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Sep 2, 2016 · 25m · top-founders

EP 405: 409A Valutions, Cap Table Pro-Formas and More with Jonathan Gass of NomadFinancial

Jonathan Goss · 12m spoken Nathan Latka · 10m spoken
0:00 / 0:00

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Host Nathan Latka interviews Jonathan Gass, founder of Nomad Financial and operating partner at Interplay Ventures, to explore essential startup finance strategies. Gass breaks down the mechanics of 409A valuations, cap table pro-formas, liquidation preference traps, and the importance of founder-investor alignment.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 45.8% of the talking time here. How this is scored →

Nathan as informed peer 4.0 Guest teaching 2.9 Guest disagreement 0.4 Nathan pushing back 1.9
05100:0010:0020:000:28–4:05 · Nathan as informed peer 2/10 Weekly Giveaway Winner and Subscription Instructions Nathan introduces the episode and asks standard background questions regarding Jonathan's previous role at Vimeo and the founding of Nomad Financial. The tone is casual and introductory.4:05–6:06 · Nathan as informed peer 5/10 Nomad Financial Services and 409A Advocacy Nathan brings in his firsthand founder experience negotiating option exercise prices and 409A valuations at Heyo. Jonathan elaborates on recent audit trends and advocacy for startup founders.6:06–8:24 · Nathan as informed peer 4/10 Demystifying 409A Valuations vs. Fundraising Valuations Nathan explicitly positions Jonathan in an educator role by asking him to explain 409A valuations to the audience. Jonathan cleanly breaks down strike prices versus investor valuations and warns against conflating the two.8:25–12:16 · Nathan as informed peer 6/10 Cap Table Pro-Formas and Exit Scenario Modeling Nathan illustrates the danger of high valuations with aggressive liquidation preferences using a real example from a past interview. Jonathan expands on preferred share structures and the dangers of multi-X liquidation preferences.12:17–14:26 · Nathan as informed peer 4/10 Smart Money vs. Plain Dollars and Vision Alignment Nathan asks whether investors use aggressive terms merely as future negotiation leverage, probing how Jonathan spots bad founder-investor alignment. Jonathan shares his philosophy on smart money versus plain capital.14:26–16:53 · Nathan as informed peer 5/10 Interplay Ventures: Foundry Model and Seed Investing Nathan applies direct pressure, telling Jonathan to 'pick a baby' and not dance around naming the friendliest investor. Jonathan deflects the ranking by pitching his own firm, Interplay Ventures, leading Nathan to interrogate their fund structure.16:54–18:57 · Nathan as informed peer 4/10 Personal Asset Allocation and Startup Investment Philosophy Nathan inquires about personal asset allocation between liquid index funds and illiquid early-stage investments. Both agree on the challenge of capital lockup in venture cycles.18:57–23:53 · Nathan as informed peer 2/10 Contact Information for Jonathan Gass and Nomad Financial The segment covers contact details, an ad read, and the standard Famous Five rapid-fire questions, concluding with Nathan's takeaways on leadership and consolidation.0:28–4:05 · Guest teaching 1/10 Weekly Giveaway Winner and Subscription Instructions Nathan introduces the episode and asks standard background questions regarding Jonathan's previous role at Vimeo and the founding of Nomad Financial. The tone is casual and introductory.4:05–6:06 · Guest teaching 3/10 Nomad Financial Services and 409A Advocacy Nathan brings in his firsthand founder experience negotiating option exercise prices