What's Below in Issue #76:
📰 - Do you love your problem?
📊 - The Rise of Liquidation Preferences in Venture Funding
🎙️ - Podcast #44 w/ Winter Mead, expert guide to mastering venture capital
💵 - Premium startup resources
🆓 - Free startup resources
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Are you passionate about the problem you're solving? Are you great at telling the story about your problem and convincing talent, partners, and investors to join you in solving that problem?
Well, you should know that investors don't want to be pitched and sold for their money.
They want to join passionate entrepreneurs on their journey to success. They want to brag about their investments and talk about their stories. Sure, they have a fiduciary responsibility to their investors to generate a return on their investment, but it's a venture. They expect to lose on most beta and have 1-2 generate all the returns.
This means you need to be great at telling your story about why you're passionate about your problem.
I was listening to Uri Levine, co-founder of Waze, and countless other startups. Uri has seen it all, many failures and 2 unicorn exits. After starting so many companies and sitting on 20 different boards, he knows what makes a winner over a loser.
He simplifies the common denominator to whether or not the founder is in love with the problem. Every company he founded started with the problem not the solution. For Waze, he hated traffic, so he built an AI crowd-sourced platform to solve that problem. He didn’t build an AI platform to find a problem.
Why does this matter to Uri and most other investors? It’s much easier to fall in love with a problem everyone can understand versus a cool solution that is looking for a problem.
Ask yourself, do you really love the problem you’re solving?
How do you really know if you’re in love with your problem? You might tell yourself you do…but do you REALLY???
Here’s a quick litmus test to see if you’re actually in love with solving your problem vs thinking you are. It could mean the difference of years of your life being wasted if you’re wrong about this, so be honest and ask yourself these questions:
If you answered yes to all 5 of the first questions above, then you are on to something. Just make sure that you're working on a problem big enough to build a scalable business around.
It’s one thing to be passionate about helping 3 legged raccoons (full disclosure I love raccoons), but it’s going to be an uphill battle to raise millions of dollars and build a Unicorn company solving this problem.
Reply to this email or message me on LinkedIn if this message impacted you in any way. It's always better to feel like I'm conversing with my subscribers versus just sending emails into the abyss.
-------------------------------------------------------------------------------------------------------------------------------------------------------------Data Corner
In venture capital, the standard liquidation preference is 1x, ensuring investors recover their money before others receive any cash benefits in liquidity events like M&A or IPO. However, in today's turbulent market, higher liquidation preferences are becoming more prevalent.
The impact varies depending on the company's stage and the type of funding round. Early-stage rounds (Seed & Series A) rarely see high liquidation preferences, but bridge rounds have experienced an increase over the past two years.
Growth-stage rounds (Series B & C) now encounter high liquidation preferences twice as often as in 2022. For late-stage rounds (Series D and beyond), the data is mixed but indicates a rising trend. Founders should anticipate negotiations involving 1.5x, 2x, or even 2.5x liquidation preferences, especially in bridge rounds after Series A, as investors hold more negotiating power in the current slow fundraising environment.
-------------------------------------------------------------------------------------------------------------------------------------------------------------Discover How Winter Mead Helps Emerging Fund Managers Thrive at Coolwater Capital in Episode 44
In this episode, Winter Mead, CEO and founder of Coolwater Capital shares his take on what it takes to support emerging fund managers. Coolwater Capital serves as an accelerator for emerging venture fund managers, offering training, resources, and a supportive cohort model to help them successfully build and scale their firms.
He has influenced over 200 fund launches and continually adapting to the dynamic needs of the venture capital market. We discuss the latest trends in VC funding and the types of fund managers that are currently securing funding. He points out common pitfalls that new fund managers should avoid. Winter also explains the cohort model used by Coolwater to support fund managers, emphasizing the importance of information sharing and strong networks.
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