Ep89: Cram Session, Episodes 26-31 (Nick Moran)

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Welcome back to TFR for another Cram Session. In these special releases, we have aggregated the takeaways and tips from previous episodes. In this installment, we will be recapping the following episodes:

 


Investor Stories 42: Why I Passed (Struhl, Collett, Hudson)

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On this special segment of The Full Ratchet,

the following investors are featured:

  • Jonathan Struhl

  • Mike Collett

  • Charles Hudson

Each investor highlights a situation with a startup

startup that they decided not to invest in and why it was that they

it was that they passed.

 

FULL TRANSCRIPT

Struhl why i passed on a startup

Mike Collett Why I Passed on a Startup

Charles Hudson Why I Passed on a Startup

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Discounting Inertia

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Below is the ‘Tip of the Week’ from Ep88: Fintech Investing, Part 2 (Sheel Mohnot)

In today’s interview, we spent some time discussing payments and the lack of innovation therein.  The most common medium used in payments is the credit card, which is technology that was developed in the 1960’s.  This antiquated technology is fairly efficient, but also easily stolen.  Sheel cited the ease in which the magnetic strip on credit cards can be copied.  And, of course, one can always write down the information on the front and back of a card and immediately have a way to use a card illegally.
 
And, outside of credit, transactions are still dominated by fiat money; a form of currency developed in 11th century China.  In 2016, the United States Treasury is projected to spend over $730M just producing paper & coin currency .  And this number does not capture the amount of value that’s lost due to counterfeiting.  Clearly there has been a major lack of progress in the currency and payment transaction sectors, which only results in lost value.  Printing money and fighting counterfeiting provides no net benefit to anyone.
 
So, the key question here is “Why such a lack of progress?”  Is innovation to blame?  I don’t think so.  Many alternatives to credit cards have been developed over the past 30 years that, in principle, are superior to plastic.  And, even replacements for the fiat money system have emerged that are tremendously more efficient, less susceptible to piracy and cost very little to maintain; namely the development of crypto-currencies like bitcoin.  So, if options exist then why the lack of adoption?  I think the explanation is inertia ie. resistance to change.
 
There are many industries that experience significant inertia.  And the degree of inertia is impacted by:
-the types of stakeholders,
-the number of stakeholders,
-the ideology of stakeholders,
-the range of decision makers within each,
-whether one is dealing with the enterprise or consumers,
-the amount of infrastructure that exists,
-the switching costs, 
-regulatory and government influence,
-and many other factors.
 
In the example that Sheel and I talked about today, one must consider the credit card companies, the retailer, the payment processor, the point-of-sale hardware manufacturers and, of course, the consumer.  In a two-sided marketplace with many intermediaries, is there

Ep88: Fintech Investing, Part 2 (Sheel Mohnot)

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Today we cover Part 2 of Fintech Investing with Sheel Mohnot of 500 Startups. In this segment we address:

  • Fintech Investing Sheel MohnotWhat was your business, Fee Fighters, doing in the payment category of fintech and how did that lead to an exit?
  • What are the major customer segments most often served by fintech companies and do you specialize/focus on startups serving specific segments?
  • It seems that often companies may be misidentified as fintech. Do you have an example of something that people lump in the fintech bucket that, from your standpoint, doesn’t fit?
  • What are the major elements you’re looking for in a fintech company that increase your liklihood of investing?
  • Have you found that the majority of fintech innovation is happening in the major, urban, financial centers in the U.S… and do you think fintech startups shoud locate in these areas?
  • Any other thoughts on financial technology startups that we didn’t cover that you’d like to touch on?

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Ep87: Fintech Investing, Part 1 (Sheel Mohnot)

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Sheel Mohnot of 500 Startups joins Nick to cover Fintech Investing, Part 1. We will address questions including:

  • Sheel Mohnot Fintech InvestingCan you talk about your experience at 500 and how the fintech fund and accelerator are related?
  • How do you define fintech?From your standpoint, what are the major categories within fintech?
  • From your standpoint, what are the major categories within fintech?
  • Can you give us an example of a company that falls into each category?
  • Can you give us the short history of the evolution of the fintech sector and why the opportunity now is so significant?
  • Seems like there is a lot of buzz around fintech lately… thoughts on why?
  • Why haven’t biometric forms of payment taken off and why are we still in a system that is dependent on antiquated credit card technology?

