Startups

If you're a pre-seed founder, you need to get familiar with SAFEs. 89% of all the money raised in pre-seed rounds went through SAFEs instead of convertible notes in Q4 2023. Pre-seed defined here as any fundraise under $1 million - I realize that's not a perfect definition, but it should give us decent direction on underlying trends. Interesting to see that while the SAFE was created in 2013 or so, it was neck and neck with the convertible note for many years until taking off in Q1 2020. The surge in startup interest from the pandemic period has really cemented the dominance of the SAFE in recent years. 𝗦𝗔𝗙𝗘 𝘀𝘁𝗮𝘁𝘀: • 89% of all funding, 85% of all signed notes for pre-seed in Q4 2023    • About 80% of those SAFEs were post-money, which is the YC default. Pre-money SAFEs, which are more favorable to the founder, made up 20% or so.    • SAFEs made up over 90% of fundraising in SaaS, Fintech, Gaming, and Edtech.    • The only three industries where Convertible Notes still took in at least 30% of all funding were Medical Devices, Pharma/Biotech, and Energy. Hardware saw about 25% CN funding. One of the major shifts underlying this SAFE growth is the frequency of founders raising multiple tranches of financing before turning to priced equity. Many founders will raise multiple SAFE rounds - some get to 4 or 5 different SAFE raises before their first priced round. Is this a good thing? Up for debate. The SAFE is a fantastic way to simplify the initial fundraise and allows early founders and investors to move quickly. But eventually the diligence inherent in a priced raise can be beneficial to investors and indeed the company itself. Dilution can get very tricky to track otherwise! (although Carta can help founders understand their dilution at a glance with our SAFE tools - totally free for anyone who has raised less than $1 million). The more you know 😄 Subscribe at link in graphic to join 20,000+ of your closest friends receiving our data newsletter, or tap the bell for more data from me here. #cartadata #SAFEs #fundraising #founders #startups  

Expanding from a single product to a multi-product company. It's almost always a prerequisite to unicorn status. And yet, that transition often leads to failure. In the episode of #TheScienceOfScaling, we study this company evolution with the help of Ryan Meadows, Head of Global Sales at Klaviyo, Stage 2 Capital LP, and HubSpot alum. He joined Klaviyo 5 years ago when they were at around $60M in ARR. Today, they're north of $700M ARR. Expanding from a single to a multi-product company was a key foundation for this growth. Here is an approach commonly used in the ecosystem that leads to failure: (1) Company needs to grow from $20M to $50M this year to meet VC IRR expectations. (2) Bottoms-up revenue math of the current product-market-channel business tops out at $40M. Company needs to find an additional $10M in growth. (3) CEO presents plan to build new product. CEO commits to $10M in revenue from new product this year. (4) Product and engineering work nights and weekends to deliver the product in the next 4 months. In parallel, Marketing updates the website and collateral, Sales Enablement trains the entire Sales and CS team, and Finance revises the projections. (5) Fail. Not only does the business dramatically miss the $10M target for the new product, but it also misses the core business target because it has distracted all resources from the known business model. It's perplexing why entrepreneurs intuitively avoid committing to a revenue target on Day 0 of their startup. Instead, they meticulously execute a sequential journey of pursuing #ProductMarketFit and then #GoToMarketFit before transitioning into revenue growth mode, complementing this strategy with clear milestones that define the transitions between phases. However, executives forget this instinct when a business surpasses $10M in revenue. They get overly confident in their ability to define the product, messaging, and sales motion correctly right out of the gate. They don't and distract the entire organization from their predictable growth motion. Ryan and the team at Klaviyo followed a different path. They succeeded at the multi-product evolution by replicating the operating cadence of a pre-product startup within the walls of Klaviyo. In summary: (1) Specialize a small cross-functional product, engineering, sales, marketing, and CS team for the initiative. Select team members as you would for a pre-seed business. Refrain from distracting the core teams with the new product. Let the core team continue to exploit the predictable revenue growth of the current model. (2) Establish North Star metrics appropriate for the new product's maturity. Use metrics around customer success creation versus unit economics and revenue optimization. (3) Accelerate the pace of learning through daily cross-functional stand-ups, frequent analysis of customer discovery calls, and detailed customer adoption metrics. Listen to Ryan's full story here: https://lnk.to/TSOS!mr

