👋Hey Sahil here! Welcome to this bi-weekly venture curator newsletter. Each week, I tackle questions about building products, startups, growth, and venture capital! In today’s newsletter, we dive into -
Deep Dive: How to Prove to Investors That This Is the Right Time and You're the Right Company?
Quick Dive:
Y-Combinator Partner: Some Of The Best Startup Ideas Live In A Grey Area of Legality.
A Hot Take on Using Memos Instead of Pitch Decks From Founder Raised $42 Million.
15 Steps to Know If Your Company Can RETURN a VC Fund to build your Financial projections.
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Major News: Ex-Google Researcher AI Startup Raised $500 Million, Alphabet will invest up to $5 billion in Autonomous car technology, Apple could launch a foldable iPhone in 2026 & More.
Best Tweet Of This Week On Startups, VC & AI.
VC Jobs & Internships: From Scout to Partner.
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TODAY’S DEEP DIVE
How to Prove to Investors That This Is the Right Time and You're the Right Company?
When talking to investors, you’re answering the what (product), why (mission), where (if relevant) and how (strategy and go-to-market).
But founders often ignore another important question: Why now?
Why wouldn’t it have been possible to have built the company five years ago?
Why would five years from now be too late?
The answer is often related to something that is shifting and changing, either in the market or with the technology layer. Anchoring your company with a good “Why now?” slide is a great addition to your story.
Successful companies usually have these things in common:
They were the right company, solving the right problem at the right time. Think of all the startups that cropped up during the early years of the pandemic that were solving specific problems related to accessing health care or presenting meetings.
Showing that you know why you’re launching now as opposed to any other time will create a sense of urgency:
Investors won’t want to miss out on a business that’s solving what they see as an immediate problem. It’s your job to highlight the ways your company can address those issues and why now is the right time to do so.
It’s often possible to see some significant market trends converging, but when it comes to timing, you’re trying to read the future.
In the words of Wayne Gretzky (Ice hockey player), you want to be skating to where the puck will be, not where the puck is.
The “Why now?” question can be answered in several ways, but it usually boils down to at least one of these three things:
Source: Google Images
technology timing,
market timing or
regulatory timing.
Think about consumer-grade photography drones. Why did they arrive on the scene when they did?
Image Source: Tenica
After all, RC planes and helicopters have been around since the 1970s. Compact video cameras (such as GoPros) have been around since the early 2000s. It’s not that the tech didn’t exist; it’s that the technology required was prohibitively expensive for a consumer-grade piece of equipment.
Apple’s iPhone changed that, though. As smartphones became ubiquitous, small camera modules, solid-state accelerometers, radio and GPS chipsets all became dirt cheap, available to hobbyists, and both well documented and hackable. Once the tech got small and cheap enough, building camera-equipped drones was a logical next step.
The most successful startups of our era did three things:
They spotted a trend early and developed a solution to take advantage of that. Google, Facebook and Apple are all good examples here: They weren’t the first search engine, social network or smartphone/computer manufacturers, but they saw an opportunity to make the tech more user-friendly.
They were able to build solutions that were better than anything else out there.
Then they ended up defining the industries they entered, riding the wave to the top.
You can use your timing narrative to reiterate some of the biggest strengths of your startup.
You should explain the macro dynamics of your space, how the market is evolving and how new technological innovations make your company possible when it wouldn’t have been before.
Remind the investors how changes in regulatory frameworks are opening new opportunities. That includes demographic shifts (the population as a whole is ageing); technology shifts (self-driving cars, solar power, electric vehicles, 5G mobile phone networks); market shifts (homeownership numbers, market boom/bust times); significant changes in how work is done (the gig economy, working from home, remote-first companies).
Many of these trends are somewhat predictable, and the best startup founders know how to spot them and leverage them to their advantage.
It’s an opportunity to remind investors how your team has been in this industry for a long time.
Something like, “I saw all of these shifts happen when I was a VP of investment banking at Goldman Sachs for 15 years,” is a great way to remind the investors that you have both experience and in-depth domain knowledge.
The “Why now?” is partially about history, but remember that it’s not a history lesson; it’s about trends.
You can use past data and innovation to draw a trend line toward the future. Combine that with what your company is doing and where it is going. The perfect “why now” slide has a fast-moving puck and a startup moving at breakneck speed to intercept it where it’s going to be in five years.
This is the sort of thing that makes investors salivate; the world’s most significant opportunities are high-risk, high-reward movements. Think big and weave a story of how you are on the right vector to be in the right place at the right time.
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Early Stage Startup Financial Model Template For Fundraising (Access Here)
When you aren’t a known brand yet, the risk of action being taken against you is much lower. How much you lean into this risk, and where the line is for you, is a personal decision.
But many successful companies flirt with the line often — many could see this working at startups like Uber, Airbnb etc.
A big learning is that, in many cases, the law is less black and white than you’re led to believe.
2. A Hot Take on Using Memos Instead of Pitch Decks From Founder Raised $42 Million.
Tara Viswanathan, founder of Rupa Health, has raised $42 million for Rupa with 15+ term sheets without using pitch decks.
