologies? 🎧📺 Listen or Watch the Full Episode here: https://ecpg.us/3Qhk2pN #CPG #ecommerce #Amazon #podcast #UnloopAccounting #businessgrowth #financialmanagement

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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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I've seen NO ONE read this correctly; the headline is pure clickbait. More GPs are planning to fundraise now (as they say "nearer") than last year. This is the largest YoY jump, instead of not planning another raise. Why? The data here suggests those who pushed a decision further out have decided. • Not decided: from 44% to 27% • No plan to raise: 6% to 13% = 2x increase • Deciding to fundraising now: 4% to 12% = 3x increase https://lnkd.in/gkAC6GGr

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I had a lot of fun recording a podcast episode with Shiva Singh Sangwan. We discussed the evolution of Humba Ventures & Susa Ventures; tips for raising and building a fund; how to improve investment sourcing & picking; the role of luck in investing, and so on. https://lnkd.in/eiqsStej

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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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Should you ask a VC to sign your NDA before sharing information about your startup? Check out my latest Youtube video to hear my perspective on this divisive topic. I cover: - the reasons a VC will not sign your NDA - why its a bad tactic to ask - when its appropriate to ask Many startups thrive on outcompeting their peers through innovation. Its understandable that many startup founders will want to jealously guard information about their innovation, product, and business. But its not a good strategy to ask for an NDA because it creates unnecessary barriers and has very little utility in the early stage of the fundraising process and very hard to enforce. Also, there are ways to mitigate the risks of sharing sensitive info. I am not a lawyer, and nothing I say in this video should be construed as legal advice. This is my personal opinion from ~10 years of experience as a VC investor. #venturecapital #startups #investing #NDAs https://lnkd.in/dxyRyrbG

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Interesting new surrvey about the VC industry by PitchBook: 13% of VC firms are not planning to raise a new fund and 27% of VC firms have been pushed further thier plans to raise a new fund. That means a 40% decline. No wonder that startups are haveing tough time to raise funds. See article below. https://lnkd.in/exYYyCPu

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How to Profit by Divesting from Companies with Anti-Israel Stances As savvy investors, we must always be alert to the implications of a company's political stance on its financial health. Take, for instance, hims & hers, whose CEO, Andrew Dudum, recently made a controversial statement about hiring pro-Palestinian protesters just days before a potentially underwhelming quarterly earnings report. This statement, coinciding with a 5% drop in share value—erasing $100 million in market equity—raises the suspicion that it might be a psychological maneuver by a CEO fearing for his job ahead of poor earnings results. Given hims & hers' history of underperformance, with shares gaining only 8.32% since its IPO compared to a 23.33% increase in the S&P 500 and similar growth in the Nasdaq, investors could have seen better returns elsewhere. Furthermore, analysts are also showing signs of concern. Recently, Jefferies downgraded hims & hers from 'Buy' to 'Hold' and reduced the price target to $15 from $17, signaling a cautious stance on the company's growth prospects. This downgrade, coupled with the anticipated poor earnings, paints a troubling picture for the future of hims & hers. Additionally, the related Supernova festival tragedy on 10/7, where victims mirror the typical hims & hers customer base, might further alienate its clientele. Customers may sympathize more with the victims than with a company perceived to be exploiting political events to distract from business failures. This scenario suggests potential for increased customer churn and a continued decline in share value, making it a critical time for shareholders to consider divesting. For those open to risk, short selling could capitalize on anticipated downturns.

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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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