I was talking to my friend Parul Singh about how too much VC money can be detrimental. I have been working with pre-seed/seed/A at and with companies for the last 20+ years and I have observed first hand that the saying “constraints breeds creativity” is true. In my experience, a company with 18 months of runway gets much more done in the second nine months than the first. 🪹 Pre-seed Companies: When you are in the “idea maze” (coined by Andreessen Horowitz) or “drunken walk” having too much money does not necessarily speed up progress. Of course you may need some money for founder living expenses but having a larger team wandering through the "idea maze" together doesn't necessarily make the journey go faster. There is a certain level of founder reflection that has to happen while navigating the “idea maze” and too many distractions (people, money) makes it hard. I teach an entrepreneurship class  (LeanLaunchpad) every year. Out of the eight teams we have navigating the “idea maze”, about half will test and land on a reasonable idea in just ten weeks (including a simple MVP and even some paid POCs). Total budget: zero. With the multitude of AI tools, time to PMF is accelerating. Check out https://lnkd.in/guM7Ymn9 (AI companies revenue >10x SaaS companies). 🌱 Seed Companies: When you are going from the “idea maze” to “product market fit” and are trying to first build a product that a few customers love and second build a way to acquire these customers efficiently, having too much money can actually be counterproductive. Why? Because too much money often translates to wasting time on things that don’t matter: you are not forced to focus on the features that are absolutely critical, you can spend in non-efficient marketing methods (skipping the crafting of the product-growth loop) and you can afford to over hire or to keep the wrong people onboard. 🅰️ Series A Companies: Post product market fit, when it is time to scale, money is absolutely critical. However there is one common failure mode: the “fake Series As”, the As that get overpriced without really having reached product-market fit. Take a seed in a hot space, a small team that has grown revenue to a few $100Ks or maybe even a million in just six months. There is little data on actual revenue stickiness or whether the founder-led sales motion can be replicated efficiently. There is a lot of competition to invest in the company and they end up raising $20M+ series A.  The founder feels confident, they are stretched-thin and they hire a bunch of folks. There is pressure to scale but the machine is not built yet (the product is not quite there, they can’t figure out how to get to customers efficiently) and things unravel. Venture money is like carbs: quality over quantity (not all money is equal); take in moderation (constraints bread creativity) and if you compete in endurance sports, you might need more carbs to perform well (if you are growing, you will need the cash).

The hardest lesson I learned as a founder? Letting go. It's about trust. I used to micromanage every event detail. Now, I focus on empowering my team. I want a team-managed company. To scale, you have to let go and empower your team. They will make mistakes along the way, it's part of the process. Here's how: 1. Clear expectations: Define success upfront. 2. Right person, right task: Match skills to challenges. 3. Regular check-ins: Guide, don't hover. 4. Feedback loop: Encourage open communication. 5. Celebrate wins: Recognize team efforts. The result? Creativity flourished. Team morale soared. Our events got better. Quality control shifted from policing to mentoring. We built systems, not restrictions. I focus on vision and strategy. My team handles execution. They surprise me daily with their ingenuity. Founders, your job isn't to do everything. It's to build a team that can. #leadership #Innovation #BusinessExcellence