What she used to pitch investors instead was a memo.
She strongly suggests founders use memos more (and not always decks), but why
Top secret - Investors love to see memo ..
First, one is not better than the other
If you need to explain a key concept (i.e. your product), use a deck.
If you need to explain more than 1 key concept (a complicated market & your product), use a memo. The complexity of a concept determines the format.
Memos force you to think
When you explain your thinking in writing, it forces you to narrate your logic step by step. You can get away with holes in thinking in a deck—with a memo, it’s impossible. Even if you don’t send the memo, writing it is valuable by itself.
Memos do the hard work for investors
By creating a memo, you simplify much of the work for them. All investors need to write internal deal memos to invest in your company. Creating a memo for them simplifies A LOT of that work.
Investment memos are dynamic.
You can include links, videos, graphs, photos, and screenshots using tools like Dropbox. Always allow investors to explore further IF they are interested. Let investors "choose their adventure”.
Pitch decks still have value.
Use a pitch deck in partner meetings—they’re great in 1-to-many settings. Send the memo ahead of time. Use pitch decks to drive the conversation.
Your memo will live on (WAY beyond the fundraising process) ∞
Decks generally need a voice-over, memos do not. This makes memos super valuable resources for recruiting, onboarding new hires, educating the team, etc.
Memos and decks serve different purposes.
Both are valuable. But I’m more and more convinced — writing a memo is insanely powerful. Especially with complex/early markets that are hard to understand.
3. 15 Steps to Know If Your Company Can RETURN a VC Fund.
Whenever I share this calculation with founders, they often ask why it's important for them to understand it. My answer is always the same: this simple concept will help create accurate financial projections and instil confidence in investors. Let's explore how this works:
1/ Why is this important
VCs have LPs (investors), they raise capital from them then say they will return it in 7-10 years and we plan to 2-3x it.
2/ How Simple math - example below:
$50m fund needs to return $150m from its investments. A fund usually invests 2-3% of its fund into each company ($1.25m)
3/ Run the math $1.25m for roughly 25 companies for $31.25 for initial checks then save the rest for follow-on checks.
Now we have to decide on ownership needed to return the fund at the exit
4/ A seed VC typically has a minimum ownership of 5-10% ownership
Let's go with 8%
Valuation is determined by check and ownership
$1.25m at 8% ownership is typically an average of $15m post
5/ Before we focus on the exit value we need to factor in dilution because other investors will invest in the company after us to get it to a larger valuation at exit or IPO
We typically see 40% dilution at the exit as seed investors.
6/ So at the exit, we know that our 8% will be closer to 4.8% and need to have $50m to return the fund
Let's run the math
7/ $1.25m at 8% for $15m post
To get to $50m - $50m/4.8% = $1bn~
So every company that the fund invests in needs to have $1bn in value at exit to return it
8/ So why should a founder know this? Well a founder can run this math themselves and understand what each investor expects from them by knowing their fund size and ownership minimum
9/ This helps the founder keep goals, updates and business decisions aligned with investors
10/ So a founder can now figure out what type of growth is needed to get to that desired exit value of their investors.
A founder can now create accurate financial projections and give the investor confidence.
11/ In most scenarios getting to $100m in rev of 7-10 yrs is the sweet spot since many companies get acquired or IPO above 10x their rev
12/ But wait what happens if an investor has a larger fund? Well that means they expect your company to have a much larger exit value (could be 2 5 or even 10 billion) This is good to know as a founder
13/ Some large multistage funds only invest in a company if they see it having $1bn in revenue or $10bn in valuation
Which is why VCs say "NO" so much and typically only invest in 1% or less of the deals they see
14/ This math can also help you understand why a VC may pass on investing in your company
They may do that math and think your market is too small
If you do your math and prove that the market is big enough you will make your fundraising journey much easier
15/ So please do the math on your own company to see if it can return an investor fund and if it can't - think about increasing your pricing or choosing a similar market that's bigger.
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THIS WEEK’S NEWS RECAP
Major News In VC, Startup Funding & Tech
OpenAI may lose $5 billion this year and could run out of cash in 12 months unless they raise additional capital from VCs. (More Here)
Apple could launch a foldable iPhone in 2026 (More Here)
Former Tesla humanoid head Chris Walti launches Mytra, a robotics startup focused on warehouse automation, raises $78 million in total funding from Garry Tan. (More Here)
Alphabet will invest up to $5 billion in Autonomous car technology company Waymo. (More Here)
Elon Musk's xAI Powers Up 100K Nvidia GPUs to Train Grok. (More Here)
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🧐 How Do Venture Capitalists Think When Writing an Investment Thesis? - A Guide for Aspiring Venture Capitalists.
One of the most important things for a VC is their investment thesis.
Defined as "the strategy by which a Venture Capital professional (or fund) makes money for the fund investors", your thesis will be a guideline/set of principles that will drive your decisions as an investor.
But how do they think and write this thesis?
We have shared a detailed guide and curated resources in our “Break Into VC” newsletter.
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That’s It For Today! Happy Weekend. Will meet You on Tuesday!
