Fundraising

In recent years, the world of Non-Fungible Tokens (NFTs) has exploded in popularity, with various use cases and projects emerging across the digital landscape. As a result, venture capitalists (VCs) and NFT investors have started actively staking their capital in NFT projects and use cases. This trend represents a significant shift in the investment landscape, with traditional investors recognizing the potential of NFTs to revolutionize various industries and create new revenue streams. From gaming and art to real estate and collectibles, NFTs offer a unique opportunity for investors to get involved in a rapidly growing market and support innovative projects with the potential for massive returns. Also check out, 10 VC Firms Investing in Web3 Companies. NFT 101: Understanding the Basics NFTs are tokens that we can use to represent ownership of unique items. They let us tokenize things like art, collectibles, even real estate. They can only have one official owner at a time and they’re secured by the Ethereum blockchain – no one can modify the record of ownership or copy/paste a new NFT into existence. – ethereum.org NFTs are unique digital tokens that represent one-of-a-kind assets that cannot be replicated, making them valuable as digital collectibles. Though they are held in a crypto wallet and function as a type of cryptocurrency, they cannot be used to purchase goods or services. Rather, their value is derived from their uniqueness and the potential to increase in value over time. This has made NFTs an attractive investment opportunity for venture capitalists, who recognize their potential to revolutionize various industries and create new revenue streams. Examples of NFTs include digital art pieces, memes, gifs, music albums, videos, virtual real estate, and even tweets. Upon purchase, the ownership of an NFT is guaranteed through a digital signature, creating a secure and transparent investment opportunity for those looking to support innovative projects with the potential for significant returns. While NFTs may seem like digital paperwork at their core, they represent a promising future in the world of digital assets and have already captured the attention of traditional investors. Where Is the Value of an NFT Derived From? Venture capitalists are investing in NFTs for several reasons, including the potential for significant returns, the growing popularity of NFTs, and the promise of innovative use cases for the technology. Unlike traditional collectibles, the value of NFTs is derived from their one-of-a-kind nature, which is stored on the Ethereum blockchain. This allows for secure ownership verification and differentiates NFTs from standard cryptocurrency tokens like ETH. This ownership verification is crucial as it provides evidence of the rarity and scarcity of an item, giving it value in the eyes of collectors. This can range from digital art, to music, to even tweets or other unique content. With blockchain technology providing ownership verification, the value of NFTs is no longer solely dependent on the market but also on their rarity and provenance. Additionally, NFTs are enabling the possibility of shared ownership, which allows for communities of fans to own a piece of the creator’s work and incentivizes their success. As a result, venture capitalists see NFTs as a promising investment opportunity that could potentially change the way creators monetize and distribute their content, while also creating new revenue streams for investors. Also check out, Top VCs Investing in the $100 Billion Creator Economy. NFTs are gaining popularity as a way for creators to monetize their digital content and intellectual property. As more artists, musicians, and other creators adopt NFTs, the market is expected to grow, presenting new opportunities for investors. Furthermore, NFTs have the potential to revolutionize various industries by enabling secure ownership and authentication of digital assets. For example, NFTs can be used in gaming, virtual real estate, and even in the art world to prove provenance and authenticity. Another reason VCs are interested in NFTs is that they represent a new and exciting asset class, with the potential for high growth and significant returns. As such, venture capitalists are investing in NFT marketplaces, NFT-focused companies, and NFT collections. Venture capitalists are investing in NFTs in a variety of ways, including through direct investments in NFT projects and platforms, as well as by investing in companies that use NFTs as part of their business model. Many VCs are investing in NFT marketplaces that allow creators to sell their NFTs, such as OpenSea, Nifty Gateway, and SuperRare. They may also invest in NFT-focused companies that are creating new use cases for the technology, such as digital identity verification or supply chain management. Overall, venture capitalists are investing in NFTs as a way to tap into the growing popularity of the technology and to support innovative projects that have the potential for significant returns. As the market for NFTs continues to grow, it is likely that venture capitalists will continue to play a major role in shaping the future of the industry. Proven NFT Use Case Examples Pier Kicks predicts we are on our way to the “Metaverse” — a “self-sovereign financial system, an open creator economy, and a universal digital representation and ownership layer via NFTs (non-fungible tokens).” NFTs made their debut focusing mainly on art, music, and trading cards because it was the most widely adopted collectible investment items with an existing community of fans to tap into- giving them instant value. This was the start though and the beauty of NFTs is that this traditional concept can now be expanded upon in so many ways. Also check out, The Top VCs Investing in Community Driven Companies. Now fast-forward 2 years later and according to our favorite crypto newsletter, The Milk Road, it looks like the NFT use cases that are here to stay are: Rewards for Super Fans A status symbol – there is actual proof that fans made the discovery early. A membership card – a way for NFT holders to get access to exclusive perks. A way for fans to “invest in your success”- if a fan buys someone’s NFT early it can be an investment and a way to fund the project/ artist/ person. Digital Collectables Art- before NFTs art wasn’t able to be digitally collected, which is why this was probably the first and best use case so far. Branded collectibles- we’re now seeing the high fashion world take part in the craze as well and eventually in the metaverse people will be able to show off these digital assets on their avatars. Membership as an Asset “NFTs turn ‘memberships’ into tradeable assets. NFTs let you ‘invest’ in a social group, rather than just paying fees for access.” Making things like a SoHo House membership digitally transferrable. Video Game Assets “In the future, games will issue items as NFTs. Those are things you OWN. You can sell them. You can bring them into new games. You can rent them out to other players.” NFTs In the Future of Investing As the use cases for NFTs continue to expand, venture capital (VC) firms are taking notice and are increasingly interested in investing in startups and businesses that are utilizing NFTs in innovative and impactful ways. One area where VC firms are likely to invest in NFTs is in the real estate industry. As mentioned, tokenizing real-world assets is still in its early days, but once certain securities, insurance, and infrastructures are built out, the use cases could be endless. We can expect to see VC firms investing in startups that are developing blockchain-based platforms that allow for the tokenization of real estate assets, making it easier for individuals and institutions to buy and sell fractional ownership in property. VC firms are also likely to invest in startups that are utilizing NFTs in the realm of official documentation. The ability to create, transfer, and verify ownership of digital assets using NFTs has the potential to revolutionize the way that official documents are handled. For example, NFTs could be used to store and verify educational degrees, professional licenses, and other certifications. We can expect VC firms to invest in startups that are building the necessary infrastructure and platforms to enable the tokenization and verification of these types of official documents. In addition to real estate and official documentation, VC firms are likely to invest in startups that are utilizing NFTs in the sports and entertainment industries. NFTs provide a new way for fans to connect with their favorite teams, artists, and celebrities. For example, NFTs could be used to create limited-edition merchandise, exclusive content, or even fan experiences. We can expect VC firms to invest in startups that are building platforms and marketplaces that enable these types of fan experiences. Overall, as the use cases for NFTs continue to expand, we can expect to see increased interest and investment from VC firms. This investment will help to drive innovation in the space and create new opportunities for startups and businesses that are utilizing NFTs in creative and impactful ways. As a side note, for any companies looking to drop NFTs to your customers or fans, thirdweb is a platform worth exploring. Resources for Founders CoinDesk: CoinDesk is a leading media outlet covering the cryptocurrency and blockchain industry. They have a dedicated section on their website for NFT news and analysis, providing updates on the latest developments in the space. CryptoSlate: CryptoSlate is a popular cryptocurrency news and media outlet that covers NFTs and their various use cases. They have a section dedicated to NFT news and analysis, providing insights on the latest trends and developments in the industry. Crunchbase: Crunchbase is a leading platform for discovering and tracking innovative companies and investors. They have a dedicated section on their website for NFT-related companies, providing information on the top investors in the space and their investment history. NFT Accelerator: NFT Accelerator is a program that provides funding, mentorship, and resources to startups that are building NFT-based businesses. They focus on helping founders navigate the challenges of building businesses in the rapidly-evolving NFT ecosystem. OpenSea: A popular NFT marketplace that allows creators to sell and trade their NFTs. Founders can use OpenSea to sell their own NFTs and learn more about the market. SuperRare: Another NFT marketplace that focuses on digital art. SuperRare has a curated selection of high-quality NFTs and offers a unique auction system that founders may find helpful. Nifty Gateway: A user-friendly NFT marketplace that specializes in drops, where a limited number of NFTs are released at a specific time. Nifty Gateway is owned by Gemini, a cryptocurrency exchange, and has attracted high-profile creators and investors. The Block: A news and research site that covers the blockchain and cryptocurrency industry, including NFTs. Founders can use The Block to stay up to date on the latest trends and developments in the NFT space. NFT Vision Hack: A hackathon and accelerator program for NFT-focused startups. Founders can apply for the program to receive funding and support from industry experts. Metapurse: A crypto-based investment fund that focuses on NFTs and virtual real estate. Founders can learn more about NFT investing and get in touch with Metapurse for potential investment opportunities. NFT School: An educational platform that provides resources and tutorials on NFTs and blockchain technology. Founders can use NFT School to learn more about the technical and practical aspects of creating and selling NFTs. NonFungible.com: A data analytics platform that tracks the NFT market, including sales data, price trends, and project rankings. Founders can use NonFungible.com to get a better understanding of the market and the performance of their own NFT projects. Top VCs and NFT Investors Actively Investing in NFT Projects With the increasing popularity and potential of NFTs, many venture capital firms and angel investors are diving into this new field of digital ownership. These investors are actively seeking out promising NFT startups and providing the necessary funding to turn these ideas into reality. In this next section, we will highlight some of the top NFT investors who are leading the way in this emerging industry. From Silicon Valley giants to influential individual investors, these are the players shaping the future of NFTs. Animoca Brands About: Animoca Brands is a global leader in gamification and blockchain with a large portfolio of over 380 investments, and with the mission to advance digital property rights and contribute to building the open metaverse. The company and its various subsidiaries develop and publish blockchain games, traditional games, and other products, many of which are based on popular global brands including Disney, WWE, Power Rangers, MotoGP™, Formula E, and Snoop Dogg. Their mission is, “To deliver digital property rights to the world’s gamers and Internet users, thereby creating a new asset class, play-to-earn economies, and a more equitable digital framework contributing to the building of the open metaverse.” Investment Stages: Seed, Series A, Series B Recent Investments: MPCH Labs Thirdwave Revolving Games Shima Capital About: Shima Capital is an investment fund that focuses on supporting cutting-edge blockchain startups. “Our goal has always been to invest in strong founders across all crypto verticals, a goal we achieved throughout 2022. #1 in seed-focused gaming projects #5 in CeFi, DeFi, Infrastructure, & Web3 #3 in total projects invested (actual # is closer to ~120)” Investment Stages: PreSeed and Seed Recent Investments: Magna Thirdwave Sender NGC Ventures About: NGC Ventures is one of the largest institutional investors of blockchain and distributed ledger technologies, and has been a key contributor to a number of leading blockchain projects. We strategically leveraging and amplifying our portfolio to help create and enhance each one’s competitive advantages. Selectively partnering with leading investment professionals and technical developers in the world. Investment Stages: Seed, Series A Recent Investments: Chainsafe Kin Insurance Fan Controlled Football HG Ventures About: We partner with visionary entrepreneurs who are focused on bringing impactful R&D to market.At HG Ventures, we understand the dynamic landscape of your industry and bring our passion, expertise, and assets to support you as you execute your strategy for success. We invest in early stage to growth stage companies developing advanced materials and systems for transportation, infrastructure, environmental services and specialty chemicals. We provide resources spanning deep market insight, manufacturing and supply chain assistance, pilot testing of products, R&D expertise and equipment, introductions to our customers and service providers, and more. Traction metrics requirements: We will invest at the pre-revenue and pre-product stage, but we want to see the beginnings of a dedicated, full-time executive team. Investment Stages: Early to Growth Stage- Seed, Series A, Series B, Recent Investments: Circulor 6k Transcend Software Paradigm About: Paradigm primarily invests in crypto-assets and businesses from the earliest stages of idea formation through to maturity. Every once in a while, a new technology comes along that changes everything. The internet defined the past few decades of innovation. We believe crypto will define the next few decades. Paradigm is an investment firm focused on supporting the crypto/Web3 companies and protocols of tomorrow. Our approach is flexible, long term, multi-stage, and global. We often get involved at the earliest stages of formation and continue supporting our portfolio companies over time.We take a deeply hands-on approach to help projects reach their full potential, from the technical (mechanism design, smart contract security, engineering) to the operational (recruiting, regulatory strategy). Thesis: Paradigm is an investment firm focused on supporting the great crypto/Web3 companies and protocols of tomorrow. Our approach is flexible, long term, multi-stage, and global. We often get involved at the earliest stages of formation and support our portfolio with additional capital over time. Investment Stages: Seed, Series A, Series B, Series C, Growth Recent Investments: Uniswap Labs Nxyz Exponential AU21 Capital About: AU21 Capital is a Venture Capital firm dedicated to procuring value for teams expanding the frontiers of blockchain technology. Our team brings decades of executive and operational experience at industry titans including Huobi and Galaxy Digital. Our business development and investment acumen shines through our portfolio companies, including partnerships with Astar, Axie Infinity, Injective, Marlin, Cere, Covalent, Casper labs, Serum, Fantom, Harmony, Iotex, Coin98, Polkadot, Star Atlas among many others. We also serve as trusted partners to sector-leading launchpads, and work routinely alongside top exchanges to bring products to market. Investment Stages: Seed, Series A Recent Investments: IQ Labs The Unfettered Cryption Network Awesome People Ventures About: Awesome People Ventures is an early-stage fund focused on Web3. We invest in the future of work and life. We support our founders with capital, hands-on growth support, and access to an exclusive talent network. Awesome People Ventures is backed by Marc Andreessen, Chris Dixon, Multicoin, and founders of top crypto projects. Awesome People Ventures invests in a diverse set of founders, who operate with integrity and are building long-standing companies. Investment Stages:Pre-Seed, Seed Recent Investments: Treeswift Solid World DAO Jia Exnetwork Capital About: Exnetwork Capital was founded in 2018 as a means to democratize access to opportunities to support blockchain projects. Since then, it has evolved to be a multi-faceted organization that supports not just the well-known configurations of blockchain organizations but radical ones such as anonymous and distributed teams. Investment Stages: Seed Recent Investments: Reign of Terror KlayCity Volare Finance ConsenSys Ventures About: ConsenSys Ventures is a venture capital arm ConsenSys, a blockchain venture production studio. Investment Stages: Accelerator, Pre-Seed, Seed, Series A Recent Investments: Kiln WalletConnect Sardine Looking for Funding? Visible Can Help- Start Your Next Round with Visible We believe great outcomes happen when founders forge relationships with investors and potential investors. We created our Connect Investor Database to help you in the first step of this journey. Instead of wasting time trying to figure out investor fit and profile for their given stage and industry, we created filters allowing you to find VC’s and accelerators who are looking to invest in companies like you. Check out all our investors here and filter as needed. After learning more about them with the profile information and resources given you can reach out to them with a tailored email. To help craft that first email check out 5 Strategies for Cold Emailing Potential Investors. After finding the right Investor you can create a personalized investor database with Visible. Combine qualified investors from Visible Connect with your own investor lists to share targeted Updates, decks, and dashboards. Start your free trial here.

15 VC Firms Investing in Web3 Companies In the evolving landscape of the internet, Web3 stands out as the next significant leap, offering a decentralized, blockchain-powered framework. Coined by Ethereum's co-founder, Gavin Wood, in 2014, Web3 embodies a trustless, permissionless internet that fundamentally alters digital interactions and transactions​​. This transformational technology has captured the attention of investors globally, as it heralds a new era of internet use where users regain control over their data and digital identities. For investors, Web3 companies represent a frontier in technological innovation, combining the promise of high-growth potential with the opportunity to shape the future of online experiences. Below we highlight 15 leading VC firms that are actively investing in this exciting new sector. Related Resource: 13 Generative AI Startups to Look out for 1. a16z/ Andreessen Horowitz Location: Menlo Park, California, United States About: Andreessen Horowitz was established in June 2009 by entrepreneurs and engineers Marc Andreessen and Ben Horowitz, based on their vision for a new, modern VC firm designed to support today’s entrepreneurs. Andreessen and Horowitz have a track record of investing in, building and scaling highly successful businesses. Thesis: Historically, new models of computing have tended to emerge every 10–15 years: mainframes in the 60s, PCs in the late 70s, the internet in the early 90s, and smartphones in the late 2000s. Each computing model enabled new classes of applications that built on the unique strengths of the platform. For example, smartphones were the first truly personal computers with built-in sensors like GPS and high-resolution cameras. Applications like Instagram, Snapchat, and Uber/Lyft took advantage of these unique capabilities and are now used by billions of people. Investment Stages: Pre-Seed, Seed, Series A, Series B, Growth Recent Investments: Dapper OpenSea Ripple 2. Sequoia Capital Location: Menlo Park, California, United States About: Sequoia is a VC firm focused on energy, financial, enterprise, healthcare, internet, and mobile startups. Thesis: We partner early. We’re comfortable with the rough imperfection of a new venture. We help founders from day zero, when the DNA of their businesses first takes shape. Investment Stages: Seed, Series A, Series B, Growth Recent Investments: Polygon Binance Bitmain 3. Tiger Global Location: New York, New York, United States About: Tiger Global Management is an investment firm that deploys capital globally in both public and private markets. Investment Stages: Pre-Seed, Seed, Series A, Series B, Growth Recent Investments: PDAX | Philippine Digital Asset Exchange Devron Novi Connect Related Resource: 12 New York City Angel Investors to Maximize Your Funding Potential 4. Coinbase Ventures Location: San Francisco, California, United States About: Coinbase Ventures is an investment arm of Coinbase that aims to invest in early-stage cryptocurrency and blockchain startups. Thesis: At Coinbase, we’re committed to creating an open financial system for the world. We can’t do it alone, and we’re eagerly rooting for the brightest minds in the crypto ecosystem to build empowering products for everyone. We provide financing to promising early stage companies that have the teams and ideas that can move the space forward in a positive, meaningful way. Investment Stages: Pre-Seed, Seed, Series A, Series B Recent Investments: Compound BlockFi Dharma 5. Paradigm Location: San Francisco, California, United States About: Paradigm primarily invests in crypto-assets and businesses from the earliest stages of idea formation through to maturity. Thesis: Paradigm is an investment firm focused on supporting the great crypto/Web3 companies and protocols of tomorrow. Our approach is flexible, long term, multi-stage, and global. We often get involved at the earliest stages of formation and support our portfolio with additional capital over time. We take a deeply hands-on approach to help projects reach their full potential, from the technical (mechanism design, smart contract security, engineering) to the operational (recruiting, regulatory strategy). Investment Stages: Pre-Seed, Seed, Series A, Series B, Series C, Growth Recent Investments: Chainalysis matrixport Fireblocks 6. Pantera Capital Location: Menlo Park, California About: Pantera Capital is the first institutional investment firm focused exclusively on bitcoin, other digital currencies, and companies in the blockchain tech ecosystem. Investment Stages: Seed, Series A, Pre-Seed, Early Stage, Series B, Series C, Growth Recent Investments: Ancient8 Stader Labs Offchain Labs 7. Ribbit Capital Location: Palo Alto, California, United States About: Ribbit Capital is a Silicon Valley-based venture capital firm that invests globally in unique individuals and brands who aim to disrupt the financial services industry. Founded in 2012 by Meyer “Micky” Malka, Ribbit believes the category is profoundly under-innovated and intends to support entrepreneurs who have already launched the businesses of the future. Ribbit has raised an inaugural $100M fund that will be aimed at driving innovation in lending, payments, insurance, accounting, tax preparation and personal financial management. Ribbit targets disruptive, early stage companies that leverage technology to reimagine and reinvent what financial services can be for people and businesses. The firm will mainly focus on investments in the U.S., Canada, Brazil, the United Kingdom, Germany, Italy, Spain, South Africa and Turkey. Investment Stages: Seed, Series A, Series B, Series C, Growth Recent Investments: Genesis Digital Assets Kavak Chipper Cash Related Resource: 8 Active Venture Capital Firms in Germany 8. Blockchain Capital Location: San Francisco, California, United States About: Blockchain Capital is a pioneer and the premier venture capital firm investing in Blockchain enabled technology companies. Investment Stages: Seed, Series A, Series B Recent Investments: Abra Securitize Anchorage 9. Digital Currency Group Location: New York City, New York, United States About: At Digital Currency Group, we build and support bitcoin and blockchain companies by leveraging our insights, network, and access to capital. Thesis: We invest in companies that are accelerating the creation and adoption of a better financial system using blockchain technology and cryptocurrency Investment Stages: Seed, Series A, Series B Recent Investments: Trust Machines Livepeer Elliptic 10. DWF Labs Location: Singapore About: DWF Labs is the global digital asset market maker and multi-stage web3 investment firm, one of the world's largest high-frequency cryptocurrency trading entities, which trades spot and derivatives markets on over 60 top exchanges. Investment Stages: Early Stage Venture, Initial Coin Offering, Late Stage Venture, Non Equity Assistance, Secondary Market, Seed. Recent investments: TRON Algorand Foundation Conflux 11. CMT Digital Location: Chicago, Illinois. About: CMT Digital is a venture capital firm engaging in the crypto asset and Blockchain technology industry. The firm focuses on asset trading, blockchain technology investments, and legal and policy. Investment Stages: Pre-Seed Recent investments: CFX Labs ZetaChain Trident Digital Group 12. NGC Ventures Location: Singapore About: NGC Ventures invests in early stage, web 3.0 infrastructure startups and projects. We identify projects with innovative ideas to today’s blockchain problems and work with them from ideation to strategy and market adoption. Thesis: We identify projects with disruptive innovation, aiming to solve problems with solutions that are characterized by simplicity, cost affordability, speed, uniqueness and a compelling product market fit. Investment Stages: Seed, Series A Recent investments: Polybase Smooth Labs Chainsafe 13. Bixin Ventures Location: Beijing, Chaoyang About: Bixin Ventures invests in early-stage infrastructure projects that cultivate and facilitate mass adoption of open finance through permissionless and decentralized networks. Thesis: Bixin Ventures’ mission is to invest in and build crucial infrastructure that enables the future of open finance through permissionless and decentralized networks. Our investment team works alongside founders to provide guidance and expertise for growth in Asia. These actions reflect our priority to transform open finance into a truly global ecosystem. Investment Stages: Pre-Seed, Seed Recent investments: Sei Earn Network zCloak Network 14. Spartan Group Location: Singapore and Hong Kong. About: Founded in 2017, Spartan Group is a leading player in the Web3 space. We are one of the most active venture investors and have backed some of the leading crypto companies and networks. We are also a leader in Web3 M&A deals and capital raises, leveraging our track record of working with world-class teams, deep expertise of the crypto industry, and unparalleled network to create collective value with exceptional founders. Investment Stages: Seed Recent investments: Wind Brine Fi DFlow 15. Alchemy Ventures Location: San Francisco, California About: Alchemy is a developer platform that empowers companies to build scalable and reliable decentralized applications without the hassle of managing blockchain infrastructure in-house. It is currently faster, more reliable, and more scalable than any other existing solution, and is incredibly easy to integrate! Thesis: At Alchemy, our mission is to provide developers with the fundamental building blocks they need to create the future of technology. Through Alchemy Ventures, we'll be accelerating this mission by dedicating financing and resources to the most promising teams growing the Web3 ecosystem. Investment Stages: Pre-Seed, Seed, Series A, Series B, Series C Recent investments: Acctual Bastion Unstoppable Domains Web3 Resources Web3 Report Q3 2021 – ConsenSys: The DeFi data, context, NFTs, tools, and trends that defined Web3 in Summer 2021. Coinbase Cloud is announcing a community for Web3 developers. Their forum for developers is live, searchable, and indexable. The Architecture of a Web 3.0 application ​​WEB2 vs WEB3 Twitter thread on Why Web3 Matters and What’s Next in Web3 Start Your Next Round with Visible These firms are not only financing the future of the internet but are also shaping the landscape of digital innovation. As the Web3 ecosystem continues to grow, staying on top of your business and connecting is key. Combine qualified investors from Visible Connect with your own investor lists to share targeted Updates, decks, and dashboards. Check out all our web3 investors here. After finding the right Investor you can create a personalized investor database with Visible. Combine qualified investors from Visible Connect with your own investor lists to share targeted Updates, decks, and dashboards. Start your free trial here. To help craft that first email check out 5 Strategies for Cold Emailing Potential. Related resource: 14 Gaming and Esports Investors You Should Know Related Resource: 14 Venture Capital Firms in Silicon Valley Driving Startup Growth Related Resource: 10 Venture Capital Firms in Canada Leading the Future of Innovation Related Resource: 7 Prominent Venture Capital Firms in Brazil

