Startup Market Outlook for 2024: What to Expect with Funding

Hey everybody, welcome to this Founder Institute event. My name is Jonathan Grecian. Sorry for the delay there, but we wanted to allow a couple more people to join the event. And I'm seeing here in the chat, if you are there, let us know what your name is, where you're joining from. This is going to be a very international event today. And for anybody who did join already, you probably saw there is a networking portion of this event. All right. Hopefully I am just the appetizer. So to speak, here where I'm going to share some of my thoughts. Some of them may be smart, some of them may not be. I can't place any guarantee on that. But what I think will be valuable for you no matter what is that networking portion. So please do stick around after my talk, check out those networking tables. We'll have members of the Founder Institute team in there, and we do have entrepreneurs, investors, executives, advisors, from all over the world, and I'm seeing in here San Jose, California, Dubai, South Africa, what else, Chicago. I'm just scrolling up here. Austin, Texas, Seattle, Jordan, Philadelphia. Great to see you guys. West Palm Beach. I'll actually be visiting my father tomorrow in St. Petersburg, Florida, so I'll be in the Florida area for a couple of days on vacation, not working. —and Abuja, Berlin, Nigeria. All right, this is awesome. So with that being said, let me explain quickly how this event's gonna work. I'm gonna go through some of my thoughts on the venture outlook and what I'm expecting to see in funding next year. All right, it's been a little bit of a tumultuous couple of years in the funding and kind of macroeconomic startup environment. So I just wanna give you some of my thoughts on what I've seen from the early-stage startup perspective. Um, and then from there I'm going to then give some advice if there are any entrepreneurs in the audience that are looking to fundraise, uh, in 2024. And by the way, if you're looking to fundraise this year and you don't already have, you know, you're not 90% done, then you're not going to fundraise this year, right? The fundraising window pretty much closes, I'd probably say maybe like this weekend, um, this year, but, uh, it may go maybe a couple days after that. But, um, so I'm going to be just giving some tips for people that are looking to fundraise in 2024, and maybe some of the things that you might want to look out for, some of the things that you might want to focus a little bit more on in your pitch and in your fundraising strategy. Okay, so let me get started. And again, throw questions into the chat. All right, so after I go through this presentation, I do want to answer some questions. I have a team here. That is, we're super advanced here at Founder Institute. We have a Google Doc that my team has where they will be feeding me questions that you serve in the audience, right? Maybe we should get some cool Matrix-style earpieces or something, but you know, we're a scrappy startup-style organization here. So we have a Google Doc and they're gonna be feeding me questions via this Google Doc. So I'm not gonna be paying attention to the chat too much during the presentation 'cause that would, just make me distracted. But if you do have questions at any time, if they pop up, questions in relation to things that I'm talking about, please do throw them into the chat. Okay, so before I get into kind of what I'm seeing right now in this environment, and when I say what I'm seeing, it's by looking at the deals that we're seeing at Founder Institute. Okay, Founder Institute operates chapters in over 100 countries around the world. We see dozens of term sheets every single week from startups. And in addition to that, our sister company, which spun out a couple of years ago, is called VC Lab. They have now launched over 350 venture funds, right? Mostly pre-seed to seed stage venture funds. So we, I like to think that not only do we have a good kind of sense on what's going on in the market, but we have a good sense of what's going on in the market, not just in Silicon Valley and New York and Austin and places like that, but internationally. And I think the first thing that I always want to explain to people is just to give them some context on where we're coming from. And where we're coming from is pretty much an unprecedented time, which was 2021, right? And when I say 2021, I'm going to use that name a lot in this talk. And really what I'm referring to is probably about second half of 2020 through about the first half of 2022. Okay. It was a crazy time. And if you want to look through sort of a timeline of what happened, we had a global pandemic. We had zero interest rate policies that were going on for many, many years, but sort of hit this kind of pinnacle, so to speak, after the pandemic in an effort to really revitalize economies that were really in the crapper. So to speak. And as a result, everybody was stuck at home. So tech went nuclear, right? It already was on an upturn, but it really— everything in tech, everything in venture capital, like, you couldn't lose money, right? I mean, think about where we were. You— people were betting. I mean, remember, uh, GameStop and things like that, right? The, the Web3, all this kind of stuff. Not Web3, I shouldn't say that's— but, uh, some of these, you know, crypto meme stocks, things like that. Like, you just— you almost couldn't lose money on some of these things because we were all stuck at home. We had nothing better to do than watch streaming and to do all these digital things, right? As a result, venture funds raised a record amount of money. The number of venture funds that raised money was at a record. Um, something that was super irresponsible was that very large, uh, institutional investors, right? So the people that would typically invest in venture funds to then invest their money into startups started skipping the venture funds and going straight to the startups, right? So these were pension funds, uh, global sovereign wealth or sovereign wealth funds and things like that, right? And that's a super risky thing to do. And as a result of that, because there were these billions coming into startups because the market was so frothy, you then saw traditional VCs were like, oh wow, the people that used to invest in us are now skipping us and going straight to startups. So now they started to need to go further down and down the startup stack in order to compete. When I mean down and down, I mean lower and lower rounds, right? Earlier and earlier stages. So you saw investors that typically would only invest in things like Series B, Series C rounds, right? Later-stage startups. Now they're starting to look at seed, pre-seed, and things like that, launching accelerators and all those kinds of things. And what really this all means is that it was a huge fricking bubble, okay? So there are still, you're gonna see all of these news items, right? Around the market saying, oh, it's fallen the most since 2019, the most since, well, this much since 2020, right? And just remember that this is what that period of time looks like, okay? So yes, those claims like this are going to be statistically accurate, but within this context, all right? It was a crazy, crazy time. It was an outlier. And since then, we've been going into a correction. So just quickly, some perception versus reality things for all the entrepreneurs out there. Is the market for startup funding really bad? No, it's not. Okay, now it is really bad compared to 2021, right? It was an outlier. And what we're seeing right now, in my opinion— and this is something that I projected last year, it was almost about a year ago, I ran a similar event— and I said, look, we're gonna get to about 2019. And if you look at the projections now, that's pretty much where we're about to get to at the end of this year, is 2019, um, pre-COVID, pre-all of that madness that I was just describing. Um, and 2019 was just fine, okay? It really was. It was the second highest year for VC funding of the entire 2010 decade. So, um, that's what we're returning to. And You know, part of where people get into the discussion of, wow, the funding market's really bad, is that they say it's really bad across the board. But look, it's really bad at those later stages. All right, and let me kind of go backwards here and explain some context. It's because there was so much money flowing into those later stages of companies, right? Billion-dollar, like, mega rounds is what we were calling them, right? Because you saw this chart here. Of, um, of unicorns, right? What makes a unicorn? A unicorn is born when people— some group of people thinks that it's worth a billion dollars, right? What's the fastest way for a company to become a unicorn? When it raises a mega round of funding, right? If you raise a $500 million round of funding, now you— right there, just that cash is half of your valuation towards becoming a unicorn, right? So these mega funding rounds have dropped a lot, right? And that's why when you look at a lot of the numbers, it's going to say, oh, look at the amount of money that was raised back then compared to now. That's always going to be skewed by the mega rounds. But if you look at the earlier stages of what's going on, right, it's really not so bad. So here, I mentioned, I think we're going to get to 2019 levels, and it actually looks like we're probably going to exceed these. This was a snapshot from June, right? Um, and if you look here, 2023, like, this would project to go over 2019 levels, right? So this is according to PitchBook, and most people in the venture space know that most of the, like, this fall and kind of fundraising season is going to eclipse that number, um, from 2019. And, you know, the other thing to think about here is that some of those trends that drove that bubble also will protect the earliest stages, right? As I mentioned, there was a lot of money coming in from institutional investors that were, um, that were trying to then invest directly in startups. This, this made a lot of traditional VCs start to go earlier and earlier and earlier and raise funds for those earlier stages. Now, just because the markets change doesn't mean that those investors can now change their thesis, right? They