Deep Dive #8 for “Some of My Learnings” Learning #8: Step 1: Prove product/market fit. Step 2: Create a repeatable opportunity creation motion. Step 3: Only after successfully completing Step 1 & Step 2, invest in scale. Prematurely investing in scale is the same as lighting money on fire. This formula applies to both startups and large companies. When you build a product from scratch, or as they say from Zero to One, there are one of two types of products you build. It’s either a product for an established market with established competitors or a product in a new category. Let’s start with established products and I can then highlight the extra work that needs to be done for a category creating product. So goal #1 that must be accomplished when you build a product from the ground-up is to get validation from the market that in fact the product you built solves an important problem, customers are willing to pay for it and what you deliver works as advertised and solves a real problem for a focused set of customers. The first 25 to 50 customers have to be acquired in very non-scalable ways. You must do things initially that don’t scale, so that you can eventually scale. The product leader in a big company or a CEO in a startup have to be intimately involved in selling and delivering the first few deals. Now, a V1 product, no matter how good, isn’t going to meet all the requirements of every customer segment or industry vertical. So it is crucial to understand exactly which customers will most benefit from the product and define that ideal customer profile (ICP). Most importantly, understand and communicate why you are different from incumbents. Not by 10% but by 10x. Once this is defined, you have to be maniacally focus on pursuing opportunities for ONLY that ICP. The reason for this is that you want to have repeatability in the sales model and not spend a whole lot of time trying to win deals where your probability of winning those deals is extremely low. The thing you want to avoid at all costs is a “slow no”. Now, as you keep enhancing the product, you can keep expanding your ICP. But staying focused on the initial ICP is great not just for sales but also adoption. So… Goal #1 is to validate an ideal customer for whom your product works as advertised. Goal #2 is to make sure that you build a repeatable opportunity creation motion with a defined ICP. Goal #3 once you succeed at #1 & #2, then and only then should you focus on scale. The mistake that many make is to not focus and try and chase and win all different types of use cases all at once, which have little repeatability amongst themselves. This lack of focus leads to low win rates and loss of confidence in the field. If you have to launch a new product category, it is even harder because of the investment needed to create a new category. So identify a large market but focus on serving a very small subset of that market to get started with in the early days.

Where Do Unicorns Come From? Endeavor Insight Researched the Career Pathways of 200 Unicorns:        This chart traces the pathways that those 200 founders took to starting a unicorn. Each line represents a founder of a unicorn company in an emerging market or the United States. The oval nodes represent key experiences along their journey to founding their unicorn company. 🌱Unicorn founders are global citizens. Fifty-five percent of the top US unicorn founders are immigrants or second-generation immigrants, and the top countries of origin for these entrepreneurs are India, Israel, China, Ukraine, Canada & Russia. Entrepreneurial migration is a common phenomenon for emerging markets too. Thirty-two percent of the top unicorn founders in emerging markets are immigrants or second-generation immigrants. 🌱Only one-third of top unicorn founders completed their bachelor’s degree at an elite university. Elite institutions are not as common among unicorn founders as you might think. Nearly all (97 percent) of the 200 top founders we researched obtained a college diploma, but only one-third of them received a bachelor’s degree from a top-ranked university. If we add in master’s programs and PhDs, a little less than half of the founders completed study at such an institution. 🌱Only 20 percent of unicorn founders worked for an elite employer. Work experience at elite employers including Big Three consulting firms, MAMAA tech companies, and bulge bracket investment banks was rare among this cohort of entrepreneurs. 🌱Half of these founders previously worked at a startup or scaleup. Most of the world’s successful unicorn founders did not have experience working for name-brand employers. Usually, they worked for an entrepreneurial company prior to launching their unicorn company. Many of these founders served as C-suite executives of tech startups or grew from within the ranks as that entrepreneurial company went from startup to scaleup. A significant number of those employers were unicorn companies themselves. In most cases, the entrepreneurial employer had a successful exit, either by going public or being acquired. Aspiring founders who work for companies that have an exit like this gain invaluable first-hand experience. For the full analysis and High Def Image: https://lnkd.in/e6NWKtnN ---- 💡 Join over 30,000 readers in optimizing your performance as an investor and founder: https://lnkd.in/eqaHAzvH --- 📢For all the startup founders that have NOT YET applied to our Pitch in Public Project, we have extended our final selection until Monday (get your applications in ASAP!) https://lnkd.in/e_-q53tt

