Is your startup idea VC backable?' with Eva Dobranzska of FundIQ.

Summary

Are you a first-time founder with a brilliant startup idea but unsure how to get the funding to make it a reality?  This podcast is your roadmap to success!Join Eva who is a seasoned VC industry professional as she empowers you with the knowledge and practical steps to secure funding for your venture. We'll delve into everything from venture capital and alternative funding methods to crafting a killer pitch deck and negotiating the right valuation.

Takeaways

1. The VC world has a dark side, with risks including boosting businesses that are not economically viable.
2. Creating an effective pitch deck involves structuring it properly and focusing on problem and target market slides, solution and competitive advantage slides, and market size and financial projections.
3. Building a waitlist can be a valuable strategy for startups, as it demonstrates market interest and potential customer demand.
4. Success stories often emerge from down markets, and being the second runner up can lead to great success.
5. Founders should carefully consider metrics, valuation, and cap table management to ensure fundraising success.

Chapters

00:00 Trailer
01:30 Who is Eva
04:44 Are you qualify for VC money? (First time founder MUST LISTEN)
08:00 Eva Key Takeaways from Working in Startups
13:35 Why Agency Models Are Not Venture-Backed
16:35 What other raising methods founder should look
26:40 What Value of Incubators and Accelerators in first time founder life
38:40 How Eva helping to raise money and what valuation to give (MUST LISTEN)
45:50 The Dark Side of the VC World
50:20 How to create an effective pitch deck
01:06:35 Metrics Founders Should Care About
01:10:42 When to use Convertible Notes or Safe Notes
01:12:37 How Eva Navigating Valuation
01:17:45 Cap Table Red Flags
01:25:21 Is Fundraising a Success?
01:19:45 Ritual Time
01:21:13 Ending 

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Transcript

Mudassir (00:02.679)
Alrighty, please do a clap for me.

Eva Dobrzanska (00:07.744)
Yeah, hi. Sorry.

Mudassir (00:09.463)
This is a post-production tip. The moment you clap, the moment you clap, and the moment it produces the spikes in the audio file helps us sync the entire video. So you're not gonna be like, there's not gonna be a drift, okay. Yeah, go ahead. Awesome. All right, rolling now. Hey, Eva, welcome to the show. How are you doing today?

Eva Dobrzanska (00:22.332)
Wait, should I clap now? Yeah.

Eva Dobrzanska (00:30.658)
Hi, I'm Woodisir, good to be with you.

Mudassir (00:33.451)
Thank you so much for the time, I appreciate it. Every single time anybody that I host on the podcast, I want to understand what are the events that has happened in their lives that led to wherever they are today. So the question that I wanna start us off with, who is Eva and why is she doing whatever she's doing today?

Eva Dobrzanska (00:55.486)
Yeah, absolutely. So like many in the investment space, I actually started out on the startup side. So back when I was living in Sydney, I was working for a couple of startups. I was basically the first addition to their teams when they were just incorporated three months prior. So it was the very, very early stages of setting everything up from the ground up.

and really making sure that we can launch these businesses and grow them into more successful scale-ups. And it was a very, very interesting journey. I was working for two startups at the same time who were basically splitting my time between themselves, which was a pretty good way to save on basically expenses, if you ask me. And for me, it was quite lucky because I got to see two...

different types of operations with two different products and operating across two slightly different sectors. And one of the startups experienced a period of very, very high, fast growth. So they went from zero to about a million ARR in I think just under like a year and a half within launching. And then...

The other one did not so well. And for me, it was really good to see and observe what did we do as a team? What did the founders do? How did they go about responding to their customers' needs and requests? And really it was all about that early stage building and delivering the product slash service and, and seeing how that impacts the growth into startups.

And that was also when I found myself in the capital raising scene in Sydney. So I was working for then for a small advisory and I've started working on my personal brand myself as well. So naturally I launched my own and since then I've been working with founders to help them understand.

Eva Dobrzanska (03:10.538)
Firstly, what I've experienced myself working in the early stage space, but then also secondly, everything that I was learning from interacting with other VCs in the space, speaking to other investors and understanding really what makes a company investable as one, but also what makes a company VC backable because VCs need to make their own returns and return them to their own LPs.

just because a certain company is an attractive investment, that might not necessarily mean it is an attractive investment to that particular VC. And there's a plethora of factors to be considered here.

Mudassir (03:55.883)
Okay, awesome. So this is a question that I usually ask like later down in the interview, but I wanna ask you at the beginning, who should raise VC money and how do you qualify to be a venture-backed business? And the reason why I'm asking you is because a lot of the founders, so there's a lot of misconceptions and we talked at length, you know, prior to the call.