raise their money based on a thesis. They raise that money, and those funds at that time saying, look, we want to invest in this stage of companies because we think this is where the value is. That still remains, right? That money is still there. Um, and, you know, a lot of people have been talking about dry powder for a while, and the dry powder is still there, right? It does need to be deployed. It doesn't need to be deployed today. It doesn't need to be deployed tomorrow, right? There is time, and I think investors are certainly just going to be prudent about when and where they deploy that. But the amount of money is there to go into startups, especially at the earliest stages. And then just to illustrate, just looking at some of the other statistics that has been released recently, I mean, look over here, you'll see that basically the later you go, right, the further down the stack, the worse it's going to get, right? But the higher up you are, you're okay. Right? The money is starting to flow more in that area. And that's generally what you see whenever there's bad economic, like, macroeconomic trends. The angel and the pre-seed stages typically seem— they're always going to be a little bit more constant, right? Because they're betting much more on the future. They're not betting on this year or next year. They're betting on the year after that, right? So there's always that leap. So the money will always typically start to flow to the earlier stages when there is, um, some of that volatility in the later stages. And then here on this right one, you'll see again seed rounds were actually starting to see an increase in the valuations. And, and this one, um, you know, just showing you a different view here, it actually— the median, the median, uh, seed pre-money valuation hit a record high, um, this year. And, uh, that is according to PitchBook as well. So that to me was sort of a surprise because I was expecting a little bit more of a seed crunch. But you are seeing that those valuations are starting to go up as people continue to sort of get slaughtered, honestly, in those later stages of VC. Money continues to flow to the beginning, and also a lot of that money strategically was allocated to those earlier stages during this whole bubble that we saw, right? Um, and again, you could see here, here's just another view of some of the stats that we've seen. You know, it's the deal making— the number of deals is up, right? Now the value of the deals is down, right? And again, when you reduce those mega deals, that's what's going to happen, right? But that's not necessarily a bad thing. It's a bad thing if you are a later stage company that raised a lot of money at very high valuations. These last couple of years, and that is what has explained a lot of the, the mass layoffs in later stage startups, right? It's just, that's the direct effect of it. But, uh, the, the deal numbers have gone up, though the value has gone down, which typically means that the earlier stages are, are favored, right? Um, so those are just some of the kind of metrics that we've seen, but there's stories out there, um, that are supporting this. And, you know, I always try to back it up with metrics before where I explain kind of what we're seeing a little bit more anecdotally. But anecdotally, 100%, we are seeing the rates of these angel and pre-seed deals rise. Now, some of the terms are not as favorable to invest to founders, and I'll get into that in a moment, and that's fine, right? That's part of the correction as well. Um, but the velocity of these deals is increasing. So, uh, Founder Institutes Sister company is called VC Lab. VC Lab is, as I mentioned, is launched now over 350 venture funds. So we have insights there and we are seeing a record number of applications, record number of pre-seed funds are being launched through that accelerator and on that platform. We recently held an event just last month where we had a lot of top angel investors. Here you'll see Peter Pham and Jason Calacanis. Jason Calacanis in particular said he's more bullish than he's ever been and this year will be the highest number of angel deals that he's ever done, right? When the later stage gets slaughtered, smart investors are investing more in the early stages because they know that those tides will turn. And by the time those companies need later stage funding, the companies that they're investing in now, right, we're going to be in a different environment. Um, so some of the other things, uh, that you can look at right now— I mean, maybe the mass layoffs has passed, right? I mean, I literally just took this screenshot this morning. This is techlayoffs.fyi. I think that, and this is supported in some of the charts that I'll show you in a second, a lot of the mass, mass layoffs, right, from the huge companies, right, the Metas, the Microsofts, et cetera. And that is really what you see here when things really started to turn towards the end of last year, right? That's what you see there. That was sort of the peak. And since then, it's been kind of floating up and down. And the reason why it's been floating up and down is that most of the mass layoffs that you're seeing now are not from the massive companies. They're from those overfunded later-stage startups that scaled up way too much during that last bubble and that are now self-correcting, right? Because they're going back into a funding market that's not as receptive to the metrics that they're bringing them, um, and to the amount of, you know, just bloat that they have in those companies. So I'm cautiously optimistic here that we're starting to level out. But I wouldn't— what I would project here is that this isn't going to continue necessarily going down to zero. I think it's just going to sort of stick around this level because we are going to see a lot. There's still going to be a lot of overfunded companies that have not been able to really get those metrics into a good shape since that bubble kind of popped that are going to continue having to cut staff. But again, because those aren't like massive, massive businesses, you're not going to be talking about thousands of employees getting cut at a time. You're going to be talking about a couple hundred, a couple dozen here or there, right? So I do think that this has sort of leveled off, but I wouldn't say that we're, that we're past that. And the other factor that is really going to drive a lot of these markets is the IPO market, right? So the IPO market has been pretty crappy for a while now. And the reason why this is important, right, let's say that you are a founder, right? You're like, oh well, why does IPO matter to me? I'm not going to need IPO for another 10 to 15 years, right? And that's kind of generally what the, the timing is these days. And yes, that's good and fine, but, but it does impact the general sentiment around the market, right? Because IPOs equal liquidity. Liquidity equals investors of kind of the highest order, and a lot of the smaller, the pre-seed investors too, that would be reinvesting back into companies at the very earliest stages, getting liquidity out of the investments that they made, right? And that market has been pretty terrible for the last couple of years. Now we are starting to see maybe, maybe, just maybe, the tide turning. Now there's been some IPOs recently this fall, and people were kind of thinking, okay, maybe this will do it, maybe this will do it, and they sort of are all a dud, kind of collectively speaking, right? So I think that the sentiment there is fairly negative. But, and if you guys don't follow Thomas Tunguz, I recommend that you do, right? He's— I follow a lot of his stuff, and I think he likes to cut through a lot of the BS in a pretty good way. And this was a recent chart where if you looked at some of these— these are all public companies, Okay, so Shopify, Netflix, Microsoft, Dell, etc. And these were companies that recently released earnings, right? So profits, okay, not revenue, but essentially something closer to profits, right? And because of all that slaughter that happened in the markets a couple, like, you know, earlier this year, what became the focus? Profits metrics, not growth, right? Not revenue, profits. What are you making from what you are doing? So the expectations from analysts across Wall Street were pretty low, and these are the percentages by which their expectations were low, were basically, you know, below what these companies actually released. In the last couple of months, right? Now, if you look at this percentage, I think across the board, the median here was 48%. But if you compared it to what the revenues were that companies reported, the delta was only 1%, right? So what I'm trying to say here is that the markets, whether it was in the private markets of venture capital, angel investing, whatever, the public markets of Wall Street, they were all telling companies, startups, whomever, stop focusing so much on growth, right? Focus more on profits and metrics. And, you know, this is the positive side of those cuts and just the more responsibility that a lot of companies took into account earlier this year. And as a result, it's surprising Wall Street here, right? So now I'm on the kind of the far later end of the spectrum. Where I'm at least trying to see, okay, you know what, maybe the tide might be turning. Maybe the IPO market might start to open up next year. And I think that's what a lot of especially later-stage investors are looking at, especially the ones that invested hundreds of millions of dollars into some of these companies during the pandemic that were expecting a liquidity event a lot earlier. Okay. All right, so that, that's kind of just going through what are some of the stats, both anecdotal and kind of quantitative, that we're seeing. So based off those, this is kind of what us at the Founder Institute are thinking we're going to continue to see this year. So Series A crunch will continue to keep those seed valuations in check. So this is something that I projected last year as well, as I showed on the chart. And actually, we've seen that Series A, um, valuations, you know, they have dropped a little bit, but the seed valuations have increased, which is sort of, um, surprising to me, right? And the reason why this is