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Startups are in a constant competition for two resources — capital and talent. Building a system to properly scale your business while maintaining your company culture is vital to a startup’s success. We figured there would be no better person to join us for a webinar to chat all things hiring and scaling than Julia Kauffman. Julia started her career in enterprise and eventually made the transition to High Alpha and is currently the VP of People & Admin at Mandolin. If there is one person who knows what it takes to properly scale the headcount at an early-stage startup, it’s Julia. Check out the recording and our favorite takeaways below: A couple of quick highlights from the webinar: Contract for Hire When hiring at the early stage it is crucial that you make hires that are “athletes” and can flex to any role while fitting in with your team and culture. Julia personally uses a contract with potential employees. This means that she offers short term contract (usually 30 days) to see how a potential employees fits with the team and culture then goes on to make a full time offer. Ongoing Development When scaling headcount it is important to have a standard onboarding process for new employees. Julia likes to use ongoing training and development to help employees find success. One of the things Julia recommends is a regular competitive analysis. In short, the team takes a lot at their competition so they have a solid understand of the business and the market. This can be done at the individual or team level. Julia also likes to leverage 1 on 1s to help with ongoing development. On a weekly basis Julia sits down and talks for 30 minutes with employees to talk about anything they’d like. This can be work, blockers, projects, anything they’d like, etc. On a quarterly basis Julia blocks an hour with employees to talk about personal development and their job so they know they have time to talk about it and their personal development. Mission, Vision, and Values Maintaining your startup culture as you scale can be difficult. Having your mission, vision, and values in place is essential as you hire and bring on new employees. When asked how companies should define their initial values, Julia recommends surveying everyone in the organization on what their values are, then you can pass those on to the leadership team to pick the ones that will be used at the core of decision making for the company. Sourcing Candidates Outside of job boards there are some interesting ways to source new candidates. Julia suggests checking out communities and different groups. Get in the habit of networking and engaging with different communities to source candidates from new and qualified places. Another source can be partners and organizations you are already working with. If done right and respectfully, this can tap into an entirely new network and candidate pool. Talking Equity Equity can be an integral part of attracting and retaining top talent. However, there can be confusion and questions surrounding equity. There are differing views on how to handle discussing and sharing cap table information. Julia believes that you need to (1) explain how and why you give out equity and (2) show employees everything and talk through the details. While it can be difficult to be transparent, most employees will understand and want to work through the details. To stay up-to-date with our future webinars and Founders Forward podcast, sign up for our newsletter below:

On episode 10 of the Founders Forward Podcast we welcome Jim McKelvey, Co-Founder of Square. The now publicly traded company with a $100B+ market cap has humble beginnings dating back to Jim and his time in a glass studio. Jim recently published his book, The Innovation Stack: Building an Unbeatable Business One Crazy Idea at a Time, that studies how Square managed to thrive and beat Amazon and draws on similar stories from companies like Southwest and Ikea. About Jim Square and Jim used a series of “innovation stacks” to not only beat Amazon but to take them to the high flying public company they are today. Jim has a deep passion for entrepreneurship and innovation that comes across as we discuss his journey building Square. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Jim. You can give the full episode a listen below (or in any of your favorite podcast apps). What You Can Expect to Learn from Jim How the idea for Square was started How Jim started his relationship with Jack Dorsey, the CEO of Square What it means to be an entrepreneur vs. business person What Southwest and Square have in common What an innovation stack is How Jim views venture capital How and why businesses copy Related Resources Jim’s Twitter Jim’s LinkedIn The Innovation Stack: Building an Unbeatable Business One Crazy Idea at a Time

In 2020 we launched the Founders Forward Podcast. The goal of the podcast is to enable founders to learn from their peers and leaders that have been there before. Over the last 7 weeks our CEO, Mike Preuss, has interviewed a different founder or startup leader every week. Related Resource: 11 Venture Capital Podcasts You Need to Check Out Here are some of our favorite quotes and takeaways from the first 7 interviews: Lindsay Tjepkema, Founder of Casted Our first episode of the Founders Forward was with Lindsay Tjepkema. Considering she is a podcasting expert, we figured there could not be a better first guest. We chat all things podcasting and alternative media types. However one of the tidbits we found most interesting was Lindsay’s outlook on venture fundraising. Oftentimes fundraising can be a frustrating journey but Lindsay views the process as an opportunity to promote her business and tell her company’s story. Give the full episode a listen here. Amanda Goetz, Founder of House of Wise House of Wise is Amanda’s second go as a startup founder. However things are no less difficult than her first time around. Her first journey was spent worrying about legal aspects and the basics of getting her business running. That was easy with House of Wise but she has faced new challenges (and opportunities) during her second journey. Give the full episode a listen here. Jeff Kahn, Founder of Rise Science Jeff has 10 years of sleep science experience and research. Before starting Rise Science Jeff spent time publishing academic articles and supporting world-class athletes and teams with better sleep. Jeff Kahn is a true expert in all things sleep. During our interview with Jeff, we chatted about how sleep can improve a founder’s leadership skills and productivity. Give the full episode a listen here. Aishetu Dozie, Founder of Bossy Cosmetics Aishetu Dozie started her career in banking and eventually made the transition to starting a cosmetics company. Just like any founder, her first time journey has been full of highs and lows. Aishetu, like many founders and leaders, has struggled with imposter syndrome. We love her thoughts below on how she has tackled imposter syndrome. Give the full episode a listen here. Kyle Poyar, Partner at OpenView Ventures OpenView Ventures is credited with coining the term “Product-Led Growth.” As Kyle and the team at OpenView continue to help SaaS companies grow and become market leaders he has seen it all. From the early days of defining PLG and the impact of COVID-19 Kyle is full of first-hand stories and the data to back it up. Check out how Kyle defines and thinks about PLG below. Give the full episode a listen here. Yin Wu, Founder of Pulley Yin Wu has been through Y Combinator 3 times and has successfully exited 2 companies. Over the course of her founder journey it is safe to say that she has spent a good amount of time fundraising and chatting with investors. Yin likes to bucket investors into 3 categories to structure who she should be chatting with and raising from. Give the full episode a listen here. Cheryl Campos, Head of Venture Growth at Republic Over the past 3 years, the funding options for startups have continued to transform. Over her 3 years at Republic, Cheryl has watched as the market has changed and crowdfunding has become a more viable option. Check out Cheryl’s thoughts on the new funding options below. Give the full episode a listen here. We have plenty of new episodes recorded and ready to share in 2021.

On episode 9 of the Founders Forward Podcast we welcome Don Brown, Founder and CEO of LifeOmic. Prior to starting LifeOmic, Don started 6 companies with his first being acquired by GM in 1986 and his most recent, Interactive Intelligence, being acquired for $1.4B in 2016. Since the acquisition Don has turned to his passion of medicine and the medical field by founding LifeOmic (and LIFE Apps). LifeOmic is a single platform that “activates precision health and wellness.” About Don Even though Don has started 6 companies he might actually have more knowledge in intermittent fasting and health. Through his studies at John Hopkins and the introduction of the LIFE Fasting Tracking, Don has become a true expert on all things fasting. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Don. You can give the full episode a listen below (or in any of your favorite podcast apps). What You Can Expect to Learn from Don What he learned from starting 6 companies What he learned from navigating the dot-com bust, the Great Recession, and COVID-19. The importance of knowing the job to be done Why intermittent fasting isn’t just “another diet craze” Why intermittent stresses are good for your body The benefits of intermittent fasting How you should think about setting up a fasting schedule Related Resources Don’s Twitter Don’s LinkedIn LIFE Apps The LIFE Fasting Tracker The Founders Forward is Produced by Visible Our platforms helps thousands of founders update investors, track key metrics, and raise capital. Try Visible free for 14 days.

