Avoid a Broken Cap Table

SDS 025: Navigating Startup Crises

Hey! thank you for reading issue 025 of Startup Definition Sunday (SDS).

SDS is the newsletter for founders, bringing you clarity one actionable tip at a time.

SDS arrives every two weeks (you guessed it) on Sundays.

In every issue you can expect:

• 1 Definition of startup jargon

• 1 actionable tip you can implement right away

• 1 article you should read

• 1 gift for founders

Let's dive in:

(P.S. I'll never sell your information, ever)

Hello there!

I'm thrilled to share this issue with you! In case you missed the last one, you can find it here.

Before we delve into today's issue, I want to inform you about something Marge and I have initiated, which we believe could be beneficial for founders – bi-weekly office hours to practice your 5-minute pitch.

We have started our Q4 sessions. If you missed the latest recorded session, you can catch it here.

Register here for our last session of Q4.

I recently had the pleasure of being a guest on the Boardroom Banter podcast, which got me thinking about the importance of setting expectations.

In today's challenging fundraising landscape, many founders are prioritizing securing funding at any cost.

Unfortunately, this can lead to missed opportunities for great startups due to a poorly structured cap table.

What is Cap table?

Capitalization table: document used by early-stage startups to outline equity ownership, dilution, and the value of various stakeholders such as founders, investors, and employees.

5 ways to avoid a broken cap table

Having witnessed numerous cases where a broken cap table hindered future fundraising efforts, I've come to realize the significance of avoiding this pitfall.

In a world where Simple Agreements for Future Equity (SAFEs) are gaining popularity, many founders are unaware of their cap table issues until it's too late.

When it comes to selecting the right investors for your cap table, there are several unique considerations, particularly in emerging markets.

Let's explore five of these factors:

Long-term partnership mindset: Investors who approach partnerships with a long-term mindset can have a significant impact on your startup's trajectory. Seek out investors who believe in your vision and are committed to supporting your growth over the long haul. It's essential to establish a strong alignment of values and goals to foster a productive and supportive relationship. While it may be tempting to prioritize well-known investors, diversifying your investor base can bring fresh perspectives, access to a broader network, and potential collaboration opportunities with other startups in their portfolio.

Local knowledge & networks: In emerging markets, having investors with a deep understanding of the local market dynamics, cultural nuances, and regulatory landscape can be instrumental to a startup's success. Seek out investors who can offer valuable insights, connections, and mentorship to accelerate your growth trajectory.

Strategic industry alignment: While securing funding is crucial, it's equally important to find investors who align with your startup's industry and vision. Look for investors who possess experience and expertise in your specific sector or niche. Their domain knowledge, mentorship, and potential synergistic opportunities can greatly enhance your chances of success.

Operational expertise: Look for investors who can provide strategic guidance and operational expertise. Their experience can help you navigate the unique challenges often faced in emerging markets, ultimately accelerating your startup's growth.

Reputation and credibility: Consider the reputation and credibility of potential investors. Do thorough research to ensure they have a track record of supporting their portfolio companies and possess a positive reputation within the startup ecosystem.

As early-stage founders in emerging markets, it is crucial to carefully structure your investment rounds and choose the right investors for your cap table. By considering factors such as local knowledge and networks, strategic industry alignment, long-term partnership mindset, operational expertise, and reputation, you can set your startup on a path to success.

If you have learned something valuable today, consider joining SDS so you don't miss exclusive sections in future editions.

If you only read one thing this week, read this...

Lightspeed Venture Partners shared a fascinating article on the intersection of Fintech and AI titled "Fintech x AI: The Lightspeed View".

Why should you give it a read? The article provides an in-depth exploration of how AI, particularly predictive and generative types, is shaping the future of the financial industry. It discusses potential applications, challenges, and opportunities, along with Lightspeed's investment perspective in this space. Whether you are a founder in the fintech field, an investor, or simply interested in the evolution of AI in finance, this piece offers valuable insights and perspectives.

Founder's Corner

As an investor, I know how challenging it can be for founders to get noticed by angel investors, especially without the right connections.

That's why I created an inbound form to allow founders to share their decks directly with me. It takes less than 5 minutes to complete. By breaking the mold and providing an alternative way for founders to connect with investors, I hope to help level the playing field.

That's all for today! As always, thank you for being a fantastic reader.

Until we meet again in two weeks, here's how we can stay in touch:

• 🐦 Find me on Twitter

• 💬 Hit me up on Linkedin

• 💌 Email me

• 🚀 Sponsor SDS (Reply to this email)

Let's chat again in two weeks,

Jasiel