surprising is that when you have companies, a large number of companies that are raising money at the pre-seed rounds, they— the— when they have a higher bar to raise seed funding or Series A funding, that's what we refer to as this crunch. Right? Um, and as a result, you do see a lot of bridge rounds happening, a lot of extensions rounds. I saw a pre-Series A— or yeah, pre-Series A extension round is something that I saw a couple of months ago, which I'd never seen before in my 20 years or so in venture, right? And that basically means that a company had raised seed funding and their whole next path was to raise a Series A, but instead they had to raise a pre-, uh, a pre-Series A round, and then they had to raise a pre-Series A extension round, right? And hopefully, maybe they will get to that Series A. But if they do, a lot of people are going to be diluted, and it's not going to be particularly a great investment for a lot of the people involved. But look, this is what you have to do during these times, right? So I do think that you're going to continue to see those kinds of crunches both at the seed level, the Series A level, and at the Series B level as these companies kind struggle with the resources that they have to reach the metrics that they need. I do think just kind of based on those last statistics that I showed you that the IPO market will slowly start to ramp up maybe sometime over the summer. All right. There are some pretty large companies in there that people are excited about. But I think based off what we've seen from the couple of kind of brave souls that went IPO this fall, that kind of went dud a little bit as a whole, that some of those other companies are going to wait it out. And I think the next kind of tranche, so to speak, of bigger IPOs in the tech market will probably start to happen in the late spring. And fingers crossed for everybody in the venture space that things will look a little bit better there. I think there's going to be a lot more M&A. And the reason for this, again, is that there's a lot of overfunded startups during the pandemic that overhired, that didn't have great unit economics, and that are— it's going to become increasingly clear to their investors and to their leadership teams that they are not sustainable standalone businesses, right? This is a great opportunity for very large companies to go in and acquire those companies at a very large discount. So that's going to happen a ton. I do think that those layoffs will slow, as I mentioned. But I think they're going to slow in terms of volume, not in terms of number of companies. The number of company shutdowns will not slow. I don't think that's going to slow. Maybe that'll probably go into early 2025, to be honest with you. That's how much of an impact this bubble had and the amount of funding that companies raised, which on the good side, they have a ton of runway. On the bad side, A lot of them are probably still just sort of zombies, and they'll either get snatched up and acquired, they may continue to raise some bridge rounds and things like that. But regardless, any of those scenarios would require them to do some more layoffs. And then finally, the power has shifted towards investors, right? And this is something that we have already seen across the market, and this is a necessary shift, right? If you look at I thought this was pretty cool from PitchBook. Has these— it's sort of an index where they show, okay, based on what are the terms that we're seeing in some of these deals, how would you qualify the market as being either startup-friendly or investor-friendly, right? And you can see here during the bubble, the investor or the market was super startup-friendly, and now it has totally shifted, um, to this point where it is less investor-friendly, right? I think, again, I don't know how long it's going to be all the way up there on the extreme. I think we're already starting to see it level a little bit. I'd say that anecdotally, okay, I think earlier this year I was seeing a lot more onerous terms in some deals, and I'm starting to see a little bit less of those now. But again, I'd say that that's, that's pretty anecdotal. But generally speaking, Founders who are raising funding have to sort of understand that valuations are going to be lower. And right now it is very much a buyer's market, right? And that's, that's just where we are. But again, you know, you always want to be somewhere around here in the middle, right? So this was not healthy down here. As much as I'm a founder, I love founders, that's what I do, but, um, that is, that is too much of an extreme, right? And this is how I've shared this before, and if you've seen this, forgive me, but but, you know, this is how I would kind of reflect that founder friendliness versus investor friendliness and just some of the conversations that a founder may have with investors, right? Um, in the 2000s, super investor friendly, and, uh, you know, you'd have some pretty kind of onerous asks, right? But meanwhile, In 2020 and 2021, it was so much to the— in the power of the founder, where people were, uh, you know, the investors were really just suffering from FOMO, right? Fear of missing out. So they were just trying to get in deals and not doing proper due diligence. And this is why, surprise, surprise, you know, we, we see some news, some pretty prominent news that will continue to come out of some of the kind of malfeasance that happened and just scams really, and, uh, fraud that took place during a bubble, right, as it usually does. Now we're sort of in this healthy middle, right? Uh, an investor in early conversation, you know what, they're probably going to say, okay, you know what, check back with me next month and I want to see what progress you've made, right? You've showed me some of your metrics from the last couple of months, show me that you keep doing it, show me that's going to keep growing, right? Um, rather than, hey, yes, uh, that other person's in, then than we are in 2. So this is all a good and healthy thing for, uh, the startup ecosystem. It really is a return to fundamentals. So last part of my presentation is here is going to be— all right, so that's sort of the market that we're in, right? And here is how we are advising, uh, people in our network who want to fundraise in 2024 as a result of what we're seeing in the market, right? So I'm going to go through kind of 6 things here. Benchmarks— if you have the metrics, this is what you should do. If you don't have the metrics, right, and then the importance of narrative, pitching a lot of investors, and then attacking your weaknesses with teams. So if you haven't seen this, uh, go to fi.co/benchmarks. We actually just updated this this morning, uh, based on some of the, the things that we have seen. right? And, and I should mention in here that these statistics, uh, when we publish them, you know, I'd say some of this is quantitative, but a lot of this is qualitative, right? And it is supposed to show sort of a global average across the world because we work with founders all across the globe, right? So I would say that, look, if you are in a market that is pretty favorable to venture investing, let's say you're in Silicon Valley, New York, London, Singapore, etc., any of those kind of global regional hubs, then you are either going to be very close to these metrics or maybe even a tad above. Uh, if you are in a market that, uh, is a little bit less favorable, then you're going to be below these metrics. And when I say here, I should say in some cases it's, it's above these metrics, right? The bar is higher. For you to reach than it might be in some other places. But this is something that we put out there, and look, this is, this is the roadmap, okay? One thing I should mention here is that this used to be zero, but there is a lot of talk now, and I've seen this in some deals as well, where people have said pre-seed equals post-revenue, right? That's a term that's going around. And I do think that that is kind of the case if you are a low, a low, like, kind of capital-intensive business, super, like, software-oriented business, something that can be launched cheaply, right? You're not hardware or something like that. We are seeing that, look, as investors get more and more power, as they have more and more options, right? As the market goes in their favor, they're going to demand more. And that's just natural. That's just basic economics, supply and demand, right? So we are seeing that, look, yeah, you probably have to show some revenue, right? If you have one of these low capital-intensive businesses, show some revenue, even if it's a little bit of revenue. We are seeing that, right? Even at that pre-seed stage. But anyway, I'm not going to dwell too much on this because you can check it out at fi.co/benchmarks, but this is just general guidance on what we have seen in terms of what you need to raise these rounds of funding and what some of those deals look like in terms of deal size, the investment vehicle, the amount of equity that founders are, um, are giving up during those rounds, etc. And the other thing that we always like to publish on that same page is what is the definition of traction. Right, most times when you talk to an investor, they will say, look, you need to show me traction. But traction is sort of a— it's a term that can mean a lot of different things for a lot of different people, right? Again, if you are in a low capital intensive business, that is where they will expect that traction to be. Look, no, you need hard metrics, right? I want to see users, I want to see dollars, I want to see retention, etc. Obviously, if you're doing something deep tech or something that's a lot more capital intensive, like that, that's not going to be reasonable for you. So traction is really just a measure of, okay, what is the velocity, what is the progress that you're making in a short amount of time that can give me the confidence that will lower the risk of investing in you, you know, in my opinion, right? So these again are some of the things that we're seeing if you're running a marketplace, right? These are the kinds of things that we think you should be aiming for, um, consumer product, a SaaS product, deep tech, And again, you can check all of these out at