There's a lot of factors behind that. Some people mistake venture capital as sort of a success thing, like, oh yeah, okay. Now that I have a million in the bank, I can relax, I can chill out a little bit more. It's the other way around, actually. But the second thing that most founders actually think about is whatever the idea that they have, they need to go to the VCs, and they need to just raise a million today, five million tomorrow, 10 million day after tomorrow, something like that. So.

especially for first time founders who are just getting into this startup ecosystem, who should raise money and what exactly is a venture backable business.

Eva Dobrzanska (04:59.23)
Yeah, so the startups that should be raising VC money and those that I called VC backable, those are the ones that have the capabilities and the right structures to produce outsides returns. So we're talking those startups that with lean operations, low burn, typically everyone's favorites that usually B2B SaaS.

And that's because, you know, like SaaS software startups, you know, like you're, you're talking software and hosting costs, the costs, the development costs, the team can be still relatively small. There's no physical equipment. There's, there's no, you know, like plant power that you would need to, to incur here in the costs. And usually that is what the VCs would be looking at so that they can generate that.

10X, 15X, even more. In 2021, VCs were betting on achieving even 100X returns. And some of the valuations that the startups were raising at, they were assuming 100X returns as well. And SAS, when done properly, it's easy to understand why VCs love it. Because there's the.

Mudassir (06:20.483)
Why VCs love it? Yeah, sorry, I didn't interrupt. Like, why do they love it?

Eva Dobrzanska (06:24.466)
Of course. Yeah. So there's the element of predictable recurring revenues, which makes it very easy to produce financial modeling and projections. Typically you've got really high margins. So we're talking 80% or more. And typically you would have an NDR above a hundred percent, which means that even without acquiring any new customers, your business is still growing. And it is much

easier to upsell to your existing customer rather than acquire a new one. And that's what a lot of SaaS startups are relying on. And some of the most successful ones that we've seen would be the ones that can actually not just retain a customer well with high retention rates and low churn, but they can also upsell to them pretty well, because this is really when they unlock those additional revenue streams.

Mudassir (07:22.731)
Awesome. I come from a world of startup, world of products actually. And one thing that I have seen many, many times, and that was every new founder, first time founder, their focus was on acquiring new customer and acquiring more and more and more and more customers and less on retaining the existing customer. So I kind of build this sort of a theory that your customer number one, the way that you cared him or her.

You should be caring your customer number 1,000 one. You should be equally protecting and providing them the value. And again, this is the main reason behind that. You mentioned something that you learned a lot over the period of time in the venture-backed industry and in those startups early on. So a two-part question that I want to ask you is, one is, what's the biggest learning that you take away from working and then fundraising at those startups? And two is,

What's the best part and what's the worst part of working at two startups, both in different verticals? Like one may be a SaaS, the other one may be a CPG. So you worked in two different verticals. What's the advantages or what are the pros and cons for that? And the other question is, what's the biggest takeaway from your time back in the day?

Eva Dobrzanska (08:41.462)
Yeah, so the biggest takeaway and that's just not from my time, you know, back in the day and with those two startups, but also from my work with founders and from what I'm seeing, from what I was seeing, you know, like back then, half a decade ago and what I'm seeing today as well. The biggest takeaway is to have a very narrow and sharp laser focus.

when you are building in the early stages. If you've got a founder who, you know, there's a certain founder characteristics and we've got certain leaders characteristic, you know, and we always talk about passion drive and optimism and really going after the opportunities. And that's fantastic. But I think that also must be complemented by carefully selecting which opportunities you actually go after.

And where you devote your time, what you pay your attention to. Cause ultimately we only have 24 hours in the day. And I've seen so many startups fail because of the lack of uniform focus. And, um, you know, like when the founders were trying to do too many things at once, and in the end they ended up not doing any of those things properly. And the reason why it is so crucial in the early stages is because that's when you have

limited resources, limited money, first of all. So it's better to focus, let's say, focus on one target market, focus on one product, nail that down first, make sure you start generating revenues in that product, make sure you really got it mastered. And once that's done, only then introduce the new things, only then go after the new opportunity. You need to have your first

um you know like 100 validated strategy in one space before you move on to the next one um if you try to do it too early if you try to chase too many ducks at the same time too early um that's a recipe for failure that's what i've seen

Mudassir (10:56.059)
Okay, and what was the takeaway from working in two different verticals?

