In this thought-provoking episode of "Venture Declassified," hosts Mike Kelly and Jacob Schpok, alongside guest Ben Pidgeon, delve into the complexities of investment decision-making in the venture capital world. This episode shines a light on the critical factors that influence whether to continue funding a company or finally "wave the white flag.

The discussion starts with the importance of not relying solely on pipeline slides, which Mike Kelly criticizes as potentially fictional. He emphasizes past performance as a key indicator of future success and stresses the need for recent achievements rather than mere future promises.

Ben Pidgeon brings up the founder education dilemma, highlighting the point at which early-stage investors must decide if continued investment in educating the founder is worthwhile. Real-life examples are shared, such as a company keeping the same big clients on their pipeline slide for a year, which Kelly uses to illustrate how tangible progress can outweigh stagnant predictions.

Jacob Schpok and the team then navigate the nuances of bridge round considerations, underlining the necessity for strategic decision-making to ensure companies have enough runway to pivot effectively rather than just cover immediate expenses. They also touch on the operational pressures and challenges that come with urgent cash flow issues, advocating for clear communication and negotiation to resolve these matters.

The conversation further explores the importance of understanding a startup’s burn rate and founders' commitment, signaling their belief in their venture by adjusting salaries when necessary. They also dive into the contrasting perspectives of funds versus angel investors, the limitations of the VC model, and the significance of maintaining pro-rata shares to avoid dilution.

With practical insights, real-world scenarios, and expert opinions, this episode provides invaluable guidance for investors and founders alike on navigating the turbulent waters of venture capital. Tune in to gain a deeper understanding of the investment landscape and the crucial decisions that can make or break a startup.

Key Topics

• Pipeline Skepticism: Emphasis on past performance as an indicator of future success
• Investment Decision Framework: Evaluation based on recent achievements and learning
• Bridge Round Considerations
• Burn Rate and Founders’ Commitment
• Profitable vs Break-even Companies: Assessment of stagnant investments and a discussion on investing in break-even companies
• Importance of Maintaining Pro Rata Shares
• Liquidation Preferences
• Founder Education Dilemma

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 special episode of "Venture Declassified," recorded live at the Rally Innovation Conference, hosts Mike Kelly, Ben Pidgeon, and Jacob Spock engage with a series of live pitches and conversations with entrepreneurs and founders. They unpack the complex dynamics of the fundraising landscape for startups, exploring how the backgrounds of entrepreneurs—whether they are repeat founders or first-timers—significantly influence their approach and success in securing investments.

Mike and Ben discuss their roles as sherpas for first-time founders, guiding them through the serpentine process of fundraising. Repeat founders, having been through the process before, often present with confidence and humility. Mike shares his heuristics for pitch evaluations, emphasizing the importance of trusted personal introductions and subject matter expertise.

The episode begins with Rockland Page, CFO of ROCKaBLOCK AR, who offers a candid glimpse into their "executives in residence" program and aggressive recruitment strategies.

Next, Jim Bartek, CEO and Business Architect of Growth Heroes, shares insights on the transformative power of digital transformation for SaaS companies and the importance of strong elevator pitches to attract both talent and investment.

Emily Edwards, founder and CEO of Paradise Spreads, then pitches her innovative plant-based spread, highlighting her company's growth as it enters grocery stores and negotiates with major players like Whole Foods.

Tony Petrucciani, CFO of Boomerang Ventures, discusses his journey, focusing on building relationships and gaining traction in the market.

The episode wraps up with AJ Richichi, founder and CEO of Sprockets, who provides insights into the importance of clear direction and modest valuation expectations for startups.

Catch this episode for a blend of practical advice, real-world pitches, and strategic insights that can help guide both founders and investors toward more fruitful engagements in the startup ecosystem.

Guest Bios

Rockland Page found success in the corporate world as a graphic designer but he always wanted something he could call his own. In 2017 he launched ROCKaBLOCK, a boutique apparel shop. Built upon Rockland’s talent for original artwork and design, his work focuses on the richness and depth of Black culture.

Website

Instagram

Jim Bartek is an experienced business consultant who works with executives at growth companies to increase profits and streamline operations through automation and process improvement. As a Salesforce.com Consulting and ISV Partner, Jim and his team specialize in redefining business processes and managing the implementation of CRM, ERP, and online accounting systems. They also developed Sales2Cash, an application that automates SaaS contracts, revenue operations, and invoicing within Salesforce. With a background in advising tech startups and co-founding a consulting company, Jim is actively involved in the entrepreneurial ecosystem, serving as an organizer for major events such as The Innovation Showcase and Indy Startup Weekend. He is also cer

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 enlightening episode of "Venture Declassified," hosts Jacob Schpok, Ben Pidgeon, and Mike Kelly take a deep dive into the intricacies of Series A valuations, fundraising strategies, and the unique challenges faced by Midwest startups. The episode sheds light on the complex dynamics that come into play when a company with $3 million in annual recurring revenue aims for a Series A round, touching on standard valuation multiples, dilution impacts, and capital efficiency.

The discussion begins with a look at the typical Series A valuation process, where companies with substantial annual revenue might see a valuation around 6x their annual revenue. This segues into a crucial conversation on securing new capital and the potential for significant dilution—up to 50%—when raising both new and old capital during this round.

Ben shares insights into how first-time founders, especially in the Midwest, often navigate multiple seed rounds and rely on bridges because of the challenging investment climate. This leads to an emphasis on demonstrating effective use of initial capital to reach significant revenue milestones within 18-24 months. The hosts underline the importance of validating customer needs early and prioritizing capital efficiency to establish a strong product-market fit before seeking heavy investment.

Jacob and Mike touch on the democratization of information, encouraging founders to back their valuation hypotheses with solid data. They also highlight the advantages of starting a company in the Midwest, where lower costs and a strong workforce create a favorable environment for startups.

Mike rounds off the episode with reminders about the importance of investor diligence, considering the founders' understanding of their market, and the critical role of minimal spend on non-revenue activities for early-stage companies. The episode is rich with examples of successful pivots and strategic investments, making it a must-listen for anyone interested in the nuances of early-stage funding.

Key Topics

• Series A Valuation and Fundraising
• Funding Challenges and Trends
• Revenue Expectations and Capital Efficiency
• Midwest Bias and Relocation Incentives
• SAFE Investment Structure
• Case Studies and Success Stories
• Valuation and Risk Assessment

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.