fi.co/benchmark. So let's say that you don't have these metrics, all right? And I imagine that probably a decent amount of you on, on this, on this, uh, event don't have some of these metrics. Here's what I'll tell you, all right? Bubbles are a great time for ideas and hype to get funded, a great time for people that are just you know, kind of snake oil salesmen, that kind of thing, right? Anybody, just a great, you know, demo and a great pitch, and damn, all right, here you go, here's your check, right? Um, times of sanity or not, right? And we have returned to a time of sanity right now. So, um, an investor's job, if you think about it, is to invest in things that they think will be more valuable in the future, right? They're taking something right now that is not so valuable and they think it's going to be more valuable in the future. So what does that typically mean? That typically means that they are investing in founders that have the ability to kind of make magic happen, right? They can do a lot with the very little, right? You are going to an investor and saying, look, I have limited amount of resources. This is why I'm talking to you. I need more resources. I need more money. But look at how much I've been able to do with the low amount of resources that I have right now. Imagine what I can do if you give me more resources, right? But you have to show them the progress that you've been able to do with the small amount of resources. So bootstrapping, this is something that we've always told our founders. That come into the Founders Institute program. All right, you don't raise money, uh, for ideas. You raise money on progress. All right, bootstrapping is not an option, it's an absolute necessity. And that necessity has been a constant, okay? It's been a constant since I started working in startups in 2004, but that has been a constant. But I will say that in about the last year, year and a half or so, um, with AI, it has become an even more of an imperative, right? And I, I put this up here because I, I was speaking to a journalist the other day and they're talking about Gen Z, right? And I asked them, I'm like, okay, well, Gen Z is, is this last generation. What are we going to call this next generation? And they said, okay, well, people are kind of calling them Gen Alpha, right? And I started thinking, at least in the startup space, it's, it's almost going to be a different generation of founders, and I would call it Gen AI. AI founders, right? There were founders kind of that before, and honestly, it's when ChatGPT was released, right? So it was about almost a calendar year ago. So let's say that November 2022 and before were a different generation of startup founders, and now after that you have this Gen AI founders, okay? These Gen AI founders have the ability to utilize AI to make themselves much more efficient than they ever could be. And guess what? At those earlier stages, if you don't have that efficiency, that is your job. Your job is to show that you create a lot with a little, right? That is your job. There is no excuse for you to not create a lot with a little, right? So I'm not saying go and start an AI company. You want to go and start an AI company, that's fine. What I'm saying is that if AI is not part of your workflow and not part of your process to make yourself more efficient when you are trying to be an extremely capital-efficient startup and trying to show how efficient and, you know, exponential you are and the results that you're able to create with a small amount of resources that you have, then you are at a significant disadvantage. All right. And just giving some examples, I mean, literally, okay, go put up a LinkedIn post. Those, use ChatGPT, right? Or you need to get a customer profile or define a customer persona, all right, use ChatGPT. I, I have no interest in ChatGPT. I wish I was a shareholder. I am not. But the $20 a month for ChatGPT 4 will probably be the best investment that you can make, especially if you are a solo founder or if you are any kind of scrappy startup team. But just, there are no excuses. All right, you have to create a lot with the little because investors at those earlier stages, right, if you don't have those metrics, you're trying to get an investor to invest in an idea. That is extremely hard. All right, extremely hard. Typically to do that, you either just need to have really rich friends, okay, which is great if you do, take advantage of that, um, or you need to be a successful founder in the past, right? Then they'll write you a blank check. But if you are a founder that doesn't have that track record and just doesn't have, uh, you know, this treasure trove of super rich friends that will just invest in you, then you have to show them progress, right? Investors aren't coming to you because they want to start a fire, right? They give you gas to put on a Kindle that you have already created, right? So you have to show them, I got these two sticks and I've made this Kindle, right? AI helps you make that Kindle. There are no excuses, right? There's never been an excuse, to be honest, to not be able to show some form of traction. Okay, and again, going back here, because this is where people usually get tripped up, right? Traction does not mean that you need to be generating, you know, millions of dollars, right? If you're building something deep tech, traction could mean, look, I've recruited amazing people to join my team, right? This person that worked at this massive organization that has, has all this expertise has joined my team. Clearly they think what I'm doing is valuable, right? That is traction. You know what I mean? So just look at how you can prove that traction, how you can prove that Kindle to get there. Because again, you have to show them the Kindle, right? That's what they want to put gas on. They're not going to help you build the fire. You have to show them that it has already started. Okay, the second part here is, all right, let's say that you do have the metrics, right? Let's say that you have those metrics. Then You have to understand that as FOMO for investors falls, right, which is I've shown as the bubble goes down, FOMO has fallen, your need to focus on the metrics and on velocity too, right, growth of those metrics rises because your investors right now, their biggest fear because of this market, because of the, you know, as I said, there's sort of a barbell thing going on right now where yes, companies are getting funded on the earlier stages I am projecting, and I'm hoping that companies will start to get funded on the later stages in the IPO market, uh, you know, mid-next year. But that still leaves this middle space, right? And anybody investing in you in that early round, they're worried about that middle space. They're worried about your ability to keep going. Um, so that is going to be their biggest fear, is for you to be able to raise that next round— not only be able to raise it, but to raise it at a markup and an increased valuation as to but you're investing in them, right? And this was— I think is cool. DocSend puts out these pretty cool reports, right? I don't know, I'd say anecdotally at least, the percentage of decks that I see from DocSend, or, you know, from, from founders raising money, it's probably like 80-plus percent. Okay, but I'm sure that probably changes, uh, in different markets around the world, but at least from what I see, about 80% of the decks that I see is, you know, are coming through DocSend. So DocSend has a kind of an amazing ability to get data and to see, okay, what are people looking at on these slides, right? So if you see here, investors spent in 2023 on— look at how much more time they spent scrutinizing, uh, this, the traction slide and the business model slide, um, for the ones that were unsuccessful, right? They are focusing much more on those metrics. So to combat their fear for their ability, or your ability, to raise that next round, your job is to reverse engineer those metrics. Okay, so let's go back to that chart that I, that I showed you before. Let's say that you are raising a pre-seed round for a SaaS company, right? And let's say that you had those metrics that I had on that first slide. So now you want to at the next one. Okay, so what do you need as a SaaS company to raise a seed round right now? Well, from what we've seen, you need about $20K to $100K monthly recurring revenue. Okay, so that's what you need. That's your benchmark. That's your target. Put it up on your wall, plot it out with your team however you want, on your Miro if you are virtual, on your whiteboard if you're still doing thing, right? Get it up there. Then what I would do is add 20%, right? And this is just buffer, all right? So add buffers. So let's say, okay, if that— if I need $20K to $100K, um, add 20% on top of that. I'm not going to try to do math here even though it's super easy. And then plot out a detailed path to get there in the next 12 to 15 months, right? And, and generally speaking, when you're raising money, you're looking at about an 18-month runway, all right, about an 18-month period of time where, where generally speaking you'd be expected to be raising your next round. Um, so again, I'm putting buffer on that by telling you to project earlier, right? So to go earlier than 18 months, go 12 to 15 months. So add 20% on that, that's your target. You have 12 to 15 months to get there. What is your plan to get to that amount? Right? What is your plan to get to $20K to $100K MRR? Who do you need to hire? How much will they cost? Right? Exact title. I need a director of growth to do this, right? I'm a SaaS company. Okay. So I need a director of engineering to actually build out the next version of the platform to add these features, to add this virality. Then I need a director of growth to this, this, this, and that. And then I need a director of sales to do this, this, and that. You know, based off those projections, if we can hit these things over the next 18 months, then we will get to this metric, right? And then based— whatever the money is that you require to get there, that's how much you should raise. All right, reverse engineer it, go step by step, and think about it. If you were an investor, would this really be so much of an ask to understand, okay, look, I