What is a cap table (i.e. capitalization table)? “Cap Tables” or capitalization tables are a critical term to understand for any startup founder or aspiring founder. But what is a cap table and why is it important? At the core, a capitalization or cap table is a table or spreadsheet that lays out the equity capitalization for the company. The equity capitalization is the total value of all the shares of the company and the breakdown of how those shares are divided. A cap table is an intricate breakdown of the shares value, holders, and projections. The cap table typically includes specifics of a company’s equity ownership capital such as common and preferred equity shares, warrants, and any convertible equity. Why is a cap table important for startups? Cap tables are important for startups for a variety of reasons. It is fundamental for a founder to understand the full scope of a cap table and why they are so important to execute. Cap tables are important because overall they illustrate the health of a startup for investors. Ownership Breakdown Founders need to be aware at all times of what their cap table means for ownership of their company. Understanding ownership is critical as the company grows and develops. Cap tables tell investors who owns what part of a company. Current investors want to see who has control. They also want the ability to forecast potential payouts and dilution under specific scenarios based on the ownership split. The breakdown of ownership in a startup can overall affect the value of the company for future fundraising rounds as well as who needs to be at the table for certain critical company decisions. Related Resource: How to Fairly Split Startup Equity with Founders Understanding Contributed Equity: A Key to Startup Financing Value Tracking An up-to-date and detailed cap table is important for tracking the value of a startup over time. Beyond current investors and founders understanding the value of a growing startup, employees find cap tables useful as well. A detailed, well-kept cap table is helpful for employees to access if they have options or equity stakes in the startup they work for. Offering equity is an appealing way to draw in top talent at leading startups. The ability to track value real-time by viewing a cap table is an important component of the value of a cap table. Fundraising In addition to current investors utilizing a cap table for forecasting and dilution predictions for different outcomes on their investments, potential investors and future fundraising can also be affected by cap tables. Potential investors can evaluate how much control and leverage could be maintained during negotiations by viewing a cap table. Historical insight provided in a cap table can affect negotiating current valuation for new funding raises. Additionally, an existing shareholder can easily determine what percentage of the company to give to the new investors in exchange for the capital contributed. Potential Audits In the event of an audit on a startup, a well-managed cap can allow your legal team to present your company’s history and holdings with accurate and well-organized information via a cap table. In general, a well-organized and well-maintained cap table is critical for the health and growth of a company across all financial situations. What does a cap table look like? Cap Tables are built out on two axis’. Typically, cap tables include a list of names or groups associated with the startup including founders, investors and common share stakeholders along one of the axis. Along the other axis the items that the various stakeholders and owners own. These items include things like types of securities, how many of these securities they own, when they invested in the company, and the percentage of company owned. Carta provides a good example of a Cap Table below: How do you make a cap table? Cap tables can be created and managed in a variety of ways. Typically it is common for new startup founders to build their initial cap table in a spreadsheet. However, as your startup grows and the valuation and stakeholders get more involved and complex, simple cap table design in a program like excel won’t work. Some companies will use a tool, such as CapShare or Carta to build and manage their cap tables. These tools are typically more dynamic and less manual than managing via excel. They can be easier to utilize to share out and circulate with employees and investors. In other scenarios, it might make the most sense to outsource the production and management of a cap table. When founders choose to self-manage their own cap table they are susceptible to risks. Some of these risks include miscalculating valuations which can lead to giving up too much equity and over-diluting shares in new investment rounds. Additionally, there might be tax consequences or legal issues that come up from mis-management of a cap table. By outsourcing the production and management of a cap table. Typically this management is outsourced to a legal team to ensure accuracy and compliance. Outsourcing is more expensive than managing with a software but can be much less expensive the cost of major mistakes or miscalculation of value. How to use a cap table? When using a cap table, it’s important to understand the following formulas: Post-Money Valuation = Pre-Money Valuation + Total Investment Amount Price-Per-Share = Pre-Money Valuation / Pre-Money Shares Post-Money Shares = Post Money Valuation/ Price-Per-Share Investor Percent Ownership = Investor Shares / Post-Money Shares These formulas are essentially what will be laid out in a cap table so understanding them is crucial. These formulas can also be used to update the cap table as it grows more complex via different significant financial rounds. The more investment rounds or other significant financial changes on the table, the more complex the cap table gets. This breakdown essentially showcases the additional steps and participants who are stakeholders in the startup. Founders round – this is the simplest version of the cap table and will typically showcase the simple split of equity between the founders of the company. Seed round – this introduces investors to the table who now own a portion of the company along with the founders and have given cash to the startup altering the overall value. Options pool round – when options are provided for new employees, this changes the value and breakdown of the company as represented by the cap table. Overtime, as more employees are hired and more options are granted, the more complex the cap table gets. VC round(s) – With any additional funding rounds taken on by the startup, the valuation drastically changes as does the list of stakeholders on the cap table. All of these events or rounds are significant and will change the breakdown and complexity of the cap table. How do you keep a cap table updated? With the array of cap table management tools on the market updating and keeping tabs on your cap table is easier than ever before. Generally founders need to stay on top of their cap table management. If you raise a new round, offer new employee grants, terminate an employee, etc. you need to make the changes as soon as possible to avoid future headaches. If you put off updating your cap table in real time it could end up being a costly mistake as you need a lawyer to update and correct the table. We highly recommend using software to manage and update your cap table to make your life as easy as possible. There are countless options but we recommend using Pulley. You can learn more about cap table management (and Pulley) in our Founders Forward Podcast with Pulley CEO and Founder, Yin Wu, here. Cap table examples/templates Instead of starting from scratch, many founders will use a template to build out a cap table. Alexander Jarvis provides an easy cap table template here. S3 Ventures offers a template in Excel that they recommend for their portfolio companies. Manage Your Stakeholders with Visible Manage relationships with your investors and other stakeholders using Visible. Centralize your key data, share updates with investors, and track your interactions with current (and potential) investors all from one place. Learn more and try Visible for free here.