In the intricate world of venture capital and private equity, liquidation preference is a pivotal concept that dictates financial outcomes during critical junctures like company sales or bankruptcies. Our article delves into the nuances of this key mechanism, exploring how it prioritizes investors' returns over common stockholders and its impact in various low-return scenarios. We'll guide you through the five primary types of liquidation preferences, each with distinct implications for investment returns and company dynamics. Particularly crucial for startups, understanding liquidation preferences is essential for navigating future funding and maintaining financial health. Join us as we unravel the complexities of liquidation preference, a crucial element in balancing the risk-reward equation in business finance. Liquidation Preference Defined Liquidation preference is a key term in venture capital and private equity, defining the order and magnitude of payments to investors in events like company sale or bankruptcy. This provision in preferred stock agreements prioritizes the return of capital to investors before any distribution to common stockholders. It's an essential mechanism in venture capital contracts to safeguard invested capital, especially in scenarios yielding low returns. For example, in a real-life scenario, if a company with a liquidation preference clause is sold, preferred investors are entitled to receive their investment amount before any payouts to common stockholders. This ensures that in a liquidity event such as a company sale, the downside risk to preferred investors is minimized, as they are guaranteed a return on their investment before others. However, if preferred stock converts to common stock in a qualified initial public offering (IPO), the liquidation preference often ceases to apply, aligning the interests of all shareholders​. The Importance of Liquidation Preference The importance of liquidation preference in venture capital and private equity cannot be overstated. Primarily, it provides financial security to investors by ensuring they recover their investment before any payouts to common shareholders in the event of a liquidation, such as a company sale or bankruptcy. This makes investing in high-risk ventures more attractive, as it reduces the potential losses in scenarios where the company does not perform as expected. Additionally, liquidation preference can influence company strategies and decision-making. It can impact negotiations during funding rounds, as terms can significantly affect how proceeds are divided in a sale or liquidation event. Moreover, for entrepreneurs and common shareholders, understanding liquidation preference is crucial in assessing how much control and financial benefit they retain in their company after external funding. In essence, liquidation preference is a key element that balances the risk and reward equation for both investors and company founders, making it an indispensable part of venture capital and private equity deals. Related resource: 5 Ways to Make Investor Communication Better The 5 Primary Types of Liquidation Preference As we delve deeper into liquidation preferences, it's important to understand that there isn't a one-size-fits-all approach. This financial tool comes in various forms, each with its unique characteristics and implications for investors and company founders. We will explore five primary types: Single or Multiple, Non-Participating and Participating, Participation Caps, Seniority Structures, and Dividend Preferences. Each type represents a different way of structuring payouts in liquidation events, offering distinct advantages and considerations. In the following sections, we'll break down these categories, providing clarity on how each operates and their potential impact on investment returns and company dynamics. 1.) Single or Multiple Single and Multiple liquidation preferences are two common structures used in venture capital and private equity to determine the payout order and amount to investors in a company's liquidation event. A Single liquidation preference, typically set at 1x the original investment amount, means that an investor with this preference gets paid back their full investment amount before any shareholders lower in the priority stack receive their payouts. This is the most common type of liquidation preference and is seen as a standard protective measure for investors​​. A Multiple liquidation preference, on the other hand, is less common and involves a multiple greater than 1x, such as 2x or 3x. In this scenario, an investor with, for instance, a 2x liquidation preference would be paid back double their original investment amount before any other shareholders receive anything. While it offers greater protection for the investor, high multiple liquidation preferences can become contentious in subsequent funding rounds and may negatively impact the ability of founders and employees to see a return, as these groups are pushed lower in the preference stack​​. For an example of a Single liquidation preference, consider a scenario where an investor invests $1 million for a 25% stake in a company that is later sold for $2 million. With a 1.0x Non-Participating Liquidation Preference, the investor would receive $1 million from their 1.0x preference, ensuring the recovery of their full investment. In this case, the remaining $1 million would be distributed to the common shareholders​​. An example of a Multiple liquidation preference is more complex and less common. For instance, if an investor has a 2x liquidation preference and invests the same amount in a company with the same sale price, they would be entitled to receive double their investment (i.e., $2 million) before any payouts to common shareholders. However, in this example, since the sale price is only $2 million, there would be nothing left for common shareholders after fulfilling the investor's 2x liquidation preference. This highlights how a multiple liquidation preference can significantly impact the distribution of proceeds, potentially leaving common shareholders with little to no return. 2.) Non-Participating and Participating Non-Participating Liquidation Preference allows investors to choose between receiving their initial investment back (usually at a 1x multiple) or converting their preferred shares to common shares and receiving a proportionate share of the sale proceeds. In other words, they can either get their initial investment back or participate in the profits like common shareholders, but not both. Participating Liquidation Preference, on the other hand, enables investors to receive their initial investment back (again, usually at a 1x multiple) and then also participate in the remaining distribution of proceeds as if their shares were common stock. This means they first recover their investment and then also get a share of any remaining proceeds. For example, if a company with a Non-Participating 1x Liquidation Preference is sold, and an investor's initial investment was $1 million, they would have the choice to either take back their $1 million (if the sale proceeds allow) or convert their shares to common and take their share of the total sale proceeds. In contrast, with a Participating 1x Liquidation Preference in the same scenario, the investor would first take their $1 million and then also receive a portion of the remaining proceeds as if they were a common shareholder. 3) Participation Caps Participation Caps in liquidation preference set a limit to how much preferred investors can receive in liquidation events, essentially capping their payout. This cap is usually expressed as a multiple of the original investment. For instance, in a capped participation preference scenario, an investor may have a cap set at 2x or 3x the original investment. This means they will participate in the liquidation proceeds on a pro-rata basis until their total proceeds reach this set multiple. After reaching this cap, they no longer receive additional proceeds, and the remaining funds are distributed to other shareholders. For example, suppose a venture capital firm invests $5 million in a company with a capped participating preference set at a 3x cap. If the company is later sold or liquidated, the VC's payout preference would be capped at $15 million (3 times the $5 million investment). In this scenario, the investor will first receive their $5 million preference and then share in the remaining proceeds until their total proceeds equal $20 million. After reaching this cap, the remaining funds are distributed to other shareholders, such as co-founders​​​​​​. This cap serves as a safeguard to prevent preferred shareholders from over-dominating the payout distribution, thus ensuring a fairer distribution among all shareholders, including founders and common shareholders. 4) Seniority Structures Seniority Structures in liquidation preference determine the order in which investors are paid in the event of a company's liquidation based on the seniority of their investment. This structure can vary, but generally, it prioritizes the most recent investors over earlier ones. A common form of seniority structure is Standard Seniority, where the liquidation preferences are honored in reverse order, starting with the most recent investment round. For instance, Series B investors would receive their liquidation preferences before Series A investors. Another form is Pari Passu Seniority, where all investors are treated equally regardless of their investment round, meaning they all receive a part of the liquidation proceeds proportionate to their initial investment. Lastly, there's Tiered Seniority, a hybrid model where investors are grouped within their funding rounds, and within each tier, payouts follow the pari passu model​​. An example of how seniority structures work can be illustrated as follows. Assume a company has received investments from seed investors who committed $2 million and Series A investors who committed $1 million, each with a 1x liquidation preference. If the company's assets after a sale amount to only $1 million, according to Standard Seniority, the Series A investors would receive the entire $1 million, leaving the seed investors with nothing. This example demonstrates the "last in, first out" principle, where investors who funded the business in its later stages, perhaps during more challenging times, are paid out first​. 5) Dividend Preferences Dividend Preferences refers to the rights of preferred stockholders to receive specific dividends before common stockholders. These dividends are usually set at a fixed amount or rate and are prioritized over dividends to common shareholders, especially in liquidity events. This clause ensures that preferred stockholders not only get priority in the distribution of dividends but also in the accumulation of those dividends if the underlying asset faces a liquidity event. For example, participating preferred stockholders with Dividend Preferences might be entitled to a set dividend rate, in addition to having a liquidation preference. In a scenario with a 2x liquidation preference, these stockholders would receive twice the amount of capital they initially invested in the company in the event of a liquidity event, provided there are sufficient funds to meet this requirement. Additionally, they have the right to convert their participating preferred shares into common stock if they choose to do so​​. This type of preference is significant in providing an extra layer of financial security to preferred stockholders, ensuring they receive their due dividends in addition to any capital returns in the event of a company's sale, merger, or other liquidity events. How Liquidation Preference Works As we've explored various types of liquidation preferences, it's clear that they play a critical role in shaping the outcomes for investors and company founders in liquidity events. Essentially, liquidation preference determines the order and amount in which different shareholders are paid in the event of a company sale, merger, or bankruptcy. This system prioritizes the returns for preferred shareholders, often venture capitalists, over common shareholders, such as employees and founders. The preference can be structured in multiple ways, each having distinct implications on the distribution of proceeds from a liquidation event. Understanding how these preferences work is key to grasping the dynamics of venture capital and private equity investments, as they significantly influence the financial returns for all parties involved in a company's journey. The Best Liquidation Preference For Startups Determining the best liquidation preference for startups depends on various factors including the company's stage, the nature of the investment, and the interests of both investors and founders. Generally, a simpler liquidation preference, like a 1x non-participating preference, is often considered favorable for startups. This type ensures investors get their investment back in a liquidation event, but doesn't excessively dilute the payouts to founders and other common shareholders. A 1x non-participating preference is balanced, offering protection to investors without overly penalizing common shareholders. This type of preference is vital for early-stage startups where future funding rounds might require more attractive terms to new investors, and excessive liquidation preferences can make follow-on funding difficult or unattractive. However, the "best" preference can vary. For more established startups with a clearer path to profitability or exit, different structures might be more appropriate. It's crucial for startups to consider how liquidation preferences might impact future funding and the company's overall financial health. Consulting with financial and legal experts is advisable to determine the most suitable liquidation preference for a startup's specific circumstances. Related resource: What Are Convertible Notes and Why Are They Used? Visible: The Ultimate Resource for Founders We've explored liquidation preference, a key aspect of venture capital and private equity that shapes the financial outcomes in events like company sales or bankruptcies. This mechanism ensures that investors' capital is prioritized over common stockholders, especially in low-return scenarios. We've examined the five primary types of liquidation preferences – Single or Multiple, Non-Participating and Participating, Participation Caps, Seniority Structures, and Dividend Preferences, each with its implications on investment returns and company dynamics. The choice of liquidation preference is crucial for startups, influencing future funding and overall financial health. Overall, liquidation preference is an essential tool in balancing risk and reward for investors and founders in the complex world of business finance. Let Visible help you succeed- raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days. Related resource: Navigating the World of QSBS: Tax Benefits and Eligibility Criteria Explained

Raising funding for a business is challenging. At Visible, we like to look at the fundraising process similarly to a traditional B2B sales and marketing process — like a funnel. At the top of the funnel, you are finding potential investors via cold outreach and warm introductions. In the middle of the funnel, you are nurturing potential investors with meetings, pitch decks, updates, and other communications. At the bottom of the funnel, you are working through due diligence and hopefully closing new investors. Related Resource: A Step-By-Step Guide for Building Your Investor Pipeline Building relationships with leads is crucial to success for both a sales and fundraising funnel. Investors are typically investing hundreds of thousands or millions of dollars so building a relationship with investors will help them build conviction. Having a game plan for networking with potential investors can set you up for fundraising success. Check out our tips for networking with potential investors below. The Importance of Networking for Investors According to Brett Brohl of Bread and Butter Ventures, the average early-stage fundraise should take around five months. This means that investors are trying to deploy hundreds of thousands or millions of dollars within just a few months of meeting founders. In order to better your odds of fundraising success, this means that you need to start networking and building relationships with investors in advance of a fundraise. This will help investors build conviction and move quickly when it does come time to raising capital. Related Resource: 7 of the Best Online Communities for Investors Key Benefits of Effective Networking Founders have to take on countless roles and responsibilities when starting their business. For many founders, fundraising can turn into a full-time job — on top of their other daily responsibilities. By investing in networking throughout the year, you will be able to build momentum when it is time to “actively fundraise.” You will have already formed relationships with investors and will allow them to build conviction quickly so you can get back to your day-to-day. Check out a few key benefits of networking with potential investors below: Momentum when it comes time to fundraise. By networking with potential investors you’ll be able to speed up your fundraise as you’ve already built relationships. Introductions to other investors. Most investors will pass on a potential investment. However, they can make introductions to other investors that might be a fit for your business. Building out your network. The startup world is a tight-knit circle. Forming relationships with investors will allow you to grow your network and find introductions to peers, potential customers, hires, etc. Related Resource: 6 Helpful Networking Tips for Connecting With Investors Breaking Down the 9 Effective Networking Tips Networking might be easier said than done for many founders. Finding an introduction or way to network with potential investors can be challenging. Check out our tips for how you can effectively network with potential investors below: 1. Attend relevant investment seminars Investors are typically involved with different events in the venture capital space. Many are geared towards helping founders network with investors. If you are located in/near a larger city, chances are you will be able to find local events that are full of local investors and VCs. 2. Cultivate a strong online presence Venture investors typically have a strong online presence. One of the best ways to network with potential investors is by having an online presence yourself. You can start by following ideal investors and slowly start to engage with them. 3. Prioritize genuine relationships over quantity There are thousands upon thousands of investors. However, not every investor will be a good fit for your business. We recommend identifying your needs and building a list of “ideal investors” for your business. By focusing on building relationships with these investors, you’ll be able to make sure you are spending time on investors that will be beneficial to your business. 4. Stay updated with industry trends Investors seek to stay in the know when it comes to different industries and verticals. By staying up to date with your industry or focus area, you will improve your odds of being able to offer investors something of value and start building your relationships. 5. Master the elevator pitch If attending different networking events or seminars it is important that you have a plan for how to engage with investors. An aspect of this is likely having your elevator pitch dialed. A shaky or uncertain elevator pitch will be seen as a red flag to many potential investors. 6. Join investor groups and associations As we previously mentioned, the startup and VC world is a tight-knit community. There are countless investor groups and associations — some based in a specific region or city and others based on a vertical or market. Investor groups are a great opportunity to network with investors and peers who are a good fit for your business. Most will host different events and workshops that will allow you to further deepen relationships. 7. Leverage technology for networking In recent years there has been a rise in different technologies to help founders and investors connect. These tools typically include investor profiles that surface their firm’s vital information (some support profiles for startups as well). Related Resource: How Startups Can Use an Investor Matching Tool to Secure Funding Visible Connect, our free investor database, enables startup founders to filter and find the right investors for their business. We use the data and information that is crucial to finding the right investor — like check sizes, investment focus, investment geography, etc. From here, you can add investors directly to your Visible Pipeline to keep tabs on your fundraising conversations and actions. Give it a free try and find the right investors for your business using Visible Connect. 8. Consistent follow-ups Fundraising can be a long and arduous process. Investors are incentivized to move slowly and wait as more data and information about your company and market becomes available. It is critical to stay persistent and continuously follow up with potential investors. At Visible, we recommend adding potential investors to your monthly investor updates to keep them in the loop with your progress. Check out a template to nurture potential investors here. Related Resource: How To Write the Perfect Investor Update (Tips and Templates) 9. Mentorship and being mentored One of the best ways to network with potential investors is to seek out advice and mentorship from them. Going in with a true intent to learn from their experiences is a great way to hone your skillset and build a strong relationship — with them and their network. Related Resource: Startup Mentoring: The Benefits of a Mentor and How to Find One Find Out How Visible Can Help You Connect With the Right Investors As we mentioned at the beginning of this post, a venture fundraise often mirrors a traditional B2B sales and marketing funnel. Just as a sales and marketing team has dedicated tools, shouldn’t a founder that is managing their investors and fundraising efforts? Use Visible to manage every part of your fundraising funnel with investor updates, fundraising pipelines, pitch deck sharing, and data rooms. Raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days.