and 409A valuations at Heyo. Jonathan elaborates on recent audit trends and advocacy for startup founders.6:06–8:24 · Guest teaching 6/10 Demystifying 409A Valuations vs. Fundraising Valuations Nathan explicitly positions Jonathan in an educator role by asking him to explain 409A valuations to the audience. Jonathan cleanly breaks down strike prices versus investor valuations and warns against conflating the two.8:25–12:16 · Guest teaching 5/10 Cap Table Pro-Formas and Exit Scenario Modeling Nathan illustrates the danger of high valuations with aggressive liquidation preferences using a real example from a past interview. Jonathan expands on preferred share structures and the dangers of multi-X liquidation preferences.12:17–14:26 · Guest teaching 3/10 Smart Money vs. Plain Dollars and Vision Alignment Nathan asks whether investors use aggressive terms merely as future negotiation leverage, probing how Jonathan spots bad founder-investor alignment. Jonathan shares his philosophy on smart money versus plain capital.14:26–16:53 · Guest teaching 2/10 Interplay Ventures: Foundry Model and Seed Investing Nathan applies direct pressure, telling Jonathan to 'pick a baby' and not dance around naming the friendliest investor. Jonathan deflects the ranking by pitching his own firm, Interplay Ventures, leading Nathan to interrogate their fund structure.16:54–18:57 · Guest teaching 2/10 Personal Asset Allocation and Startup Investment Philosophy Nathan inquires about personal asset allocation between liquid index funds and illiquid early-stage investments. Both agree on the challenge of capital lockup in venture cycles.18:57–23:53 · Guest teaching 1/10 Contact Information for Jonathan Gass and Nomad Financial The segment covers contact details, an ad read, and the standard Famous Five rapid-fire questions, concluding with Nathan's takeaways on leadership and consolidation.0:28–4:05 · Guest disagreement 0/10 Weekly Giveaway Winner and Subscription Instructions Nathan introduces the episode and asks standard background questions regarding Jonathan's previous role at Vimeo and the founding of Nomad Financial. The tone is casual and introductory.4:05–6:06 · Guest disagreement 0/10 Nomad Financial Services and 409A Advocacy Nathan brings in his firsthand founder experience negotiating option exercise prices and 409A valuations at Heyo. Jonathan elaborates on recent audit trends and advocacy for startup founders.6:06–8:24 · Guest disagreement 0/10 Demystifying 409A Valuations vs. Fundraising Valuations Nathan explicitly positions Jonathan in an educator role by asking him to explain 409A valuations to the audience. Jonathan cleanly breaks down strike prices versus investor valuations and warns against conflating the two.8:25–12:16 · Guest disagreement 0/10 Cap Table Pro-Formas and Exit Scenario Modeling Nathan illustrates the danger of high valuations with aggressive liquidation preferences using a real example from a past interview. Jonathan expands on preferred share structures and the dangers of multi-X liquidation preferences.12:17–14:26 · Guest disagreement 1/10 Smart Money vs. Plain Dollars and Vision Alignment Nathan asks whether investors use aggressive terms merely as future negotiation leverage, probing how Jonathan spots bad founder-investor alignment. Jonathan shares his philosophy on smart money versus plain capital.14:26–16:53 · Guest disagreement 2/10 Interplay Ventures: Foundry Model and Seed Investing Nathan applies direct pressure, telling Jonathan to 'pick a baby' and not dance around naming the friendliest investor. Jonathan deflects the ranking by pitching his own firm, Interplay