Episode Summary

In this engaging episode of "Venture Declassified," hosts Mike Kelly, Ben Pidgeon, and Jacob Schpok unpack the various types of investment vehicles and the appropriate contexts for their use. The episode is loaded with expert insights into the nuances of safes, convertible notes, and equity financing, making it a must-listen for both budding entrepreneurs and seasoned investors.

Jacob outlines the main reasons why pre-seed and seed stages often employ safes and convertible notes, citing the difficulty in pricing companies at these early stages. Mike dives deeper into the topic, discussing the similarities and differences between safes and convertible notes, including the importance of cap rates and the implications of having or not having a maturity date. Ben contributes by explaining how the size of the investment can influence the choice of vehicle, emphasizing the balance between legal fees and capital deployment.

The hosts also explore more nuanced instruments, such as rolling closes and warrant coverage, providing listeners with a thorough understanding of when and why these might be used. Jacob and Mike engage in a spirited debate over the merits and pitfalls of these investment vehicles, offering contrasting perspectives. Mike's pragmatic approach is balanced by Jacob's principled stance, both underpinned by Ben's thoughtful moderation.

The episode wraps up with practical advice on navigating these financial instruments, making it an invaluable resource for anyone involved in venture capital or startup funding. Tune in to gain a comprehensive understanding of how different investment strategies can align with your entrepreneurial journey or investment thesis.

Key Topics

• Types of Investment Vehicles: Pricing the Round, Convertible Notes, SAFEs (Simple Agreement for Future Equity)

• Convertible Notes

• Precedent and Seed Stage Usage

• Difficulty in Pricing

• Potential Scenarios and Legal Aspects

• SAFEs

• Fundraising Speed and Simplicity

• Convertible Notes vs. SAFEs

• Convertible Notes’ Role in Different Rounds

• Merits and Demerits of SAFEs in Pre-Seed and Seed Stages

• Additional Investment Structures

Connect

Mike Kelly

• LinkedIn

• Website

• Developer Town

Ben Pidgeon

• LinkedIn

• VisionTech

Jacob Schpok

• LinkedIn

• Elevate Ventures

Hear more interviews and stories like this one at www.VentureDeclassified.com

The information provided on the show is not intended to be investment advice and should not be relied upon as such. The investors on today’s episode are providing their opinions based on their own assessment of the businesses or topics presented. Those opinions should not be considered professional investment advice. If they start up pitched as a part of this episode, it is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell, subscribe for or buy any securities.

Episode Summary

In this enlightening episode of "Venture Declassified," hosts Ben Pidgeon, Mike Kelly, and Jacob Spock tackle the subject of waterfall analysis, offering listeners a clear understanding of its role in the investment process. The topic comes to life through a real-life scenario where their portfolio company faced an acquisition offer, leading to choices between cash, equity, or a mix of both.

Ben starts by defining waterfall analysis, explaining the allocation of returns and the considerations for investors, like liabilities, deferred wages, and fees. Mike emphasizes the importance for angel investors to ask for detailed breakdowns and understand the financial health of the acquiring company. Jacob underscores conducting due diligence and evaluating various payout options such as cash, equity, and earn-outs.

Adding to the complexity, they explore liquidation preferences, convertible notes, and safes, and how these elements can significantly affect investor returns during an exit event. Jacob emphasizes the importance of understanding these factors to make informed investment decisions.

This episode of "Venture Declassified" is packed with valuable insights for both novice and experienced investors, making it essential listening for anyone involved in the startup investment ecosystem. Tune in to gain a deeper comprehension of waterfall analysis and navigate the nuanced world of investment returns more effectively.

Key Topics

• Definition and explanation of waterfall analysis

• Breakdown of options: Cash, equity, earn-out, seller’s notes and buyer’s notes

• Understanding financials and capital structure of the acquirer

• Evaluating the acquiring company: Private equity vs. venture-backed firms

• Situational analysis for decision making:

• Keeping money in vs. cashing out

• Impact of overall portfolio performance and liquidity needs

• Evaluating industry growth and leadership team

Connect

Mike Kelly

• LinkedIn

• Website

• Developer Town

Ben Pidgeon

• LinkedIn

• VisionTech

Jacob Schpok

• LinkedIn

• Elevate Ventures

Hear more interviews and stories like this one at www.VentureDeclassified.com

The information provided on the show is not intended to be investment advice and should not be relied upon as such. The investors on today’s episode are providing their opinions based on their own assessment of the businesses or topics presented. Those opinions should not be considered professional investment advice. If they start up pitched as a part of this episode, it is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell, subscribe for or buy any securities.

In this episode of "Venture Declassified," hosts Jacob Schpock and Mike Kelly dive into an engaging discussion centered on using AI tools to create a Minimum Viable Product (MVP). They explore the necessary skills, costs, and time commitment involved in product development with a focus on leveraging low code/no code platforms and developer productivity tools. Mike emphasizes how tools like Figma can generate front-end experiences quickly, allowing for iterative design, which is particularly beneficial for early-stage companies.

Jacob and Mike analyze a hypothetical business idea related to improper financial categorization, discussing its scalability with AI-enhanced tools. They outline a detailed go-to-market strategy, emphasizing the importance of validating product-market fit through personal network engagements, cold outreach, and preliminary public testing.

The conversation shifts to product development, highlighting their MVP built on the Bubble platform and a professional website using Squarespace. They discuss their approach to branding, marketing strategies, and the resource commitment required for early-stage development. Mike underscores the significance of manual MVPs using tools like Excel for initial testing and feedback collection.

Jacob and Mike also provide practical advice for non-technical founders, recommending CRM tools like HubSpot and highlighting Bubble's ease of use for building MVPs. They stress the importance of learning from direct customer feedback and iterating based on real-world reactions.

In this insightful episode, listeners gain a comprehensive understanding of the strategies and tools essential for building and validating a scalable, high-margin SaaS company. Tune in to hear Jacob and Mike's expert analysis and practical tips for aspiring entrepreneurs navigating the MVP stage.

Key Topics

• Using AI Tools for MVP Creation: Low-code/no-code platforms and developer productivity tools.

• Current easier and more maintainable code for MVPs, especially B2B SaaS.

• Go-to-Market Strategy for an MVP

• Branding and Marketing Efforts

• Importance of timing in addressing business risks.

• Current AI's inadequacy in handling creative branding and marketing tasks.

Connect

Mike Kelly
LinkedIn - Start Something Ventures

Ben Pidgeon
LinkedIn - VisionTech

Jacob Schpok
LinkedIn - Elevate Ventures

Hear more interviews and stories like this one at www.VentureDeclassified.com

The information provided on the show is not intended to be investment advice and should not be relied upon as such. The investors on today’s episode are providing their opinions based on their own assessment of the businesses or topics presented. Those opinions should not be considered professional investment advice. If they start up pitched as a part of this episode, it is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell, subscribe for or buy any securities.