Venture Capital (VC) plays a pivotal role in the entrepreneurial ecosystem, fueling the growth of innovative startups and established companies alike. This comprehensive guide delves into the various stages of venture capital funding, from early seed investments to late-stage and bridge financing. It also explores exit strategies and offers real-world examples to elucidate the VC landscape. Whether you're an aspiring entrepreneur or an investor, understanding these facets of venture capital is key to navigating the complex world of business finance. An Overview of the Three Principal Types of Venture Capital Funding Venture capital funding, a critical catalyst for business growth and innovation, encompasses more than just the three principal types: early-stage financing, expansion financing, and acquisition/buyout financing. Within these broad categories lie several specialized types of funding, each tailored to different stages of a company's lifecycle and specific needs. Seed financing, for instance, caters to businesses at the idea or concept stage, providing the initial capital to get off the ground. Startup financing then takes over, helping slightly more established businesses that are ready to market their product or service. First-stage financing supports those in the early stages of selling their products. As businesses grow, they may seek second-stage financing for expansion, or bridge financing to cover short-term needs while preparing for a significant event like an IPO. Third-stage (mezzanine) financing is often used for further expansion or to prepare a company for acquisition or IPO. In the acquisition/buyout category, acquisition financing helps businesses acquire specific assets or other companies, while management (leveraged buyout) financing is used to buy out a company's existing owners. Each of these funding types comes with its own set of criteria, risks, and opportunities. The following sections will delve deeper into these various forms of venture capital funding, providing insights into what they entail, who typically funds them, the risks involved, potential exit strategies, and real-world examples to illustrate these concepts in action. This comprehensive exploration aims to provide a clear understanding of the intricate landscape of venture capital funding. Related resources: A Quick Overview on VC Fund Structure How To Find Private Investors For Startups Early Stage Financing Early-stage financing is provided to companies to set up initial operations and basic production. This type of financing supports activities such as product development, marketing, commercial manufacturing, and sales. It's intended for companies in the development phase, which are typically beyond the seed stage and require larger sums of capital to start operations once they have a viable product or service​​. Early-stage companies are generally defined as having tested their prototypes, refined their service model, and prepared their business plan. They might be generating early revenue but are usually not profitable yet​​​​​​. An example of a business that would seek early-stage financing is a tech startup that has developed a working prototype of a new software or hardware product. This company would have validated its product idea, perhaps through initial customer feedback or small-scale deployments, and now requires funding to scale up its production, enhance its product features, and expand its market reach. Regarding the overall market related to early-stage financing, the trends in 2023 indicate a mixed picture. While venture capital investment in Q3 2023 remained flat, with VC-backed companies raising $29.8 billion, which is comparable to the $29.9 billion raised in Q2 2023, there is a continued interest in certain areas like generative AI. Although economic uncertainty and the overhang from existing money in the market have limited investor appetite, early-stage companies are expected to experience more success in fundraising compared to companies trying to raise funds in later-stage rounds​​. However, the fund formation has continued to decline since the highs of Q1 2022, and Q3 2023 ranked as the lowest quarter for fund formation since Q3 2017. Expansion Financing Expansion stage financing is a type of funding used to scale businesses and expand their market share. This stage is typically reached when a startup is growing, the product is selling, and the company is generating significant revenue. It characterizes a new phase of development, often involving expansion into new markets and distribution channels, and can also be used for external growth through mergers and acquisitions​​. This stage of financing is usually pursued after a company has moved past the startup and early stages of its business life cycle​​. An example of a business that would seek expansion financing is a tech startup that has successfully launched a product in a local market and is now looking to expand its reach nationally or internationally. Such a company might use expansion financing to enter new markets, scale up operations, increase production capacity, or diversify and differentiate its product lines. The overall market trend related to expansion financing, the venture capital landscape saw a slight increase in deal count and invested capital in Q3 2023 compared to Q2 2023. Cooley reported 225 venture capital financings in Q3 2023, representing $6.8 billion in invested capital, an increase from 221 financings and $6.4 billion in the previous quarter. This upward trend began in Q2 2023 and ended the steady decline observed from Q4 2021 to Q1 2023. However, this increase in deal count was more pronounced in early rounds, with mid-stage rounds (which include expansion stage) showing a decrease, and late-stage rounds remaining consistent with the previous quarter​​. Despite these upward trends in deal numbers and amounts raised, the percentage of down rounds increased to 27% of deals for Q3 2023, up from 21% in Q2 2023. This marks the highest percentage of down rounds and the lowest percentage of up rounds since 2014, indicating a challenging environment for raising funds at higher valuations​ Acquisition/Buyout Financing Acquisition/buyout financing refers to the capital sources obtained to fund the purchase of a business, comprising a mix of debt and equity in the capital structure. It is specifically used in transactions where a business, usually by a private equity firm or a financial sponsor, is acquired with debt constituting a significant portion of the financing​​​​. The use of leverage (borrowed capital) is a key characteristic of this type of financing, especially in leveraged buyouts (LBOs), where the acquired company's assets are often used as collateral for the loans. An example of a business that might seek acquisition/buyout financing is a medium-sized enterprise in a mature industry, with stable cash flows and strong market presence, looking to acquire a competitor or a complementary business to consolidate market share, expand product lines, or enter new markets. Regarding the overall market trend for acquisition/buyout financing, it has faced significant challenges over the past year, akin to the most prolonged challenges since the 2008–2009 financial crisis. Factors like rising interest rates, geopolitical tensions, and recession fears have led to a sustained downturn in deal activity, which bottomed out in the first quarter of 2023. However, since then, there has been a cautious return to deal-making, and M&A activity seems to be stabilizing, although the pace of recovery varies across regions and sectors​​. According to BCG in 2023, M&A activity was significantly subdued compared to the frenzy observed in 2021 and early 2022. Through the end of August 2023, there was a 14% decline in deal volume and a 41% drop in deal value compared to the same period in 2022​​. Additionally, private equity and venture capital sectors experienced dramatic declines in deal activity, with existing investments facing sharp devaluations and numerous "down rounds" for VC-backed companies​​. This trend indicates a more cautious approach in acquisition/buyout financing, influenced by broader economic uncertainties and tighter financing conditions. Related resource: What is Acquihiring? A Comprehensive Guide for Founders What About Seed Financing, Bridge Financing, and the Other Types of Venture Capital Funding I’ve Heard About? VC funding is not a one-size-fits-all approach; it encompasses a diverse range of types beyond the principal categories of early stage, expansion, and acquisition/buyout financing. These include specialized forms such as seed financing, which nurtures business ideas into reality, and bridge financing, which provides interim support in critical business phases. In the following sections, we'll explore in detail: Types of Early Stage Financing: This includes seed financing, startup financing, and first stage financing, each addressing different needs of nascent businesses. Types of Expansion Financing: Here, we'll look at second-stage financing, bridge financing, and third-stage (mezzanine) financing, crucial for businesses in their growth phase. Types of Acquisition/Buyout Financing: Covering acquisition financing and management (leveraged buyout) financing, this section addresses the needs of businesses looking to expand through acquisitions. Each of these sections will delve into the specifics of what each financing type entails, who typically provides and receives the funding, associated risks, potential exit strategies, and real-world examples. Related resource: Understanding the Advantages and Disadvantages of Venture Capital for StartupsTypes of Early-Stage Financing Seed Financing Seed financing, the earliest stage in the capital-raising process for startups, is fundamental for getting a business off the ground. It is used for several initial operations, including market research, prototype development, and covering essential expenses like legal fees. This form of financing is typically equity-based, meaning investors provide capital in exchange for an equity interest in the company. Startups that receive seed funding are at their inception stage, and have a business idea or concept/ prototype. These businesses are typically pre-revenue and are seeking funds to turn their ideas into a viable product or service. Seed financing is often sourced from family members, friends, or angel investors, who are pivotal in this stage due to their ability to provide substantial capital. Some VCs or banks may shy away from seed financing due to its high risk. It's considered the riskiest form of investing, as it involves investing in a company far before it generates revenue or profits. That being said there are also many VCs that focus solely on investing at the seed stage. The success of a seed investment heavily depends on the viability of the startup's idea and the management's ability to execute it. If this is strong then the likelihood of finding seed funding from any investor is strong. Related resource: List of VCs investing at the Seed stage from our Connect investor database Seed financing is considered the riskiest form of investing in the venture capital spectrum. The primary risk stems from investing in a business far before it has proven its concept in the market, often without a clear path to profitability. This high risk, however, is balanced by the potential for significant returns if the startup succeeds. Exit strategies for seed investors might include acquisition by another company or an Initial Public Offering (IPO), but these are long-term outcomes. Another exit strategy could be the sale of shares during later funding rounds to other investors at a higher valuation. Despite its risky nature, seed financing can yield high returns. A famous example is Peter Thiel’s investment in Facebook. In 2004, Thiel became Facebook’s first outside investor with a $500,000 contribution for a 10% stake, eventually earning over $1 billion from his investment (source). Related resource: Seed Funding for Startups 101: A Complete Guide Startup Financing Startup financing refers to the capital used to fund a new business venture. This financing is essential for various activities, such as launching a company, buying real estate, hiring a team, purchasing necessary tools, launching a product, or growing the business. It can take the form of either equity or debt financing. Equity financing, often sourced from venture capital firms, provides capital in exchange for partial ownership, whereas debt financing, like taking a loan or opening a credit card, must be repaid with interest​​. Startup financing is commonly funded by angel investors, venture capital firms, banks, and sometimes through government grants or crowdfunding platforms. These entities typically fund startups that exhibit high growth potential, innovation, and a solid business model. Startups that receive funding usually have a unique business idea or a promising market opportunity. They are often in their early stages but have moved past the initial concept phase and have a detailed business plan and, in some cases, a minimum viable product (MVP). Investing in startups is inherently risky, given that about 90% of startups fail. The risks include market risks, where even a great idea may fail if there's no market for it or due to unforeseen changes in the market. The potential for high returns is counterbalanced by the high probability of failure​​​​. Common exit strategies for equity financing include acquisition by another company or an Initial Public Offering (IPO). Acquisition allows access to resources and can lead to economies of scale and diversification. An IPO provides access to capital for further growth or debt repayment. However, these strategies come with challenges like integration issues, financial risks, and regulatory hurdles​​​​​​. A classic example of successful startup financing is Airbnb. In its early stages, Airbnb raised funds from venture capital firms and angel investors, which helped it scale its operations globally and eventually led to a successful IPO in 2020. First Stage Financing First-stage financing, often referred to as Series A funding, is a pivotal moment for startups, marking their first significant round of venture capital financing. This phase is crucial for companies that have moved beyond the seed stage, demonstrating initial market traction and a working prototype of their product or service. The primary uses of Series A funds include further product development, bolstering marketing and sales efforts, and expanding into new markets. The funding for first-stage financing often comes from a variety of sources. Initially, startups might rely on funds from family, friends, or angel investors. As they progress, professional investors like venture capitalists or angel investors become significant sources of capital during the seed round, which is typically the first formal investment round in a startup​​​​. As for who gets funded, it's generally startups that have moved beyond the initial concept stage and are ready to ramp up their operations. This involves increasing production and sales, indicating that the company's business model is being validated​​. Typical exit strategies for investors within a 5-7 year timeframe include: IPO (Initial Public Offering): Offering shares on a stock exchange, providing liquidity and potential high returns. Acquisition: Selling the company to another entity for an immediate exit and payout. Secondary Offering: Selling shares to private equity firms or institutional investors for liquidity. An example of a company that successfully went through first-stage financing, specifically Series A funding, is YouTube. In 2005, YouTube raised $3.5 million in its Series A funding round, with venture capitalists as the primary investors. This funding was crucial in helping YouTube expand its services and grow its user base, ultimately leading to its position as a major player in online video and social media​ Types of Acquisition/Buyout Financing Acquisition Financing Acquisition financing is a process that involves various sources of capital used to fund a merger or acquisition. This type of financing is typically more intricate than other forms of financing due to the need for a blend of different financing methods to optimize costs and meet specific transaction requirements. Various alternatives available for acquisition financing include stock swap transactions, equity, all-cash deals, debt financing, mezzanine or quasi-debt, and leveraged buyouts (LBOs). Acquisition financing is used to fund the purchase of another company or its assets. It can be utilized for several purposes, including: Expanding a company's operations or market reach. Acquiring new technologies or products. Diversifying the company’s holdings. Eliminating competition by buying out competitors. The financing for acquisitions comes from multiple sources, each with its own characteristics and implications: Stock Swap Transaction: This involves the exchange of the acquirer's stock with that of the target company. It's common in private company acquisitions where the target's owner remains actively involved in the business. Equity: Equity financing is typically more expensive but offers more flexibility, especially suitable for companies in unstable industries or with unsteady cash flows. Cash Acquisition: In an all-cash deal, shares are swapped for cash, often used when the target company is smaller and has lower cash reserves. Debt Financing: This is a preferred method for many acquisitions, often considered the most cost-effective. Debt can be secured by the assets of the target company, including real estate, inventory, or intellectual property. Mezzanine or Quasi Debt: This is a hybrid form of financing that combines elements of debt and equity and can be converted into equity. Leveraged Buyout (LBO): In an LBO, the assets of the acquiring and target companies are used as collateral. LBOs are common in situations where the target company has a strong asset base and generates consistent cash flows​​. Acquisition financing is typically sought by companies looking to acquire other businesses. This includes large corporations expanding their market share, medium-sized businesses seeking growth through acquisition, or even smaller firms aiming to consolidate their market position. Risks in acquisition financing vary based on the type of loan, its term, and the amount of financing. The risks include: Type of Financing Provider: The wrong type of financing provider can pose significant risks, especially if the loan is collateralized, as in the case with most bank loans. Pressure from Lenders: Banks can exert pressure for repayment, particularly if they view the company primarily as asset collateral rather than focusing on future cash flow growth. Capital Shortage Post-Acquisition: Acquiring companies need additional capital post-acquisition for growth, and being capital-short can be a significant risk​​. Exit strategies for investors or owners in acquisition financing might include: Increasing personal salary and bonuses before exiting the company. Selling shares to existing partners upon retirement. Liquidating assets at market value. Going through an initial public offering (IPO). Merging with another business or being acquired. Selling the company outright​​. A prominent example of acquisition financing is Amazon's acquisition of Whole Foods Market. In 2017, Amazon acquired Whole Foods Market in a $13.7 billion all-cash deal. This acquisition allowed Amazon to expand significantly into physical retail stores and further its goal of selling more groceries. The deal involved Amazon paying a premium of about 27% over Whole Foods Market's closing price, indicating a substantial investment in future growth prospects Management (Leveraged Buyout) Financing A Management Buyout (MBO), a type of leveraged buyout (LBO), is a corporate finance transaction where a company's management team acquires the business by borrowing funds. This usually occurs when an owner-founder is retiring or a majority shareholder wants to exit. The management believes that they can leverage their expertise to grow the business and improve operations, generating a return on investment. Lenders often favor MBOs as they ensure business continuity and maintain customer confidence. Financing for MBOs can come from various sources: Debt Financing: This is a common method where management borrows from banks, though banks may view MBOs as risky. Seller/Owner Financing: The seller may finance the buyout through a note, which is paid back from the company’s earnings over time. Private Equity Financing: Private equity funds may lend capital in exchange for a share of the company, with management also contributing financially. Mezzanine Financing: This is a mix of debt and equity that enhances the equity investment of the management team without diluting ownership​​. Risks associated with MBOs include: Interest Rate Risk: High interest rates on financing agreements can be a challenge. Operational Risk: Business efficiencies anticipated may not materialize, causing operational problems. Industry Shock Risk: An unexpected industry shock can adversely affect the success of the MBO​​. Exit strategies for MBOs typically align with general business exit strategies and may include: Increasing personal salary and bonuses before exiting. Selling shares to partners or through an initial public offering (IPO). Liquidating assets. Merging with or being acquired by another business. Outright sale of the company. A classic example of an MBO is the acquisition of Dell Inc. by its founder, Michael Dell, and a private equity firm, Silver Lake Partners, in 2013. The deal valued at about $24.4 billion, involved Michael Dell and the investment firm buying back Dell from public shareholders. This buyout was funded through a combination of Dell's and Silver Lake's cash along with debt financing. The MBO aimed to transition Dell from a publicly traded company to a privately held one, allowing more flexibility in restructuring the business without public market pressures. ​ How to Obtain Venture Capital Funding Obtaining venture capital funding is a multi-step process that requires preparation, strategic networking, and clear communication. Here’s a guide on how companies can navigate this process. Related resource: How to Get Your Startup Ready for Investors’ Operational Due Diligence Present Your Idea With a Compelling Business Plan When presenting a business plan, start by tailoring your presentation to align with the VC firm's interests, emphasizing aspects of your business that resonate with their investment philosophy. Creating a visually appealing slide deck, complete with graphs, charts, and infographics, can help make complex data more accessible and keep your audience engaged. Practice is key, so rehearse your presentation multiple times to refine your message and improve delivery. During the presentation, begin with an attention-grabbing story or statistic and then provide a structured walkthrough of your business plan. Be prepared for a Q&A session afterward and handle questions confidently and honestly. Remember, if you don’t know an answer, it’s perfectly acceptable to acknowledge it and offer to provide the information later. Following the presentation, be proactive in providing any requested additional documents and maintain open lines of communication for future discussions. Key components of a business plan: Executive Summary: A concise overview of your business, including the mission statement, product/service description, and basic information about your company’s leadership team, employees, and location. Company Description: Detailed information about what your company does and what problems it solves. Explain why your product or service is necessary. Market Analysis: Provide a robust market analysis that includes target market segmentation, market size, growth potential, and competitive analysis. Organizational Structure and Management Team: Outline your company’s structure and introduce your management team, highlighting their experience and roles in the success of the business. Products or Services: Detailed description of your products or services, including information about the product lifecycle, intellectual property status, and research and development activities if applicable. Marketing and Sales Strategy: Explain how you plan to attract and retain customers. This should include your sales strategy, marketing initiatives, and a description of the sales funnel. Financial Plan and Projections: This is critical for VC firms. Include historical financial data (if available) and prospective financial data, including forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. Funding Request: Specify the amount of funding you are seeking and explain how it will be used. Also, discuss your plans for future funding. Exit Strategy: Describe the exit strategies you might consider, such as acquisition, IPO, or selling your stake in the business. This shows investors how they might reap a return on their investment. Your business plan is a reflection of your vision and capability, so ensure it is clear, concise, and compelling. It should effectively communicate the potential of your business and be able to capture the interest and confidence of the VC firm. Attend an Introductory Meeting to Discuss Project Details The introductory meeting with a VC firm is a pivotal moment for entrepreneurs seeking funding. Its purpose extends beyond mere information exchange; it's an opportunity to make a compelling first impression, establish the credibility and potential of your business idea, and assess the compatibility between your company's goals and the VC’s investment philosophy. During this meeting, several critical details will be discussed: Business Model: You will explain how your business intends to make money, focusing on its sustainability and profitability. Market Opportunity: Discuss the potential market size and how your company plans to capture and grow its market share. Competitive Landscape: Outline your key competitors and what sets your company apart from them. Financial Needs: Clearly state how much funding you need, what you will use it for, and your company’s valuation. Future Vision: Share your long-term vision for the company, including potential growth areas and exit strategies. Examples reinforcing the importance of this meeting include: Tech Startup: A tech startup might use this meeting to showcase their innovative technology, provide evidence of scalability, and present market research supporting the demand for their solution. For instance, a SaaS company could illustrate their recurring revenue model and discuss their rapid user growth and engagement metrics. Biotech Firm: A biotech company might focus on their cutting-edge research, its impact on healthcare, and the path to regulatory approval and commercialization. They could discuss clinical trial results or partnerships with medical institutions. Retail Business: A retail entrepreneur might discuss their unique brand positioning, market penetration strategies, and plans for online-offline integration. They could highlight customer loyalty data and plans for expanding their digital footprint. These examples underscore the significance of the introductory meeting as a platform to demonstrate the potential for growth, showcase the strength and expertise of the team, and articulate the viability of the business model. This meeting is not just an informational session; it's a strategic opportunity to begin building a relationship with potential investors. Remember, the goal of this meeting is to leave a lasting, positive impression that paves the way for further discussions and potential investment. It's as much about selling your vision and team as it is about presenting your business plan. Account for Business-Related Queries and Perform Due Diligence The due diligence phase is a critical part of the VC investment process. It's a comprehensive evaluation undertaken by potential investors to assess the viability and potential of a startup before they commit to an investment. This phase allows investors to confirm the details presented by the startup and to understand the risks and opportunities associated with the investment. During this phase, a wide range of information will be requested, covering various aspects of the startup's operations, finances, legal standings, and market position. Some key areas include: Financial Records: Detailed examination of financial statements, cash flow, revenue projections, burn rate, and historical financial performance. This also includes an analysis of the startup’s business model and profitability potential. Legal Documents: Review of legal documents such as incorporation papers, patents, intellectual property rights, legal disputes, and contractual obligations with suppliers, customers, or partners. Market Analysis: Assessment of the startup’s market, including size, growth potential, competitive landscape, and the company's market share and positioning. Product or Service Evaluation: Thorough evaluation of the product or service, including its development stage, technological viability, scalability, and competitive advantages. Customer References and Sales Data: Verification of customer references, sales records, and customer retention data to assess market acceptance and satisfaction. Management and Team Interviews: Interviews with key team members to evaluate their expertise, commitment, and ability to execute the business plan. Operational Processes: Review of internal processes, including supply chain management, production, and delivery mechanisms, to assess operational efficiency and scalability. Examples of Due Diligence Activities Customer Reference Checks: Investors may directly contact a few customers to gauge their satisfaction and understand the value proposition of the startup’s product or service. Product Evaluations: Technical assessment of the product to understand its uniqueness, technological soundness, and compliance with industry standards. Business Strategy Review: In-depth discussions about the startup’s business strategy, including market entry strategies, growth plans, and risk management. Management Interviews: Personal interviews with the CEO, CFO, and other key executives to assess their leadership and operational capabilities. Market and Industry Analysis: Engaging market experts or conducting independent research to validate the startup’s market analysis and growth projections. Due diligence is vital for both investors and startups. For investors, it mitigates risk by providing a clear picture of what they are investing in. It uncovers potential red flags that could affect the investment's return. For startups, this phase is an opportunity to demonstrate transparency, build trust, and potentially receive valuable insights from experienced investors. Related resource: Valuing Startups: 10 Popular Methods Review Term Sheets and Approve or Decline Funding A term sheet is a critical document in the venture capital funding process. It's a non-binding agreement outlining the basic terms and conditions under which an investment will be made. A term sheet serves as a template to develop more detailed legal documents and is the basis for further negotiations. It typically includes information about the valuation of the company, the amount of investment, the percentage of ownership stake the investor will receive, the rights and responsibilities of each party, and other key terms such as voting rights, liquidation preferences, anti-dilution provisions, and exit strategy. During the term sheet review, negotiations are a fundamental part. It's a give-and-take process where both the startup and the VC firm discuss and agree upon the terms of the investment. These negotiations are crucial as they determine how control, risks, and rewards are distributed between the startup founders and the investors. Areas of negotiation can include: Valuation: Determining the company's worth and consequently how much equity the investor gets for their investment. Ownership and Control: Deciding on the percentage of ownership the investor will have and how much control they will exert over company decisions. Protection Provisions: Negotiating terms that protect the investor’s interests, such as anti-dilution clauses, liquidation preferences, and board representation. Vesting Schedules: Discuss how the founder’s shares will vest over time to ensure their continued involvement in the business. Negotiations require both parties to compromise and agree on terms that align the interests of both the investors and the founders. Once the term sheet is accepted and signed by both parties, it leads to the drafting of detailed legal documents that formalize the investment. The actual disbursement of funds typically occurs after these legal documents are finalized and signed, a process that can take several weeks to months, depending on the complexity of the terms and the due diligence process. The funds are generally made available in a single tranche or in multiple tranches based on agreed-upon milestones or conditions. It's important for startups to understand that a term sheet, while not legally binding in most respects, is a significant step in the funding process. It sets the stage for the formal legal agreements and the eventual receipt of funding. The clarity, fairness, and thoroughness of the term sheet can set the tone for a successful partnership between the startup and the venture capital firm. Raise Capital and Keep Investors in the Know with Visible As a founder, it's essential to remember that venture capital is not the only measure of success. The true value of your venture lies in the problem it solves, the impact it creates, and the legacy it builds. Venture capital can be a powerful catalyst, but your vision, tenacity, and ability to execute are what will ultimately define your journey and success. Let Visible help you succeed- raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days.