Ventures, leading Nathan to interrogate their fund structure.16:54–18:57 · Guest disagreement 0/10 Personal Asset Allocation and Startup Investment Philosophy Nathan inquires about personal asset allocation between liquid index funds and illiquid early-stage investments. Both agree on the challenge of capital lockup in venture cycles.18:57–23:53 · Guest disagreement 0/10 Contact Information for Jonathan Gass and Nomad Financial The segment covers contact details, an ad read, and the standard Famous Five rapid-fire questions, concluding with Nathan's takeaways on leadership and consolidation.0:28–4:05 · Nathan pushing back 1/10 Weekly Giveaway Winner and Subscription Instructions Nathan introduces the episode and asks standard background questions regarding Jonathan's previous role at Vimeo and the founding of Nomad Financial. The tone is casual and introductory.4:05–6:06 · Nathan pushing back 1/10 Nomad Financial Services and 409A Advocacy Nathan brings in his firsthand founder experience negotiating option exercise prices and 409A valuations at Heyo. Jonathan elaborates on recent audit trends and advocacy for startup founders.6:06–8:24 · Nathan pushing back 1/10 Demystifying 409A Valuations vs. Fundraising Valuations Nathan explicitly positions Jonathan in an educator role by asking him to explain 409A valuations to the audience. Jonathan cleanly breaks down strike prices versus investor valuations and warns against conflating the two.8:25–12:16 · Nathan pushing back 2/10 Cap Table Pro-Formas and Exit Scenario Modeling Nathan illustrates the danger of high valuations with aggressive liquidation preferences using a real example from a past interview. Jonathan expands on preferred share structures and the dangers of multi-X liquidation preferences.12:17–14:26 · Nathan pushing back 3/10 Smart Money vs. Plain Dollars and Vision Alignment Nathan asks whether investors use aggressive terms merely as future negotiation leverage, probing how Jonathan spots bad founder-investor alignment. Jonathan shares his philosophy on smart money versus plain capital.14:26–16:53 · Nathan pushing back 6/10 Interplay Ventures: Foundry Model and Seed Investing Nathan applies direct pressure, telling Jonathan to 'pick a baby' and not dance around naming the friendliest investor. Jonathan deflects the ranking by pitching his own firm, Interplay Ventures, leading Nathan to interrogate their fund structure.16:54–18:57 · Nathan pushing back 1/10 Personal Asset Allocation and Startup Investment Philosophy Nathan inquires about personal asset allocation between liquid index funds and illiquid early-stage investments. Both agree on the challenge of capital lockup in venture cycles.18:57–23:53 · Nathan pushing back 0/10 Contact Information for Jonathan Gass and Nomad Financial The segment covers contact details, an ad read, and the standard Famous Five rapid-fire questions, concluding with Nathan's takeaways on leadership and consolidation.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 77.7% · guest 22.3%0:00 · Nathan 77.7% · guest 22.3%3:00 · Nathan 40.2% · guest 59.8%3:00 · Nathan 40.2% · guest 59.8%6:00 · Nathan 38.3% · guest 61.7%6:00 · Nathan 38.3% · guest 61.7%9:00 · Nathan 28.9% · guest 71.1%9:00 · Nathan 28.9% · guest 71.1%12:00 · Nathan 30.1% · guest 69.9%12:00 · Nathan 30.1% · guest 69.9%15:00 · Nathan 19.5% · guest 80.5%15:00 · Nathan 19.5% · guest 80.5%18:00 · Nathan 72.6% · guest 27.4%18:00 · Nathan 72.6% · guest 27.4%21:00 · Nathan 40.9% · guest 59.1%21:00 · Nathan 40.9% · guest 59.1%24:00 · Nathan 100% · guest 0%24:00 · Nathan 100% · guest 0%
Sharpest disagreement ▶ 14:49 Refusing to name a specific investor