In searching for your investor, every VC seems to have different stipulations and ranges for their check sizes. Many firms will initially write smaller checks to their first-time investments and larger checks to their recurring, portfolio investments. Finding a VC with a check size that fits your need can be difficult. We will segment some of our favorite VCs by typical minimum check size, sweet spot check size, and maximum check size. Related Reading: A Quick Overview on VC Fund Structure Angel Investors: Checks under $30,000 Jonathan Ozeran Jonathan Ozeran serves as an advisor for Great North Labs and is a hands-on investor that has seen many phases of growth. He focuses on several verticals, including AI, Mobile, Biotechnology, Digital Health, Health Care, Hardware, Insurance, and more. Check Size: Min. $10,000 — Sweet Spot $25,000 — Max. $25,000 Lolita Taub Lolita Taub is the Co-Founder and General Partner at The Community Fund where she invests in community-driven companies. She has over 40 investments as an angel and VC. Check Size: Min. $1,000 — Sweet Spot $20,000 — Max. $30,000 Pre-seed/Seed Investors: Checks under $300,000 DC Ventures DC Ventures assists startups in areas crucial to funding and growth. Their team is made of industry experts and savvy investors who help entrepreneurs reach their goals. They are based in Washington D.C., Dublin, and Buenos Aires. Check Size: Min. $10,000 — Max. $100,000 Hustle Fund Hustle Fund is a seed fund for hilariously early hustlers. They are led by Elizabeth Yin and Eric Bahn. Hustle Fund is comfortable setting terms and being the first check. Because of their small check size, they will not be putting in the bulk of money in your round. Check Size: Min. $25,000 — Max. $100,000 (Check out their Visible Connect profile HERE.) Supernode Ventures has an extensive network of contacts providing access to media, customers, and investors to help support. They are based out of NYC and look to add 10-12 companies to their portfolio each year. Check Size: Min. $50,000 — Max. $200,000 Beta Boom Beta Boom invests in underdog founders that don’t fit the typical Silicon Valley founder profile, and they particularly look for founders that have lived their problem and have shown tenacity, hustle, and focus. They don’t care if you went to Stanford or Harvard. Check Size: Min. $150,000 — Sweet Spot $150,000 — Max. $300,000 Checks under $10,000,000 Allos Capital Allos Capital invests in early-stage B2B software and business services companies in the heart of the Midwest. They are managed by Don Aquilano, John McIlwraith, and David Kerr. Allos generally invests within a 5-hour drive of our offices, which are located in Indianapolis and Cincinnati. Check Size: Min. $250,000 — Max. $3,000,000 Cowboy Ventures Cowboy Ventures invests in US-based, software-oriented companies. Their sweet spot is co-leading or leading seed rounds (usually a round of $1-5m). They seek to back exceptional founders who are building products that “re-imagine” work and personal life in large and growing markets. Check Size: Min. $500,000 — Sweet Spot $1-5M — Max. $7,500,000 Fuel Capital Fuel Capital is a California-based early-stage venture fund focused on consumer, SaaS, and cloud infrastructure companies. Their goal is to open doors for founders who have the potential to change the world, and provide them with more value than capital could buy. Check Size: Min. $500,000 — Max. $1,000,000 Second Century Ventures Second Century Ventures is focused on promoting innovation in the real estate industry. SCV prefers SaaS companies generally focused on big data applications, digital media, fintech and business services that can span multiple verticals and geographies. Check Size: Min. $1,000,000 — Max. $5,000,000 .406 Ventures .406 Ventures is an early-stage venture capital firm that invests in innovative IT and services companies founded by the finest entrepreneurs. They typically are the lead, first institutional investor in early-stage and de novo investments in market-changing IT Security and Infrastructure, Technology-Enabled Business Services, and Next-Generation Software companies. Check Size: Min. $2,000,000 — Max. $6,000,000 Freestyle Capital Freestyle Capital is a seed-stage investor and mentor for Internet software startups. They make just 10-12 investments each year, to support their founders and portfolio companies. Check Size: Min. $1,000,000 — Sweet Spot $1,500,000 — Max. $7,500,000 Checks over $10,000,000 Insight Partners Insight Partners is a leading global venture capital and private equity firm investing in high-growth technology and software ScaleUp companies that are driving transformative change in their industries. Check Size: Min. $10,00,000 — Max. $350,000,000+ Summit Partners Summit Partners invests just about everywhere in the world. They are led by 27 managing directors with an average of 14 years of experience. They ultimately are looking to accelerate growth in companies and achieve very dramatic results. Check Size: Min. $10,00,000 — Max. $500,000,000 Explore thousands of different VCs by their check sizes, geographies, verticals, and more at Visible Connect! Related Resource: How to Find Venture Capital to Fund Your Startup: 5 Methods

What is a restricted stock unit? Restricted Stock Units or RSUs are forms of compensation issued to employees by an employer founder. This compensation is issued in restricted company shares. Shares are restricted because their value is limited by a vesting plan. After a set amount of time laid out in a vesting plan occurs, a certain amount of shares becomes accessible and valuable. RSUs give employees interest in a company but will not be worth their full value until the full vesting period is complete. RSUs will always have value due to their underlying shares. What is a restricted stock award? Restricted Stock Awards or RSA’s are given to the employee on the day they are granted. They do not have to be earned via a vesting schedule like RSUs do. The employee “owns” the stock associated with the RSA on the grant date. However, they may still have to purchase them, depending on the nature of the offer. This purchase contingency is why RSAs are considered “restricted stock”. RSUs vs RSAs for startups Overall, restricted stock in the form of RSUs or RSAs can be a value-add for startups and a great way to incentivize talent employees to join the team. RSUs are not purchased at grant date but instead have a timed vesting period as well as other vesting conditions before they are owned outright. RSAs are purchased on the grant date but still typically have time-based vesting conditions. Unvested RSUs are given up when an employee is terminated and RSAs are available for repurchase when an employee is terminated. RSAs are typically granted to early employees before funding rounds with additional equity payouts and RSUs are typically granted to employees after funding is taken on. What the differences are important to understand RSUs and RSAs are two common terms to understand in the startup landscape. RSU stands for “Restricted Stock Unit” and RSA stands for “Restricted Stock Award”. Understanding the difference is key when building and operating a startup. While both RSUs and RSAs are forms of restricted stock, they are different and serve different purposes. In general, restricted stock is owned from the day it is issued and does not need to be purchased. However, because it is restricted, it needs to be earned. How do restricted stock units work? RSUs became popular in the early 2000s after a variety of executive fraud scandals occurred across the market. With it’s vesting limitations, RSUs have become a popular option for compensating leadership and early employees without the risk of providing full stock upfront. RSUs give an employee interest in company stock but they have no tangible value until vesting is complete and typically vesting plans are staggered so that only a certain percentage of shares vest at a time. For example, if an employee has a 4 year vesting period with a 1 year cliff, they would only walk away with 25% of their promised shares after a year of employment (or none if they leave or are terminated prior). RSUS are also structured with limits in case termination occurs that can override vesting or cliff rules. The restricted stock units are assigned a fair market value when they vest. When RSUs finally vest, they are considered income, and a portion of the shares is withheld to pay income taxes. When the employee receives the remaining shares and can sell them. If an employee is terminated, they keep any of their vested shares but the company can purchase back the unvested shares. Like any potential compensation option, RSUs have pros and cons to their structure and offering. Some Pros of offering RSUs include: Long Term Incentive – because of the standard vesting period of 4 years, generous RSU packages can be helpful in incentivizing top talent to stick around longer, put in more effort to grow the company, to ultimately claim their full offering of stock at the highest possible value. Low-Impact: The admin work and back-end management of RSUs is minimal compared to other, more complicated stock incentive plans. RSUs also allow a company to defer issuing shares until the vesting schedule is complete. This helps delay the dilution of its shares. Related Resource: Everything You Should Know About Diluting Shares Some Cons of offering RSUs include: No Dividends: Because actual shares are not allocated, RSUs don’t provide dividends to the stock holders. However this means that the employer issuing the RSUs needs to pay dividends in an escrow account that can help offset withholding taxes or be reinvested. This is something to keep in mind as a potential founder offering RSUs. Income Restrictions: RSUs aren’t taxable until they vest. So employees can’t pay taxes before vesting as the IRS doesn’t consider unvested RSUs to be tangible property. Shareholder Voting Rights: RSUs don’t grant the