Eva Dobrzanska (11:00.146)
Yeah, so the takeaway... I would say in here, it wasn't as much as a takeaway, but it was just a very good eclectic experience to be exposed to two completely different business models, where one was operating on a retainer, one-off fees, no upsells, whereas the other one was operating on success fees.

multi-year contracts, recurring revenues. So I think you can tell which one was the one that achieved 1 million ARR. And I think for me, some of the biggest takeaways from working for those two startups actually came along only, I would say, last year when I continued to observe them and see how they did and seeing where the founders are right now today.

and being able to see the growth trajectories that they have experienced with hindsight. Because now you can see a full picture, you know, like the exponential growth curve for one and the other one that grew a little bit, but then plateaued and it's still staying on that plateau. And going back to your previous questions, the VCs will be looking for the first category. The VCs will be looking for the startups that...

are at the very beginning of the exponential growth curve that they can achieve with their startups. And ideally, they will be placed in such verticals and industries that are poised for growth as well. So, you know, nowadays, obviously, where there's a lot of talk about AI, I don't think AI is an industry. It's simply a technology that is spilling over every other sector and industry.

So the interesting thing that is happening is that the technology will accelerate certain industries more than others. And typically it would be those industries who were already so overdue for a modern upgrade. If it comes to how they handle data, how they process information and how they make decisions.

Mudassir (13:23.311)
Great, one question that I personally want to know, some of the biggest of the biggest of the biggest companies in the world are agency business. You look at Deloitte, you look at all these big, McKinsey, you look at all of them, they're like consultation agency business, frankly speaking.

Mudassir (13:42.571)
Why venture backed, why these businesses are not venture backed? Why agency model does not get that sort of an attraction? And there is now a very sort of an uprising of productized agency, just sort of like a SaaS. So you run a design service or something like that on a monthly recurring revenue, almost similar to what a SaaS does. But why these businesses are not venture backable?

Eva Dobrzanska (14:09.826)
Yeah, I think my answer to that would be simply because of the human element that is needed in those businesses. You know, if we're talking about Kinsey Deloitte or even working with your lawyers, you've got that human element and you've got, you know, like a very high price point in there because you're paying for professional services. However, if we are talking about some of the best...

you know, like some of the biggest unicorns of the last decade where, you know, like we're talking Slack, WhatsApp, Airbnb. The key denominator between them is that the platforms that they've built automated how users interact with it so that the user does not need the human element to be handheld. They can just explore the platform themselves and their revenues and their

growth came from volumes of users. So there was virtually no limit of how many users could use the platform. There's virtually no limit of how many users can be on the platform at the same time and using it. You know, if I'm a consultant on McKinsey, I can only speak to one client at the time. If you know, if you, if you've got a platform that, you know, like you can have like however big the traffic is on your platform and how many, however many transactions are being completed.

at the same time. That's why marketplace models are one of the ones with, I would say, they're the hardest to build, but they've got the biggest potential when it comes to growth and outsized returns. So marketplaces done correctly. It's amazing because you've got incredibly high volumes and you're taking a take rate on this. This is like

Even e-commerce, we're looking at e-commerce, you know, like Amazon, Alibaba and so on, like how many daily transactions are happening there. And that's also why those business models are so successful.

Mudassir (16:15.895)
Yeah, totally makes sense. Totally makes sense. Okay. So I want this particular episode to be sort of a master class for fundraising, for early stage founders especially. So we're going to talk a lot about the different methods and different resources that are available for funding, not just VC money, which everybody just so loved. And then we're also going to talk about the pitch decks and then saves and convertibles. We're going to talk about follow-up rounds, all of that stuff. Okay. So

I want you to start with sharing, you put together a very nice sort of an infographic and pretty, one it looked pretty but I'm also a fan of graphs and stuff like that so thank you for putting that out there. Just talk to us a little bit about like what are the different methods that are available out there for the founders in order for them to just generate some capital. But take a step deeper and just tell us like which.

method or which avenue should be explored by which sort of a business model. Like who should look for friends and family, who should look for institutional VC money, like that kind of thing.

Eva Dobrzanska (17:17.312)
Yeah, yeah, yeah.

Eva Dobrzanska (17:22.978)
Yeah, absolutely. So, well, when it comes to, I'll probably divide this into the stages, because at the very early stage, we were talking idea stage. Yes, so that's when the first thing that you do, as with any person will do, will be most likely as friends and family. The important thing to note in here is that it is good if you...

Mudassir (17:33.047)
Okay.

