Ethan Ding

Bold prediction for 2025: Investors will pay founders to access their venture data. Founders own their data and grant access to investors for a fee. This shift promotes transparency, trust, and efficiency in fundraising, while giving startups a new revenue stream.

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Some thoughts on the following post regarding the "Secret YC SAFE" o  Isn't the whole point of a SAFE the fact that it is not debt or equity so it is only convertible based on a future fixed valuation (priced round), less whatever discount is stated and therefore requires only minor legal review. o  A valuation cap if attached to the SAFE only guarantees a maximum price for conversion. o  It therefore is not a fixed percentage of the cap table but on a post money SAFE it would guarantee a minimum percentage of the post total equity. o  There are legal, regulatory and tax consequences to buying or selling straight equity or debt. o  A SAFE agreement is neither, and therefore you only have fluff until there is a priced round that triggers the SAFE and locks in a fixed price for conversion to equity on the cap table. o  What if instead of the standard SAFE terms, (discount and or valuation cap) the 'Secret YC SAFE' simply locks in a post money percentage of equity. o  In that case you might as well subscribe for straight equity and purchase common or preferred stock. o  This however will have legal, tax, and regulatory consequences that the SAFE was designed to avoid. o  Why then, if the price is fixed and you are an accredited investor would you want to hold a SAFE that has no value until there is a priced round. o  If there is no priced round there is generally no guaranteed conversion. o  As a possible solution we have added a clause to a standard SAFE agreement to cover this obvious shortcoming;  “If this instrument does not otherwise expire or terminate prior to the two-year anniversary of the issue date, the company will, at the sole option of the Investor, and prior to the provisions of any subsequent 'Events' as described in Section 1(a)(b)(c)(d) below, issue Common Stock at a Conversion Price determined by and equal to the Safe Price.” o  This may potentially create a grey area where it could be argued for tax and regulatory purposes that the price of the offering had an ultimate fixed price and therefore did not meet the ambiguous price certainty that sets a SAFE apart from being painted with the same brush as Debt or Equity. o  A SAFE agreement that is altered to state only a definitive percentage of total outstanding equity, post money, becomes a fixed value security with the exception that it may have no guarantee of conversion prior to a fixed price round of financing. o  Taking away the ‘discount’ from a future priced round erases a key incentive for an early investor without having to negotiate the price per share upfront. Investors should want the discount in the scenario that a priced round valuation comes in lower than the valuation cap or it at least guarantees them a substantial discount to the priced round investors that come in much later at less risk.

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Investors are pattern matchers. Metrics are a way to pattern match. Try to get your company metrics to fit the patterns if you can. 😁

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Most people don’t realize that there are 7,000+ YC founders. YC is adding 1,000 founders a year. It’s the most powerful founder network in the world. These founders have built across all verticals and all stages. There is someone amongst these 7,000 who is one of the best experts at something. I think about the pace of learning and iteration in the group because of that. I could talk to 100 founders who are building companies at the forefront of AI and learn a ton from them. There are people to answer anything, I’m only limited by my questions.

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I designed Peak OS for venture-backed companies after working with hundreds of them over the past 20 years. VC-backed teams are different, period. They need an operating system designed specifically for them. You can read about why (and get a step by step instruction manual to get started with Peak OS) in my bestselling book, Peak Teams. Check it out on Amazon and Audible. #venturebacked #vcbacked #venturecapital #leadership #ceo #founder #operatingsystem #peakOS

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❌ Don't blindly use any pitch deck template ...that being said, here's the one I always start with 😃 At the very least add 3 slides at the beginning of any template to make it truly unique to you 🌟 Title Slide - 1 sentence to give the VC context? 🥳 Wow Slide - what’s your most exciting thing? 🤔 Why You Slide - why were you able to get that? Okay, here's the template I always start with... 1️⃣ Why Now Story First tell a story around the VCs biggest question ❗️ Why Now - we live in a new world… 🚨 Problem - and if they stick with the status quo… ❓ Opportunity - but what if? I like to start by agreeing on something to get their heads nodding And if you’ve done it right, you'll pause here so they lean in to ask how? Which you'll answer with... 💡 Solution - here’s why we’re different 🚘 Product - and why it adds value for customers And that's your opening Why Now Story! Okay, stories are great but… 2️⃣ Proof Now you'll need to show proof And there’s lots of ways to do that at pre-seed and it only gets better as you get to seed, series A, B, C... And remember there's 2 parts to PMF First you need happy customers. Then you need to build a factory that can acquire $1M+ worth of (new) happy customers every year So... 🥰 Value - customers love us because… 📈 Traction - so far we’ve accomplished… But VCs don’t care about points in time, they only care about growth... So keep that in mind when putting these together as a foundation for your GTM strategy next 3️⃣ Go to Market Now this is where we transition to the future 💰 Model - an average customer is worth… 🏭 Go to Market - we’re starting with… 🌎 Expansion - which will help us expand to… PMF is all about happy customers and a factory to produce happy customers But now we need to be capital efficient... So we want that all to come from a one well defined segment / use case The model is your building block. Your GTM is all about your first few segments and your expansion is about bigger steps to the future And now we’re in the final stretch! 4️⃣ Advantage Obviously you aren’t the only ones that see a big opportunity out there So focus these slides on the customer and not you 🤼 Competition - and we’re winning because… 🏆 Advantage - we’ll build an advantage over time… 👨‍👩‍👧‍👦 Team - and we’re the right team because… Why are customer (or will they) chose you? Hint - it’s not because of features How will you build an advantage over time that’ll help you win more customers? And why is your team the best to build factories that can product $1M worth of happy customers? Now all that’s left is to recap and state your ask… 5️⃣ The Ask This shouldn’t be about how you’ll spend the money ✋ Ask - now we’re raising so we can… Instead it's about where you'll get to with the money (and is that enough to unlock your next round?) -- ♻️ Repost to help a founder in your network Click 'visit my website' at the top of this post to register for my Seed to Series A session

