Novice Investor #9 - How to Game Headline Valuations, Intern Needed and New Startup Ideas
Happy October all!
Last month, I had the pleasure of camping in the West of Ireland with family. It was my first ever camping trip and much better than I originally expected. The onsite hot showers and unusual lack of rain made the weekend. Here is some holiday spam of beautiful Clifden.
At Kennet, the post-summer rush has descended. There are plenty of deal opportunities kicking off and I am pumped to find our next investment. With workload heating up, we are looking for a new intern to join the team. If you are fresh out of university and eager to take your first step into the world of software investing, submit your CV to this job posting. Tip - subscribing to this newsletter will increase your chance of success tenfold.
Cap Table / Round Model Part 2
Last month I walked through how to build and model a straightforward equity raise. This month, I added some complexity in the form of loan notes and shared some tips/warnings on how to game the headline valuation. If you are a CEO about to receive term sheets, watch this video so you know what to look out for.
Books & Podcasts
The 10x Rule: The Only Difference Between Success and Failure
To start with the positives, I love the author’s intensity and relentless drive to achieve goals. The book bolstered my belief that the biggest factor of success is hard work. I fully believe anyone can do any job with enough confidence and hard work to get up the learning curve (any corporate job at least).
The debater in me struggled with the book’s oversimplified advice. I expected the author to deliver more nuance as the book progressed but it never came. For example, telling someone who works 70 hours a week to work 700 hours a week is not the most useful nugget of wisdom I have ever received. Other blanket statements like always over-promise and over-deliver to customers sounds good in theory but it is not practical. Overpromising what your software can do and overdelivering for every customer will turn your SaaS business into an unscalable custom software development shop.
The author also has a perfectly contrasting view on goals compared to the previous books I have reviewed. He suggests setting very lofty tangible goals such as owning 1,000 apartments or having $100 million in your bank account. I am a bit torn here. Previously I have always had lofty tangible goals. I find it is more motivating but I can also understand the Stoic point of view that it leads to an unhappy life. I am still pondering this one.
Modern Finance - Beeple - His Story, The Future of NFTs, His Favorite Digital Artist, and More.
Modern Finance is a podcast hosted by Kevin Rose, an entrepreneur turned investor with some notable big hits such as Twitter, Facebook, Zynga and Square. Kevin is now a Partner at True Ventures where he focuses on crypto and digital asset investing. The Modern Finance podcasts explore cryptocurrency, DeFi, NFTs, traditional finance hacks, and more.
This episode introduces Beeple, the most prolific NFT artist who sold his latest portfolio of NFTs for $69 million. Beeple was already a well-known digital artist prior to dipping in his toes in the NFT world. He used a strong following and obvious talent in digital art to become the highest-earning NFT artist in history. If you are not an expert on NFTs and you are interested in learning more, this is an excellent place to start.
Best of YouTube
Cold Fusion - From Essays to Coding, This New A.I. Can Write Anything
GPT-3 or Generative Pre-trained Transformer 3 is a highly advanced deep learning model that can create human-like text. It was released via API a little over a year ago by Open AI. Since then, many startups have leveraged the model for applications such as writing eCommerce copy, generating code and even helping people write essays and articles.
With developments like GPT-3, I feel like the world of professional services is in for acute disruption soon. Previously, software did not have the intelligence to replace expert advice and services. Now, with advances such as GPT-3, start-ups are productising previously untouchable service offerings.
A tip for thinking of an AI startup idea - go to Fiverr and see if you can use GPT-3 to automate any of the most used services!
Kennet Partner’s Investment Target
Kennet Partners is a Growth Equity investor with over 20 years of experience partnering with European and US SaaS companies. If you know any companies which fit our criteria, please reach out.
Investment size: $8m - $30m
Maturity: Over $3m in ARR
Growth: > 30%
Type: Bootstrapped and capital-efficient B2B SaaS businesses
Geography: Europe & US