The deal flow process is arguably the most important operational functions at a VC firm. From an outsider's perspective, the way a VC firm runs its deal flow process can be mysterious. It’s the secret recipe that helps VC firms find and invest in the best-performing startups resulting in the biggest returns for their LPs. In this article we’re breaking down the deal flow process: what it is and why it matters. Defining deal flow in venture capital Deal flow is defined as the process investors run to attract potential investments, narrow down those opportunities, and then make a final investment decision. How a venture capital firm runs this process, and the quality of investments in their deal pipeline, is what separates great investors from the rest of the pack. The process of building great deal flow is similar to a sales funnel. Investors want a lot of leads (potential investments) coming to them at the top of their funnel to increase their odds of finding winners. What’s most important though is the quality of those leads. Too much inbound interest from startups that are not aligned with the fund’s thesis is overwhelming and distracting for investors. This is why it’s important for startups to do their research before reaching out to an investor. Similarly, it’s why investors often consider companies that come to them from a referral more credible opportunities -- those companies have already been pre-vetted by someone in their network. Ultimately, investors care about both volume and quality when building their deal flow pipeline. Maximizing the number of high-quality leads ensures investors are spending their time reviewing opportunities that can actually result in an investment. Why startups should be familiar with the deal flow process It’s important for startups to be familiar with the deal flow process so they can engage with the right type of investors, in the right way. When startups fundraise with a solid understanding of the deal flow process they can save themselves time and increase their likelihood of securing funding. According to a survey from more than 900 VC’s, investors are most likely to source a deal from the following channels: 30% - former colleagues or work acquaintances 30% - VCs initiating contact with entrepreneurs 20% - other investors 10% - cold outreach from startups 8% - existing portfolio companies What this means for startups is they shouldn’t rely on cold outbound alone. They’re more likely to stand out to an investor if they can get a warm intro from a personal connection, another relevant investor, or even from a current portfolio company. Founders should invest more time deepening relationships in their networks as opposed to a spray-and-pray cold outbound approach. A great way for founders to strengthen their relationships with their networks is to send out monthly communications to keep their potential investors, friends, and colleagues engaged. Get started sending regular updates with Visible. If a company is going to send a cold outreach to an investor it’s important to understand just how much inbound interest investors receive on a weekly basis. It’s reported that small VC firms receive about 30 inbound messages from startups per week while larger firms can receive more than 200 (source). Here's what this means for startups: Don’t be discouraged if an investor doesn’t respond to your cold outreach; they’re busy making their way through all the other inbound interest from the week Your pitch deck needs to be clear, concise, and compelling Make sure you research the investor in advance and are confident your company fits their investment thesis; otherwise, you’re wasting multiple people's time Related resource: Pitch Deck 101: How Many Slides Should My Pitch Deck Have? It’s also important for startups to understand that investors only invest in about 1% of the companies that go through their pipeline. While this may sound daunting, this advice from VC investor Krittr highlights the optimistic mindset founders should take. “This is the first thing that is important to understand — VC firms want you to succeed. We want you to get the money, and grow. All we want is a strong enough reason to give you the money. Remember this, this mindset shift does wonders.” Stages of the deal flow process in venture capital The deal flow process is commonly broken down into seven phases with a decreasing number of companies making it to the next phase. During this process, investors are collecting more information and building conviction about whether a company is a fit for their firm or not. A more in-depth breakdown of each step can be found below. 1. Sourcing Sourcing is the process of VCs finding potential investment opportunities. To source deals investors will do things like attend networking events (demo days, pitch competitions, industry conferences), research market activity, and meet with other VCs or incubators/accelerators to discuss deal opportunities. 2. Screening During the screening process, investors will rely on basic assets such as pitch decks to determine which opportunities are worth digging into on a deeper level. Share your deck with confidence and track engagement rates with Visible. Related resource: How to Get Your Startup Ready for Investors’ Operational Due Diligence 3. First meeting When investors believe the company has the potential to be a good investment opportunity based on their initial pitch deck, they will be invited to join a first meeting with the firm. At this stage, investors are trying to better understand the dynamics of the leadership team, whether the company has a competitive advantage, and the market health of the specific sector. This may lead to additional follow-up meetings where more in-depth questions are asked by the investment team. Learn more about preparing for the first meeting. 4. Due diligence If the investment team has built conviction on a company based on the initial meetings they will kick off a more thorough due diligence process. During this phase, the VC is trying to gain an in-depth understanding and evidence of the company’s financial, technological, legal, and market opportunities and risks. Here is a breakdown of the topics investors evaluate at this stage Market - The size of the market, level of maturity, predicted growth and trends, competitive activity, and regulatory changes Business - How does the product work, what are the early customer metrics indicating (CAC, Churn Rate, Average Order Size, MRR, Annual Run Rate, Cash Runway, Gross Sales, CLV), how is the team structured, what does the company operations look like Technical - Does the company have any intellectual property or patents Financial due diligence - Analyzing financial statements, unit economics, and performance rations Legal due diligence - Is the company complying with local and federal regulations Related resource: Startup Due Diligence: What Every Founder Needs to Prepare For 5. Investment Committee The next phase of the deal flow process is when the investment committee reviews all the due diligence information, listens to the company present another time, asks additional questions, and then votes on whether to move forward with the investment opportunity. The investment committee is usually comprised of the General Partners who have worked on the deal, some independent investment committee members, and possibly experts in the field. It is during this meeting that the firm decides whether or not to invest in the company. The VC Krittr explains that VCs can have different motivations for choosing to invest in a particular company. VC motivations can include: Conviction that this company will return 10x their investment (the VC power law) Balancing risk in the portfolio construction Building the right co-investing relationships Building a relationship with a great founder even if success may not come from this particular company Publicity or staying true to the firm's thesis/mission As a startup, it is beneficial to identify what is motivating the VC so you can leverage your strengths and build a good relationship with the VC. 6. Term sheet and negotiation Once the VC has decided to invest in a company they will give the startup a term sheet and negotiation begins. VCs and startups negotiate terms until both parties agree on key items such as: Deal size and ownership percentage - how much equity founders are willing to give to investors Cash flow rights - the financial upside that gives founders incentives to perform Control rights - the board and voting rights that allow VCs to intervene if needed Liquidation rights - the distribution of the payoff if the company fails and has to be sold Employment terms, particularly vesting - which gives entrepreneurs incentives both to perform and to stay at the company Pro rata rights - allows investors to retain their initial ownership percentage by participating in future financing rounds The goal of a term sheet negotiation is for both founders and VCs to feel fairly rewarded when the company succeeds, and protected if the company is missing milestones. (Source) Related resource: 6 Components of a VC Startup Term Sheet Related resource: Navigating Your Series A Term Sheet 7. Capital Deployment The final stage in the deal flow process process is the actual transaction of capital from the venture capital firm to the startup's bank account. Related resource: Navigating Pro Rata Rights: Essential Insights for Startup Entrepreneurs Key metrics venture capitalists track in the deal flow process To ensure a Venture Capital firm is running an efficient deal flow process they measure success based on a few key metrics. Volume - Investors measure how many new companies are added to their deal flow pipeline each week. It’s an indication of their brand recognition in the industry and awareness among founders. Relevance - VCs not only care about the number of investment opportunities that land in their inbox but also how relevant the deals are. If they are seeing a high number of irrelevant deals the VC may need to strengthen their branding and messaging to attract the right type of founders. Conversion rates - It’s important for investors to track how many companies are making it to each stage within their pipeline so they can identify any areas of inefficiency. For example, they may have too many deals making it to the first meeting stage and as a result, they may need to set up a more formal application process for companies to go through. Diversity - Investors measure the diversity of the deals they are evaluating to understand and remove bias from their deal flow processes. For example, if they’re mostly receiving referrals or inbound interest from a certain demographic, the firm likely needs to work on diversifying their network as a whole. Related resource: Improving Diversity at Your VC firm Find the right investors for your startup with Visible Understanding the venture capital deal flow process is fundamental if startups want to make a great impression while fundraising. Demonstrating an understanding of each of the seven phases of the deal flow process is a sure way to impress investors. Additionally, understanding what is required from startups at each step will help founders prepare for their next fundraise. Visible helps over 3,500+ startups with their fundraising process.

Raising capital for a startup is challenging. At Visible, we like to look at the fundraising process similarly to a traditional B2B sales and marketing process — like a funnel. At the top of the funnel, you are finding potential investors via cold outreach and warm introductions. In the middle of the funnel, you are nurturing potential investors with meetings, pitch decks, updates, and other communications. At the bottom of the funnel, you are working through due diligence and hopefully closing new investors. In order to give yourself the best odds of raising capital, you need to have a healthy “top-of-funnel” filled with qualified investors. There are a number of different ways and sources you can use to find investors for your fundraise. Check out how an investor matching platform can help below. What is an Investor Matching Platform? An investor matching platform is a tool that founders can use to find qualified investors for their business. On the flip side, investors can use an investor matching platform to find qualified deal flow for their business. An investor matching platform typically involves profiles for both investors and founders with firmographic information. These are used to help founders find investors that are a fit for their business. Related Resource: How To Find Private Investors For Startups Benefits of Using an Investor Matching Tool The average founder has 48 investors in their Visible Pipeline. Many VCs and thought-leaders recommend that founders target 100+ investors over the course of a fundraise. Check out the number of investors a founder should expect to target below: In order to fill your fundraising pipeline with 48+ investors, it is important to have plenty of opportunities to find potential investors. Related Resource: A Step-By-Step Guide for Building Your Investor Pipeline This is where an investor matching tool can help. Check out more benefits of an investor matching tool below: 1. Wider access to potential investors As we’ve mentioned above, a fundraise typically requires a list of 48+ investors. A matchmaking tool can be a great resource to help find the right investors for your business. In the past, most founders have had to look to their immediate network for introductions to potential investors (or cold email) — a matchmaking tool allows you to widen your pool of potential investors. 2. Time and resource savings Finding potential investors can be a time consuming process. You need to identify your needs, find the investors that fit your needs, then find an introduction or write a personalized cold email. With a matchmaking tool, you can quickly find investors investors that are the right fit for your business using filters. 3. Data-driven matching Finding investors is similar to finding the right leads for your sales and marketing team. In order to find the right investors, you need to use data and criteria to find the investors that are a fit. With Visible Connect, our free investor database, you can filter investors using fields and data, such as the following: Investor check size minimums and maximums Investor stage focus Investor sector/vertical focus Investor fund size Investor geographic focus 4. Streamlined communication and negotiation Some investor matching tools have communication built directly into the platform. This allows for quick introductions and a quick yes/no from potential investors. While this can save time and streamline communication this can also come with downsides. For example, potential investors have the ability to pass on your business with little explanation or knowledge. 5. Increased credibility Some investor matching tools require a vetting process for both founders and investors. This leads to increased credibility and ensures both parties that they are talking to a credible person. 6. Community and networking opportunities A fundraise requires conversationsn with many investors, peers, and leaders in the space. While most investors will pass on your business it can lead to an increase in your network. For example, some investors might pass on your business because it is too early stage, this is an opportunity for you to build a relationship with this investor over time. How to Get the Most Out of an Investor Matching Platform For many investor matching tools, you will get out of it what you put into it. You’ll want to approach it with a plan for your fundraise that can be used when finding potential investors. Check out a few examples to make sure you’re getting the most out of your investor matching platform below: Related Resource: 20 Best SaaS Tools for Startups Define your needs First things first, you should define what you are looking for out of a fundraise and start to build out what your “ideal investor” looks like. This typically means identifying the criteria you’d want out of your investor — check size, stage focus, vertical focus, etc. Build a strong profile If your investor matching tool requires a founder/company profile, make sure it is built out. For many investors, this will be their look into your business and how you operate. If your profile is half built out, they will assume you are not taking it seriously. Proactively engage with investors Investors receive hundreds of emails and messages from potential investors every month. Chances are that your initial messagse could get lost in the shuffle. Make sure you are proactive and have a plan to follow up as needed. Be transparent If you are using an investor matching tool, chances are this will be your first interaction with many of the investors. In order to build trust, you need to start the relationship with transparency. Be honest about where your business is at, what you’re looking for out of potential investors, etc. Keep your information up-to-date As we mentioned above, your profile will be a potential investors first look into your business and how you operate. Make sure that your information is up-to-date and relevant. If an investor sees that your information is months or quarters old, they will question how you operate. Match With the Right Investors With Visible As we mentioned at the beginning of this post, a venture fundraise often mirrors a traditional B2B sales and marketing funnel. Just as a sales and marketing team has dedicated tools, shouldn’t a founder that is managing their investors and fundraising efforts? Use Visible to manage every part of your fundraising funnel with investor updates, fundraising pipelines, pitch deck sharing, and data rooms. Raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days.