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OpenSky is actively funding founders who want to build for a strategic exit in the $50-$250M range by raising a few million dollars of equity and then scaling with profitability in mind. Not every startup needs a > $1B outcome to be a "win." Here's a real example of what that looks like. Levanta is one of my favorite deals we've made at OpenSky Ventures since we started. Their founders Ian Brodie and Rob Schab think differently than 99% of founders I've met looking for funding– it reminds me of my personal investment strategy. When founders and investors are aligned on a specific vision for building a company, everything falls into place. That’s exactly what happened when we invested in Levanta. So first, what's the product? Levanta focuses on promoting your listings on Amazon by connecting creators, publishers, and influencers to promote products from brands on Amazon in a way that is very straightforward and monetizes well. And the product is exploding. We invested in Q1 2023 at a ~$3m valuation. At the time, they were pre-product. Just 18 months later, they're north of $4 million ARR! One aspect of Lavanta that resonated with us was their thesis about the type of exit they were looking for. Here’s what they came to us with: “We think we have something here that’s going to catch on quickly. We think it's going to be worth at the minimum $50m and the maximum maybe $200m - but here’s the kicker - in the next 3 to 5 years.” If you think about that timeframe, it's quick. Most VC-backed startups are looking to build on a 7-10+ timeline. So many startups taking VC money are trying to become unicorns and land a $1B+ sale. Mostly because their fund structure makes it so they have to chase these outcomes. Levanta's “reasonable” valuation allows for a higher likelihood of acquisition and still substantial returns for them and for investors in a shorter timeframe, creating win-win situations for everyone. Raising less money means: ➝ Buyers can acquire promising tech at a fair price, not $500M+ ➝ Founders see significant rewards from the lucrative exit ➝ Investors see 10-15x returns in a short timeframe So what’s the takeaway here? Raising VC isn't one-size-fits-all. Align with investors early on a reasonable valuation and specific exit timeline. It avoids misalignment while still allowing founders, investors, and buyers to achieve great outcomes together. Have you seen other startups with a similarly ambitious yet practical vision for rapid growth and exit? I'd love to hear about them. Shoutout to Wilson Patton for the inspo on this post!

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🚀 AlleyCorp Closes $250M Fund to Fuel Tech Innovation in NYC and Beyond🗽 🌟 Founded by NYC internet entrepreneur Kevin Ryan, AlleyCorp incubates and invests in transformative companies across diverse verticals including Diversified Technology, Healthcare, Robotics, and Impact. 💡💰 🤝 The fund, backed by a select group of LPs, supports AlleyCorp's mission to originate ideas, hire teams, provide initial funding, and maintain integral leadership throughout the company’s lifecycle. 🌱🔍 💼 With about 20–30 new investments and 5–8 incubations per year, AlleyCorp has a track record of nurturing early-stage tech pioneers. 📈🌐 🦄 Notable investments include MongoDB (NASDAQ: MDB), Business Insider, Gilt Groupe, Zola, and Nomad Health, shaping the landscape of tech innovation in NYC. 🌆🌟 🔬 AlleyCorp also announces the incubation of Radical AI, pioneering AI-driven materials design, and Conduce Health, revolutionizing access to personalized healthcare specialists. 💻🏥 ✅ 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 #VentureCapital #TechInnovation #NYCTech #StartupInvestment #Incubation #AlleyCorp #ImpactInvesting #HealthTech #AI #Robotics #DiversifiedTechnology #InvestmentStrategy

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Rarely do VCs tell you the honest part out loud: "We sell rocket fuel" There's plenty of VC-bashing on this site, some of it well-deserved. Many VCs disrespect founders' time and efforts by ghosting, tire-kicking, or over-promising a value-add but never delivering. Go ahead. Name, shame, and drag them. But often what is underlying the founder's frustrations simply boils down to: "I know I've got a good business... these VCs just don't get it". Truth is, they likely do. They just don't wanna say the truth to your face. VCs sell rocket fuel. Rocket fuel only goes in rockets. So we look for rockets. We back founders who understand the growth and trajectory they are signing up for and who have a clear picture of where they are headed. We accept the risk that some rockets will fail on the way up as long as we believe that you'll learn from those fails and keep launching more. But you can't put rocket fuel in a lawnmower and ride it to the moon. That's bad for both my fuel and your lawnmower. But that doesn't mean there is anything wrong with your lawnmower. Lawnmowers are awesome and essential. They can be the cornerstone of great businesses for you, your employees, and your family. Honestly, your likelihood of becoming a multi-millionaire higher building a successful lawnmower business than a rocket ship. But... We don't sell lawnmower fuel. We sell rocket fuel. So if you pitch me a lawn mower, I'll wish you the best of luck and remind you: We sell rocket fuel.

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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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