I remember the exact moment I realized that most of what I'd learned at HBS, McKinsey, & in all the startup books + blogs was kinda irrelevant: I had been struggling to find product-market fit for 2 years. Did all the things you're "supposed" to do to launch a startup - customer interviews, demand validation, doing the unscalable, prototypes, pilot agreements, you name it. Did all the right things, built the "right" product, but the market just didn't seem to pull. Sound familiar? I then heard this quote that changed how I thought about startups and business generally: “Anybody who does product design has to switch between looking at the world from two different perspectives. The first perspective is what we call Supply… all about what we make, what we build, what we put out there… And the other side is called the Demand side. The Demand side is all about what you can’t control. This is about what’s going on for the customer in their life. We don’t get to decide what’s happening to the customer, what they’re trying to do, what they value… those are all things that are out there in the real world. As modern, informed product designers, we try to be very user-centric. We like to think that we’re sitting in the demand box, trying to figure out what to build on the supply side. But it turns out that in reality, a lot of the things we think are demand really aren’t.” (Listen to the full 18-minute podcast by Ryan Singer and Chris Spiek for an example that adds color to the concept, link below.) This was the point that I realized that everything I’d done and learned was on the supply side - the things I controlled: Our product, our customer research as it relates to our product, our marketing & sales. And when I thought I’d understood what customers wanted, I was REALLY looking through the supply lens - what their problems were as they related to my product idea, not what they were actually trying to do. I’m now obsessed with demand, and am blown away by how little it is understood and discussed. → Understanding demand is the ONLY way to “build something people want” & find PMF → The main problem startups have is that they obsess over supply, but THINK they are focused on demand → When you focus on demand, you can get to a product the market pulls (oddly, the path to building a great product ISN’T by focusing on product) → Successful founders often have an intuitive sense for demand, but can’t explicitly describe it → Demand is the foundation of “jobs to be done” - a wildly powerful concept that most people think they understand, but actually don't → Many problems in modern businesses are due to designing the organization around Supply (what we do), not Demand (what the customer wants to accomplish) Ultimately, what I’m building with PMF Camp is really about helping founders find demand - which makes everything else downstream easier and intuitive. Demand rules all. The most important (& totally ignored) business concept. More to come…

10 Things I Learned in 8 Weeks in Y Combinator When you think of Y Combinator, big names like Airbnb, Stripe, and DoorDash come to mind. But beyond the billion-dollar startups, there’s a lot to learn from their methodologies—especially for early-stage entrepreneurs.  Here are my top 10 takeaways for founders: 1️⃣ Talk to Users: ↳ Your product only matters if it solves real problems.  ↳ YC emphasizes getting user feedback every week.  ↳ Don’t ask users what they want—ask them what’s holding them back.  ↳ Build solutions for their problems, not their wishlist. 2️⃣ Focus on Problems, Not Ideas: ↳ As Henry Ford said, "If I had asked people what they wanted, they would have said faster horses."  ↳ Your job as a founder is to uncover pain points and design better answers, not just fulfill surface-level demands. 3️⃣ MVP Everything: ↳ Don’t spend months perfecting a product that might not work.  ↳ Start with a minimum viable product (MVP), test it, iterate, and grow from there.  ↳ Think of it as an experiment—launch early and often. 4️⃣ Always Be Shipping: ↳ In the startup world, speed beats perfection.  ↳ Frequent releases and short sprints help you stay ahead and adapt to feedback.  ↳ If you’re stuck in a six-month development cycle, you’re already behind. 5️⃣ Stop Worrying About Scaling (For Now): ↳ Early-stage startups don’t need to scale immediately.  ↳ Validating your idea is more important than perfecting its scalability.  ↳ Some of today’s biggest startups started with manual, unscalable processes. 6️⃣ Measure, Don’t Assume: ↳ Gut instinct isn’t enough. Every decision should be backed by data.  ↳ Even the best-looking product can fail if it doesn’t convert.  ↳ Test everything, track results, and let the numbers guide you. 7️⃣ Embrace Big Problems: ↳ Every founder faces roadblocks, but no challenge is insurmountable.  ↳ The bigger the problem, the greater the opportunity for innovation.  ↳ Approach obstacles as puzzles to solve, not barriers to quit. 8️⃣ Build Culture Early: ↳ Company culture isn’t something you fix later; it’s something you build from day one.  ↳ A strong culture helps align teams, make decisions, and scale effectively.  ↳ Set your values early and live by them. 9️⃣ Leadership Is Action, Not Talk: ↳ Great leaders inspire trust through their actions, not their words.  ↳ Leadership isn’t about claiming titles—it’s about how you show up for your team, customers, and community every day. 🔟 Stay Resilient: ↳ Startups are tough.  ↳ YC’s Geoff Ralston advised: “Don’t get sad.” Setbacks are inevitable, but resilience is your biggest asset.  ↳ Keep moving forward—write code, talk to users, and improve your product. YC isn’t just an accelerator—it’s a mindset. If you’re serious about building something meaningful, these lessons will serve you well. What’s one startup lesson you’ve learned the hard way? Share your thoughts below! 👇 #startups #venturecapital #investing #ycombinator