The technological landscape has been dynamically evolving with the surge of AI, leading to the inception of numerous startups that harness AI's potential to innovate and disrupt industries. These ventures are redefining creativity and productivity, crafting systems that can generate anything from realistic images to sophisticated code, mimicking human ingenuity. They are crafting intelligent systems that can create content, solve complex problems, and generate ideas, ushering in an era where AI is not just a tool, but a creator and innovator. Generative AI startups are not only grabbing headlines but also attracting substantial investments, reflecting the confidence and excitement surrounding their potential to transform every sector they touch. Let's delve into some of the most groundbreaking generative AI startups that are redefining the tech industry. Related resources: How AI Tools are Reshaping Venture Capital: Tools to Know CBInsights Generative AI Bible How AI Can Support Startups & Investors + VCs Investing in AI AI Meets Your Investor Updates 1. OpenAI OpenAI is an artificial intelligence research laboratory consisting of the for-profit OpenAI LP and its parent company, the non-profit OpenAI Inc. It aims to promote and develop friendly AI in such a way as to benefit humanity as a whole. OpenAI's research has led to the development of some of the most advanced AI models in the world, including GPT-3, DALL-E 2, and InstructGPT. These models have been used to create a variety of innovative products and services, including AI-powered content generators, image editors, and chatbots. Its work is centered on advancing digital intelligence in a way that can scale to solve complex problems in a variety of domains, from healthcare to economics. The utility of OpenAI's products stems from their ability to automate complex tasks, process large amounts of data efficiently, generate human-like text, and more, which can significantly impact various industries by enhancing productivity, innovation, and problem-solving capabilities. Year founded December 2015 Founders The list of founders of OpenAI includes: Elon Musk, who has since left the company. Sam Altman, previously president of Y Combinator. Greg Brockman, formerly the CTO of Stripe. Ilya Sutskever, a leading expert in machine learning. Wojciech Zaremba, a researcher with expertise in robotics. John Schulman, a researcher in machine learning and robotics. Funding OpenAI has secured over $300 million in funding in April from prominent backers including Sequoia Capital, Andreessen Horowitz, Thrive, and K2 Global, at a valuation of $29 billion. Additionally, a major investment from Microsoft, closed in January, was reported to be around $10 billion. OpenAI, with Microsoft holding a 49% stake, has projected optimistic financial prospects, expecting to reach $1 billion in revenue in 2023. This anticipated financial success underscores the company's significant impact and innovation in the field of artificial intelligence. Related resource: Top 15 Machine Learning Startups to Watch 2. Chohere Cohere is a Canadian startup that specializes in large language models and generative AI for enterprise use. Founded by a team with roots in Google Brain's transformative research on machine learning architectures, Cohere has quickly positioned itself at the forefront of AI innovation. The company's mission is to empower businesses with AI-driven solutions that enhance chatbots, search engines, content creation, and data management. Cohere's strength lies in its sophisticated language models capable of understanding and responding to text with nuanced comprehension. Their multilingual model breaks language barriers, extending advanced text processing to over 100 languages. By integrating their technology with major platforms like Oracle and Salesforce, Cohere is embedding AI deeply into business operations, automating tasks from copywriting to content moderation. The company's commitment to responsible AI development is underscored by its adherence to international guidelines and its nonprofit arm dedicated to open-source AI research. With its cloud-agnostic platform and strategic partnerships, Cohere not only competes with giants like OpenAI but also paves the way for generative AI's future in the enterprise realm. Year founded 2019 Founders Aidan Gomez Ivan Zhang Nick Frosst Funding Cohere's journey in securing financial backing has been marked by significant milestones. In September 2021, the company proudly announced a $40 million Series A funding round led by Index Ventures, with the added bonus of Index Ventures partner Mike Volpi joining Cohere's board. This round was notable for contributions from Radical Ventures, and respected AI experts such as Geoffrey Hinton, Fei-Fei Li, Pieter Abbeel, and Raquel Urtasun. The momentum continued into February 2022, when Cohere announced a substantial $125 million Series B funding, spearheaded by Tiger Global. The company's financial trajectory reached new heights in June 2023 with a Series C funding round that brought in an additional $270 million. This round saw participation from notable investors including Inovia Capital, Oracle, Salesforce, and Nvidia, elevating Cohere's valuation to an impressive $2.2 billion. 3. Hugging Face Hugging Face, Inc. stands as a unique blend of a French-American company and an open-source community, primarily known for its development and contribution to machine learning technologies. Based in New York City, the company has gained acclaim for its Transformers library, which is pivotal in natural language processing. By emphasizing community collaboration and accessibility, Hugging Face has created a platform that encourages users to share and showcase machine learning models and datasets. Hugging Face's journey from a chatbot app developer to a machine learning platform highlights its adaptability and commitment to innovation. Notable achievements include the launch of the BigScience Research Workshop and the introduction of BLOOM, a groundbreaking multilingual large language model. The company's acquisition of Gradio and collaborations with industry giants like Graphcore, Amazon Web Services, and others further showcase its expanding impact. Through its Transformers library and Hugging Face Hub, the company provides versatile resources for machine learning, catering to a variety of needs in text, image, and audio tasks. Its services have become essential for developers seeking efficient, collaborative, and innovative AI solutions. Year founded 2016 Founders Clément Delangue Julien Chaumond Thomas Wolf Funding Hugging Face's financial journey reflects its growing influence in the AI sector. In March 2021, the company raised $40 million in Series B funding. This was followed by a significant Series C round in May 2022, where it achieved a $2 billion valuation. The funding milestones continued with a substantial $235 million Series D round in August 2023, catapulting the company's valuation to $4.5 billion. This round was led by Salesforce, with notable contributions from Google (GV), Amazon, Nvidia, AMD, Intel, IBM, and Qualcomm, underscoring the tech industry's confidence in Hugging Face. 4. Inflection AI Inflection AI is at the cutting edge of developing machine learning and generative AI hardware and applications. The company's flagship product, the Pi chatbot, represents a leap in AI-driven personal assistants. Named for "personal intelligence," Pi is designed not just to assist but also to provide an emotionally supportive experience. The chatbot aims to engage users with kindness, diplomacy on sensitive topics, and a sense of humor, setting it apart from other chatbots like OpenAI's ChatGPT. This focus on emotional intelligence in AI marks a significant step towards more human-centric technology. Year founded 2022 Founders Reid Hoffman Mustafa Suleyman Karén Simonyan Funding In June 2023, Inflection AI made a remarkable financial achievement by raising $1.3 billion. The company, led by former DeepMind leader Mustafa Suleyman, has achieved a valuation of $4 billion, with its recent $1.3 billion funding round drawing major backers like Microsoft (M12), Nvidia, and high-profile tech billionaires Reid Hoffman, Bill Gates, and Eric Schmidt. With this funding, Inflection plans to expand its computing power and further develop Pi, as well as potentially offer APIs for selected partners. CEO Mustafa Suleyman envisions continued rapid fundraising, opting for strategic investors over traditional venture capital to leverage their experience and network. This aggressive growth strategy underlines Inflection's ambition to be a frontrunner in creating advanced AI models and applications. 5. Jasper Jasper AI stands out in the artificial intelligence landscape as a powerful platform focused on enhancing copywriting and content creation, especially in the marketing sector. Launched in January 2021 in Austin, Texas, Jasper has evolved into a vital tool for creating diverse digital content, ranging from blog posts and social media ads to product descriptions. As a "wrapper" for ChatGPT, it utilizes the OpenAI API, making it a robust solution for businesses and enterprise clients. Jasper's AI-driven approach simplifies the content creation process, offering an 'AI copilot' for marketing. This includes AI insights, campaign management tools, and content scheduling, all seamlessly integrated into the content production workflow. Its technology leverages models from Cohere, OpenAI, and Anthropic, although it's acknowledged to sometimes produce inaccurate information due to the 'hallucinations' typical in large language models. Apart from text generation, Jasper also provides an API for customer-facing applications and has expanded into AI-generated artwork with "Jasper Art," utilizing DALL·E 2 technology. These features make Jasper an all-encompassing platform for creative and marketing needs. Year founded 2021 Founders Dave Rogenmoser Chris Hull John Phillip Morgan Funding Jasper AI has attracted significant investment since its inception, raising a total of $143 million. A notable funding milestone was a $125 million investment round, which placed the company's valuation at $1.5 billion. Despite facing challenges like employee layoffs in July 2023, Jasper continues to innovate and release new products, indicating a strong position in the AI content creation market. This financial backing and continued product development underscore Jasper's commitment to maintaining its status as a leading AI content generation platform. 6. Synthesis AI Synthesis AI is pioneering synthetic data technologies to enable more capable and ethical AI. The platform leverages the power of deep learning and CGI to create photorealistic and perfectly labeled synthetic data for computer vision and perception AI applications. This synthetic data can be used to train AI models more effectively and efficiently, without the need for expensive and time-consuming human-annotation. Synthesis AI's products and services have the potential to revolutionize the way AI models are developed and deployed. By using synthetic data, businesses can develop better models at a fraction of the time and cost of traditional approaches. This can lead to faster innovation and more cost-effective AI solutions. In addition to its commercial applications, Synthesis AI's technology also has the potential to make AI more ethical and responsible. By using synthetic data, companies can avoid the risks associated with collecting and using real-world data, such as privacy violations and bias. Year founded 2019 Founders The company was founded by Yashar Behzadi, PhD, an experienced entrepreneur with a proven track record of success in building transformative businesses in AI, medical technology, and IoT markets. Funding Synthesis AI has raised over $10 million in funding from leading venture capital firms such as Andreessen Horowitz and Khosla Ventures. 7. Anthropic Anthropic has quickly gained recognition for its work in developing general AI systems and large language models. Founded by former OpenAI members, including the siblings Daniela and Dario Amodei, Anthropic stands out as a public-benefit corporation closely aligned with the effective altruism movement. The company's ethos revolves around ethical AI development, emphasizing safety and responsible innovation. Anthropic's flagship project, Claude, is a chatbot akin to OpenAI's ChatGPT but with a distinct focus on safety, trained on principles from human rights documents and corporate policies. This approach, termed "Constitutional AI," aims to ensure the chatbot upholds values like freedom, equality, and brotherhood. Besides Claude, Anthropic is also known for its interpretability research in AI, particularly in transformer architectures. Year founded 2021 Founders Daniela Amodei Dario Amodei Funding By late 2022, the company had raised $700 million, with significant contributions from Alameda Research and Google Cloud. In May 2023, a further $450 million was raised in a round led by Spark Capital. The company's funding milestones continued with substantial investments from major tech players: in September 2023, Amazon announced an investment of up to $4 billion, making it a minority stakeholder and primary cloud provider. The following month, Google committed an additional $500 million, with plans to invest $1.5 billion over time. As of July 2023, Anthropic had raised a total of $1.5 billion, positioning it as a significant contender in the AI industry with a valuation bolstered by these strategic partnerships. 8. Lightricks Lightricks has emerged as a leader in developing mobile apps for video and image editing, most notably its highly popular selfie-editing app, Facetune. Based in Israel, the company has expanded to employ approximately 600 people and boasts over 680 million app downloads as of 2023. Lightricks has distinguished itself by integrating generative AI capabilities into its products, making it a frontrunner in the mobile editing space. Lightricks' suite of products is diverse and innovative. Facetune, its flagship app, has consistently ranked among Apple's top downloaded and paid apps. Other notable apps include Photoleap for general image editing, Videoleap for video editing, and Popular Pays for influencer marketing and content creation. The company also offers a range of other tools such as Lightleap, Motionleap, Beatleap, Artleap, Seen, and Boosted, each catering to different aspects of digital content creation. The company's business model revolves around the freemium approach, offering subscriptions and free versions of their apps. This strategy, adopted early in the app industry's shift towards subscriptions, has played a crucial role in Lightricks' financial success and market penetration. Year founded 2013 Founders Zeev Farbman Nir Pochter Yaron Inger Amit Goldstein Itai Tsiddon Funding Lightricks' journey in securing funding has been marked by several successful rounds. The company received its first funding of $10 million in 2015, led by Viola Ventures. In November 2018, it raised $60 million, followed by a significant $135 million in Series C funding in July 2019, which implied a valuation of $1 billion. By September 2021, Lightricks achieved a valuation of $1.8 billion with an additional $100 million in primary and $30 million in secondary Series D funding. The total funding raised by the company amounts to $205 million, supporting its growth and innovation in the competitive field of mobile app development. 9. A121 Labs AI21 Labs, based in Tel Aviv, is a company at the forefront of Natural Language Processing (NLP) technology. Founded in November 2017, AI21 Labs focuses on developing AI systems capable of understanding and generating natural language, making strides in how machines interact with human language. The company's flagship product, Wordtune, is an AI-based writing assistant that offers context-aware suggestions for paraphrasing and rewrites. Launched in October 2020, Wordtune quickly gained recognition, even being named one of Google's favorite extensions in 2021. Following this success, AI21 Labs launched AI21 Studio and the Jurassic-1 NLP system, enhancing their portfolio with advanced language processing capabilities. In 2023, AI21 Labs introduced Wordtune Spices, a generative AI tool designed to enrich textual content with a variety of expressive and stylistic options. This innovation further positions the company as a leader in AI-driven language enhancement tools. Year founded 2017 Founders Yoav Shoham Ori Goshen Amnon Shashua Funding AI21 Labs' journey in fundraising reflects its growth and the market's confidence in its NLP technology. The company's initial seed funding round in January 2019 raised $9.5 million. This was followed by a series of successful funding rounds: $20 million from Walden Catalyst and a $25 million series A round led by Pitango in November 2021. In July 2022, AI21 Labs secured $64 million in a series B funding round, with contributions from Ahren and other notable investors. The company's most recent financial milestone is the closing of a $155 million Series C financing round in August 2023, which included investments from prominent tech giants like Google and Nvidia, as well as previous participants. This significant investment underscores the industry's belief in AI21 Labs' potential to revolutionize the field of natural language processing. 10. Tabnine Tabnine has focused on developing a platform that enhances the software development lifecycle with generative AI. Its flagship product, Tabnine Chat, serves as an AI code assistant, offering functionalities similar to ChatGPT but specifically tailored for coding. This tool allows developers to write code more efficiently and access information about their codebases more easily. Tabnine sets itself apart from competitors like GitHub Copilot and Amazon CodeWhisperer by offering more control and personalization, with options for on-premises deployment or via a virtual private cloud. Another advantage Tabnine claims is reduced legal risk, as it uses AI models trained on code with permissive licenses or on customers' in-house codebases. The success of Tabnine is evident in its user base — over a million users and 10,000 customers — and its planned growth. The funds from this Series B round will be invested in expanding Tabnine's generative coding capabilities and building out its sales and global support teams. The company expects to grow its team to 150 employees by the end of the year, a significant increase from its current size of around 60. This expansion indicates Tabnine's commitment to advancing its technology and strengthening its market position in the AI coding sector. Year founded 2013 Founders Dror Weiss Eran Yahav Funding Tabnine has recently secured a significant financial milestone. In a recent Series B funding round, Tabnine raised $25 million, led by Telstra Ventures with contributions from Atlassian Ventures, Elaia, Headline, Hetz Ventures, Khosla Ventures, and TPY Capital. This investment round brings Tabnine's total funding to $55 million. 11. Rephase.ai Rephrase.ai is at the forefront of video creation technology, offering a unique AI-powered visual dubbing tool. This innovative platform is designed to transform any text into a video of a person realistically speaking that text. Utilizing advanced generative AI tools, Rephrase.ai is adept at learning and mimicking facial features corresponding to spoken audio. It can then generate photorealistic faces that sync perfectly with any new text or audio input. The versatility of Rephrase.ai's technology makes it an invaluable asset across various sectors. It enables clients to create engaging training videos, personalize sales videos, bring characters to life in AR/VR environments, and give a human-like appearance to digital assistants. This technology opens up new possibilities in video production, allowing for more personalized, dynamic, and cost-effective content creation. Year founded 2019 Founders Ashray Malhotra Shivam Mangla Nisheeth Lahoti Funding As of the latest funding round on September 15, 2022, Rephrase.ai successfully raised $10.6 million in a Series A round. To date, Rephrase.ai has accumulated a total of $13.9 million over the course of four funding rounds from investors including Red Ventures, Silver Lake, AV8 Ventures, Lightspeed India, and Techstars. This funding trajectory highlights the company's consistent growth and the increasing interest from venture capitalists and investors in their cutting-edge video creation technology. 12. Midjourney Midjourney, a San Francisco–based independent research lab, has developed a notable generative artificial intelligence program and service that specializes in generating images from natural language descriptions. Comparable to OpenAI's DALL-E and Stability AI's Stable Diffusion, Midjourney entered open beta in July 2022 and has quickly gained traction for its innovative capabilities. Led by David Holz, co-founder of Leap Motion, Midjourney enables users to create artwork through Discord bot commands. The platform is particularly popular among artists for rapid prototyping and concept visualization, offering a new dimension to creative expression. It's also found applications in the advertising industry and architecture, where it assists in creating custom ads, special effects, and mood boards. Midjourney continually improves its technology, releasing updated algorithm versions that enhance image quality and artistic stylization. The platform's unique approach allows for a more 'opinionated' artistic expression, making it a valuable tool for professionals seeking to rapidly prototype and visualize concepts. Year founded 2022 Founders David Holz Funding As of August 2022, Midjourney was reported to be profitable, a significant achievement for a startup in the generative AI space. The company's funding details have not been explicitly mentioned, but its profitability indicates a strong financial foundation with no financial backing so far. 13. Gridspace Gridspace is reshaping how businesses understand and manage customer communications. The company specializes in AI-driven solutions that analyze voice conversations in real-time. Gridspace's technology is adept at processing and interpreting large volumes of speech data, turning them into actionable insights. This capability is invaluable for customer service and support, where understanding customer needs and responding effectively is crucial. The platform excels in areas such as speech recognition, natural language processing, and conversation analytics. By using Gridspace, businesses can improve customer experience, enhance compliance monitoring, and gain deeper insights into customer interactions. This makes it a potent tool for companies looking to leverage AI to improve communication strategies and customer engagement. Year founded 2012 Founders Anthony Scodary Evan Macmillan Nico Benitez Funding Gridspace has raised $20.2M over three rounds. Looking to raise money for your startup? Try Visible today The substantial investments and rapid growth seen across these startups are a testament to the potential and promise of AI in transforming various industries. As these companies continue to evolve and push the boundaries of what's possible, they underscore the transformative power of AI in driving progress and innovation. No matter the series, size, or timing of your round, Visible is here to help. With Visible, you can manage every stage of your fundraising pipeline: Find investors at the top of your funnel with our free investor database, Visible Connect Track your conversations and move them through your funnel with our Fundraising CRM Share your pitch deck and monthly updates with potential investors Organize and share your most vital fundraising documents with data rooms Resources: How To Find Private Investors For Startups The Ultimate Guide to Startup Funding Stages 10 VC Firms Investing in Web3 Companies Manage your fundraise from start to finish with Visible. Give it a free try for 14 days here.

How to Start a Successful Tech Company Starting a Successful tech company can be an exciting journey filled with new learnings, discovery, and, of course, a few challenges along the way. In this article, we’ll explore some foundational elements that drive success and resilience within the tech industry. We will cover why a user-focused approach, starting small, prioritizing growth over immediate profit, and leading with innovation are critical steps in building a tech empire. As well, we’ll walk you through 11 pivotal steps, including assembling a dedicated team, creating a robust business plan, and establishing clear KPIs that will help in navigating the complex yet exciting landscape of the tech world. So, whether you are a rising entrepreneur or an established professional looking to make your mark in the tech industry, you’ll gain valuable insights and actionable strategies to ensure your tech venture not only survives but thrives in today’s competitive market. What Makes a Tech Company Successful? To build a thriving tech company, understanding the key components that drive success is crucial. These elements are the foundation upon which resilient and innovative tech companies are built. Successful Tech Companies Focus on the Users User-centric companies are more likely to succeed. By understanding and addressing the needs and preferences of the users, companies can build products and services that resonate with the target audience, fostering loyalty and encouraging word-of-mouth referrals. A relentless focus on delivering value to users can be the differentiator in a competitive market. This approach mandates companies to meticulously understand and address the needs, preferences, pain points, and expectations of their users, leading to the development of products and services that are highly resonant with their target audience. Here’s how a user-centric focus becomes a catalyst for success: Enhanced Customer Satisfaction: By creating solutions tailored to users’ needs and solving their problems, tech companies ensure high customer satisfaction, which can translate to loyalty, positive word-of-mouth, and repeat business. Product Relevance: Understanding users’ needs helps in developing products and features that are relevant and valuable to them. Iterative Improvement: A focus on users encourages companies to continually seek feedback and make iterative improvements to their products or services, ensuring that they evolve based on users’ changing needs and preferences. Competitive Differentiation: Companies that prioritize users can differentiate themselves in a saturated market, offering unique value propositions and user experiences that competitors might not offer. Market Expansion: Delighted users become advocates for the company, leading to organic growth and expansion through referrals and recommendations, allowing companies to penetrate new markets and customer segments with lower acquisition costs. Revenue Growth: Addressing the genuine needs and wants of users generally translates to higher adoption and usage rates, directly impacting a company’s bottom line and paving the way for sustainable revenue growth. Brand Equity: Providing value and consistent positive experiences will enhance brand image and reputation, which are invaluable assets for tech companies in establishing industry authority and attracting partnerships and investments. Informed Decision-Making: User feedback and insights lead to more informed business decisions, helping in aligning business strategies, resource allocation, and development efforts with user needs and market demands. Innovation Drivers: The constant quest to meet and exceed user expectations pushes companies to innovate continuously, exploring new technologies, methodologies, and solutions that can deliver enhanced value to users. Risk Mitigation: Understanding user preferences and expectations helps in identifying potential issues and addressing them proactively, reducing the risk of product failure and negative customer experiences. Most Successful Tech Companies Start Small Starting small allows companies to be agile, adapting quickly to market needs and changes. It also facilitates a deeper understanding of the target market, enabling more personalized and effective solutions. Small beginnings often lead to refined, scalable models that are more attuned to the market’s pulse. Related resource: The Do’s and Don’ts of Rapid Scaling for Startups Successful Tech Companies Lead and Don’t Follow Innovation is the heartbeat of successful tech companies. Leading tech companies distinguish themselves by breaking conventions and setting trends, shaping industries and consumer behaviors. Their commitment to innovation, willingness to embrace risk, and focus on proactive problem-solving allows them to chart new territories and redefine possibilities. By fostering a culture of innovation, establishing thought leadership, and driving industry evolution, these companies not only achieve unparalleled success but also contribute to the broader advancement of technology and society. Foster a Culture of Innovation: Leading tech companies nurture an environment that encourages creative thinking, exploration, and experimentation. This culture of innovation is pivotal in developing groundbreaking solutions and staying ahead of the curve. Employees are motivated to think outside the box, challenge the status quo, and seek transformative solutions, thereby contributing to the company’s visionary endeavors. Embrace Risk and Learn from Failures: The journey of innovation is fraught with uncertainties and risks. Successful tech companies are not afraid to take calculated risks and venture into the unknown. They view failures as learning opportunities, refining their approaches, and gaining insights that fuel further innovation. This resilience and learning mindset are crucial for navigating the volatile tech landscape and discovering untapped potential. Proactive Problem Solving: By proactively identifying and addressing problems, innovative tech companies create value and fulfill unmet needs. They employ foresight, research, and intuition to anticipate challenges and develop solutions that not only resolve issues but also enhance user experiences and quality of life. Establish Thought Leadership: Successful tech companies establish themselves as authorities in their respective fields by sharing knowledge, insights, and expertise. They engage with communities, participate in dialogues, and contribute to the industry’s intellectual capital. This thought leadership enhances their credibility, influence, and impact, paving the way for shaping industry trends and consumer behaviors. Drive Industry Evolution: Leading tech companies play a pivotal role in steering the direction of industry evolution. They introduce disruptive technologies, redefine business models, and influence industry standards and practices. By pushing boundaries and challenging conventions, they drive progress and transformation across sectors, fostering a more dynamic and inclusive tech ecosystem. Customer-Centric Innovation: Leading tech companies prioritize their customers in the innovation process. They actively engage with users to understand their needs, preferences, and challenges. By aligning innovation with customer insights, they ensure that their solutions are user-centric, relevant, and value-driven. 11 Steps for Building a Successful Tech Company Incorporating these critical success factors, the following steps provide a roadmap to launch a successful tech company. 1) Start With a Unique and Strong Idea An innovative idea is the cornerstone of a successful tech company. It should address a genuine need or problem, offering a unique solution that stands out in the market. Validate your idea through research and feedback to ensure it has potential. 2) Build an Efficient Team Starting With Technical Experts Assemble a dedicated team of skilled individuals who share your vision. Technical experts are crucial for developing a robust product, while diverse talents in marketing, sales, and operations contribute to a well-rounded business strategy. Related resource: How to Build A Startup Culture That Everybody Wants 3) Create a Business Plan A comprehensive business plan outlines the company’s vision, mission, target market, competitive landscape, financial projections, and operational plan. It serves as a blueprint for your tech startup, guiding you through each stage of development. What Should Be Included In the Business Plan Executive Summary Company Description Market Analysis Organization and Management Structure Service or Product Line Marketing and Sales Strategy Funding Requirements Financial Projections Related Resource: The Business Model Canvas “The Business Model Canvas is a strategic management and entrepreneurial tool. It allows you to describe, design, challenge, invent, and pivot your business model. This method from the bestselling management book Business Model Generation is applied in leading organizations and start-ups worldwide.” 4) Choose a Name for Your Startup Selecting a suitable name is crucial as it represents your brand and leaves a lasting impression on your audience. It should be memorable, easy to spell, and reflective of your company’s essence. How to Choose a Name for Your Tech Startup Brainstorm a list of potential names that align with your company’s vision and values. Use online tools to check availability and consider the relevance, pronounceability, and uniqueness of the name before making a final decision. Related resources & tools: Shopify’s Business Name Generator & Guide Namelix name generator The 8 Best Startup Naming Tools 5) Choose a Business Structure The right business structure impacts liability, taxation, and regulation compliance. Consider your business needs, goals, and the level of control you wish to maintain when deciding on the structure. Should You Form an LLC? An LLC (Limited Liability Company) combines the liability protection of a corporation with the tax benefits of a partnership. It’s suitable for those seeking flexibility and protection from personal liability. Should You Form a Sole Proprietorship? A sole proprietorship is the simplest structure, ideal for single-owner businesses. However, the owner is personally responsible for all debts and liabilities. Should You Form a Corporation? A corporation is a separate legal entity that offers the most protection against personal liability but involves more regulations and tax requirements. 6) Conduct Extensive Market Research Thorough market research informs product development, marketing strategies, and business decisions. It provides insights into market trends, competition, and customer preferences, enabling you to tailor your offerings and identify opportunities. Related resources: Hubspot: 20 Tools & Resources for Conducting Market Research Neil Patel:19 Market Research Tools To Uncover Actionable Insights 7) Build a Go-to-Market Strategy Building a meticulously crafted go-to-market strategy is paramount for tech startups aspiring to carve a niche in the competitive landscape. It serves as a strategic roadmap, guiding startups to position their innovations effectively, communicate compelling values, and reach the right audience with precision. A well-executed GTM strategy paves the way for sustained growth, market penetration, and lasting success in the dynamic tech ecosystem. Define Clear Objectives: Establish specific, measurable, achievable, realistic, and time-bound (SMART) objectives for your GTM strategy. These objectives could range from acquiring new customers, expanding market share, to increasing brand awareness. Clear objectives serve as a guiding light, providing direction and focus for all GTM activities. Identify Your Target Audience: Deeply understand who your ideal customers are. Consider demographics, psychographics, behavior, and needs. The more nuanced your understanding, the better you can tailor your approach, messaging, and solutions to meet their specific needs and expectations. Understand the Competitive Landscape: Analyze your competitors, their offerings, strengths, weaknesses, market position, and strategies. Understanding the competitive landscape enables you to identify your unique value proposition and differentiate your solutions effectively. Develop Value Proposition: Articulate the unique benefits and values your product offers to the customers. A compelling value proposition addresses customer pain points, provides solutions, and clearly communicates the unique advantages of choosing your product over others. Price It Right: Your pricing strategy should reflect the value you’re providing, the market demand, and what the market can bear. It’s crucial to consider various pricing models, evaluate competitors’ pricing, and understand your cost structure to set a price that’s attractive to customers yet profitable for you. Create Persuasive Messaging: Develop powerful, concise, and clear messaging that resonates with your target audience. Your messaging should address the needs and aspirations of your audience, highlighting how your product is the solution they’ve been looking for. Select Appropriate Channels: Determine the most effective channels to reach your target audience, whether they are online or offline. These could include social media platforms, email marketing, content marketing, trade shows, or direct sales. The choice of channels should align with where your audience spends their time and how they consume information. Design a Comprehensive Marketing Mix: Leverage a mix of promotional strategies, including advertising, public relations, content marketing, SEO, and social media marketing, to create awareness and generate interest in your product. A balanced and well-executed marketing mix optimizes reach and impact. Optimize Sales and Distribution: Define your sales approach, whether it’s direct sales, inbound marketing, channel sales, or a combination, and establish effective distribution channels to ensure your product is accessible to your customers. Align your sales and distribution strategies with customer preferences and behaviors. Implement, Monitor, and Adjust: Once your GTM strategy is in place, implement it meticulously, monitor its performance against the set objectives, and gather feedback. Use data-driven insights to adjust and optimize your strategy, ensuring it remains aligned with market dynamics and continues to drive desired outcomes. 8) Figure Out How to Scale Successful Efforts Scaling is not merely about growing bigger; it’s about growing smarter. By refining and fortifying successful strategies, optimizing resource allocation, and embracing innovation and flexibility, tech companies can scale their efforts efficiently, creating a ripple effect of sustained growth and market leadership. The intersection of diligent evaluation, strategic adaptation, and relentless pursuit of excellence is where tech companies find the momentum to rise above and reshape the technological frontier. Develop Scalable Systems and Processes: Building scalable systems and processes is crucial. Invest in technology and automation to streamline operations, reduce manual workload, and enhance efficiency. Establishing systems that can handle increased load and complexity ensures consistent service delivery as the company grows. Regular Analysis and Evaluation: Continuously assess your business strategies, marketing campaigns, and operational processes. Use analytics and performance metrics to determine what’s working and what’s not. Regular evaluations pinpoint successful efforts that can be amplified and optimized for better results. Resource Allocation and Management: Effective scaling requires meticulous resource management. Allocate your resources—time, personnel, and capital—where they yield the most impact. Prioritizing high-return activities and reallocating resources from less productive areas are essential for sustained growth. Diversify Product or Service Offerings: Identify new markets or segments where your products or services can have a significant impact. Diversification reduces dependency on a single revenue stream and opens up new opportunities for growth. Customer Retention and Expansion: Focus on retaining existing customers while acquiring new ones. Develop strategies to upsell and cross-sell to your current customer base. Satisfied customers often become advocates, facilitating organic growth through word-of-mouth referrals. Talent Acquisition and Development: Hiring and nurturing the right talent are vital for scaling. Bring in individuals with the skills, experience, and mindset that align with your company’s culture and growth objectives. Investing in employee development enhances capabilities and fosters a culture of continuous learning and innovation. Foster Partnerships and Collaborations: Build strategic alliances and partnerships with other organizations. Collaborations can provide access to new markets, technologies, and resources, enabling mutual growth and expanding your company’s reach and influence. Related resource: The 16 Best Startup Newsletters 9) Create a Fundraising Plan Fundraising is vital for fueling growth. Explore various options, considering the suitability, terms, and implications of each. Related resource: The Understandable Guide to Startup Funding Stages Should You Pitch an Angel Investor? Angel investors are affluent individuals who provide capital for startups in exchange for ownership equity or convertible debt. Angel investors, often heralded as the saviors of early-stage startups, inject not only much-needed capital but also bring valuable insights, expertise, and networks to the table, propelling nascent ideas into actionable, scalable ventures. They are suitable for startups that may be too risky for venture capitalists and too small for traditional lenders. Typically, angel investors are individuals with a keen sense of market dynamics and a willingness to take risks. They tend to invest in companies in their early stages when the venture is shaping its core idea, refining its product or service, and establishing market fit. The investments from angel investors are generally more flexible and personal, allowing room for negotiation and alignment with the startup’s unique needs and goals. Should You Pitch a Venture Capitalist? Venture capitalists manage pooled funds from many investors to invest in high-potential startups, fueling innovative startups with the substantial financial injections they often need to scale and expand. They are most suitable for companies that have moved past the ideation and product development stages and have proven business models showcasing significant growth potential and a path to profitability. Venture capitalists typically focus on high-growth markets and industries, seeking companies that can deliver exceptional returns on investment. Their involvement usually goes beyond mere financial investment; they also bring a wealth of experience, industry connections, and mentorship to help startups navigate the complexities of market expansion, talent acquisition, and corporate governance. The collaborative approach of VCs can help in refining business strategies, identifying new market opportunities, and establishing partnerships that can be pivotal for sustained growth and success. Is Bootstrapping Right for Your Company? Bootstrapping involves building your business using your resources, allowing you to retain control but requiring cautious financial management. While bootstrapping requires meticulous financial management and may present a slower growth trajectory initially, it can yield a robust, customer-centric business model marked by sustainable growth and resilience. For founders who value autonomy and are willing to navigate the initial challenges, bootstrapping can be a rewarding journey. 10) Market Your Company In today’s increasingly digital landscape, the significance of a multifaceted and dynamic marketing strategy cannot be overstated. Effective marketing goes beyond mere visibility—it is about creating meaningful engagements, building relationships, and fostering trust with your audience. It necessitates a holistic approach that combines various elements harmoniously, tailored to resonate with your target demographic. Developing a comprehensive marketing plan involves a meticulous understanding of your audience’s needs, preferences, and behaviors. It requires identifying the most effective channels and platforms to reach them, leveraging the potency of social media, email marketing, influencer collaborations, and online advertising to create impactful touchpoints. The integration of content marketing, enriched with value-driven articles, blogs, and multimedia content, can bolster your brand’s authority and drive organic traffic, aiding in building a strong brand presence. Search Engine Optimization (SEO) remains a crucial component of any marketing strategy. Optimizing your digital content for search engines can significantly enhance your visibility, driving sustained organic traffic to your platform. By focusing on relevant keywords, meta tags, and backlink strategies, you can improve your ranking on search engine result pages, increasing the likelihood of attracting potential customers. Partnerships, both strategic and collaborative, can be an invaluable asset in expanding your reach. By aligning with other brands, influencers, or platforms sharing a synergistic vision, you can tap into new audience segments, enhance brand credibility, and drive mutual growth. Joint ventures, affiliate marketing, and co-branding initiatives can create win-win scenarios, propelling brand awareness and user acquisition. Performance analytics and data-driven insights should guide your marketing endeavors, enabling a deeper understanding of your audience’s interactions and preferences. Regularly analyzing the effectiveness of your campaigns, engagement rates, and conversion metrics allows for continuous refinement of your strategies, ensuring that your marketing efforts remain aligned with your business objectives and are responsive to evolving market dynamics. User-generated content and customer testimonials can be leveraged to enhance authenticity and build trust. Encouraging your user base to share their experiences, reviews, and content can create a community around your brand, strengthening customer relationships and augmenting your brand’s image. Incorporating a blend of inbound and outbound marketing strategies can optimize reach and engagement. While inbound strategies focus on attracting customers through value-driven content, outbound strategies like targeted ads and email campaigns can proactively reach potential customers, enhancing brand recall and conversions. 11) Decide Which Metrics To Monitor Success Deciding which metrics to monitor is integral for steering the company in the right direction and making informed decisions. Established Key Performance Indicators (KPIs) act as a compass, indicating whether the business is on the path to achieving its goals. Besides the listed metrics, several other nuanced and contextual KPIs might be critical depending on the unique nature and needs of your business. KPIs That Measure Success Monthly Active Users (MAUs) Customer Acquisition Cost (CAC) Lifetime Value (LTV) Conversion Rate Retention Rate Revenue Growth Rate Each KPI serves a specific purpose. For instance, Monthly Active Users (MAUs) gauge the level of user engagement and the overall health of the product, while Customer Acquisition Cost (CAC) helps in assessing the efficiency and effectiveness of your marketing strategies. Monitoring Lifetime Value (LTV) aids in understanding the long-term value of a customer relative to the acquisition cost, guiding resource allocation, and retention strategies. The Conversion Rate is pivotal as it quantifies the percentage of users who take a desired action, offering insights into the effectiveness of your user interface and call-to-actions. The Retention Rate evaluates the ability of your company to retain customers over a specific period, highlighting the sustainability and appeal of your product or service. The Revenue Growth Rate is fundamental for assessing the financial trajectory of the company, allowing you to measure the pace at which your revenue is increasing, which is essential for evaluating the scalability and long-term viability of the business model. In addition, focusing on user satisfaction metrics, Net Promoter Score (NPS), and churn rate can also provide valuable insights. User satisfaction metrics reveal the overall contentment levels of your customers, allowing for enhanced user experience and product improvement. The NPS measures the willingness of customers to recommend your product or service, serving as a reliable indicator of customer perceptions and loyalty. A lower churn rate indicates higher customer satisfaction and better product-market fit. Get Fundraising Assistance for Your Tech Startup With Visible Just as a sales and marketing team has dedicated tools, shouldn’t a founder that is managing their investors and fundraising efforts? Use Visible to manage every part of your fundraising funnel with investor updates, fundraising pipelines, pitch deck sharing, and data rooms. Let Visible help guide you in your Fundraising journey! Raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days. Related resource: Top 18 Revolutionary EdTech Startups Redefining Education