shareholder voting rights or input into the company until they are fully vested. How do restricted stock awards work? Restricted Stock Award shares are given to the employee on the day they are granted. While RSUs are more commonly awarded to general employees, RSAs are more common with early employees at a startup before the first round of equity financing. Instead of a timed out vesting period that portions out the stock like in an RSU, an RSA is the lump sum awarded on one date (although that may still be time-based). Vesting still applies in a different way to RSAs. Vesting only impacts a receivers RSAs if they are terminated or leave the company allowing the company to potentially purchase back the shares. The vesting is less about the employee owning the stock as the RSA is owned but about the ability to retain what is owned. However, there are usually time-based rules associated with RSAs so that the shares may expire if certain requirements, specifically financial requirements, aren’t reached. Most companies have vesting schedules in place to prevent individuals from joining a company, receiving their RSA award, and leaving immediately. Most RSA pros and cons are fairly similar to RSUs as RSAs are simply another form of restricted stock. How are restricted stock units taxed? With restricted stock, it’s important to consider two types of taxes: regular income tax and capital gains tax. Taxing on restricted stock is complex but the basic underlying factor of income still applies – anything that a company pays an employee is taxable. For RSUs, regular income taxes are paid when the recipient shares vest. How are restricted stock awards taxed? For RSAs, the receiver has to pay for them outright so when the vest date rolls around there are no additional taxes to pay on the shares themselves unless they change value. The RSA receiver will only need to pay taxes on the gains in value of the shares. The tax on gains between grant date and vesting will be income tax. The tax on gains between vesting and sale of those shares will be capital gains tax. An election called the 83(b) election can be selected on a tax form which means the recipient can pay all their ordinary income tax upfront. The 83(b) election is eligible for RSAs not RSUs.

On episode 8 of the Founders Forward Podcast we interview Nate Turner, Co-Founder of Ten Speed. Ten Speed helps “companies accelerate funnel growth by quickly growing traffic to existing content.” Prior to starting Ten Speed, Nate was the VP of Acquisition & Marketing Operations at Sprout Social (and their first marketer). Nate helped take Sprout Social from a modest startup doing a $100k in revenue to a publicly traded company doing over $100M in revenue during his time there. About Nate Nate leveraged SEO and other top-of-funnel growth tactics to help Sprout Social become the software juggernaut it is today. He has taken his learnings to Ten Speed where they help startups optimize existing and create new content to grow all aspects of their funnel. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Nate. You can give the full episode a listen below (or in any of your favorite podcast apps). What You Can Expect to Learn from Nate How Nate helped Sprout Social scale revenue to $100M+ How product impacts pricing and revenue How Sprout Social won in a crowded market How organic search can be a lever for growth Why companies should optimize existing content to grow organic traffic How early stage founders should think about budgeting for SEO and written content The biggest mistake he sees early stage companies make with SEO Related Resources Ten Speed Nate’s Twitter Nate’s LinkedIn

San Francisco and NYC hold the largest amount and value of venture investing across the US. However, with a plethora of urban areas, Texas is continuing to offer venture funding at a rapid pace. We will evaluate various VCs who are involved throughout Austin, Dallas, Houston, and San Antonio. To keep an eye on Texas-based investments we wanted to share which venture capitalists are geologically active.Visible Connect is our investor database. Connect allows founders to find active investors using the fields we have found most valuable, including: Check size — minimum, max, and sweet spot Investment Geography — where a firm generally invests Board Seat — Determines the chances that an investment firm will take a board of directors seat in your startup/company. Traction Metrics — Show what metrics the Investing firm looks for when deciding whether or not to invest in the given startup/company. Verified — Shows whether or not the Investment Firm information was entered first-handed by a member of the firm or confirmed the data. And more! Using Visible Connect, we’ve identified the following investors, segmented by Austin, Dallas, Houston, and San Antonio. Search through these investors and 11,000+ more on Visible’s Connect platform. S3 Ventures With over 14 years of investing experience, S3 targets startups with a focus on Business Technology, Consumer Digital Experiences, and Healthcare Technology. S3 has branded themselves as “The Largest Venture Capital Firm Focused on Texas.” Led by Brian Smith, S3 invests between $250k – $10M. To learn more about S3 Ventures check out their Visible Connect profile. View Profile Santé Ventures Santé invests at the intersection of health care and technology. Douglas French, Joe Cunningham, and Kevin Lalande are the three founding, managing directors of the Austin-based firm. Santé often leads entry-level rounds and is on the mission to improve people’s lives with every investment. To learn more about Santé Ventures check out their Visible Connect profile. View Profile ATX Venture Partners ATX looks to invest in post-revenue companies with initial investments ranging from $300k – $3M. With a focus on the central-south US, ATX has always had a people-centric view and looks to drive performance through each of their investments. Brad Bentz, Danielle Weiss Allen and Chris Shonk lead the firm as Co-Founders and Partners. To learn more about ATX Venture Partners check out their Visible Connect profile. View Profile LiveOak Venture Partners LiveOak is a premier seed and series A investor that looks to invest into teams. They focus primarily on tech-enabled businesses based in the Texas area. With over 15 years of VC experience, LiveOak has invested over $200M into Texan companies. Initial heck sizes range between $500k and $5M. To learn more about LiveOak Venture Partners check out their Visible Connect profile. View Profile Next Coast Ventures Next Coast is a forward-thinking VC with over 30 investments. They follow investment themes relating to software, future of retail, communities, future of work, marketplaces, and self-care. They also run a blog with resources for founders and insight into their VC’s direction. To learn more about Next Coast Ventures check out their Visible Connect profile. View Profile NEXT VENTŪRES NEXT VENTŪRES invests in the sports, fitness, nutrition, and wellness markets. Managed by Lance Armstrong, Lionel Conacher, and Melanie Strong, NEXT has a focus on passion and energy. NEXT is open to investments all over the world and offers check sizes between $500k and $3M. To learn more about NEXT VENTŪRES check out their Visible Connect profile. View Profile RevTech Ventures RevTech is all about investing in the future of retail. RevTech looks to lead or follow onto deals at the pre-seed and seed level. Initial checks are around $100k and follow on capital ranges anywhere from $200k to $4M. David Matthews is the Managing Director. To learn more about RevTech Ventures check out their Visible Connect profile. View Profile Goldcrest Capital Led by Adam Ross and Daniel Friedland, Goldcrest invests into private tech companies. They have logged over 20 investments and typically write checks between $1M and $10M. To learn more about Goldcrest Capital check out their Visible Connect profile. View Profile Perot Jain Perot Jain has a focus on US-based companies that are tech-enabled. They offer up to $500k in initial checks to B2B businesses throughout seed and early-stage investments. The investment firm is led by Ross Perot Jr and Anurag Jain. Perot Jain ultimately partners with bold and innovative entrepreneurs. To learn more about Perot Jain check out their Visible Connect profile. View Profile Work America Capital Work America Capital invests in Houstonians and Houston-based businesses by partnering with high-potential, talented leaders with a passion for building a business. Work America invests more than just capital. They look to offer coaching and mentoring to new business leaders. They are managed by Mark Toon and Jeffrey Smith. To learn more about Work America Capital check out their Visible Connect profile. View Profile Vesalius Ventures Vesalius Ventures focuses on the intersection of medicine and emerging technology. As they focus on both early and mid-stage companies, Vesalius looks to offer both capital and management help to various health tech companies surrounding Texas. To learn more about Vesalius Ventures check out their Visible Connect profile. View Profile Active Capital Active Capital has been investing in B2B SaaS companies for over 20 years. Active looks to participate in pre-seed and seed rounds, as they invest anywhere between $100k to $1M. They have an extensive and successful list of portfolio companies outside of Silicon Valley. To learn more about Active Capital check out their Visible Connect profile. View Profile Texas Next Capital Texas Next has long created profitable companies throughout the industries of oil & gas, ranching, agriculture and real estate — which have stood as staples of the state. Their strategy is to invest directly into Texas, partner with Texas leaders/investors, and focus on small businesses. To learn more about Texas Next Capital check out their Visible Connect profile. View Profile To view Texas-based VCs and over 11,000 other global VCs, visit Visible Connect!