Building two companies taught me one thing: Some decisions save years of headaches. Here’s the list of things I wish I had done sooner (so you don’t have to learn the hard way): ~~ 1/ Build in public I was hesitant to share numbers and strategies. But when I started posting transparent updates, everything changed: • Better hires • Inbound leads • An audience rooting for our success Sharing your journey builds trust faster than any ad campaign. == 2/ Hire overseas talent For years, I focused only on local hires. Big mistake. By hiring globally, we: • Saved 40-60% on costs • Found top-tier talent • Built a 24/7 work cycle Great talent doesn’t have a zip code. == 3/ Use simple software (Airtable) instead of an overbuilt, bloated, expensive CRM (Salesforce) In the early days, we wasted hours configuring tools like Salesforce. And it was expensive. I wish we’d started simple with Airtable. It’s fast, cheap, and flexible—perfect for early-stage startups. Complexity kills focus. == 4/ Join a founder group Joining YPO was a game-changer for me. Founder groups (like YPO or Hampton) offer: • Tactical advice from those who’ve been there • Support when the journey gets tough • Lifelong connections Build your network before you think you need it. == 5/ Talk to customers weekly At my first startup, I was too busy “running the business” to talk to customers. Huge mistake. Now, I talk to them every week. They tell us: • What to build next • How to price better • Where we’re falling short The answers are always with your customers. == 6/ Systematize hiring from day one At my prior startup, hiring was reactive—every new role felt like an emergency. At Onward, we built a system: • Hire freelancers first • Define culture fit early • Always recruit, even without open roles Great hiring compounds over time. == 7/ Spend zero on paid marketing (early on) We burned cash on ads too early at StackCommerce. At Onward, we prioritized: • Referrals • Organic growth • Partner-led sales It’s slower but more sustainable. Scale paid only after you’ve nailed organic channels. == 8/ Use templates and automation I used to think every process had to be built from scratch. Now, we automate wherever possible: • Notion for SOPs • Airtable for tracking • Loom for onboarding Small tools save hundreds of hours—use them. == 9/ Focus on retention over acquisition Acquiring customers gets all the attention. But retaining them is where real growth happens. At Onward, we obsess over: • NPS scores • Success calls • Features that boost lifetime value Keep them happy, and they’ll never leave. == 10/ Set boundaries early At StackCommerce, I burnt out by making everything urgent. At Onward, slow is smooth and smooth is fast. Boundaries create focus. Focus creates freedom. == What’s on your “why didn’t I do this sooner” list? Let me know below. If you enjoyed this post, follow Josh Payne for more startup lessons, leadership insights, and scaling advice.

Scaling doesn’t mean doing more. It means building something that runs better with less of you. This took me a long time to accept. In the early days, I believed growth came from force. More time. More output. More effort. If I worked harder, I thought everything would grow. It did work for a while But eventually, it broke Because true scale doesn’t come from working more It comes from building smarter Here’s how I see the journey now You start by selling your time Then your process Then your system Eventually, your method and brand carry the weight Every stage forces change In how you think In what you prioritize In how you lead I used to do it all Close every deal Deliver everything myself Rely on a few star players Post content when I had time Hire when I was already overwhelmed None of it was sustainable And it definitely wasn’t scalable So I made the shift I turned custom work into repeatable delivery I created playbooks before handing off tasks I built a real content engine I set up systems to run without me I mapped out team needs before they became urgent These decisions made space Space to breathe Space to lead Space to grow If your business still needs you every day It isn’t scaling It’s just surviving Real growth means letting go of control So you can build something that stands without you #Growth #Systems #Strategy