Raise capital, update investors, and engage your team from a single platform. Try Visible free for 14 days. The digital age has ushered in the rise of marketplace startups, changing the way we buy, sell, and interact. A marketplace now can take many forms but always connects buyers and sellers, facilitating transactions. These platforms can be vertical (specific to one industry), horizontal (across multiple industries), global, or localized. From Airbnb and Uber to niche platforms that cater to specific audiences, marketplaces have transformed industries. However, beyond creating a functioning platform, it’s essential for founders to build startups that resonate with investors. The Current Marketplace Investment Landscape According to the a16z Marketplace 100: 2023 report, the marketplace economy is growing rapidly, with the top 100 marketplaces generating over $2 trillion in GMV in 2022. Key Takeaways for Marketplace Founders Focus on solving a real problem. The best marketplaces address a real need that people have. They don’t just create a new way to do something that already exists. Build a strong network. The success of a marketplace depends on having a large and active network of buyers and sellers. Make sure you have a plan to attract and retain users. Be data-driven. Use data to make decisions about your business, such as which features to develop, how to price your products or services, and how to target your marketing campaigns. Trends Marketplace Founders Should Be Aware Of The growth of embedded finance, where financial services are embedded into non-financial products and services. This trend is creating new opportunities for marketplaces to offer lending, payments, and other financial services to their users. The increasing importance of data and analytics for marketplace businesses. Marketplaces generate a lot of data, which can be used to improve the user experience, optimize operations, and make better decisions. The rise of sustainability-focused marketplaces. Consumers are increasingly looking for sustainable options, and this trend is creating new opportunities for marketplaces to offer products and services that are better for the environment. The continued growth of cross-border marketplaces. The global marketplace is growing rapidly, and this trend is creating new opportunities for marketplaces to connect buyers and sellers from different countries. What Do Marketplace VCs Look for in Their Investments Traction & Momentum While this involves numbers, VCs also look at the qualitative aspects, like the pace of growth or the startup’s momentum in acquiring users or partnerships. Cultural and Social Impact Especially relevant for modern VCs, does the marketplace have a positive impact on society or the environment? Is there an alignment with broader societal values, like sustainability or inclusivity? Exit Potential VCs want to know the potential exit strategies, whether it’s an acquisition, merger, or going public. Strategic Partnerships & Alliances Does the startup have key partnerships that can accelerate growth or provide a competitive advantage? Feedback from Users Testimonials, case studies, or direct feedback that showcase the value and satisfaction of users. Market Trends & External Factors VCs assess external trends, economic factors, or global events that might impact the marketplace. Additional Resources: Kickstarting a Marketplace with Trey Closson, CEO of Amplio 25 Marketplace Metrics to Track By tracking these metrics, founders can gain insights into their marketplace’s health, growth potential, and areas of improvement. It’s crucial not just to monitor these numbers but also to understand their implications and how they interrelate. Adjustments and strategic decisions can then be based on data-driven insights. Positive unit economics are attractive to investors so make sure to highlight this in your updates. For instance, founders should understand the relationship between Customer Acquisition Cost (CAC) and the Lifetime Value (LTV) of customers. Related CAC Resources: Customer Acquisition Cost: A Critical Metrics for Founders Video: Formula Builder (Customer Acquisition Cost) Here are 25 metrics marketplace founders should be tracking: Gross Merchandise Value (GMV): Represents the total value of transactions on the platform. It gives a broad view of the marketplace’s activity. Net Revenue: This is the revenue the marketplace retains after direct costs (like refunds). For most marketplaces, this would be the fees they charge for facilitating a transaction. Monthly Active Users (MAU): Measures the number of unique users who have interacted with the marketplace within a given month. Customer Acquisition Cost (CAC): The average expense of acquiring a new customer, including marketing and sales expenses. Lifetime Value (LTV): An estimate of the total revenue a business can reasonably expect from a single customer account. LTV: CAC Ratio: A metric that compares the value of a customer over their lifetime to the cost of acquiring them. A ratio above 1 indicates a profitable customer acquisition. Take Rate: The percentage of GMV that the marketplace retains as revenue. Liquidity: A measure of how easy it is for users to make transactions on the platform. User Growth Rate: The speed at which new users are joining the platform. Churn Rate: The percentage of users (buyers or sellers) who stop using the platform over a specific period. Repeat Transaction Rate: The percentage of users who make more than one purchase or sale on the platform. Average Transaction Value (ATV): The average value of a transaction on your marketplace. Buyer-to-Seller Ratio: Represents the balance between the supply (sellers) and demand (buyers) sides of the marketplace. Time to First Transaction: The average time it takes for a new user to complete their first transaction after signing up. Conversion Rate: The percentage of users who take a desired action, like signing up after visiting the platform or making a purchase after browsing listings. Customer Satisfaction (CSAT): A measure of how satisfied users are with the marketplace. Net Promoter Score (NPS): Gauges user loyalty by asking how likely they are to recommend the marketplace to others. Average Resolution Time: Measures the time taken to resolve disputes or complaints on the platform. Supply/Demand Fill Rate: The percentage of demand/supply that gets successfully matched on the marketplace. Inventory Turnover Rate: Especially for product-based marketplaces, this metric measures how often inventory is sold and replaced over a specific period. Operational Efficiency Metrics: These can include the average time to onboard a new seller, average response time for customer queries, and so on. Engagement Metrics: Metrics like session duration, page views per visit, and actions per visit can provide insights into how users are interacting with the platform. Retention Rate: The percentage of users who continue to use the marketplace over time. Referral Rate: Measures how many new users are acquired through existing user referrals. Cost of Goods Sold (COGS): For product-based marketplaces, COGS represents the direct costs involved in producing the goods that were sold. How Founders Can Model Their Marketplace Startup for Success Modeling a marketplace startup for success involves a strategic approach to planning, execution, and scaling. Here are steps and considerations founders can undertake to increase the likelihood of their marketplace’s success: Clear Value Proposition Understand the core problem your marketplace solves. Ensure that your solution offers clear value to both sides (buyers and sellers) of the marketplace. Product-Market Fit: Conduct thorough market research to ensure there’s demand for your platform. Launch a minimum viable product (MVP) to gather feedback and iterate. Focus on Building Trust: Create a secure and transparent environment for transactions. Implement a robust review and rating system. Consider offering guarantees or refund policies for additional assurance. Achieve Liquidity: Ensure there’s a balance between supply (sellers) and demand (buyers). Consider strategies to stimulate one side if it’s lagging. Leverage Network Effects: Design the platform so that the more people use it, the more valuable and attractive it becomes to new users. Invest in Technology: Ensure your platform is scalable, secure, and user-friendly. Leverage AI and data analytics for personalized user experiences and to derive actionable insights. Adopt a Data-Driven Approach: Continuously monitor key metrics to understand user behavior, traction, and areas of improvement. Test and iterate features based on feedback and data. Effective Monetization Strategy: Determine the best revenue model: commission, subscription, freemium, advertising, or a combination. Ensure pricing is competitive and offers value to users. Community Building: Foster a sense of community among users through forums, events, or social media. Engage with your user base and encourage them to be brand advocates. Strong Marketing and Branding: Invest in building a recognizable and trustworthy brand. Employ a mix of content marketing, social media, partnerships, and paid advertising. Resources Finding the Balance While Building a Marketplace with the Founders of ChefPrep 13 Metrics for Marketplace Companies a16’s Required Reading for Marketplace Entrepreneurs All of a16’s Featured Marketplace Content VCs Investing in Marketplace Startups 1. VentureFriends About: VC fund based in Athens but investing across Europe, LatAm & the Middle East. We focus on FinTech, PropTech, B2C, Marketplaces & B2B SaaS. We are entrepreneurial investors, with strong experience, network and track record. We have been entrepreneurs, founders, worked at startups or angel investors in early stages and have a founder first & value driven approach. Stage: Pre-Seed, Seed, Series A Check size: $ 500K – $ 2.50M Check out their Connect Investor profile here. 2. Starting Line About: Starting Line invests in founders who are willing to take on substantial personal risks, out of fear of living a life of regret. That fear of wondering what life might have looked like if you’d just gone for it. Stage: Pre-Seed, Seed Check size: Around $ 1M Check out their Connect Investor profile here. 3. Version One Ventures About: Version One Ventures is an early-stage fund investing in outstanding consumer internet, SaaS, and mobile entrepreneurs. Thesis: Backing the next generation of mission-driven technology founders. Stage: Seed, Series A, Series B Check size: $ 500K – $ 750K Check out their Connect Investor profile here. 4. Benchmark VC About: Benchmark Capital is focused on one, and only one, mission: to help talented entrepreneurs build great technology companies. That’s what drives them and everything they do – from how they organize their firm to their investment strategy. Their investments range in size from as little as $100,000 to as much as $10 or $15 million. Typically, they invest $3 to $5 million initially and expect to invest $5 to $15 million over the life of a company. Stage: Seed, Series A, Series B, Growth Check size: $ 5M – $ 25M Check out their Connect Investor profile here. 5. Frog Capital About: Frog is a specialist European software scale-up investor. Our strategy is based on selecting the best scale-up phase investments and empowering technology CEOs to grow fast, by deploying our capital, our network and our support. At Frog we focus on ensuring long term commercial success for each and every business we invest in. A frog investment: – Headquartered in Europe – High-growth software businesses – Making a positive social impact – Generating over €3m ARR – Transactions of up to €20m Stage: Growth Check size: $ 5M – $ 30M Check out their Connect Investor profile here. 6. Global Founder Capital About: Global Founders Capital is a globally oriented, stage-agnostic venture capital firm that empowers gifted entrepreneurs worldwide. 01 // Global. We support founders in all geographies. 02 // Stage agnostic. We back companies across all stages and throughout the lifecycle. 03 // Operational. Our platform offers founders all the support they need to scale. Stage: Agnostic Check size: $ 50K – $ 10M Check out their Connect Investor profile here. 7. Market One Capital About: Market One Capital invests with a long term view in European startups across pre-seed and seed stages. European heart. Global mind. Thesis: Seed fund empowering network effects platforms across Europe Stage: Pre-Seed, Seed Check size: $ 2M Check out their Connect Investor profile here. 8. Peak Capital About: SaaS / Platforms / Marketplaces opportunities with multiple co-founders Thesis: Peak Capital is an Amsterdam-based venture capital firm. Stage: Pre-Seed, Seed Recent fund size: $ 71.70M Check out their Connect Investor profile here. 9. Piton Capital About: Founded in 2010, Piton Capital is a venture capital and growth equity firm headquartered in London and investing in businesses with network effects. We make investments ranging from €200k to €20m and since inception have invested in over 50 businesses, primarily in Europe. Piton focuses exclusively on network effects businesses as this provide one of the few moats or forms of defensibility to achieve dominance. Thesis: Investing in companies with network effects. Stage: Series A, Series B, Early Stage Recent fund size: $ 71.70M Check out their Connect Investor profile here. 10. White Star Capital About: White Star Capital is a global multi-stage investment platform built by a team of founders, investors and operators with a track record of entering new markets, expanding teams and exiting companies. Our approach to venture is characterized by a unique combination of international presence, perspective and people. With feet on the ground in New York, London, Montreal, Paris, Tokyo, Hong Kong, and Singapore, we partner closely with our portfolio to help them scale internationally from Series A onwards. Stage: Series A, Series B Check out their Connect Investor profile here. 11. Spark Capital About: Recognized as a 2022 Emerging 50 VC, Spark Growth Ventures is a community oriented, early & mid stage, vertical-agnostic, technology venture capital firm. Our mission is to support gritty and exceptional founders in their missions by bringing forth the combined value of our strong community. We are fortunate to have a global network of entrepreneurs, C-level relationships, subject matter experts, world-class talent, institutional investors, high net worth individuals and family offices, many of who are investors in our platform. Thesis: Spark Capital is an early and growth stage venture capital firm that partners with exceptional founders and the products they design. Stage: Seed, Series A, Series B Check out their Connect Investor profile here. 12. NextGen Venture Partners About: NextGen Venture Partners invests $1-2M in seed stage companies with the participation of 1,000+ Venture Partners. Stage: Pre-Seed, Seed, Series A Check out their Connect Investor profile here. 13. Right Click Capital About: Right Click Capital is a venture capital firm backing ambitious tech startups in Australia, New Zealand, and South East Asia. Thesis: We invest in and champion bold tech. Stage: Pre-Seed, Seed, Series A, Series B Check out their Connect Investor profile here. 14. LDR Ventures About: LDR is a VC firm based in Los Angeles investing In Female & Minority Founders, Consumer Product, Food, E-Comm, Marketplaces & Legal Tech Thesis: Female led and Los Angeles based, we consult to and invest primarily in female entrepreneurs at the Seed & Series A Stages. Stage: Seed, Series A Check out their Connect Investor profile here. 15. Strive VC About: STRIVE invests in early stage (Seed to Series A) internet and mobile companies in Asia. Thesis: We help fulfill each entrepreneur’s amibitions through continuous and proactive hands-on support understanding their true needs. Stage: Seed, Series A Check out their Connect Investor profile here. 16. Upfront Ventures About: We invest primary in the US but have a 20-year history of funding companies in Europe. Our managing partners (Yves Sisteron & Mark Suster) are both dual citizens of France & UK respectively. Kevin Zhang funds games companies and looks in Sweden, Finland, UK and beyond. And locally Julien Etaix is based in Paris and open to talking with anybody on the continent. Thesis: Early investors. Long-term partners. Stage: Seed, Series A, Series B, Growth Check out their Connect Investor profile here. 17. No Brand About: No Brand is a private investment company focussed on opportunities empowered by technology. Our focus is on backing mission driven leaders, who are building for a long term horizon and benefit from online platforms, community or network effects. Stage: Pre-Seed, Seed, Series A, Series B Check out their Connect Investor profile here. 18. Everywhere Ventures About: Global pre-seed fund backed by 500 founders and operators. Thesis: We invest $50-250k into pre-seed companies looking to raise between $500-$2M. We are happy to lead or partner with other investors. We are generalists at heart, but lean into three core areas: money, health, and work. We embrace first-time founders, and founders who may lack traction but have a distinct vision for a world that may not exist…yet. Stage: Pre-Seed Check out their Connect Investor profile here. 19. LAUNCHub Ventures About: LAUNCHub Ventures is a leading early-stage venture capital fund, investing in technology startups in the Seed and Series A funding stages. We invest in Central and Southeastern Europe (SEE & CEE), and in companies built by ambitious founders from that region who are based in the leading startup hubs such as London, San Francisco, and beyond. Our initial investment is between €500K and €2M, with capacity to continue supporting the funding needs of our portfolio companies in future rounds. We are looking for scalable businesses with initial traction and passionate founders, originating from South-Eastern Europe and the broader CEE region. Thesis: When evaluating potential deals, we place a strong emphasis on the team, market, and vision. Specifically, we look for: * an ambitious and talented team proven to execute, founder competitive advantage and path to a clear moat, a big market or one with the potential to grow or emerge. Stage: Series A, Seed, Pre-Seed Check out their Connect Investor profile here. Partner With VCs Investing In The Future of Marketplaces with Visible Venture capital has emerged as a powerful catalyst for progress in the Marketplace space. By bridging the funding gap, providing expertise, and fostering innovation, VCs enable Marketplace startups to thrive and create transformative solutions. Check out Visible’s investor database, Connect, to find VCs investing specifically within the Marketplace space. Also here two more of our list articles, 10+ VCs Investing in E-commerce and Consumer Products 15 Direct to Consumer (D2C) VC Investors You Need to Know Companies should leverage VCs expertise and resources to accelerate their growth, navigate regulatory challenges, and scale their impact. Also get access to Visible for free for 14 days: https://app.visible.vc/create-account