On episode 7 of the Founders Forward Podcast we welcome Cheryl Campos, Head of Venture Growth and Partnerships at Republic. Republic is a crowdfunding platform for startups. It allows founders to access a wide range of angel investors and small check investors. Cheryl has been there for 3+ years and has watched the market transform and become a popular funding option for startups. About Cheryl Cheryl started at Harvard and went into banking but eventually landed at Republic. Over the course of her 3 years at Republic (even in just the last 90 days) the crowdfunding market has radically changed as more individuals are able to invest. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Cheryl. You can give the full episode a listen below (or in any of your favorite podcast apps). What You Can Expect to Learn from Cheryl How she went from banking to working for a startup How recent regulation changes have impacted crowdfunding What kind of companies generally succeed on Republic How the rates are structured at Republic How founders can leverage their crowd investors The importance of network effects How “community” is reshaping go-to-market and marketing Related Resources Chery’s Twitter Cheryl’s LinkedIn Republic Community Fund The Founders Forward is Produced by Visible Our platforms helps thousands of founders update investors, track key metrics, and raise capital. Try Visible free for 14 days. Related resource: Understanding The 4 Types of Crowdfunding

On episode 6 of the Founders Forward Podcast we welcome Yin Wu, CEO and Founder of Pulley. Pulley is a cap table platform for hyper-growth startups. Pulley is the third company that Yin has started so it is safe to say she knows the ins and outs of building a startup. About Yin With her first 2 startups successfully exiting Yin has her eye’s set on a new market and issue that all founder face — cap tables and valuations. During her first bouts as a founder Yin had the realization that “no one starts a company because they want to pair this spreadsheet. You start a company cause there’s this vision, this idea that you want to bring it to this world.” In addition to sharing her learnings from building 3 companies, Yin also shares how founders should think about fundraising, cap table management, and distributing equity. Our CEO, Mike Preuss, had the opportunity to sit down and chat with Yin. You can give the full episode a listen below (or in any of your favorite podcast apps). What You Can Expect to Learn from Yin Why Pulley wants to lower the bar to make it easier for founders to start a company Why founders should own 20% of their company by the time they raise a Series A Why they believe founder led companies are more successful in the long run How they are approaching hiring, mostly past founders, at Pulley How they are building their culture at Pulley How they approached their $10M funding round at Pulley What she learned from going through Y Combinator 3 times Related Resources Yin’s Twitter Yin’s LinkedIn Pulley The Founders Forward is Produced by Visible Our platforms helps thousands of founders update investors, track key metrics, and raise capital. Try Visible free for 14 days.

Businesses are formed through a number of different methods and structures. Different business structures are selected for a number of reasons: decision-making structures, financial implications, tax adjustments, flexibility, etc…One common example of a business structure or investor structure is the Limited Partnership or an LP. Let’s explore what exactly a Limited Partnership is, and the Pros and Cons of working within this specific structure. What Is a Limited Partnership? A Limited Partnership is a business partnership of 2 or more partners. Limited Partnerships are made up of partners that contribute a significant financial investment to the business. There are a few specifications that make a Limited Partnership what it is. Within the partnership, there is always 1 General Partner while the remaining member or members of the LP are considered Limited Partners. Beyond the breakdown of how the members of the LP are structured and held responsible, an LP operates in a few specific ways. For starters, they are pass-through entities. This means that the Limited Partnership itself is not subject to corporate income tax. Instead, the LPs profits flow through to the owners or members, or in this case Partners, and then those profits are taxed under individual income tax laws. Most states in the U.S. have specific laws governing the formation of LPs and most states require some form of registration of said LP with that state’s Secretary of State. Typically, LPs are formed as an ideal structure to raise capital for a particular set of investments that ensures limited liability for most members of the LP to protect losing more than they invest and maximizing their opportunity for gains. In tech, LPs are a common structure for many Venture Capital Firms or Private Investment Firms. In summary, remember these key takeaways about LPs: LPs have at least 2 members A Limited Partnership always has a General Partner while additional members are Limited Partners. LPs are pass-through entities. LPs protect most members’ assets with losses only ever being possible for the amount initially invested. Limited Partnerships are a great structure for raising capital for large, potentially risky investment opportunities – like software and technology companies. Related Resource: The Understandable Guide to Startup Funding Stages Related Resource: 6 Types of Investors Startup Founders Need to Know About How Does a Limited Partnership Work? Diving in more specifically to the structure of a Limited Partnership’s members, it’s critical to understand the difference between the General Partner and the Limited Partner(s). The General Partner oversees and runs the business including the day-to-day operations and management of the business, it’s activities, and it’s investments. Additionally, the General Partner takes on unlimited liability for the debt of the business as well as any obligations or activities as outlined in the partnership. The Limited Partner or Limited Partners do not make any decisions in the execution and operation of the business. However, they only have limited liability for the debt of the business, with liability only up to the amount they invested. Limited partners are sometimes known as passive or silent investors since they have no stake in the business and are more like general company shareholders with the type of influence they can have on the operations of the business. How Do You Form a Limited Partnership? The process of forming a Limited Partnership is fairly straightforward. As mentioned above, most states require Limited Partnerships to be registered with the state’s Secretary of State. So for most LPs in most states, the first step to forming an LP is to file as an official LP within the state your LP will be based in – the state your LP is registered in doesn’t mean that is where all your Limited Partners have to be residing, as they will pay individual income tax in their respective states, but it is where your LP will be registered to operate or where your LP will be headquartered. As part of registration with your Secretary of State, most states will require the LP to pay a filing fee. When an LP is officially recognized by the state government, the Limited Partnership will be granted a Certificate of Limited Partnership. This certificate includes the names and addresses of the general partner or partners, the street address of the LLP’s principal office, and a brief, formal statement of the partnership’s business. After the legal registration is complete, the next step to forming a Limited Partnership is to create a Limited Partnership Agreement. The LP Agreement will be a formal, legal document that governs how much ownership each Limited Partner has in the partnership, any partnership limitations or agreements that the General Partner must adhere to, and any other miscellaneous terms of the partnership. The Limited Partnership Agreement will serve as the foundational, fundamental outline of how your newly formed LP will operate. What to Include in a Partnership Agreement The Limited Partnership Agreement is a critical part of the formation of an LP. There are a number of pieces of information that should be included in a standard partnership agreement. Business Name: The formal name of the Limited Partnership should be clearly outlined at the heading of the partnership agreement. Business Purpose: The goal of the Limited Partnership should be outlined within the agreement. This should include the reason for establishing the LP as well as the purpose this LP will serve – what it’s investing in or why it’s formation will be a positive outcome for said business projects or initiates it will impact. Partner Structure: The Partnership Agreement should list out the roles and responsibilities