When directly challenged to name the friendliest investor without dodging, Jonathan resists Nathan's framing and instead promotes his own firm, Interplay Ventures.

 Hardest push from Nathan ▶ 14:45 Demand to stop dancing around the question

Nathan cuts through Jonathan's generic response by ordering him to 'pick a baby' and stop dancing around naming specific top investors.

 Biggest teaching moment ▶ 6:22 409A strike price versus fundraising valuation

Jonathan clarifies the widespread founder misunderstanding between setting employee option strike prices for tax purposes versus negotiating high post-money equity valuations.

 Nathan holds their own ▶ 10:07 Nathan dissects valuation traps and liquidation preference

Nathan demonstrates financial mastery by citing Teachable's metrics and breaking down how multi-X liquidation preferences on high valuations can completely wipe out founders on small exits.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Weekly Giveaway Winner and Subscription Instructions 2101 Nathan introduces the episode and asks standard background questions regarding Jonathan's previous role at Vimeo and the founding of Nomad Financial. The tone is casual and introductory.
Nomad Financial Services and 409A Advocacy 5301 Nathan brings in his firsthand founder experience negotiating option exercise prices and 409A valuations at Heyo. Jonathan elaborates on recent audit trends and advocacy for startup founders.
Demystifying 409A Valuations vs. Fundraising Valuations 4601 Nathan explicitly positions Jonathan in an educator role by asking him to explain 409A valuations to the audience. Jonathan cleanly breaks down strike prices versus investor valuations and warns against conflating the two.
Cap Table Pro-Formas and Exit Scenario Modeling 6502 Nathan illustrates the danger of high valuations with aggressive liquidation preferences using a real example from a past interview. Jonathan expands on preferred share structures and the dangers of multi-X liquidation preferences.
Smart Money vs. Plain Dollars and Vision Alignment 4313 Nathan asks whether investors use aggressive terms merely as future negotiation leverage, probing how Jonathan spots bad founder-investor alignment. Jonathan shares his philosophy on smart money versus plain capital.
Interplay Ventures: Foundry Model and Seed Investing 5226 Nathan applies direct pressure, telling Jonathan to 'pick a baby' and not dance around naming the friendliest investor. Jonathan deflects the ranking by pitching his own firm, Interplay Ventures, leading Nathan to interrogate their fund structure.
Personal Asset Allocation and Startup Investment Philosophy 4201 Nathan inquires about personal asset allocation between liquid index funds and illiquid early-stage investments. Both agree on the challenge of capital lockup in venture cycles.
Contact Information for Jonathan Gass and Nomad Financial 2100 The segment covers contact details, an ad read, and the standard Famous Five rapid-fire questions, concluding with Nathan's takeaways on leadership and consolidation.

Statements from this episode (7)

Insight
Gass: Vimeo differentiated by focusing entirely on creators instead of consumers
“The big thing that they did was built tools In order to support video makers and they focus the entire value proposition around the maker as opposed to the consumer.”
Jonathan Goss Sep 2, 2016 ▶ 3:51
Assertion Not checkable as stated
Gass: Big Four auditors are pushing back on 409A startup valuations
“The other thing we've started seeing is, is during audit, during the audit process, when you, whether you're using a big four or one of the other large firms, you're starting to actually see some pushback on that, right?”
Jonathan Goss Sep 2, 2016 ▶ 5:39
Assertion Not publicly verifiable
Latka: Teachable raised at a $30M valuation on $150K MRR
“He launched a site called Teachable, and they're doing, they're, at the time, they're doing like a 150 grand per month, and he just closed around where their post money was thirty million.”
Nathan Latka Sep 2, 2016 ▶ 10:19
Insight
Gass: Early 2X to 3X liquidation preferences will cripple future fundraising
“If say you gave away two or three X preference early on, it's going to be hard to do follow on fundraising when an investor sees that, because that's going to be impactful to them. They don't want to be, they don't want to participate in that company. So eithe…”
Jonathan Goss Sep 2, 2016 ▶ 11:31
Disclosure
Gass: Interplay Ventures invests its own capital and operates without LPs
“We don't have LPs.”
Jonathan Goss Sep 2, 2016 ▶ 16:09
Disclosure
Latka: Executing a roll-up strategy by acquiring B2B SaaS Chrome plugins
“I'm actually going and acquiring a bunch of Chrome plugins right now in the B to B SaaS space and trying a little roll up.”
Nathan Latka Sep 2, 2016 ▶ 21:39
Assertion Not publicly verifiable
Latka: Roy Mann hit $360K MRR and 5,000 customers in mid-2016
“Roy did 360 grand in June revenue. He's on track to do four million this year with 5000 customers paying 70 dollars per month on average.”
Nathan Latka Sep 2, 2016 ▶ 24:36
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