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VC signaling in seed rounds
       Venture Hacks
Outline: VC signaling in seed rounds

 1.    VC signaling in seed rounds
 2.    Chris Dixon bio
 3.    Mark Suster bio
 4.    Naval Ravikant bio
 5.    3 guests, 3 different types of funds
 6.    What stages of investment does a startup
       go through?
 7.    The $ amount in a round changes based on
       the public markets
 8.    Seed investors make decisions quicker and
       ask for less control with simpler
       documents
 9.    The cast of characters you run into when
       you're raising money
 10.   What is VC signaling?
Outline: VC signaling in seed rounds

 11. VC signaling is when insiders convey
     information through their actions
 12. Investors aren't the only insiders who can
     signal
 13. VC signaling is the action or lack of
     action of people who have information you
     don't have
 14. Investment decisions are often influenced
     by social proof and momentum
 15. Social proof short-circuits investment
     decisions
 16. Social proof is rational
 17. How do investors transmit signals?
 18. Typical investor signals
 19. When signaling matters
Outline: VC signaling in seed rounds

 20. All VCs talk to each other — you can't keep them
     apart
 21. If you hear 5-6 people passed, you're predisposed
     not to like it
 22. 4 types of investor signals
 23. In the good old days, supportive investors would
     always do their pro rata
 24. Supportive investors still tend to do their pro
     rata in the Series B
 25. Funds can establish norms and stick to them
 26. Does GRP have a follow-on policy?
 27. Do early stage funds do selective follow-on
     rounds?
 28. There's a difference between focused seed stage
     investing by VCs and shotgun seed investing by
     VCs
 29. Don't give VCs contractual options on your next
     round
Outline: VC signaling in seed rounds


 30. Taking office space can also be a signal
 31. If my existing investors don't want to
     invest, how do I talk my way out of it?
 32. Does a VC work against you in the Series A if
     they don't buy enough of the company in the
     seed round?
 33. What are the pros of taking seed money from a
     VC?
 34. Anything I missed that I should have brought
     up?
 35. How to take an option-style investment from a
     VC
 36. What's your favorite blog these days?
 37. What's your favorite life hack these days?
 38. Get intros to seed investors with AngelList
VC signaling in seed rounds
Chris Dixon
 cdixon.org
  @cdixon
Mark Suster
bothsidesofthetable.com
       @msuster
Naval Ravikant
startupboy.com
    @naval
3 guests,
3 different types of funds
What stages of investment does a
      startup go through?
The $ amount in a round changes
  based on the public markets
Seed investors make decisions
quicker and ask for less control
     with simpler documents
The cast of characters you run
into when you're raising money
 -   Individual angels
 -   Individual angels investing OPM
 -   Seed stage funds
 -   Multi-stage funds
What is VC signaling?
VC signaling is when insiders
  convey information through
         their actions
Investors aren't the only
 insiders who can signal
VC signaling is the action or
lack of action of people who have
    information you don't have
Investment decisions are often
  influenced by social proof
         and momentum
Social proof short-circuits
   investment decisions
Social proof is rational
How do investors transmit signals?
Typical investor signals:
- Lead the round
- Do pro rata
- Do nothing
When signaling matters

- 10% company is hitting it out of
the park and signaling doesn't matter

- 80% of the time the company is
middling and signaling *matters*

- 10% of the time the company is a
disaster and signaling doesn't matter
All VCs talk to each other — you
     can't keep them apart
If you hear 5-6 people passed,
you're predisposed not to like it
4 types of investor signals:
-   Insider tries to do the whole round
-   Do a little more than pro rata
-   Do less than pro rata
-   Pass
In the good old days, supportive
investors would always do their
            pro rata
Supportive investors still tend to
 do their pro rata in the Series B
Funds can establish norms and
        stick to them
Does GRP have a follow-on policy?
Do early stage funds do selective
        follow-on rounds?
There's a difference between
focused seed stage investing by VCs
 and shotgun seed investing by VCs
Don't give VCs contractual
options on your next round
Taking office space can
   also be a signal
If my existing investors don't
want to invest, how do I talk my
         way out of it?
Does a VC work against you in the
Series A if they don't buy enough
of the company in the seed round?
What are the pros of taking seed
        money from a VC?
Anything I missed that I should
        have brought up?
How to take an option-style
    investment from a VC
What's your favorite
  blog these days?
What's your favorite life
    hack these days?
Get intros to seed investors with:
           AngelList
    venturehacks.com/angellist
✌
Get more startup advice
     Venture Hacks
    venturehacks.com
     @venturehacks