This year’s fundraising environment has been undoubtedly challenging for startups of all stages. Understanding today’s complex fundraising dynamics is critical to distinguish yourself from the competition. Join Visible and two fundraising experts from Antler for a recorded discussion on how to stand out to investors for the rest of this year and beyond. Webinar Overview You can check out a few of the topics we hit on below: Breakdown of current fundraising dynamics Standing out to early-stage investors Standing out with storytelling Standing out with investor communications Antler’s recommended Investor Update Template Watch the Recording Give the recorded webinar a watch below:

The esports realm is more than just a digital battleground; it’s a convergence of passion, innovation, and immense business potential. Esports has seen a huge rise in popularity over the past decade and is continuing its upward trend. The global audience, both in terms of participants and viewers, has grown exponentially, making it one of the fastest-growing sectors in the entertainment industry. According to DemandSage, there are currently 532.1 million e-sports audiences worldwide, and the e-sports market is valued at $1.44 billion as of 2023. This number is set to reach $5.48 billion by the year 2029. The Esports Investment Landscape The investment landscape in esports is dynamic, reflecting the industry’s rapid evolution. Current trends indicate a growing interest from traditional venture capitalists, corporate investors, and even celebrities. As the industry matures, we’re seeing a shift from early-stage investments to more growth-stage funding, indicating confidence in the long-term viability of esports ventures. Valuation Valuing an esports company can be complex. Traditional metrics might not always apply, given the unique nature of the industry. Factors like team performance, audience engagement, and brand partnerships play a significant role. It’s crucial to understand how similar companies in the space are valued and to be prepared to justify your valuation with concrete data and projections. Remember, while you want a valuation that reflects your company’s worth, it’s equally important to negotiate terms that are both favorable and fair to ensure a harmonious investor-founder relationship. What Esports VCs Look for in Esports Investments The weightage of these factors can vary. An investor more interested in the technology side of esports might prioritize infrastructure and assets, while another focused on branding might emphasize partnerships and audience engagement. Team Performance and Potential: Success in tournaments, player talent, and robust coaching infrastructure. Audience Engagement: The size and engagement level of the fan base, including metrics like social media engagement and merchandise sales. Monetization Strategies: Diverse revenue streams, their sustainability, and potential for new opportunities. Brand Partnerships and Sponsorships: Existing relationships with renowned brands and the potential for future collaborations. Market Potential: Industry growth trends, expansion opportunities, and competitive positioning. Management and Leadership: The track record of the management team, their vision, and organizational efficacy. Infrastructure and Assets: Both physical assets, like training facilities, and digital ones, such as streaming rights. Regulatory Environment: Understanding and navigating the regulatory landscape of esports. Scalability: The potential to scale and the infrastructure to support that growth. Unique Value Proposition: What makes your organization stand out? It could be unique content, community strategies, or other differentiators. Exit Strategy: Potential avenues for investors to see a return, be it through acquisition or public listing. Why Esports is Good Business Many VCs recognize that esports is not just a trend but a sustainable industry. With its integration into educational institutions and the establishment of professional leagues, there’s a belief in its long-term viability. Strategic Partnerships: The potential for partnerships between esports entities and established brands, media companies, and even traditional sports franchises offers lucrative opportunities. Diverse Revenue Streams & High Return Potential for VCs: Esports offers multiple avenues for monetization, including advertising, sponsorships, ticket sales, merchandise, media rights, and online streaming platforms. Global Reach: Unlike traditional sports that might be popular in specific regions, esports has a global appeal. Games like “League of Legends” or “Counter-Strike: Global Offensive” have massive followings across continents. Mainstream Acceptance: With esports events being broadcast on major networks and even discussions of esports becoming an Olympic event, there’s a belief that esports is moving from niche to mainstream. Young Demographic: The primary audience for esports comprises millennials and Gen Z, a demographic that’s attractive for advertisers and brands looking to establish long-term loyalty. Technological Integration: The ability to integrate emerging technologies like AR, VR, and AI into the esports ecosystem presents opportunities for innovative startups. Community Engagement: Esports fans are highly engaged, often participating in online forums, fan events, and even contributing to crowdfunded prize pools. Potential for Innovation: From virtual reality to AI-driven analytics, the esports industry is ripe for technological innovations that can enhance player performance and viewer experience. Related Read: The Startup Metrics Potential Investors Want to See Related Resources: All-Encompassing Startup Fundraising Guide 15 Venture Capital Firms Investing in VR FinTech Venture Capital Investors to Know BITKRAFT Ventures Stage: Seed, Series A/B Investment Location: Global Key person: Jens Hilgers, Malte Barth, Scott Rupp, and Moritz Baier-Lentz Gaming investments: Epic Games, Manticore Games, Frost Giant, Anzu, Bit Fry, Carbonated, Koji, Voicemod, etc. Thesis: Built by founders for founders, BITKRAFT is a global early- and mid-stage investment platform for gaming, esports, and interactive media. We focus on Seed, Series A, and Series B investments in game studios, interactive platforms, and immersive technology. Velo Partners Stage: Pre-Seed, Seed, Series A Investment Location: Global Key persons: Connor Williams Gaming investments: Ninjas in Pyjamas, Tripledot, and Moon Active. About: Velo Partner invests in Gaming and Gambling globally across mobile, online, land-based, online, social, B2B and B2C assets. Thesis: Velo typically invests in Series A or early growth stage rounds. Our ideal investment candidates demonstrate strong early traction and a clear understanding of their unit economics and growth trajectory. We also work in association with a gaming accelerator called RNG FOUNDRY for earlier-stage investment opportunities. Once invested, we typically follow our rights for later investment rounds and work with management to define good corporate governance and reporting. We will opportunistically evaluate later-stage investments on an ad-hoc basis. Play Ventures Stage: Pre-Seed, Seed, Series A Investment Location: Global Key persons: Anton Backman, Harris Manninen, Henric Suuronen Gaming investments: Thirdwave, Azra Games, Fractal Thesis: We are a global early-stage gaming fund, founded by two gaming entrepreneurs. We invest globally and early into ambitious mobile & PC free-to-play game studios and games services startups that are looking for more than just money. Makers Fund Stage: Seed, Series A, Series B Investment Location: North America Key persons: Jay Chi, Jiang Li, Lia Zhang, Matthew Ball, Michael Cheung Gaming investments: Theorycraft Games, Smitten, Xterio Thesis: We support innovative, ambitious founders. Our fund helps visionary entrepreneurs create their initial foundation and support them as they navigate the waters of early-stage business. 1Up Ventures Stage: Seed, Series A Investment Location: Pacific Northwest Key persons: Chris Wheaton, Ed Fries Gaming investments: Lost Lake Games, Drop Fake, Lightforge Games Thesis: At 1Up Ventures we are building a diverse and inclusive community of the most talented, experienced, and creative independent game developers in the world. We believe that by working together we can help each other be more successful. Black Sheep Ventures Stage: Pre-Seed, Seed, Series A Investment Location: Global Key person: Nolan Bushnell, Ron Bauer Gaming investments: X2 Games Thesis: Black Sheep Ventures seeks visionary entrepreneurs who are unflinching in creating new realities for entertainment experiences and human interactions, including in eSports, Gaming, Blockchain Technology and Immersive Experiences, and other sectors, where disruptive technology such as Blockchain and visionary creativity can permanently shift the established order. CAA Ventures Stage: Seed, Series A/B Investment Location: United States, Canada Key person: Michael Blank Gaming investments: Streamlabs, Mobcrush, Dapper, & more. Thesis: CAA Ventures provides value beyond capital to company founders. These companies are largely in the consumer Internet sector with an emphasis on mobile platforms, social media, crowdfunding, online video, publishing, games, and eCommerce. Dune Ventures Stage: Pre-Seed, Seed, Series A/B Investment Location: Global with a focus on NYC Key person: David Brillembourg Gaming investments: First Light Games, Oooh TV, Kanga Thesis: Dune Ventures: a new early-stage venture firm investing in gaming, esports, and interactive technology. We invest globally and back founders building content studios, social platforms and infrastructure that will define the next generation of entertainment. GameFounders Stage: Pre-Seed, Seed Investment Location: Global Key person: Kadri Ugand, Paul Bragiel Gaming investments: First Light Games, Oooh TV, Kanga Thesis: GameFounders accelerate teams or companies with two or more persons with launched games/demos/slices from any country in the world. Gamerforce Ventures Stage: Seed, Series A Investment Location: Global Key person: Lance Quek Gaming investments: Resurgence Thesis: Gamerforce Ventures is one of the first venture capital firms that is set up specifically to create high-value companies in the Esports and Gaming scene. Our partners are successful entrepreneurs and high flying executives coming from diverse backgrounds to help our portfolio companies succeed. We typically invest between seed and Series A, but may come in at later stages should the opportunity arises. Konvoy Ventures Stage: Seed, Series A Investment Location: Global Key person: Jason Chapman, Jackson Vaughan, Josh Chapman Gaming investments: Bunch, GameFam, Hiberworld, Lootcakes, & more. Thesis: We invest in the infrastructure technology, tools, and platforms of tomorrow’s video gaming industry. London Venture Partners Stage: Pre-Seed, Seed Investment Location: Europe, North America Key person: David Gardner, David Lau-Kee, Are Mack Growen Gaming investments: Treehouse Games, Knock Knock, Singularity 6, Coda, & more. Thesis: LVP is a venture capital seed fund with a difference – we’re operating experts in the games sector, and we only ever invest in the games ecosystem. That means we bring real experience and deep understanding. We speak the same language, share the same references, understand the same challenges – and we believe in the same vision. Remagine Ventures Stage: Pre-Seed, Seed Investment Location: Europe, Israel Key person: Eze Vidra, Kevin Baxpehler Gaming investments: Hour One, Syte, Minute Media, & more. Thesis: We meet and invest in startups early, help them refine product-market fit and introduce them to our strategic partners in order to kick-off collaborations and accelerate time-to-market. Related Resource: 9 Active Venture Capital Firms in Israel SeventySix Capital Stage: Pre-Seed, Seed, Series A Investment Location: United States Key person: Jon Powell, Wayne Kimmel, Chad Stender Gaming investments: Nerd Street Gamers Thesis: SeventySix Capital invests in passionate, smart and nice entrepreneurs who are launching game-changing startups in sports tech, esports, and sports betting. Griffin Gaming Partners Stage: All stages Investment Location: Global Key persons: Phil Sanderson, Peter Levin, Nick Tuosto Gaming investments: Forte, Discord, Overwolf Thesis: Investing at the intersection of content, software, infrastructure, and gaming-related web3 companies. Connect with esports investors with Visible Finding the right investors for your business is only half the battle. Having a system to track and manage your fundraise to help you get back to what matters most — building your business. Use Visible Connect to browse our investor database of hand-curated investors. Find investors and add them directly to your Fundraising Pipeline in Visible. Give it a try here.

Where Do LPs Get The Capital They Deploy? The National Venture Capital Association states that limited partners (LPs) are typically institutions or high-net-worth individuals, family offices, and sovereign wealth funds that have a substantial amount of liquid capital to invest. Some examples could include pension funds, endowments, foundations, and insurance companies. In many cases, these investors allocate a portion of their capital to alternative asset classes, such as private equity or venture capital, as part of a broader investment strategy. The LPs then pool these funds together and invest them in venture capital firms as limited partners. It carries a higher risk compared to traditional assets such as stocks and bonds but also offers the potential for higher returns. Institutional LPs generally invest between $5 million to $50 million in a fund. The venture capital firm, in turn, uses the capital to invest in early-stage or high-growth companies with the potential for significant returns. If the investments are successful, the venture capital firm will generate returns for its limited partners, who may then reinvest those returns into other funds or asset classes, or distribute them to their own investors or stakeholders. How To Find LPs Finding limited partners (LPs) for a venture capital fund can be a challenging and time-consuming process. Here are some general steps that can help: Develop a target investor profile: Before starting your search for LPs, you need to understand the type of investors who are likely to be interested in your fund. Consider factors such as their investment preferences, geographic location, size of investment, and sector focus. Network: Networking is a crucial part of the fundraising process. Attend industry conferences, join venture capital associations and groups, and seek out opportunities to meet potential LPs in person or online. Leverage existing relationships: Reach out to your existing network of investors, entrepreneurs, and industry contacts to see if they can introduce you to potential LPs. Work with placement agents: Placement agents are firms that specialize in helping venture capital firms raise capital from institutional investors. They can provide access to a broader range of LPs and can help you navigate the fundraising process. Use online databases: As mentioned earlier, there are online databases like PitchBook, Preqin, and NVCA that offer information on LPs investing in venture capital firms. These databases can help you identify potential LPs and get a better understanding of their investment preferences and history. Hire a professional investor relations team: Larger venture capital firms often have dedicated teams focused on investor relations. If you have the resources, hiring a professional investor relations team can help you navigate the fundraising process and build relationships with potential LPs. LPs and VCs typically connect through one of two channels, either directly, due to prior collaboration at another fund or in an adjacent area of finance, or indirectly, via a warm introduction from a trusted source. When VCs set out to establish a new fund, they often seek out an initial, strong LP known as an anchor. The anchor commits to the fund and helps the VC identify other potential investors. Depending on the network of the VC and their anchor, the fund’s investors can include family offices, high net-worth individuals, or even large institutional funds such as a fund of funds, CALPERS, or university endowments. While VCs tend to be selective in choosing who they allow to invest in their fund, the process of selecting an anchor by well-connected or respected individuals is even more deliberate and cautious. Securing the right anchor for a fund is a crucial task for a venture firm to successfully raise their fund and set the stage for subsequent rounds in the future. What Kind of Limited Partner To Target For Your First Fund If you are building your first fund, you should look for LPs who are interested in investing in early-stage venture capital funds and have a history of investing in first-time funds. These LPs are typically high-net-worth individuals or family offices who are willing to take on higher risks for potentially higher returns. Additionally, you may want to consider looking for LPs who have experience in the industry or sector you are targeting with your fund. They can provide valuable insights and connections that can help you identify and evaluate investment opportunities. It’s also important to consider the size of the LPs you are targeting. While institutional investors can provide significant capital, they may also have more stringent investment criteria and require a proven track record. On the other hand, smaller family offices and high-net-worth individuals may be more flexible and willing to take a chance on a first-time fund. Related Resource: Visible’s Guide to Fundraising for Emerging Managers Criteria That LPs Use to Evaluate VC Firms Limited partners (LPs) use various criteria to evaluate new venture capital firms that are raising either their first fund or subsequent ones. Investment thesis: LPs want to see that the VC firm has a clear and well-defined investment thesis that fits their interests and investment strategy. Team: LPs evaluate the experience, track record, and expertise of the VC firm’s founding team. They want to see that the team has relevant experience and a strong network in the industry. Transparency: LPs expect transparency from the VC firm on their investment activities, portfolio performance, and other relevant information. Use our templates for Investors to create transparency by sending your LPs updates! Differentiation: LPs look for a unique and differentiated value proposition of the VC firm that sets it apart from other firms in the market. Network: LPs consider the firm’s network of industry contacts, co-investors, and advisors to gauge their potential deal flow and access to investment opportunities. Deal flow: LPs assess the firm’s ability to source high-quality deals and their process for evaluating potential investments. Due diligence: LPs want to see that the VC firm has a rigorous and disciplined process for conducting due diligence on potential investments. Alignment of interests: LPs look for a firm that aligns its interests with those of the LPs, such as having a significant investment in the fund, a reasonable management fee structure, and a fair carried interest arrangement. Related Resources: VCs can use Visible.vc to send their LPs updates as well! Check out our LP Update templates below. Returns That LPs Expect There are very complex agreements between venture capital LPs and venture firms/GPs, as you might imagine. Based on research from Cambridge Associates, over the past ten years, the highest 25% of venture capital funds have yielded an average annual return between 15% and 27%. In contrast, the S&P 500 has only yielded an average of 9.9% per year over the same period. Generally, top-tier venture LPs are looking for something north of a 3x net return on invested capital. This is for venture funds that usually have a formal 10-year lifespan. Top-tier venture LPs usually would rather have higher returns than faster returns, i.e. they don’t really care about IRR if they can get high overall returns. Related Resource: What is IRR for VCs 3x net return on invested capital doesn’t sound like a lot for a financing industry that helps fund companies like Google and Facebook, but there are surprisingly few venture firms that can generate that level of overall return over time. Related Resource: VC Fund Performance Metrics 101 (and why they matter to LPs) What is Included in Limited Partner Agreements Extensive documentation of the terms of an investment in a venture fund is contained within the Limited Partnership Agreement (LPA). The LPA outlines several critical terms, including: Management Fee: This fee is paid quarterly by Limited Partners (LPs), the investors, to the General Partner (GP), the venture capitalist, to manage the fund. The fee is typically 2% of the committed investment but decreases once the fund has invested in new companies, typically after five or six years. After the investment period, the fee declines annually based on a negotiated formula. Carried Interest: The GP earns a fee, generally 20% of any profits on the fund after the LPs have received back their invested capital up to the point of liquidity event that made the carried interest possible. Once the GP has paid back the LPs all that they have invested up to that point, the GP gets 20% of distributions, and the LPs receive 80%. For a period, the GP may get more to “catch up” and receive their 20% carry. Hurdle Rate: While popular with private equity (PE) funds, a hurdle rate is not typical with venture capital (VC) funds. GP Clawback: If the GP receives more than 20% of the profits at the end of the fund, the GP agrees to pay back the LPs. This may happen if the GP receives their 20% early in the fund’s life based on early successes, but the LPs continue to invest, and the fund performs poorly, with no future distributions to bring the LPs to the point where they have all their invested capital back and 80% of any distributions above the return of capital. Investment Period: This is the period that the GP/VC has to make new investments, usually five to six years. After this period, the GP can only make follow-on investments in existing portfolio companies and cannot invest in new companies. Term: The term of a fund is generally ten years, with potential extensions of up to three years. The extensions may require LP approval or not. In theory, once the fund term is over, the fund should be fully liquidated, although provisions for a longer fund life may be necessary to take care of some lingering investments. Key Man: Many funds identify one or a few key employees (VCs) whose leaving can trigger something – usually the end of the Investment Period. So if the super star VC of the firm leaves or dies, something happens. Likely, the Fund at that point can’t make any new investments unless the LPs vote that they can. There are many variations of this. A typical clause would be if 2 or 3 of 5 named partners leaves then this is triggered also. GP Commitment: The GP has to commit at least 1% of the capital of the fund, with more being better, but 1% is standard. Fee Offset: If the GP takes any fees from portfolio companies, those fees go to reduce the management fee paid by the LPs. In a VC firm, the offset is usually 100%. Investment Limitations: Limitations on investments in public companies, in hostile takeovers, in international companies…Limits on the amount of investment in any one company… Borrowing: Limitations on the Fund’s ability to borrow or guarantee borrowings. Related Resource: What should be included in a Data Room for LPs? Resources NVCA-2023-Yearbook The NVCA Yearbook serves as an important industry resource documenting trends and analysis of venture capital activity from the past year. OpenLP Demystifies the LP perspective, helping GPs stay on top of their game and better understand how venture works. 4Degree Airtable LP List A database with LP names, websites, investment manager names, and other information to help you with your fundraising List of LPs Foundry We invest in startups and venture funds, creating a symbiotic network that propels innovation. Our approach to venture capital is characterized by long-term thinking and a “give first” philosophy. Wellcome Trust Wellcome Trust is a healthcare-focused private foundation with investments in various financial assets, including public or private corporate equity, real estate, and infrastructure, among others. Its investment portfolio is currently valued at $25.7 billion. Point72 Point72 is a global asset manager led by Steven A. Cohen that deploys discretionary long/short equity, systematic, and macro investing strategies, complemented by a growing portfolio of private market investments. Blackstone Blackstone is the world’s largest alternative asset manager, with $975B in AUM. We serve institutional and individual investors by building strong businesses that deliver lasting value. StepStone Group StepStone Group provides investors with customized portfolios that integrate primaries, secondaries, and co-investments. GIC GIC is one of the three investment entities in Singapore that manage the Government’s reserves, alongside the Monetary Authority of Singapore (MAS) and Temasek. Recast Capital Recast Capital is a platform supporting and investing in emerging managers in venture capital. As our name suggests, we are breaking the traditional mold and doing things a bit differently. MacArthur Foundation The MacArthur Foundation supports creative people and effective institutions committed to building a more just, verdant, and peaceful world. Plexo Capital Plexo Capital is an institutional investor focused on investing into: 1/ venture capital funds led by general partners creating the next generation of leading franchises + 2/ private companies led by entrepreneurs building the future. Partners Group Partners Group is a large, independent investment firm that is truly dedicated to private markets. We are fully aligned with our clients and provide bespoke solutions to institutional investors, sovereign wealth funds, family offices and private investors globally. MSD Capital MSD Capital, L.P. was established in 1998 to exclusively manage the assets of Dell Technologies Founder, Chairman, and CEO Michael Dell and his family. MSD Capital engages in a broad range of investment activities with flexibility to invest in a wide variety of asset classes. Emerson Collective Emerson Collective is focused on several key issue areas. Complex issues require complex solutions, so we use a broad range of tools including philanthropy, venture investing, convening, and art to spur measurable, lasting change. Soros Family Office Soros Fund Management LLC (SFM) is the principal asset manager for the Open Society Foundations – one of the world’s largest private philanthropic funders. SFM invests globally in a wide range of strategies and asset classes, including public equities, fixed income, commodities, foreign exchange, alternative assets and private equity. Vintage Investment Partners Vintage is a global venture firm that invests in venture funds and startups via primary and secondary transactions. Korea Venture Investment Corp KVIC invests in VC funds globally, managing the ‘Korea Fund of Funds’ backed by Korean governments. Argonautic Ventures Argonautic Ventures is a Venture Capital and Hedge Fund that focuses on a handful of emerging and mature industries. Mousse Partners Mousse Partners is the investment division of Mousse Investments Limited that manages a proprietary global portfolio of investments. Top Tier Capital Partners Top Tier Capital Partners is a venture capital fund of funds, co-investment, and secondaries manager investing. Next Play Capital Next Play Capital is a venture investment firm that focuses on both funds and direct co-investments. Greenspring GA is a comprehensive platform focused on fund, direct and secondary investments solely within the venture capital asset class. Sapphire Ventures Sapphire is a venture capital firm that partners with visionary teams and venture funds to build companies. Willougghby Capital Willoughby Capital is an investment firm focused on partnering with growth companies across private and public markets. Pritzler Vlock Family Office Pritzker Vlock Family Office (PVFO) manages a diverse and international asset base that includes emerging bio tech and medical device companies, consumer technology products, real estate and more. Created with a vision to back great people with industry changing ideas, PVFO is a family backed organization that operates with a singular goal: to invest in capital efficient opportunities that result in meaningful and lasting impacts. Seven Valleys Seven Valleys is a New York City-based family office. The family office manages a portfolio across investments in commercial real estate, venture capital, private equity and other asset classes. Related resource: Carried Interest in Venture Capital: What It Is and How It Works Keeping Your LPs Up to Date with Visible Over 400+ funds are tracking key metrics from their portfolio companies and keeping their Limited Partners up to date using Visible. Impress your LPs with data-informed, easy-to-build, updates about your portfolio and fund performance. Related resource: Understanding the Role of a Venture Partner in Startups