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Ep86: Cram Session, Episodes 18-21 (Nick Moran)

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Welcome back to TFR for another Cram Session. In these special releases, we have aggregated the takeaways and tips from previous episodes. In this installment, we will be recapping the following episodes:

 


Investor Stories 41: Lessons Learned (Triest & DeMarrais, Polovets, Rose)

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On this special segment of The Full Ratchet,

the following investors are featured:

  • Jonathon Triest & Brett DeMarrais

  • Leo Polovets

  • David S. Rose

Each investor illustrates a critical lesson

they have learned about startup investing and

how that has changed their approach.

FULL TRANSCRIPT

Rose_Why_I_Invested

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A Simple Capitalization Table

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Below is the ‘Tip of the Week’ from Ep85: The Cap Table, Part 2 (John Buttrick & Sean Moran)

Instead of the standard tip this week, I’ve decided to put together a very simple version of cap table. As discussed, these things can get quite complex after factoring in various terms and multiple rounds of funding. But it’s best to know the basics and start with a simple example. I’ve put this in a Google Sheet and will make sure to link it up in the post on the website.

If you’d like to test your knowledge, see if you can calculate the price per share, with the following inputs…

A startup, called Lost Certs is raising their first round of capital. They have agreed to a pre-money valuation of $3M and have raised a total of $1M. So the post-money valuation is $4M and they are selling 25% of their company. And finally the outstanding founder stock, prior to investment, was 6M shares.

So, based on those inputs, how many shares are being sold and at what price?

To see the simple cap table w/ formulas and the answer, check out the post of fullratchet.net.

https://docs.google.com/spreadsheets/d/1wHUT-SQ6WfqusgnZhZ7yFlQfbuTmNsOo5cu1gVZFY44/edit?usp=sharing

Simple_Capitalization_Table

 


Ep85: The Cap Table, Part 2 (John Buttrick & Sean Moran)

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Today we cover Part 2 of The Cap Table with John Buttrick of Union Square Ventures & Sean Moran of eshares. In this segment we address:

  • John, I’ve heard from many founders that get caught up in the Option Pool Shuffle. Can you describe what that is and if the eshares solution has an easy way to allocate the option pool to pre or post money?
  • I want to talk a little about employee equity. This has been a recent big topic of discussion on a number of different levels. Sean, how does eshares affect that cultural discussion.
  • John, some view the market for eshares as too small. What’s your response to them?
  • Sean Moran cap tableSean, I had heard that eshares struggled to raise capital… was this the case and how have you found the process?
  • John, what was your thesis on investing and why is USV so positive on eshares?
  • Sean, does eShares expand beyond Silicon Valley? If so, how? If not, what drives future growth?
  • Is there a data play here as well? It seems that there are many companies trying to understand and aggregate the very data that eshares will own? How are you thinking about the data angle?
  • John, any final thoughts or advice for very early-stage startups in light of today’s topic?
  • Sean, anything we didn’t touch on that you’d like to add to the cap table discussion?

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Ep84: The Cap Table, Part 1 (John Buttrick & Sean Moran)

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John Buttrick of Union Square Ventures & Sean Moran of eshares joins Nick to cover The Cap Table, Part 1. We will address questions including:

  • John, can you walk us through your background and how you became involved in venture capital
  • Can you talk about your experience at USV and what you are focused on there?
  • Sean, can you walk us through your story, your path to eshares and your role there?
  • We’ve discussed cap tables on the program in the past but have never done a deep dive. Just to get everyone on the same page, Sean can you start us off w/ overview of what a cap table is and what one can expect to see on most cap tables?
  • Sean Moran cap tableJohn, I’m sure you’ve seen many cap tables as an investor. Can you mention some of the common issues you come across when reviewing a cap table?
  • Many of the cap tables that I review at the seed stage are pretty simple tables in an excel or google sheet. Sean, why the need for an automated solution?
  • What is a 409A valuation?
  • John, what’s the biggest value for investors of a clean and potentially automated cap table?
  • Sean, what’s the biggest value for startups of a clean and automated cap table?

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Chuck Feerick

Need a cram session on the most important things in #VC? Listen to this podcast from @TheFullRatchet! fullratchet.net/ep83…