ChatGPT reasoning test
Want to test ChatGPT's latest model, announced yesterday, that they claim has the ability to reason but don't have a subscription?
Ask me a question in the comments and I will share the answer.
Nervous about investment terms
A founder messaged me today, nervous about "counter-entrepreneurial investment terms". I was able to tell him what normal looks like.
Founder - "Being candid, I’m not convinced by some of the VCs in Europe - some of the terms seem counter-entrepreneurial and closer to to PE."
Me - "What terms in particular do you mean and I can let you know how standard they are."
Founder - "1.5x liquidation preference and an anti-dilution clause are two that have been mentioned to me. Also value capping SAFE (which concerns me that the next investors would also get that valuation so keeps the value artificially low)."
Me - "SAFE is quite normal and doesn't prevent a higher valuation in later rounds. 1x liquidation pref is normal, should not be higher."
"Anti dilution you should avoid unless it's only for the next round in which case it's basically the same as a SAFE with a cap."
"One benefit of a SAFE is you can do a Seedfast (SeedLegals standard terms SAFE) and it saves time and money negotiating legals."
"Hope that's helpful."
Founder - "Yes it is - thank you."
Exit plan = red flag
Investing in startups is like buying options - there is very little intrinsic value, it's all about the upside.
That's why backing businesses with the biggest potential outcomes is so important - it maximises the value of that option.
That's why an exit plan is a red flag - it caps the upside and its value.
The hard problems are worth solving
The hard problems are the ones worth solving. If it's easy, why isn't it done?
I had coffee this morning with Ross Guilbert who is heading to UCL to do a Masters in AI (and forgot to take a selfie 🤦♂️). During our chat I realised how much I am drawn toward tackling hard problems.
I did it with poker and AI. I did it with trading and AI.
Now, I'm doing it with venture investing - and, on the side, with standup.
Every founder is doing the same. By definition, it's not easy, and there is no guarantee of success. But these are the things with the great rewards.
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➕ Follow Marc Cohen for deep yet concise insights into venture investing, startups, fundraising and AI.
Ask me anything - a LinkedIn experiment
❓ Ask me anything - a LinkedIn experiment.
💡 Write a post with your question about venture investing, startups, fundraising or AI, and tag Marc Cohen and unbundled vc and I’ll do my best to provide a thoughtful answer.
I aim to share deep yet concise insights on these topics.
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➕ Follow Marc Cohen for deep yet concise insights into venture investing, startups, fundraising and AI.
Venture investment decisions are simple
Fundamentally, venture investment decisions are simple.
• How big a multiple could you achieve?
• What is the likelihood of getting there?
• How fast might that happen?
Everything you do - every process you build, every question you ask, including those on founder strength - should be in service of those three key questions.
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➕ Follow Marc Cohen for deep yet concise insights into venture investing, startups, fundraising and AI.
The power of growth
🚀 For startups with revenue, the biggest single predictor of future growth is current growth. Strong growth compounds amazingly. Just see the chessboard.
Yes, sometimes growth can be bought uneconomically (Hi WeWork). But fundamentally this is why investors value it so highly.
That's why your growth rate directly impacts your ability to secure funding. And why explosive growth can drive those huge multiples and valuations.
Without enough growth, you will need to convince investors you are at an inflection point. That is a much tougher job.
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♻️ Repost so more founders and investors appreciate the power of growth.
➕ Follow Marc Cohen for deep yet concise insights into venture investing, startups, fundraising and AI.
Suggestions for LinkedIn tagline
Hi LinkedIn, I need your help.
I'm looking to add a "Follow me for..." tagline to my posts so people know what to expect from my content.
Any suggestions?
How I Used ChatGPT to Write "Venture Capital’s Wild Ride"
People have asked me how I worked interactively with ChatGPT to write my latest article, "Venture Capital’s Wild Ride." So, I thought I’d share the process.
I started with rough notes on how the 2021 venture capital boom impacted the Channel Islands. I used ChatGPT interactively to refine the structure, clarify key points, and create engaging section titles like "The Market Reverses Course" and "The Promise of AI."
It wasn’t just about editing - ChatGPT helped me reword complex ideas, improve the flow, and ensure every section fit seamlessly into the overall narrative.
I even used ChatGPT to write this post! If you’re interested in the full conversation that led to the final article, check the comments for the link.
When to transition to full time
Founder - "When do you think would be the right time to transition into this full time?"
- One question is are you definitely going to give this a go full time or is it conditional on either fundraising or some early traction that convinces you it is worth it? the answer will depend on your risk appetite, your confidence in success, your financial situation, and how easy it will be to return to what you were previously doing if it doesn't work out. I'd start by considering those factors.
- Obviously the more time you dedicate to it the greater the chance of success but that's not an independent consideration, hence your need to answer those other questions first.
- I think that might be it - you need to figure those things out before you know the answer.
- Investors 'should' be fine with you not being full time until you've raised if that's your path but they will insist on it post raise
Female Founder office hours at Sifted Summit
I will be at Sifted Summit again next month, with my weirdly distorted head, doing female founder office hours for Alma Angels with 49 other investors for 100 founders. 🎟 Get your ticket to Sifted Summit with 15% off with the code Alma15 - link in comments - and Sifted will contact you to register.
During the day, I will most likely just find a spot and stay there. Please come and say hi.
Venture capital’s wild ride
Venture capital's wild ride - my article for this month's Business Brief magazine.