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VC signaling in seed rounds

  • 1. ✌ VC signaling in seed rounds Venture Hacks
  • 2. Outline: VC signaling in seed rounds 1. VC signaling in seed rounds 2. Chris Dixon bio 3. Mark Suster bio 4. Naval Ravikant bio 5. 3 guests, 3 different types of funds 6. What stages of investment does a startup go through? 7. The $ amount in a round changes based on the public markets 8. Seed investors make decisions quicker and ask for less control with simpler documents 9. The cast of characters you run into when you're raising money 10. What is VC signaling?
  • 3. Outline: VC signaling in seed rounds 11. VC signaling is when insiders convey information through their actions 12. Investors aren't the only insiders who can signal 13. VC signaling is the action or lack of action of people who have information you don't have 14. Investment decisions are often influenced by social proof and momentum 15. Social proof short-circuits investment decisions 16. Social proof is rational 17. How do investors transmit signals? 18. Typical investor signals 19. When signaling matters
  • 4. Outline: VC signaling in seed rounds 20. All VCs talk to each other — you can't keep them apart 21. If you hear 5-6 people passed, you're predisposed not to like it 22. 4 types of investor signals 23. In the good old days, supportive investors would always do their pro rata 24. Supportive investors still tend to do their pro rata in the Series B 25. Funds can establish norms and stick to them 26. Does GRP have a follow-on policy? 27. Do early stage funds do selective follow-on rounds? 28. There's a difference between focused seed stage investing by VCs and shotgun seed investing by VCs 29. Don't give VCs contractual options on your next round
  • 5. Outline: VC signaling in seed rounds 30. Taking office space can also be a signal 31. If my existing investors don't want to invest, how do I talk my way out of it? 32. Does a VC work against you in the Series A if they don't buy enough of the company in the seed round? 33. What are the pros of taking seed money from a VC? 34. Anything I missed that I should have brought up? 35. How to take an option-style investment from a VC 36. What's your favorite blog these days? 37. What's your favorite life hack these days? 38. Get intros to seed investors with AngelList
  • 6. VC signaling in seed rounds
  • 10. 3 guests, 3 different types of funds
  • 11. What stages of investment does a startup go through?
  • 12. The $ amount in a round changes based on the public markets
  • 13. Seed investors make decisions quicker and ask for less control with simpler documents
  • 14. The cast of characters you run into when you're raising money - Individual angels - Individual angels investing OPM - Seed stage funds - Multi-stage funds
  • 15. What is VC signaling?
  • 16. VC signaling is when insiders convey information through their actions
  • 17. Investors aren't the only insiders who can signal
  • 18. VC signaling is the action or lack of action of people who have information you don't have
  • 19. Investment decisions are often influenced by social proof and momentum
  • 20. Social proof short-circuits investment decisions
  • 21. Social proof is rational
  • 22. How do investors transmit signals?
  • 23. Typical investor signals: - Lead the round - Do pro rata - Do nothing
  • 24. When signaling matters - 10% company is hitting it out of the park and signaling doesn't matter - 80% of the time the company is middling and signaling *matters* - 10% of the time the company is a disaster and signaling doesn't matter
  • 25. All VCs talk to each other — you can't keep them apart
  • 26. If you hear 5-6 people passed, you're predisposed not to like it
  • 27. 4 types of investor signals: - Insider tries to do the whole round - Do a little more than pro rata - Do less than pro rata - Pass
  • 28. In the good old days, supportive investors would always do their pro rata
  • 29. Supportive investors still tend to do their pro rata in the Series B
  • 30. Funds can establish norms and stick to them
  • 31. Does GRP have a follow-on policy?
  • 32. Do early stage funds do selective follow-on rounds?
  • 33. There's a difference between focused seed stage investing by VCs and shotgun seed investing by VCs
  • 34. Don't give VCs contractual options on your next round
  • 35. Taking office space can also be a signal
  • 36. If my existing investors don't want to invest, how do I talk my way out of it?
  • 37. Does a VC work against you in the Series A if they don't buy enough of the company in the seed round?
  • 38. What are the pros of taking seed money from a VC?
  • 39. Anything I missed that I should have brought up?
  • 40. How to take an option-style investment from a VC
  • 41. What's your favorite blog these days?
  • 42. What's your favorite life hack these days?
  • 43. Get intros to seed investors with: AngelList venturehacks.com/angellist
  • 44. ✌ Get more startup advice Venture Hacks venturehacks.com @venturehacks