know that my investment's going to kind of go to crap if you can't raise your next round. This is what the market is telling me right now is required to raise the next round. Why don't you explain to me how exactly you are going to get to those metrics, right? That is what they're expecting right now. So you should be able to do that. And this is juxtaposed to what I typically see in a startup pitch deck, which is a donut chart, which is super, super vague, right? It's saying, okay, you know what, I'm raising $10 million and I'm going to use 20% on marketing, Right, it's like, okay, so where are you putting my $2 million? Like, what? Like, marketing? Okay, like, what does that mean, right? Be specific. Reverse engineer specifically to exactly the metrics that you need to get. Explain to them how you're going to get there. And again, raise that amount, all right? Raise what you need right now. Don't say, oh, I'm raising for 18 months of runway, even though I just said that is generally speaking what people try to aim for. You need to get 100 levels more specific than that, uh, in determining kind of how you're going to use the fund, uh, that you're raising, right? So reverse engineer how you're going to get from point A to point B. So the fourth thing here, and then I'll open it up for questions in just a couple of minutes, is you need to ruthlessly focus your narrative, all right? Um, pitch decks are always about storytelling, and it's becoming more and more important now. Um, as a CEO, you're the storytelling officer, okay? You are the CSO, and you have to explain to them how you are going to get to your next round of funding. So again, as I explained, you have to reverse engineer those things, and then you have to explain to them how you're going to grow exponentially once you get that funding in the 2 to 5 years thereafter, right? So that is how you have to do it on the pitch deck. And then just more succinctly, every time that you're talking to investors, you have to simplify the complex and convey a memorable message, right? The thing that I will harp on here is that your one-sentence pitch, or your elevator pitch, whatever you want to call it, it has to be instantly conveyable. Any investor that you talk to, uh, is typically going to be sharing your pitch with somebody else, right? Now, if it's an angel, it's just them, But still, it needs to be super succinct and conveyable. But especially if you are pitching into any kind of VC fund, right, you're going to be pitching to one person, they're going to share it with the other partners, they're going to share it, it's going to be part of some meeting where they're reviewing investment opportunities, right? And you have a champion who is the person that's, you know, in the investment firm that you have been speaking with. And that person, if they're not able to easily convey what it is that you're doing, then it's going to fail. Right? It's a game of telephone. So everything that you tell them, you have to assume that the next time it goes on this game of telephone, it's going to degrade, you know, let's say 20 to 30% from there and then 20 to 30% from there. So you have to make it so simple that even when they're conveying it, it is super clear. And even when that second level is conveying it, it is super clear. All right, has to be super conveyable. And then in terms of your pitch decks, this is something we've been sharing for years, but please check it out. Let's throw this link in the chat. Um, but, uh, our pitch deck guide basically breaks down, um, pitches, and it's usually 4 different narratives. All right, it's usually the problem-solution framework where, okay, I have a customer has a simple problem, here's a solution to There's usually a vision and opportunity framework, which is not so much talking about a problem that a customer has right now, but a problem or an opportunity that will arise in the future that you have the vision to foresee, right? And that's why I usually would refer to this sort of like a moonshot. The third one would be, look, if you have a killer team, right, that's what you should lead with. That should be your narrative. Right? It's like kind of don't bury the lead, so to speak, utilizing like a journalism term, right? What is the lead of the story? The lead of the story— if you've just recruited this amazing team, then that has to be the focus of your narrative. And then similarly on the traction side, traction trumps everything, okay? If you have the metrics, you could have the dumbest idea in the world in the terms of an investor, but if you are showing them amazing metrics, then that trumps everything. So if you have those numbers, you have to lead with that, right? And I would say that probably the most common mistake that founders make is that most of them will go right to number one, right? You'll Google pitch deck template, and what you will see is a pitch deck. Google it right now, I promise you, right? You're going to find a pitch deck. It's going to go through a basic narrative of saying, okay, here's my idea, here's my team, here's the problem, here's the opportunity, here's some BS financial projection charts that's going to show a hockey stick, right? And that's not what you want to do, all right? You want to adjust your pitch based on what the specific values that you have and the benefits that you have on your business, okay? Aim for 10 slides or less right now. Again, succinctness is key, and just keep in mind that if you can't understand it simply, you don't understand it. Or if you can't explain it simply, you don't understand it well enough, right? So a lot of people will have a hard time. You know what's easy? Explaining your, your company in 30 slides. You know what's hard? Explaining in 20 slides. You know what's necessary? Explaining it in 10, right? You have to— the shorter the better. You have to be succinct. You have to explain it simply. Um, the fourth thing here is you got to pitch 100 investors. All right, um, this is— we've been preaching this also for many, many years in our Funding Lab program, which is where Founder Institute graduates can go into to help them raise funding and to go through the process of actually closing the lead investor to their round. But even this does not apply just to first-time fundraisers, okay? Peter Pham, who was one of the speakers of that Founder X event that I mentioned before, He, he's raised billions of dollars in venture capital, okay? Billions. And even he was saying that a minimum, anytime he's pitching, 70 to 80 investors he has to pitch, okay? And that is somebody that has raised billions of dollars, all right? I think most founders get turned off, like, they get the first couple of nos and already they're they're in the gutter mentally and they kind of give up. All right, and trust me, I understand it's hard, okay? It is really hard to just keep getting punched in the face with a no over and over and over. But I can tell you from experience of being in this business for 20 years that probably the biggest, the biggest factor that will separate the companies that get funded from the companies that won't is just simply persistence, okay? It is just Persistence is just the ability to take those nos, not just to take the nos, okay? It's not just saying, okay, no, then go back and just keep pounding, you know, pounding the rock against the wall and not changing what it is that you're doing. It's your ability to take those nos, be positive, take, take learnings from those nos, right? And continue to tweak that pitch over time so that you can continue to get closer to yeses, right? It's an iteration process. You have to pitch 100 investors, not just because a lot of them are just going to say no, but just because you— that's how many investors it will require for you to realize, okay, you know what, this is a strength of my pitch, this is what investors seem to like, this is super confusing, right? I need to simplify this, this is irrelevant, nobody cares about this point, remove that, right? Every single time you need to be increasing or just increasing your level of knowledge so that you can get closer to a yes, right? And again, that's the only way that you can identify the strengths, the weaknesses, um, and really start to perfect the narrative of that pitch to get closer to a yes. And, um, this is something that also, uh, we see a lot of founders make the mistake, right, where from the beginning they have this idea in their head like, oh, this person's going to invest in my company because they're they believe in what I'm doing, right? They, they— I follow their Twitter and they share our same views on this industry or whatever, right? Start with your lowest priority investors first, okay? Again, assume that the pitch that you have, even if you spend 100 hours creating this pitch that you think is awesome, um, you know, I, I— it's an alpha, okay? So you don't want to pitch your priority investors until you're way past that alpha stage. Right? Start with the alpha on lower priority investors first, right? You sort of got to get your reps in and you start, and you have to take their feedback in order to continue to iterate. And again, there's nothing worse than that cookie-cutter pitch, all right? Again, if you, if you did go and Google on, um, if you did go and Google the, you know, pitch deck template, again, that problem-solution pitch is probably only applicable to maybe 20 or 30% of the startups that I see, but probably 99% of startups use it, right? Maybe not 99, maybe like 90, but still, you have to adjust your pitch based on the specific strengths, weaknesses of what you're doing, the strengths and weaknesses of your team, the metrics or lack of metrics that you have, and again, all of the feedback that you've been getting with those reps. By pitching a lot of investors, right? Because every single business is going to have what I would call an 800-pound gorilla, right? If you are any kind of consumer product company and you have not shown an ability to reach customers at scale and efficiently, that's going to be a huge gorilla, right? I don't care how amazing, you know, your product looks. If you can't show me that you have the ability to get users in an efficient way without spending boatloads of money on, on Facebook that, that