of the General Partner and the Limited Partner(s). The agreement should also include the existing names of the GP and any current LPs – this can be amended at a later date if more LPs join or some exit the Limited Partnership. In addition to just outlining the specific roles of each partner, the partnership agreement should outline how specifically partners can leave the partnership. Ownership shares and capital contributions: This section of the Partnership Agreement should outline the specific capital contributions of the LPs within the Limited Partnership, as well as the equivalent ownership stake and shares that each LP is granted. This section should also cover how specifically any profits or losses will be divided among partners depending on their contributions and partnership status (Limited or General). Voting Rights and Decision Structure: Clearly outline how decisions within the partnership will be made. If there are voting rights for members beyond the General Partner(s) outline that. Additionally, outlining a plan for decision making should the GP have any trouble upholding their role or need to step down for any reason. Dissolution Guidelines: Like any business, not all LPs are going to have a successful outcome or last forever. As your forming your Limited Partnership, clearly outline what will happen should the lP ever dissolve – outline how assets will be divided, how knowledge will be dispersed, and any other structural outlines or decisions will be made. What Is An Example of a Limited Partnership Business? Now that we’re clear on what a Limited Partnership Business is and have the basics for the formation of one, it’s important to understand the types of businesses that may benefit from being established as Limited Partnerships. Commercial Real Estate Projects – Real estate, especially commercial real estate, typically requires a lot of capital up front in order to get a project off the ground and finished. This makes large commercial real estate projects a great candidate for a Limited Partnership Business. An experienced real estate investor or contractor may choose to form an LP for a large commercial project and serve as the general partner if the know space and market and are confident they can get a return. The LP structures secures that project capital up front from the limited partners and allows the general partner operators, maybe a lead investor or contractor or even construction company, to front the risk and manage the project. Estate Planning Businesses – If someone has a large estate that will need to be divided up and passed on, an LP is a good option to ensure this is done fairly and efficiently. An LP for an estate can ensure one primary partner is responsible for managing said estate and any ongoing businesses tied to that estate, while the Limited partners of said estate can benefit financially from a few very specific entities or allowances from said estate but will have no governing control of the assets. This LP is a great way for someone to ensure their estate is properly taken care of after they pass. Family Businesses – A business looking to operate without any external partners or investors, but rather, keep all financial stake within the business to family funds or money is a great candidate for a Limited Partnership. Within a family owned business, a specific family member can be designated as the General partner of the business and ensure all operations of the business run smoothly, while family money from other members serving as limited partners can finance the business. This keeps debt tied to the family vs. taking on any additional, outside debt. Limited Partnership Pros and Cons Like all business structures, there are pros and cons to forming a Limited Partnership. Pros Easy to Create – With essentially a 3-step process (Register with the state, pay a feel, write up an agreement), LPs are one of the easiest business types to create. This makes forming an LP as a way to fund and launch a business a great option. Additionally, LPs don’t come with formal reporting requirements like annual board meetings or shareholder meetings. The General Partner of the LP will handle decisions as clearly outlined in the partnership agreement. Personal Liability Protection – For the majority of stakeholders in an LP, the limited partners, there’s a limit to what they are liable for in the business. As stated, limited partners are only liable for the amount up to their investment so the risk is a lot more black and white and much less risky than other investment opportunities or business structures for the majority of stakeholders in an LP. Pass Through Entity – There is no self-employment taxes for limited partners and there are no corporate taxes for LPs, all partners are taxed with standard income tax so the financial structure of an LP is extremely straightforward and attractive for the participants. Less Formal – Outside of outlining the guidelines between the General Partner(s) role and the Limited Partner(s) role, there aren’t a lot of required formal structure or guidelines for running an LP. This allows LPs to be one of the most informal options for running your business which for many types of businesses is a great benefit, especially if the business is straightforward and extra structure or obligations would be unnecessary or frivolous. Cons Unlimited Personal Liability for the General Partner – While the Limited Partners benefit greatly from an LP structure, an General Partner in an LP is taking on unlimited personal liability with the business. This can be a huge risk and be extremely detrimental to a personal finance situation if said business does go under or doesn’t pan out as intended with its specific investments. For a lead investor to take on a GP role, the risks of unlimited personal liability are certainly something to consider. Limited Partner Participation – If having a stake in decisions about yoru investments is important to you, then investing as a limited partner in an LP could be a major con. Limited partners don’t have any say or influence on what happens within the LP which can be a con if you end up not liking the outcome of certain GP decisions or existing investments or outcomes within your LP. Ownership Changes – LPs come with a number of challenges with ownership and leadership. On the leadership side, it’s not a flexible structure for bringing in new management. Based on the way LPs and GPs are determined, from financial and liability stake, it’s not a straightforward process to bring in new operators – it requires a certain amount of financial contribution and changes ot the limited partnership agreement. On the ownership side, this also makes it hard to transfer to other investment entities like LLCs due to the way the capital and liabilities are divided out. An LP may not be the right structure if selling the business is part of the end game plan. After diving into the details of Limited Partnerships, how they are structured, and the pros and cons of selecting a Limited Partnership to establish your business, you may still have a few questions on the mind. Limited Partnership: Frequently Asked Questions (FAQ) How Are Limited Partnerships Taxed? LPs will not pay income tax. They are pass-through organizations so the individual partners of the LP will pay income taxes on their investments, earnings, and losses. How Do Limited Partners Earn Returns? Limited Partners will earn returns via dividends when their investments via the LP produce returns. Limited Partners will receive dividends in proportion to how much they invested in the Limited Partnership business. What Securities Laws Are Limited Partnerships Subject To? In general, LPs are subject to all state and federal security laws and must be registered unless a clear exemption is stated and available in their state or at the federal level for their specific business. What Is the Difference Between a Limited Partnership and a Sole Proprietorship? A sole proprietor is someone who owns an unincorporated business by themselves. A Limited Partnership requires at least 2 partners – a general partner and a limited partner – but may have more than 2 partners as well. What Is the Difference Between a Limited Partnerships and an LLC? An LLC, or a Limited Liability Company, is a company where there is limited liability to all owners. This differs from an LP because there is not one sole partner that has unlimited liability, so all members of an LLC have more protection for their investments. Both types of businesses are pass-through businesses from a taxation perspective. Find and Secure Funding for Your Limited Partnership With Visible Collect KPIs and metrics from portfolio companies, add investment data, and built beautiful reports and Updates to share with your limited partners all from one platform — learn how venture capital firms are leveraging Visible to level up their LP communication and fundraising efforts here. Related Resource: Investor Outreach Strategy: 9 Step Guide