Solo GPs (the sole general partner of a fund) are a unique and growing breed of venture capitalists. Unlike larger venture capital firms, solo GPs manage their own investment funds independently, without the backing of a larger organization. While solo GPs may have smaller teams and fewer resources, they offer unique strengths and benefits to startups. They are often more nimble, able to make faster investment decisions and move more quickly to support portfolio companies. They may also have more flexibility in terms of investment focus, as they are not beholden to the constraints of a larger firm. However, solo GPs also face challenges such as limited resources and networks compared to larger firms, and they may need to work harder to build credibility with investors and establish their reputation in the industry. Despite some challenges they may face, solo GPs are increasingly playing an important role in the venture capital ecosystem, providing a valuable source of funding and support for startups across various industries and stages of growth. Investment Focus of Solo GPs The investment focus of solo GPs varies widely depending on the individual investor’s background, interests, and expertise. Some solo GPs may specialize in a particular sector, such as healthcare or fintech, while others may focus on a specific stage of the startup lifecycle, such as seed or early-stage investing. Additionally, some solo GPs may have a geographic focus, investing primarily in companies in a certain region or market. For startups seeking funding from solo GPs, it is important to understand the individual investor’s investment focus and determine whether their startup aligns with that focus. This can help increase the likelihood of a successful investment and ensure that the startup receives the support and resources it needs to succeed. Resource: You can filter through our Connect Investor Database based on these focuses Raising Capital from Solo GPs Versus Traditional VC Solo GPs and traditional VCs differ in several ways when it comes to the investment process, including how they source deals, conduct due diligence, make investment decisions, and approach risk and portfolio management. Sourcing deals Traditional VCs often have larger teams and more resources, which allows them to source deals through a wider variety of channels, including conferences, events, and partnerships with accelerators and incubators. Solo GPs, on the other hand, often rely more heavily on their personal networks and referrals from other investors. Due diligence Traditional VCs often have larger teams and more specialized expertise, which allows them to conduct more detailed and comprehensive due diligence on potential investments. Solo GPs, on the other hand, may have to rely more on their own knowledge and experience when conducting due diligence, which can make the process more time-consuming. Investment decisions Traditional VCs often have more rigorous investment decision-making processes, which may involve multiple rounds of pitches, due diligence, and review by investment committees. Solo GPs, on the other hand, may be able to make investment decisions more quickly and independently, given their smaller team and more streamlined decision-making process. Risk management Traditional VCs often have a more diversified portfolio, which can help mitigate risk. They may also have more resources to devote to risk management and monitoring of portfolio companies. Solo GPs, on the other hand, may take a more hands-on approach to risk management, given their closer involvement with their portfolio companies. Portfolio management Traditional VCs often have larger portfolios, which can make it more challenging to provide individualized attention and support to each portfolio company. Solo GPs, on the other hand, often have smaller portfolios, which allows them to provide more personalized attention and support to each investment. Overall, the differences in the investment process between solo GPs and traditional VCs often stem from differences in team size, resources, and investment focus. Traditional VCs may have more specialized expertise and more resources to devote to due diligence and portfolio management, while solo GPs may take a more hands-on approach and rely more heavily on personal connections and networks when sourcing deals. Benefits of Solo GPs Raising capital from a solo GP can be a different experience for a founder compared to raising capital from a larger venture capital firm or other types of investors. Some of the key differences and benefits include: Personal relationship With a solo GP, the founder will likely have a more personal relationship with the investor. This is because the GP is typically the sole decision-maker and has a more hands-on approach to working with their portfolio companies. Easier access It may be easier for founders who are just starting out or who have limited connections in the industry to get access to Solo GPs. They may also be more willing to take a chance on early-stage startups that have not yet established a track record. Long-term partnership Solo GPs often view their investments as long-term partnerships, rather than just financial transactions. This means that the GP may be more invested in the success of the startup and more willing to provide ongoing support and guidance. Faster decision-making Solo GPs often have a shorter decision-making process compared to larger firms, as they don’t have to go through multiple layers of approval. This can be beneficial for founders who need to move quickly to secure funding. Smaller funding amounts Solo GPs typically manage smaller funds compared to larger firms, so they may offer smaller investment amounts. However, this can be beneficial for early-stage startups that are not yet ready for large rounds of funding. More flexible terms Solo GPs often have more flexibility in terms of investment focus and deal terms. They may be more willing to invest in unconventional or niche markets and may be open to negotiating terms that are more favorable to the founder. While solo GPs can offer many benefits to founders, they also have limited resources compared to larger firms. This means that founders may need to be more self-sufficient and may not receive the same level of support and resources that they would from a larger firm. Solo GPs to Watch Underline Ventures GP: Bogdan Iordache About: Underline Ventures partners at the earliest stages with Eastern European founders building high-growth startups with global ambitions Thesis: We believe founders should be in control of the company they are building. We subscribe to their strategy and align our interests for the long term, while providing a needed critical view. And, if things don’t go as planned, which they often do, we help them through thick and thin. Investment stages: Pre-Seed, Seed, Remote First Capital GP: Andreas Klinger About: A group of remote founders, operators and early investors investing in the next generation of remote work. Thesis: First investor in ideas by global talent going after global opportunities. Investment stages: Pre-Seed, Angel, Early Stage Wischoff Ventures GP: Nichole Wischoff About: Wischoff Ventures invests in early stage, high growth technology companies bringing massive offline industries online. Investment stages: Pre- Seed and Seed Coelius Capital GP: Zach Coelius About: Coelius Capital provides entrepreneurial early-stage capital for technology startups. Investment stages: Pre-Seed, Seed, Series A Streamlined Ventures GP: Ullas Naik Location: Palo Alto, California, United States About: We are a seed stage investment firm rooted in the belief that the founders of companies are the true heroes of entrepreneurial value creation in our society. We are passionate about working with visionary founders to help them create exceptional companies and help them capture as much of that value for themselves as possible – they deserve it! If we stay true to our beliefs and we are good at what we do, then we will benefit too. Our style of engagement with all our stakeholders focuses on low ego behavior, mutual respect and clarity of thought. We seed invest in visionary founders who are building the next generation of transformational technology companies. Investment stages: Series A, Seed Buckley Ventures GP: Josh Buckley Location: San Francisco, California, United States About: We partner with entrepreneurs to build ambitious technology companies Investment stages: Seed, Growth Anamcara GP: Annelie Ajami About: Anamcara is a pre-/seed stage fund investing angel-size checks in B2B companies across Europe. We are reimagining the future of commerce by investing in companies that are leading the new wave of business technologies. Thesis: Anamcara means ‘soul friend’, a person with who can share anything with without judgment. Our mission is to find the best founders and to build meaningful partnerships to help them achieve greatness. Investment stages: Seed, Pre-Seed Buckley Ventures GP: Josh Buckley Location: San Francisco, California, United States About: We partner with entrepreneurs to build ambitious technology companies Investment stages: Seed to Growth Stellation Capital GP: Peter Boyce II Location: Brooklyn, New York, United States About: Stellation’s mission is based on the belief that communities of learning, mission-driven, talent magnets shape the future of technology in service of improving human livelihood. We bank on people because we believe they are the fundamental atomic units of every successful company, even and especially at their earliest stages. Investment stages: Seed to Growth D2 Fund GP: Amory Poulden Location: London, United Kingdom Thesis: Technical founders building capital efficient businesses Traction metrics requirements: No, although we prefer to see some signs that you have built a first version of your product. Sales carry enormous weight. Investment stages: Pre-Seed, Seed Zeev Ventures GP: Oren Zeev Location: Palo Alto, California, United States About: Zeev Ventures is an early-stage venture fund that invests in technology, financial, e-commerce, and consumer service sectors. Investment stages: Seed and Series A Beyond Capital GP: Gloria Bäuerlein Location: Berlin, Germany About: We are a €21.5M angel-operator fund dedicated to partnering with exceptional European pre-seed and seed founders who aspire to build transformational B2B companies. We aim to support you like a founding team member, not like another investor, even if it means negotiating against ourselves. We work tirelessly to support you on your journey, connecting you with early customers, world-class talent, and global investors. We strive to be the highest value per euro invested on your cap table. We collaborate with other investors and will help you build an exceptional support group, optimising for your success and without our own agenda. Investment stages: Pre- Seed and Seed Air Street Capital GP: Nathan Benaich About: Air Street Capital is a venture capital firm investing in AI-first technology and life science companies. We invest as early as possible and enjoy iterating through product, market and technology strategy from day 1. Thesis: AI-first technology and life science companies. Investment stages: Pre-Seed, Seed No Label Ventures GP: Ramzi Rafih Location: London, England About: No Label Ventures (NLV) is a European early-stage VC fund built to capitalise on the over-performance of immigrant founders. NLV backs exceptional immigrant founders from Day 1, helps them with visa and immigration, as well as introductions to clients and downstream funding. Investment stages: Early Stage Nomad Capital GP: Marc McCabe About: Nomad Capital is a seed stage fund focused on investing in emerging companies building marketplaces and B2B software. Nomad is founded by Marc McCabe who previously worked at Google, SV Angel and was an early employee at Airbnb where he led numerous projects including Airbnb for Work and Samara. Since leaving Airbnb in 2018, Marc has been angel investing and supporting clients with fundraising, business strategy, hiring and organizational design. Investment stages: Seed Curious Capital GP: Andrew Dumont Location: Seattle, Washington About: Since 2017, and long before that as operators, we’ve been bettering the odds for companies we work with. We do this as minority investors in our seed companies, majority owners in the companies we operate, and occasionally with outside companies we advise and consult. Every company we support benefits from our scaling machine. Curious was founded by Andrew Dumont, a former technology CEO with nearly 20 years of hard-earned experience operating and scaling early-stage companies. Thesis: As investors and operators, we join you in the trenches to better the odds. Curious has three distinct pillars. An investment arm that supports seed-stage companies, a holding company that operates majority-owned businesses, and a machine that helps them reach scale. We’re the empathetic partner you’ll want on your cap table and in your corner. Investment stages: Seed Pretiosum Ventures GP: Yana Abramova About: We invest in the Future of Businesses, Web2 and Web3 Infrastructure your company should care about. Investment stages: Pre-Seed, Seed 20VC GP: Harry Stebbings About: Building the next great financial institution at the intersection of venture capital and media. 20VC raised $140M across two separate vehicles from some of the most renowned limited partners in venture including MIT, Harvard, Sequoia Heritage, and RIT Capital Partners. Early breakout investments include BeReal, Sorare, Linktree, Nex Health, Merge API, Linear, TheyDo.io, and many more. Investment stages: Pre-Seed and Seed Start Your Next Round with Visible We believe great outcomes happen when founders forge relationships with investors and potential investors. We created our Connect Investor Database to help you in the first step of this journey. Instead of wasting time trying to figure out investor fit and profile for their given stage and industry, we created filters allowing you to find VCs and accelerators who are looking to invest in companies like you. Check out all our investors here and filter as needed. After learning more about them with the profile information and resources given you can reach out to them with a tailored email. To help craft that first email check out 5 Strategies for Cold Emailing Potential Investors. After finding the right Investor you can create a personalized investor database with Visible. Combine qualified investors from Visible Connect with your own investor lists to share targeted Updates, decks, and dashboards. Start your free trial here.

Raise capital, update investors and engage your team from a single platform. Try Visible free for 14 days. A fundraise is full of challenges. On top of building a fundable business, meeting with the right investors, and working through due diligence — you need to share the right documents, with the right investors, at the right time. Over the course of a fundraise, it is all but guaranteed that you’ll need to share a pitch deck, data rooms, and other assets with potential investors. When expecting to communicate with 50+ investors it is crucial to have a reliable system and tool to share your most important fundraising materials. Related Read: What Should be in a Startup’s Data Room? Below, we highlight some of the most popular alternatives to DocSend when it comes to reliably sharing your data room: 1. Visible Integrated fundraising tools for every part of the process. At Visible, we like to compare a fundraise to a traditional B2B sales and marketing funnel: At the top of the funnel, you are finding potential investors via cold outreach and warm introductions. In the middle of the funnel, you are nurturing potential investors with meetings, pitch decks, updates, and other communications. At the bottom of the funnel, you are working through due diligence and hopefully closing new investors. Just as a sales and marketing team has dedicated tools — we believe the same should be true for founders managing their current and potential investors. With Visible you can manage and track every interaction. Find investors at the top of your funnel with our free investor database, Visible Connect Track your conversations and move them through your funnel with our Fundraising CRM Share your pitch deck and monthly updates with potential investors Organize and share your most vital fundraising documents with data rooms Visible Data Rooms allow you to re-purpose your existing Visible assets to quickly build and securely share (via login or link) your data room. We’ll offer granular data so you can understand how different investors are engaging with your data room materials. Related Read: Manage Every Part of Your Fundraising Funnel with Visible Data Rooms Key features Fully integrated with our other fundraising tools — like our Fundraising CRM, Pitch Deck Sharing, Investor Updates, and Dashboards Segmented permissions so you can share individual folders, documents, and assets with different investor groups Advanced analytics so you can understand how individual investors are engaging with your data room materials Manage your fundraise from start to finish with Visible. Give it a free try for 14 days here. Pricing options You can learn more about Visible pricing here. Visible Lite Plan includes data rooms, pitch deck sharing, dashboards, and updates and starts at $59/mo Visible Pro Plan includes the above with more usage and advanced features and starts at $99/mo Visible Scale includes the above with full customization, custom domains, and other advanced features and starts at $199/mo 2. DocuSign Best for electronic signatures. As put by their team, “Contract collaboration doesn’t belong in email, documents and chats. With your most important documents stored and managed in one place, you can focus on what matters most.” Learn more about Docusign and it’s key features below: Key features 400+ direct integrations Easy electronic signatures Contract lifecycle management Pricing options DocuSign pricing differs depending on what products and features you’d like to use. Their trademark eSignature tool starts at $15/month and goes up to $65/month depending on usage. 3. Paperflite Best-rated sales content management. Paperflite is file management software focused on sales and marketing organizations. As put by their team, “Paperflite’s dynamic content hub brings all your sales collaterals, playbooks, marketing materials, and content your teams need and use every day from multiple sources in one single intuitive interface.” Learn more about Paperflite and its key features below: Key features Intelligent content discovery Direct integrations to a mailbox Analytics to help understand how prospects are engaging with your content As we mentioned above Paperflite is highly geared towards sales and marketing teams and does not mention use of data rooms for fundraising. Pricing options Paperflite pricing starts at $50/month and scales up to $500/month depending on feature usage. 4. emPower Document management system. Empower offers document management geared towards learning at large organizations. With their suite of tools, you can organize and share your organization’s important policies, quizzes, and documents. Etc. Learn more about emPower and its key features below: Key features Centralized training materials for teams Create your own quizzes for training Set automatic email reminders for team member training assignements Pricing options The team at emPower does not publicly list pricing for their product. 5. Showell Best for sales enablement. Showell is a centralized place for sales and marketing teams to centralize their most important documents. Showell is especially useful for sales enablement leaders looking to set their sales and marketing teams up for success. Learn more about Showell and its key features below: Key features Single platform to centralize all sales and marketing collateral Can be used to share and present your sales materials to clients real-time Content tracking and analytics to understand how leads are engaging with content Pricing options Showell offers a free plan. Depending on usage and number of users prices will scale. Their first paid plan starts at $25/month. 6. 360Learning Best for knowledge sharing. 360Learning is a tool dedicated to learning and development managers looking to level up their team training and development. Learn more about 360Learning and its key features below: Key features Direct integrations to automatically centralize vital L&D documents and materials Use off the shelf content created by the 360Learning team to learn from the best organizations that have mastered L&D Workflow tools to help encourage your team members to move along with their learning materials Pricing options 360Learning pricing is based on individual users. Per-seat pricing starts at $8/user for the first 100 users and offers custom pricing from there. 7. Box Best maximizing sales and customer growth. Box offers secure document management for teams across an organization. In addition to their document management and storage, Box offers tools to help with esignatures. Learn more about Box and its key features below: Key features Box offers an e-Signature tool to help users sign critical documents Box offers direct integrations with thousands of tools Workflows to help build process and systems around your document sharing Pricing options Box pricing is based on number of users. Plans start at $20/month per user (with a minimum of 3 users). Depending on usage and features, plans can scale to as much as $47/month (per user with a minimum of 3 users). 8. Docuware Best for digitizing your paperwork. Docuware focuses on digitizing business paperwork to help teams boost productivity. Docuware helps with documents in every corner of the business from HR to sales materials. Learn more about a few of Docuware’s key features below: Key features Fully automate invoice processing with their digitization and workflows Support remote team members with digital documents Archive and store critical documents Pricing options Docuware does not publicly list its pricing options and plans. Share documents and connect with investors using Visible At Visible, we oftentimes compare a fundraise to a B2B sales and marketing funnel. At the top of your funnel, you are finding new investors. In the middle, you are nurturing and pitching potential investors. At the bottom of the funnel, you are working through diligence and ideally closing new investors. With the introduction of data rooms, you can now manage every aspect of your fundraising funnel with Visible. Find investors at the top of your funnel with our free investor database, Visible Connect Track your conversations and move them through your funnel with our Fundraising CRM Share your pitch deck and monthly updates with potential investors Organize and share your most vital fundraising documents with data rooms Manage your fundraise from start to finish with Visible. Give it a free try for 14 days here.