aren't creating a great return, then that's going to be a huge issue, right? And again, you find out these things by pitching. And on the other side, most businesses are going to have a unicorn as well within their pitch, right? There's going to be a specific aspect to your business, whether it's some specific insight that you've made, some specific person you've recruited to your team, whatever. Right, um, or even just some specific trend that you're trying to capitalize on, right? They're going to be things that investors, as you start to pitch them more and more, you will see that they really gravitate towards, right? And the only way to know these 800-pound gorillas and these unicorns that you should be de-emphasizing and emphasizing is to start pitching. Okay, um, and then The last thing that I'm going to say here is that attack your weaknesses with team. There is a massive migration from corporates to startups right now. All right, the, the number of layoffs has started to subside, right? Earlier this year, as I showed on some of those charts, the number of people that were being laid off from very large tech companies was, was extremely high, was flooding the market with talent. All right, I think as I've seen recently, some of the talent is still out there. Okay, so there is a great opportunity right now for startups still. I don't think this opportunity is going to kind of, you know, continue too much further into the next year, right? As some of these things start to rebound, these people are going to get snatched up and they're not going to be willing to work at a risky startup anymore. So there is a large amount of talent on the market at the moment. And outside of traction, if you aren't able to show numbers, um, in the eyes of an investor, team is, is the next biggest thing, right? It's sort of this great equalizer, right? It kind of covers up some other faults that you have in the business if you are able to attract great team members. All right, because again, it's just saying, look, I— yeah, we don't have the metrics yet, but look at the track record of the people that I've been able to recruit to my team. Clearly, based on all their experience, they think that what I'm doing is valuable. So your investment is not an investment in the metrics that I have right now. Your investment is an investment in this team's ability to figure it out, right? That's a great equalizer. So if you don't have those metrics, you should be looking, um, towards great team members. And in some cases, your advisory board can seen as an extension of your team, check out fi.co/fast, uh, FAST, the Founder Advisor Standard Template. This is a free legal agreement that we released about 10, 11 years ago, I believe, at this point. Um, and we put the link here in the chat there too for you. Uh, but this is a great way, a very simple templated way for you to recruit advisors to your team. Now look, an advisor uh, is, is never going to replace a full-time employee or a co-founder that has expertise, right? But it's a step, all right? It is a step in the right direction, um, for you to get out there, start talking to other experts, and start recruiting other experts to think what you're doing is valuable, right? That is a measure of confidence that an investor can see when they're starting to look at your business, especially if you are sort of in that pre-revenue, pre-product, pre-traction stage. And then the final note that I'll have here, and this is something— this has been the final note on most of my decks now for the last couple of years, to be honest. But the reason why I do this is because, you know, this is— my talk today has largely been a talk of positivity, right? Um, hopefully it's not— I'm not trying to overhype things, right? I still think that the market next year is going to be challenging for the later stages. I still think that the middle stages, especially Series A, B, etc., are going to be crunch. I still think that a lot of overfunded startups are going to be laying people off, but I do continue to have a lot of confidence in the pre-seed market continuing to grow and kind of be the pillar. And then hopefully on the other side of this barbell, on the other side of the market, to have the IPO markets start to open up, which would then kind of, you know, allow these two sections to sort of meet in the middle and fill that Series A, Series B gap. I, I do understand that as the leader of a startup accelerator, um, you know, it could be seen, you know, everything that you're saying is, yeah, I like tell people to start companies, right? It's good for you financially, right? And startup accelerators need applicants. We make money by helping people to launch companies, and if those companies become valuable, right, we have equity in those companies, right? Yes, all these things are true. Um, but I'll also just bring you back in that the Founder Institute was started in April of 2009, okay? Um, 2000— April 2009 was literally the nadir of the last big economic recession, right? The Great Recession, the housing boom, or the housing bust, whatever you want call it, right? That's literally when we were founded. Um, during that time frame, um, around, and you know, that housing bust in the years thereafter were the foundational companies that were built that defined the last decade in technology, right? If you look at all of the things you had— the direct-to-consumer boom, you had the Web3 boom, you had the fintech boom, you had all of these different things Um, you know, those companies were all started during that time frame because entrepreneurs thrive in disruption, right? The reason why people like Jason Calacanis and the reason why the angel and the pre-seed markets continue to stay resilient right now despite all of the other turmoil in the venture and IPO markets is because people understand that the companies right now are being built that are going to be capitalizing on those markets in a couple years when they out, right? This is the time to start companies. This is the time to invest in those early-stage markets. Um, so yeah, the companies, they're, they're being formed right now, they're being funded right now, they're being scaled right now. And AI has just thrown this whole other layer of kind of napalm on top of all of these things and all these opportunities that were already there. So You know, if you have the means and if you're, you know, to start a business, I do recommend that you do it. Now, again, I recommend that you bootstrap, okay, and only start the business if you are in a position to be able to bootstrap and to be able to get scrappy. And there's a lot of programs out there, Founder Institute being one, that can kind of help you do that a little bit more efficiently. But just know that, you know, you don't want to wait till the next bubble to start building a business. You want to start building the business now so that when the next bubble or when the upturn takes place, then you're in a position to capitalize on, right? You can't— you won't be in the position to capitalize on those things if you start right at that point. Okay, um, thank you everybody. So let me bring up— hopefully that was, uh, helpful for you all. I gotta bring up the doc here, um, from my team. So team members, can you shoot me the doc in Slack real quick? This is, again, showing you guys how advanced we are here. Right? We have this Google Doc that's gonna have the questions for you all. And my team right now is going to Slack it to me. There it is. Thank you, team. Alright. And now I have that document, and I'll start going through some of the questions. Okay. So let me look here on some of the questions that I have. Alright. Okay. So, Chamidi from London, hopefully I'm pronouncing that correctly. Okay, Chimiti from London. I saw a thumbs up there, so maybe I am. I typically tend to screw up people's names. So Chimiti from London is asking, what's the most effective way to find 100 relevant investors to pitch and to get the opportunity to pitch them? Okay, so it's pure grit and using Google. Okay, honestly is the way to do it. So here's how I would do it, number, uh, step by step if I were you. And let's say number one, you need to become part of local networks, uh, in your startup community, either local networks, right, and where you live, or I'd say networks related to the type of business that you're trying to build. Okay, forums, Reddits, uh, online groups, LinkedIn groups. Start attending online events around that space, start making connections. Number 2, there are definitely going to be other companies that have done things similar to you that have investors. Start leveraging tools like AngelList, Crunchbase. Again, just Google to see who are the companies that have invested, not just in direct competitors in your space, okay? This is where a lot of people get screwed up because they're saying, okay, well, I took your advice and I started looking up other people who invested in my space and and they don't wanna talk to me 'cause they've already invested in a competitor. I'm like, okay, well, you have to look at other companies on the theme. Okay? So it's not necessarily just looking at somebody who does exactly what you do or something very close, but it could be looking at somebody who does something very close to a similar market. Right? So let's say that you are trying to democratize access to something in a specific market. What are other investors who have invested a lot of other companies in sort of adjacent markets, similar markets, who are investing in products that sort of have this thesis to democratize access to something that has been closed, right? That's how investors typically invest. They invest on a thesis, right? They're not investing saying, I want to invest in companies that are trying to help this customer do X, right? They're investing and saying, I'm trying to— I am investing in a thesis that this market has been closed off for too long, or that there are a number of markets that have been closed off for too long, and that there are going to be startups that chip away at those moats and open up that access, and that's going to create a lot more opportunity, right? So you have to look for those other ways. I'd say literally just go to tools like— there's NFX, I forgot what