On episode 5 of the Founders Forward Podcast we welcome Kyle Poyar, VP of Growth at OpenView Ventures. OpenView Ventures is an expansion stage venture firm with an extreme focus on software (SaaS) companies. Unique to OpenView is their team of in-house experts, like Kyle, that portfolio companies can call on to help tackle a growth issue. OpenView coined the term product-led growth. If there is one person who knows the ins and outs of PLG, it’s Kyle. About Kyle As Kyle and the team at OpenView continue to help SaaS companies grow and become market leaders he has seen it all. From the early days of defining PLG and the impact of COVID-19 Kyle is full of first-hand stories and the data to back it up. In addition to learning the basics of PLG we had the opportunity to dive into OpenView’s annual SaaS survey, the 2020 Expansion SaaS Benchmarks Survey, and uncover trends in 2020 and discuss what lies ahead for 2021. Mike Preuss, CEO of Visible, had the opportunity to sit down and chat with Kyle. You can give the full episode a listen below (or in any of your favorite podcast apps). What You Can Expect to Learn From Kyle Define and understand product-led growth Why PLG is more a “dimmer switch” than an “on or off switch” How public PLG companies are performing What channels perform the best for PLG companies Why PLG companies are extremely good at SEO Why PLG companies start growing most efficiently at $5M ARR How to compensate product leaders How to find the right VCs for your business Related Resources Kyle’s Twitter The 2020 OpenView SaaS Expansion Benchmark Survey The OpenView Labs Blog

On episode 4 of the Founders Forward Podcast we welcome Aishetu Dozie, CEO and Founder of Bossy. Bossy is a cosmetics brand with an intense focus on community and empowering women. Aishetu has years of experience in banking (at just about every major firm) and was looking for a new direction. She enrolled in a Stanford program and the rest is history. About Aishetu As Aishetu continues her founder journey she is learning and growing along the way. From her struggles to raising venture capital to supply chain issues amid COVID Aishetu has tackled every problem thrown at her. The conversation does not stop at bootstrapping Bossy — Aishetu shares all sorts of amazing stories on own personal life and journey as a founder. Plus, she was recently featured on How I Built This so we were particularly thrilled to hear about her experience. Mike Preuss, CEO of Visible, had the opportunity to sit down and chat with Aishetu. You can give the full episode a listen below (or in any of your favorite podcast apps). What You Can Expect to Learn From Aishetu How she transitioned from banking to beauty How Aishetu has faced the struggles of 2020 How Bossy has built a community How Aishetu has bootstrapped Bossy How being a guest on How I Built This impacted her business Related Resources Bossy Beauty Aishetu’s Twitter Aishetu’s How I Built This Episode Bootstrapping 101: Pros & Cons of Bootstrapping Your Startup We created the Founders Forward Podcast to learn from people like Aishetu. For founders looking to learn from a newly minted founder that is figuring it out, Aishetu has you covered. As you scale your business, having the right guides at your side can make all of the difference. Each episode we’ll talk to fellow founders, investors and experts. We’ll dive into their zone of genius as well as hear about their past mistakes to give you a better chance of success.

What is Private Equity? Making the decision to take on external funding should not be taken lightly. A decision to bring on additional capital and more importantly, where that capital comes from, can make or break a business if not fully understood. Two types of investment that a new business or startup might consider are private equity and venture capital. Private equity and venture capital play critical roles in a company’s growth. At their core, private equity and venture capital may seem similar, however, the types of companies each type of funding typically invests in and how much they invest differ quite a bit.The firms involved in each type of funding are very different as well. It’s important to know the differences between them if you are a founder looking to take on new funding. At the simplest level, private equity is capital that is invested in a company or other type of private entity that is not publicly listed or traded. More detailed, private equity is a compilation of funds sourced from firms as well as high net-worth individuals. The purpose of these firms is to invest in private companies by buying large amounts of shares. Additionally, private equity can also mean buying the majority of a public company with the intention of taking it private and delisting it from the public stock exchange. The majority of the private equity world is dominated by large institutional investors. These large institutional investors typically include large private equity firms and pension funds. A pension fund is any plan, fund, or scheme which provides retirement income. These funds are typically larger and well equipped to be invested into private companies. How Does Private Equity Work? Private equity firms hold roughly $4 trillion assets annually. The breakdown of private equity investments comes from two major types of investors. The two types of private equity investors are: Institutional investors, primarily pension funds or major banks Large private equity firms The typical goal of private equity investments is to gain control of a company through a full buy-out or a majority investment in said company. With total control being the main focus and purpose of private equity investments, lots of capital is needed. Therefore, typically the funds involved in private equity need to be large and stable. Large private equity funds and institutional investors are made up of accredited investors. Most private equity funds have a minimum requirement. These minimum requirements set the minimum amount of money that an accredited investor must commit to the fund in order to be a part of the fund. These minimums are significant. A standard one might be $250,000 – $500,000. Private equity firms focus on two main functions. These functions are deal origination and management, and portfolio oversight. refers to managing overall deal flow. This is done by relationship management and deal management – creating, maintaining, and developing relationships with M&A (Merger and Acquisitions) intermediaries, investment banks, other transaction professionals in the space. This focus allows private equity firms to build a strong network for referrals and new opportunities to invest and purchase companies. In the robust M&A landscape, it is also common for private equity firms and institutional investors to employe folks specifically focused on prospecting companies where a future opportunity to buy or invest could occur. Portfolio oversight is the overall management of all active investments in the private equity firm’s workflow at any given time. Any active investments make up a portfolio. Managing that day in and day out consists of advising and directing revenue strategies, monitoring profitability, making hiring and executive decisions, and overall monitoring if the portfolio is balanced and profitable. The level of work in each investment will vary depending on how large and what stake of ownership the firm has. Financial management will be the main focus but IT procurement and operational tasks are typically part of that as well. Outside of traditional large cash, equity or debt investments, a common strategy for private equity firms is the leveraged buyout strategy or LBOs. An LBO is a complete buy-out where a company is bought out by a private-equity firm, and the purchase is financed through debt. The collateral for that debt is the company’s operations and assets. Examples of Private Equity Firms Holding trillions of dollars in capital, there are plenty of private equity firms out there. The top 10 globally are: The Blackstone Group Neuberger Berman Group LLC Apollo Global Management Inc. The Carlyle Group Inc. KKR & Co. Inc. Bain Capital LP CVC Capital Partners Warburg Pincus LLC Vista Equity Partners and EQT AB. Most of the largest firms have global offices spanning New York to San Francisco to Hong Kong to Paris and many other major hubs in between as well as across all populated continents. On the institutional investor side, JP Morgan Chase, Goldman Sachs, and Citigroup are all prominent players within the private equity space as well. Private Equity Backed Companies Private Equity firms can invest in a variety of different types of companies. A few examples of well-known companies that are backed by private equity firms include: Hostess Brands – the sweets company ADT Inc. – a leading provider of monitored security Qdoba – the fast food