The Ledger
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Jain: Raising a first institutional round is the hardest in a decade
“In fact, this is probably the hardest time in the last decade to raise your first institutional round.”
Jain: Cloud cost savings are offset by rising startup labor costs
“So the cost saving that's come from the shift to, you know, AWS, Twilio, et cetera, it's offset by the increase in labor costs, which is why that number has stayed fairly stable, and we expect that to stay stable in the future.”
Jain: Series A funds preempt rounds sooner and at inflated valuations
“In a prepared mind for a Series A fund, we certainly see those rounds getting preempted, and maybe those rounds are getting done sooner than they would have five, 10 years ago, and they're getting done at a price higher than those companies probably deserve.”
Jain: Multi-stage VCs fail at pre-seed by applying Series A frameworks
“And this is, I think, also where it's tough for multi-stage investing firms, frankly, to invest at this pre-traction stage, because what the company looks like is very different than when you look at it as Series A. And I think it's easy to fall in the trap of…”
Jain: Success in venture capital requires staying small and resisting expansion
“Success and venture actually means you have to fight that inherent desire to expand and grow. Success and venture means you have to get really, really good at what you set out to do. You stay within your lane. And that's counterintuitive because it's staying s…”
Gaurav Jain: Angel and scout funds do not lead pre-seed rounds
“There's tons of angel and scout funds, but they're not leading these deals. You still need someone to catalyze. If you're trying to raise a proper round, if you're trying to raise enough money to get your next inflection point, you do need a lead investor.”
Jain: Afore Capital represents 40% of capital in pre-seed focused funds
“In fact, you know, a four accounts were about 40% of capital that has gone into funds exclusively focused on pre-seed.”
Jain: Venture capital is a human service business that cannot scale like software
“But I think people forget that venture is a services business. This is not a software company. You know, two core parts of being a venture capitalist are exercising judgment and advising founders. And both of those things cannot be productized. Well, at least …”
Jain: Multi-stage funds entering seed rounds is a temporary phase
“So we think this is a more of a phase, and I think over time, as the economic cycles shift, you know, the Series A funds will retreat to focus on what they do best, which is investing at Series A, which is, you know, around the time when the company is getting…”
Jain: Series A Funds Rely Heavily on Insider Follow-On Signals
“And look, as I mentioned earlier, series of rounds are getting done earlier and earlier, which means there is less and less data for the story. So, so series of funds are looking for other signals. And I think whether your insiders are doubling down or not is …”
Jain: Startups face more variation across growth stages than sectors
“We think there's more variance on the problems that companies face across stages and phases of the business than there are across sectors.”
Jain: Afore Capital achieves an 86%+ pre-seed portfolio graduation rate
“And our graduation rate's been upwards of 86%, and it's because we're able to do this diligence to really figure out, can the company get to the next stage?”
Jain: Early startups should raise $500k-$1M for 12-15 months runway
“And this is where we recommend to founders, like, look, you should raise somewhere between half a million to million dollars, which we think is the right balance between having enough to really be heads down and execute for, let's say, 12 to 15 months. But at …”
Jain: LP flight to quality will lead to fewer new micro-VC fund creations
“So, so you're going to see, we think of fewer new fund creations. And when we say fund, we're not talking about a few million dollar funds. We're talking about sizable funds that can lead, you know, institutional size rounds.”
Jain: More specialist institutional investors will enter the pre-seed stage
“And we also expect, given the incredible amount of demand for institutional grade lead investors at the pre-seed stage, That we expect more specialists to enter the category. Whether they're coming in from a stage focus, like we are, or a sector focus, we expe…”
Jain: Media overstates frequency of massive initial seed rounds for new founders
“I think it happens much less frequently than the media may make it up to seem. Mostly because when that happens, it becomes news. Hence, we all hear about it, and it makes it feel like that is what is happening day to day. But the reality on the ground is, for…”
Jain: Angel Funds and Scout Programs Are Funded Mainly by Series A VCs
“If you look at where the capital is coming from for these funds, it's predominantly from Series A funds or GPs individually investing.”
Jain: Early-stage diligence should focus on reaching the next inflection point
“And the way we operate is we make a list of key questions we have to answer in the diligence process. And these are basically things that need to go right for this company to get to the next inflection point. Not necessarily for this to be a massive business.”
Jain: Best pre-seed startups reshape markets in ways founders cannot anticipate
“In my opinion, best companies will either expand or shrink the market in ways even the founders cannot anticipate at the pre-seed stage.”
Jain: Uber estimated a $4.2B TAM initially, now handles nearly $60B
“Uber, of course, you've seen the first deck, right, talks about the TAM being 4.2 billion dollars. And they now do almost sixty billion dollars in bookings.”
Jain: Pre-seed unit economics are leading indicators of market pull
“I think it's, you cannot take it literally on what the unit economics are, but I think you start to see some leading indicators on, you know, the idea of market pull that I talked about.”
Jain: VCs should ask founders questions rather than dictate actions
“Don't tell founders what to do, even though you have that urge all the time, because you've seen that before, but instead to focus on first principles to ask the right questions of the founder. So they can make, they can come to that conclusion themselves and …”
Jain: Android Grew From Under 1M Total Users To 1M Daily New Users
“We had less than a million total users on Android at the time. It was a phenomenal journey for me to kind of see Android grow from less than a million total users to about a million new users a day.”
Jain: Afore Capital's average initial check is ~1% of fund size
“Our average primary check is just over one percent of the fund, and we think that's a good number because it allows us to get meaningful ownership, it's meaningful to the fund, but it also allows us Take a lot of risk.”
Gaurav Jain: Afore Capital treats follow-on checks as new investments
“We consider each check we write, even in existing portfolio companies, as a new investment. So we run a very similar process where we will put together a memo and really try to understand, is this, if we were to have a blank slate, would we invest in this comp…”