Polovets: Staggered valuation caps offer minimal dilution savings over upfront rounds
Leo Polovets · 20VC: Investing; A Game Of Access Or Picking, Why Technical DD At Seed Is Irrelevant & Why A Contrarian Mindset Does Not Always Lead To Optimal Returns with Leo Polovets, Co-Founder & General Partner @ Susa Ventures · Apr 19, 2017 · at 10:57
Leo Polovets, General Partner at Susa Ventures, explains cap table math to host Harry Stebbings, illustrating why raising seed rounds on gradually increasing valuation caps yields virtually no dilution benefit.
0:00 / 0:18exact quote · 18.1s
720p mp4 · rendered on demand · StarZero watermark
“Whether you raise all of it on five, or you raise a little bit on four, seven, and 10, most people think that the four, seven, 10 approach is way better, because the valuations go up so much. But it turns out, I think it's within about half a percent of dilution. One gets you to like, 77% ownership for the founders, and the other one's like, 77 and a half. So it's basically a wash”
quote is from the automated transcript, cleaned for reading: filler sounds and stutters are removed, nothing is rephrased. names can be misheard (the analysis reads context, assessments check outside sources). how →
More from Leo Polovets
Polovets: Evaluating startup technology and CTOs at seed is a waste
“I spent most of my time trying to figure out how good is the technology, how good is the CTO. And it took me a few months to realize that that was probably just a waste of time for everybody.”
Polovets: Startups fail from lack of product-market fit, not technology
“It's very rare for me to see companies fail because of the technology. It's almost always the product market fit is not there, or the team isn't able to recruit as much as they'd like”
Polovets: Solely accepting warm intros excludes non-traditional founders
“If you only meet people through introductions, you're going to be shutting yourself off from people who come from different backgrounds or spend time in their social groups or different settings.”
Polovets: Fund returns depend far more on initial seed checks than follow-ons
“Yeah, you know, I do believe, actually, that you make most of your money on the right initial bets, And the key is just to make those bets meaningful and trying to double down later helps, but I really think it's secondary.”
Polovets: Overpaying across a seed portfolio cuts overall fund returns in half
“I do believe price is important. I think everybody talks about if you invest in Uber, then the seed price doesn't matter. And I think if you invest in Uber, that's true. The seed price doesn't matter. But I think the challenge is that most investors think most…”
Leo Polovets: VC reputation is built on handling struggling portfolio companies
“There's a really great Fred Wilson quote where he talks about VCs making their money on their big winners, but the reputations on the companies that struggle. And I think building that good reputation is what gives you a chance to work with the next generation…”