brand Infoblox – software security Marketo – sales and marketing software Powerschool – education technology LogicMonitor – SaaS performance monitoring What is Venture Capital? Venture capital is also a form of private funding. More specifically, venture capital is funding given to startups or other young and new businesses that have the potential to break out of their category and grow rapidly, finding success. Venture capital funding typically comes from wealthy individual investors, banks, or other financial institutions. Notably, a venture capital investment is typically financial but could also be an offer of technical or managerial experience. Venture capital is all about the risk and reward balance. Venture capital investors invest in companies that have not proven success yet but show major potential and the opportunity to make back higher than typical returns if the company delivers at the high potential the venture capitalists believe that it will. Related Resource: 12 Venture Capital Investors to Know Related Resource: Miami’s Venture Capital Scene: The 10 Best Firms Related Resource: 8 Most Active Venture Capital Firms in Europe Related Resource: Breaking Ground: Exploring the World of Venture Capital in France Related Resource: 7 Best Venture Capital Firms in Latin America Related Resource: Exploring the Growing Venture Capital Scene in Japan How Does Venture Capital Work? Venture capital in a nutshell is private equity but specifically for small startups and new companies with high-growth potential in the technology, biotechnology, and clean technology spaces. Venture capital is technically a form of private equity, however, it is a type of investing that is normally all equity and smaller investments than other private equity investments. The main differentiator is that venture capital is focused on high-risk, high-reward scenarios. There are three main types of venture capital financing: Early-stage – this is typically a small amount of funding, potentially in a seed round, that allows a startup to finish building a product or service offering, qualify for a loan, or in some cases kick-off early stage operations. Expansion – this type of venture funding is typically a higher capital amount that will allow a startup to scale rapidly. The type of funding might be seen at a Series A or larger. Acquisition – this type of funding may be purposed specifically for financing the buyout of another company or competitor in that startups space. It might also be used to develop a new type of product or launch a new line of business within their company. Just like private equity firms, venture capital firms offer capital for equity. Investors from venture capital firms often take board seats as part of their ownership / equity stake in a company. Venture capital firms typically raise set funds with teh intention of investing those funds over the course of a set period of time. The funds are typically made up of individual investments from limited partners, or wealthy individuals, banks, or other institutional investors. LPs invest their money in venture capital firm’s funds because they are looking for high-growth returns and trust the venture capital firms to make those investment decisions for them. Venture capital firms typically employ a staff dedicated to researching the potential investments that could be made. Because of the high-risk high-reward industries that VCs work with, due-diligence and detailed research is crucial to eliminate as much risk as possible before investing firm dollars in a startup. Examples of Venture Capital Firms With tech startups historically being founded in the Bay Area and other major metro hubs like New York City, a large portion of VCs are based on the coasts. A few well-known venture capital firms include: Bessemer Venture Partners Sequoia Capital Andreesen Horowitz GGV Capital Index Ventures Founders Fund and IVP Related resource: Understanding the Role of a Venture Partner in Startups Examples of VC backed companies Most high-growth, successful tech companies, especially SaaS companies, are venture backed. Well known venture-backed companies include: Pinterest – the visual bookmarking tool LinkedIn – world’s largest professional network Yelp – online directory for local restaurants, services, retail, reservations and recommendations Docusign – digital documents Hubspot – marketing and sales software Instagram – photo sharing social platform Private equity vs venture capital for startups The main difference between private equity and venture capital comes down to size and risk. What Private Equity Firms are Looking For (in startups) Private Equity firms typically are looking for large companies with a proven track record to buy. They are looking for mature businesses where the model is proven out. These large or more mature companies may be failing for one reason or another. Even if a company is not necessarily failing but instead has plateaued their growth, a private equity firm would look to buy the company and streamline operations to make it more capital efficient, cash positive, and profitable. Private equity firms mostly buy 100% ownership of the companies in which they invest. Typically then the companies are in total control of the firm after the private equity buyout. Private equity investments are also typically a minimum of $100M for one single company. There are no limits for the type of companies private equity companies can invest in. In addition to equity, private equity firms may structure investments with debt and cash. Related resource: Dry Powder: What is it, Types of Dry Powder, Impact it has in Trading What VC Firms are Looking For (in startups) Venture capital is typically invested in a new company with high potential. This could be a small startup or a larger scaling startup that has yet to reach profitability but is showing major upside and potential. Unlike private equity, venture capital firms typically invest less than 50% in any one company or investment. Due to the high-risk nature of the companies they are investing in, they typically like to spread the money in their funds across many different investments to increase their chance of success and high return. The investments from venture capital firms are typically less than $10M per investment. Venture capital firms are limited to startups in technology, biotechnology, and clean technology. Additionally, venture capital firms typically only invest with equity. For startups early on in their journey, venture capital is typically where they might seek investment. This is due to the early risk of their companies as well as the desire to maintain majority control in their companies management and direction as they build. Down the line, a startup may end up in the position where their only option is to give away the majority stake in their company to inject capital into the business to keep it afloat. Related Resource: Understanding the 9 Types of Private Equity Funds Related Resource: Accredited Investor vs Qualified Purchaser Critical differences between venture capital firms and private equity firms The difference between private equity and venture capital matters because the type of investor a company brings into their business can completely shape the outcome and ultimate goal of the company. Understanding your desire to IPO, get acquired, or stay private are critical to consider before seeking different types of funding. Ownership and advisory can make or break a successful company as well as change the type of value and long-term financial success of the founders or initial employees. Related Resource: How to Choose the Right Law Firm for Your Startup When to seek out Private Equity vs Venture Capital As a startup, it’s important to understand when to seek out private equity or venture capital backing throughout your company’s journey. Taking on the right type of investors (or not) at the right time is critical for long-term success. Startups in the tech space will most commonly seek out venture capital funding first. If a startup is in the tech space and is aiming to grow quickly and make it big or believes it has the potential in a large market to take a large market share, venture financing makes sense as it allows that company to scale quickly without giving up too much equity or majority stake. Companies in a position where they heed a large injection of cash, are not in the startup technology space, or are not high-risk, might make more sense to seek funding from a private equity firm. This type of investment may lead to a larger stake of control being put forward but with more stable and long-term financing options. Visible can help your startup report out important updates to your investors (private equity or venture capital!). Learn more here. Related Resource: Exploring the Top 10 Venture Capital Firms in New York City Related Resource: Chicago’s Best Venture Capital Firms: A List of the Top 10 Firm