- 2021's soaring public market valuations sparked a major VC boom, significantly boosting fund services in the Channel Islands.
- VCs rushed to invest in high-growth startups, amidst a surge in IPOs, and driving record levels of capital into the venture space.
-The post-pandemic reversal, with rising inflation and interest rates, abruptly ended the boom, slashing valuations and stalling the IPO market.
- Venture funds found themselves holding devalued portfolios, leading to poor returns and making fundraising difficult for many.
- The Channel Islands' fund services sector has slowed, and weaker funds are likely to merge or wind down.
- However, the rise of AI presents new investment opportunities, and the Channel Islands are well positioned to support the next phase of VC growth.
I used AI to help me write this. Is anyone interested in seeing how?
Thank you again Amanda (Mandy) Eulenkamp and I know I owe you some copy 🙇♂️ .
Seedlegals article coming soon
I had a great chat with Mo Saed of @seedlegals about what I look for before making any investment decisions.
We’ll be sharing a quick article soon that covers everything from my first investments and the tough lessons I had to learn early on, to the surprising perks of doing improv and standup!
If you’re interested in the full story, you can sign up for the @seedlegals Investor Newsletter here.
Oh, and yes Mo Saed & @anthonyrose, definitely rethink the office wallpaper 😂.
European vs US lawyers
Daniel Glazer of Wilson Sonsini for European founders Part 2 - US vs European lawyers:
- Lawyer involvement is very different in the US to Europe. For example, in the US it is the norm for tech-focused law firms to assist (in the background) with term sheet review and negotiation, and with investor outreach in advance of the raise. It also is extremely common in the US for the company’s outside counsel to attend the company’s board meetings as a matter of course.
- On average, US startups use lawyers much more than European startups, largely due to the more robust litigation environment in the US. In Europe, startups often take a relatively light touch approach to using lawyers. In the US, the potential consequences of legal exposure are more severe, such that US lawyers play a “problem-avoidance” proactive advisory role in addition to a “problem-solving” reactive one. This dynamic will be relevant post flip.
What European founders need to know about raising in the US
I was fortunate to have some time with Daniel Glazer of Wilson Sonsini who is well known for his deep expertise and network in the US venture capital ecosystem.
As promised, here are a few topics he often discusses with European-based founders who are considering raising from US-based VC investors.
Please share widely as this is important information for all founders.
Part 1 - raising advice:
- It usually doesn’t make sense to Delaware flip ahead of reaching out to US investors. Just make clear to US investors you will do so if necessary and flip as needed as part of the financing transaction. There’s a substantial difference between having a business that is interesting to US investors and simply having a Delaware parent company. Spending money on a Delaware flip, only to find out that the business is not interesting to US investors from a commercial or operational standpoint, is not an optimal use of limited funds.
- The earlier you raise from US investors, the more likely it is you will need to flip as a condition of the raise.
- At Seed, roughly 75-80% of US investors leading the round will insist on it. Those with European offices often will not (most of the 20-25%). Rarer: some large US firms without European offices are comfortable with UK and some other European docs, and some but not many US-based investors will lead a Seed round before the company is ready to commercially and operationally expand to the US.
- At A, about 20-25% of the time UK companies will need to flip when raising from a US-based VC investor leading the round; the percentages are somewhat higher for other European companies.
- He virtually never sees it required of UK companies at B or later. Again, the likelihood is somewhat higher for other European companies.
- Post flip, the admin to run your business is more expensive. There is no Companies House or equivalent in the US. You are expected to keep your own house in order. This requires more regular interaction with US lawyers, in a manner that may seem strange or even off-putting to European founders.
- Term sheets are typically more founder friendly in the US, in part because the US National Venture Capital Association (NVCA) model documents generally are more founder friendly relative to equivalent documents in Europe. No good/bad leaver provisions. Fewer investor consents. Founder non-competes are unusual. On average, European term sheets tend to reflect a greater level of control over the business.
- When negotiating term sheets, European founders would be well-served to get up to speed on US market-standard terms.
Runna is hiring
Runna is hiring for 35 people across 20 different roles in Boston and London as a result of its incredible growth.
Runna aims to be the go-to training platform for any runner and in doing so reach millions of subscribers.
If you want to help Dom Maskell and Ben Parker achieve this by joining the team below, check out the link in the comments.
If you know anyone who might be interested, please share widely.
I am a proud investor.
How to be sure your pitch deck makes sense
Here's how to be sure your pitch deck makes sense:
- Write a bullet point that summarises each slide. If you can't do it in one bullet point, there's too much on the slide.
- List all your bullet points.
- Read the bullets in order.
- If this is the story you want to tell, you're good. If it isn't, you know where you're going wrong. Edit and go again.
Any other tips?
Speak to Aisling Gray for coaching
The fantastic Aisling Gray is looking for a small number of coaching clients. Here's why you should speak to her:
- Before retraining as a coach, Ash ran PR for Rest Less UK and they continue to have the most and best press I've ever seen in a startup.
- Coaching works. It empowers you to unlock your potential. It's one of the reasons I invested in Mica Vaipan's RunYourself.
- Ash is a delightful human being. You will enjoy any time you spend with her.
My two youngest kids have a rare genetic condition. Ash pro bono helped the campaign to get a new treatment funded by the NHS. Help me help her back.
Contact her directly aisling@asggroup.me or ask me to introduce you.
Do you think AI will ever exceed human intelligence
From a debate with my friends. I'd love to know what you think.
Leave reasons in the comments if you wish.