the name of the NFX tool is, but just look up NFX Tech Directory, right? It's again AngelList. I mean, the number of the angel investors are out there, all right? But again, it's, it's, you're not going to go, there's not one like central marketplace, right, to find investors interested in your company, right? And I would also warn people that what a lot of founders try to do is they try to say, okay, well, you know, this should just be like anything, right? It should be like eBay or Airbnb where I can just like put up my listing and people are going to invest in me. That's generally not how these things happen, all right? Because if you think about it from the perspective of an investor, investors— if they— if for an investor to go on a public site and look through a whole bunch of listings and say, okay, this looks like an interesting thing to invest in, right? That's not what happens in their head. You being on a site like that, or you being on some massive directory, is a signal to them saying, wow, this person wasn't able to get investors like the way everybody else does, which is just sort of the hard way, right? Which is making connections, doing their research online, doing their diligence and finding the right people, right? So you have to, like, you gotta roll up your sleeves, you gotta do the work here, right? And it's, again, Google is probably your best resource, honestly. Um, going on YouTube, just becoming immersed in the market that it is that you're trying to serve. Starting to understand who the players are, who are the investors, what are the themes, right? It really should be part of and parallel to your process of building out your pitch is starting to understand who are the people that you want to pitch, right? Because now, like anything, right, like, like trying to build a product for any target market, now you're trying to build a pitch for a target market, for a target investor, right? You have to do the work. And it looks like there are some, some, uh, some other, uh, explanations in here as well. But yeah, there's a lot of, a lot of local things. I'd say go to local events, all right? That really is like step one for any entrepreneur, especially if you're a first-time entrepreneur. Just start going to local startup events. Start— and a lot of them now are online, right? And again, uh, joining groups around the specific market that you're trying to serve, right? Outsiders, generally speaking, are not going to get investment, especially if you're a first-time founder. You have to just start to understand who the networks are, who they, you know, the things that they're interested in. Start being present, then you start meeting people, they start connecting you, and pitch as many people as possible, okay? The way for you to not network is to think that your idea is so valuable that you want to hide it because you think people are going to steal it. The way to network and the way to start opening up these connections to investors is to pitch as many possible people as you, as you can, because that's how you'll find not only investors, but that's how you'll find, uh, co-founders, team members, etc. Okay, uh, let's see, let me get another question here. Um, what are investors looking for when they are investing in pre-revenue Startups, and I feel like my team here is just picking the hard names to pronounce. So Obina, I guess this one's a little bit easier, but so Obina from Lagos. So I'd say go back to that presentation. So let me take this down here, right? And I'll bring you back. Might be making you a little nauseous here, but forgive me. Okay, so if you are pre-revenue, again, what are some of the things, um, and when a company, when an investor is interested in traction, right, they want to see a Kindle. So again, the definition of what that Kindle can be will be determined on the kind of business that you're building, right? So if you're building some kind of consumer app, the bar is going to be a lot higher All right. My question would, would be why can't you generate revenue? Right? Why can't you just put cobble together some no-code tools online and, and at least generate a little bit of revenue? But again, it can be other things, right? We've had people invest in companies where they've had just waiting lists of tens of thousands of people saying, look, I built this audience. Now I just need some money to build a product that this audience has told me that they want, right? Again, we've had people raise money pre-revenue just based on the team, right? Literally, your job as a founder— like, this is your job— is to figure out how to show that traction at that point, right? It's sort of— it's this chicken and egg issue, and we refer to this as the entrepreneurial wall, right? If you're pre-revenue, most entrepreneurs, or pre-product, most entrepreneurs will say, well, I, I'm here because I need to raise money in order to build a product to get to revenue, right? And we'll immediately get back to them and say, well, you're not going to get the revenue, or to get to, to, you're not going to be able to build a product to get to revenue unless you have funding, right? And they'll say, well, I need the funding to do that. And we're saying, well, you're not going to get the funding unless you can do that. Right? And around and around we go, sort of this chicken and egg problem. And that's where you just, you gotta get creative, right? You have, again, this is the Kindle that you have to show, right? We're not giving you a blowtorch. It's like you have two sticks and you have to figure out how to make it work. And, you know, depending on the kind of business that you have, again, if it's, if it's something that's a consumer app, you know, again, I'd recommend using no-code tools, just starting to hack away, even if you have no technical ability, ability. Alright? Trust me. I have very little technical ability, but I can put things together just by using low-code and no-code tools on the internet by using AI by just— and it's just Google research, guys. Right? It's just doing the work. It's just hacking away. So, yeah, that just— there's no excuses there. You have to be able to just rub those two sticks together. And, you know, different ways to do it is show user numbers, show waiting lists, start getting MOUs or LOIs. Letters of intent is something that we do a lot with SaaS companies, right? So if a SaaS company, they don't have a product yet, they at least, we have them go out and interview hundreds of different, you know, large corporations and the corporations sign with them letters of intent to say, look, yes, if you build this first version of the product, we will purchase it. Now that's a non-binding letter of intent, but again, in the eyes of an investor, you're starting to de-risk. You are just showing some level of confidence that you have momentum, that you have velocity towards what you're trying to build. Okay. So I'm gonna answer a question for Ralph from Astoria here. So Ralph in Queens. Ralph, I'm a big Mets fan. I'm from New York. New York originally, and I, uh, I grew up in, in Westchester County, New York. Uh, so Ralph is asking, how are investors assessing the wave of AI businesses coming to them? Do they even differentiate at this point? Um, so, and then, right, talking about, okay, is the AI just a wrapper? So here's what I would say. I'd say definitely some of those metrics that I showed before in terms of valuations and things like that have been buoyed by AI, right? And that's a good thing, right? We have this sort of foundational technology that has come upon us that has created a whole new wave of interest and opportunity in the technology space, which is amazing, right? I think what last— last people, or the last wave, people thought that that was going to be blockchain, right? Web3. Now it still could be, and to be honest, I'm, I'm a believer in Web3. I'm not necessarily a believer crypto, right? And unfortunately, uh, those two things have been kind of intertwined in, in most people's minds. But, but I think Web3, and just in terms of decentralization, still has a lot of promise. But, um, I think, you know, that was sort of the last foundational thing that people thought was really going to transform the industry, and it really hasn't to this date, right? And then if you go back before Web3, what was the thing before that? It was cloud computing. And that's where I think, when I think about AI right now, I think about it from a cloud computing perspective. There, we were so early this last couple of years, this last year or so, and even now, right? The only mega rounds that you saw in tech were in the people that were trying to create the, the, the infrastructure, the service layer or sorry, not the service layer, just the infrastructure layer for these technologies, right? So on ChatGPT, on Anthropic, et cetera, right? Essentially the cloud provider, right? So they were trying to say, okay, who's gonna be the AWS? Who's gonna be the Azure, et cetera, right? And I think that wave has sort of passed at this point. I'm sure there'll be some more and maybe some of this recent, you know, tumultuous stuff that's going on at OpenAI opened up the door a little bit more, but I'm not sure. Like OpenAI is so ahead of a lot of other people, it's kind of ridiculous at this point, at least in, in what they're doing. Um, so you have that kind of infrastructure layer, right? So that led this last boom. Now I think at this point, right, a lot of people are saying, okay, well, you know, it's sort of already been decided. No, it hasn't already been decided, okay? Maybe there will only be a couple of players who will win the infrastructure side. Right, which is where the billions and tens of billions will be made, right, being the next AWS. But now I think you're starting to see a lot more investment in the verticalization, right? So who are the companies that are going to take that infrastructure and apply it to different industries, right? And that, that's where now we're seeing the second wave of investment come in. And those waves of investment aren't going to be, you know, in the hundreds of millions, right? It's going to be, okay, look, these people are utilizing ChatGPT's layer, right? As if they would utilize AWS to scale, they're using ChatGPT's layer to perform the functions that they need to address this specific market, right? To make salespeople so much better. And they're able to do this by selling into all these different organizations, right? So I think right now you're just seeing it much more on the vertical side of things. And I think that's going to be super exciting. I think that's what's going to basically define AI investing next year. Is seeing who are the companies, who are the scrappy founders that are taking these tools right now and being able to just build startups out of them, right? I mean, think about when AWS was released. That, in my opinion, AWS probably had a larger impact on startups than any other service that's been developed in the last 15, 20 years, right? Because it allowed startups to develop things at at such a small amount of cost, whereas before that they were dealing with extremely expensive server costs, right? Even if things went to the cloud before that, it was still super variable and super expensive and not easy to plan around, right? And then before that, they literally had to buy their own servers, right? AWS made it scalable, and I think AI is doing the same thing just in a different realm. It's doing it for the calculations, for the services that you're able to provide. And I think it's just going to create a boom, like an absolute boom. And you're starting to see it now, right? This first phase we saw in the who's going to really make the tens of billions by providing that layer, and that has subsided at this point a little bit. Um, who knows, maybe there's some more players I'm not aware of yet. Um, and then now I think you sort of see a little bit of a lull, um, as that starts to shake out. But now especially once the ChatGPT store opens and some of these other stores open and they just release better tools to allow other companies to build on top of these technologies, you're just going to see this whole other second level boom across all of the verticals. Okay, so we've gone a little bit over here, so I think I'm going to maybe take one more question. So let me see here. All right, Connor is asking, how do you define low priority versus high priority investors? So Connor, and I'm looking at some of the other questions here, and maybe I'll just address some of these quickly. You can leave this one up, team, for a second, but Let's see, like, Homer from Budapest asks, how does PR make a big difference for the pre-seed? Homer, I'd say that PR, the only way that it makes a difference in the pre-seed again is if you are trying to show traction, right? It's a form of validation. Some forms of validation are better than others, right? I would say that things like PR have, are much more effective during bubble times, right, because it's sort of hype. Uh, they're less effective during times now where investors are going to want to see much more brass tacks, much more metrics, much more team, things like that. Um, and then, uh, uh, Parachute from London asked, uh, is leveraging exponential tech like AI— is it, um, improve the chance of funding, or is it just seen as an efficiency enabler? And I would say that look, it's, it's an efficiency enabler, right? But that doesn't mean that it's not part of your product. Every single founder, in my opinion right now, should be utilizing AI in some way, shape, or form to make themselves more efficient, right? To increase their output based on the limited resources that they have. Now, if you can build AI into the actual product that you're building, right, I mean, that's an easy story to tell investors, to say, okay, look, yes, um, Well, if you're a SaaS company, right, every SaaS company right now is, or every company that's looking for SaaS products is saying, okay, yeah, like we want to be more efficient. AI is doing some cool things. Like, does your company help us do that? Right? So yeah, you can build it in to the product, but again, I think at an even higher level, if it's not built into your product, it's an efficiency enabler for you as a team. It's your ability to make magic happen, so to speak. Week with low resources. And then finally here, Connor from Vancouver was asking, how do you define low priority versus high priority? It's a good question, Connor. Um, I'd say your high priority investors, um, are typically going to be the ones that you think will be a lead investor. Okay, um, and a lead investor, for those who don't know, right, Usually when you go out and you start raising funding, some people will tell you nos, and that's good, okay? If somebody just tells you a no, get feedback from them, all right? Like, and even if you totally disagree with the feedback, a no is a good thing. At least it's, well, it's better than, than a maybe, right? Maybe then you don't really get much feedback at all. If you get a no, get the feedback. All right, then some people will tell you maybe, and usually that maybe either is a way for them to just not give you feedback and never speak to you again, right? And this is something I know in VC Lab they try to preach to their, their new up-and-coming managers is that, look, is it— if you want to be founder-friendly, just get back to them quickly. If it's a no, tell them no. If it's not, tell them why, right? Um, because investors have their job, they have to say no to like 95% of the things that they see, right? So as a founder, at least if they tell you why they're saying no and they tell you quickly, right, then you can kind of get on with your day. Um, but a lot of the ones that will say maybe, uh, they'll say, okay, well, get back to me when you have a lead, right? And that's a lead investor. And the lead investor is the one who sets the terms on the round, um, and generally is the one that all of the other investors will follow. So if I were you, I would be identifying who could potentially be a lead investor. So who could be a lead investor? A lead investor would be somebody that really, really, really believes in what you're doing and has the ability to put in the amount of money that would be required of a lead, right? So they're going to be putting in a good chunk of the round that you're trying to raise, right? Number one, so do they have that capability? And number two, have they invested in other startups in the space? And is their thesis very in line what it is that you're doing. Okay, I would identify those as sort of being potential leads. Now, don't, don't fret if in the beginning when you start your fundraising journey you don't have people that immediately that you think could be potential leads. Okay, a lot of the times just going out there and pitching kind of lower priority investors will start to get you closer to a lead, right? Some of them may say, oh well, I know this person, and you know, they'll start to make other connections right? But I'd say, generally speaking, your highest priority investors are the ones that you think could be leads, or, um, they are ones that can drive a, a very high level of interest in what you're doing in the eyes of other investors. So it could be a big name, right? Uh, it could be just somebody that has a lot of experience in your space, right? So maybe it's in angel investor who founded another company in your space that did really well, right? That would be a high priority one because you know that if you unlock that person as an investor, that's something that you can literally go back to every other investor who's given you a maybe and say, look, this person's now in the round, are you interested? And that'll probably flip them to a yes, right? So the highest priority investors are the ones that either can lead or are the ones that by having them on your cap table, it will increase your ability to close all the other maybes that you'll probably collect. Okay. Alright. Well, I, I really hope that was interesting and helpful for everybody. We will be sharing out a recording and the deck from this video in the next couple of days. If anybody is on the earlier stages of this journey, if you are at that point where you're in that pre-seed stage and you're trying to get to some of those metrics metrics to raise funding, you're trying to build some of those relationships, uh, to raise funding and trying to, you know, build out your local network or your network within whatever kind of startup that you're trying to build, uh, do check out the Founder Institute. We are enrolling programs, uh, I believe in, in over 70 countries worldwide at the moment. And the Founder Institute is an accelerator that's specifically geared towards people at that idea stage who are trying to get those metrics and get to the point where they can raise funding. All right. Thank you very much, everybody. Have a good evening, afternoon, or morning, wherever it is that you're joining from, and I hope I'll see you again soon. Oh, last thing. Sorry. There is some networking here going on. Now, I did go a little bit long, so maybe the network will be a little bit, a little bit less vibrant, but hopefully not. Oh, wow. We still got a very large number of people. Who are here listening in. Thank you, everybody. 324 people. That's amazing. I feel very blessed. Maybe some of the things I was saying were helpful after all. So if you are still here, I'm going to check out. I have a meeting that I'm 5 minutes late for at the moment. But as soon as I close this, you're going to get Zoomed right back into our networking room. And look, if you have an idea, this is where you could start. Okay, start pitching your idea, right? You won't get any closer to the metrics that you need, and you won't get any closer to raising funding if you are not just pitching your idea to anybody and everybody that will listen, right? Even if they're not an investor, they may give you feedback. Even if they're not an investor, they may connect you with somebody who will connect you with somebody who will be an investor. Even if they're not an investor, maybe they share your passion, will join your right? So that's what I encourage you all to do, is that we'll go into these networking rooms, but share your ideas, meet other people, jump around, make connections, right? And that's how you start building out your network and start getting closer to, to raising funding next year. Okay, all right, thanks everybody, take care, bye.