Eva Dobrzanska (17:49.154)
can get some professional advice. We're not talking for legal support, unless you can afford it, that would be fantastic. But the thing with friends and family money is that, yes, they are your friends and yes, they are your family, but you also want to treat them professionally as potential investors. And especially that will be hugely helpful further down the line.

When it actually comes to, you know, like exits, payouts and everything else, you want to make sure that there is a right legal structure put in place into this. Otherwise, you might be risking jeopardizing your personal relationships, which is risky. Then at the idea stage. So this is the moment where a hundred percent of your cap table remains with you as a founder or potentially you and your team. You have no external investors yet.

This is where incubators and venture builder studios come into place. And that's exactly what we do at BlockDojo. So we incubate idea stage founders by helping them to make progress on their basic prototype slash MVP, and we help them become pre seed ready. So at that stage, I would definitely suggest that startups should look at incubators.

There's a couple of grant programs as well and competitions that serve this stage of the market as well. And usually, if you've got pitch competitions where, let's say, you can win 5K, 6K, it's the small boost that can be quite handy for an early stage startup founder, because that could be the difference to create a basic clickable prototype that can be shown to...

early stage investors, which are the next ones in this process. So that's where you would start to talk to angel investors. Typically they body up into angel syndicates. So you can start by approaching angel syndicates. What is important to them in the UK and what's important in the startup space in general in the UK.

Eva Dobrzanska (20:06.886)
is the SEIS and EIS Advanced Assurance from HMRC. So this is the tax benefit scheme that every startup can apply for. And it's important to get it. It's important that you qualify for it as a startup wanting to raise institutional money because virtually every startup in the UK is advanced assured. If you don't have it, if you don't offer SEIS and EIS, you would be putting yourself at a disadvantage.

So the maximum ceiling on how much money can be raised under the SCIS scheme is 250k. And this is also the reason why many startups in the UK choose this amount as their pre-seed raise. So it would typically be 250k pre-seed. It could be more depending on your product, your plant growth trajectory.

And the evaluation that you are assigning to your business, I've seen pre-seed businesses raising anywhere up to even 1 million, which I would be the highest end of the spectrum, but typically 250K, 500K. I've seen 100K as well. But I would say early stage angel investors and angel syndicates would be most used to the 250K mark.

Mudassir (21:17.419)
Mm-hmm. Yep.

Eva Dobrzanska (21:35.562)
So typically startups would have a little bit of friends and family money, couple of angel checks. A good advice is to, if you are taking checks from a number of different individuals, let's say you've got, you know, like two family members, one of your friends, and then you've got two angel investors that want to put in a check, it would be a good idea to syndicate them and they're an SVP. For example, platform called Odin, they do that.

What it helps you to do is that you can aggregate all of those different checks and all of those different investors into one single entry on your cap table, which not only makes it cleaner and neater for your future due diligence that the VCs will be doing on you, it will also save you time, money and effort in producing paperwork and managing all of those checks coming in.

So that's all what would be happening, I would say, whilst you're raising your pre-seed. And I've seen a lot of founders fill in their entire pre-seed raises with angel checks. And typically it would be an angel syndicate that is able to put in like slightly larger check to close off their rounds. So we're talking like between 50K to about 100K. And that's your pre-seed closed. And many startups do it that way.

It's also worth noting that there is a number of early stage funds that co-invest. So for example, I believe it is Development Bank of Wales actually that co-invests. So if you secure your 50k check, you can then reach out to the Development Bank of Wales and they will match it with 50k if you fit with their criteria. And then...

Moving on to the seed stage, that is typically when the world of VCs becomes open for you. There is a number of VCs investing at pre-seed as well. However, from my conversations with them and from the general market sentiment at the moment, pre-seed could be a little bit too early. And even at

Eva Dobrzanska (24:02.158)
pre-seed, it would be often that the investors would expect, you know, like more kind of like closer to seed level results. So in the UK, most of the VCs come into play when you're at a seed stage. At this stage, you would be raising anywhere between 1 million, 2 million, to about 5, 6, again, depending on your business model. But I think...

my averages and all of the numbers that I'm mentioning are best suited to your SaaS software platforms. Yeah. So yeah, from early stage VCs, you know, like some of the most, some of the biggest names in the UK of the seed stage VCs that come to mind would be Fuel Ventures, Ascension, SFC. They put in the checks relatively early.

Mudassir (24:34.755)
Yeah, yeah, okay.

Eva Dobrzanska (24:57.726)
And this is where they would, you know, you would need to find a VC that leads your round. So to lead is to put in the larger check, but also lead the entire due diligence process. And the lead VC must be the one that sort of gives the tick of approval. We've done the DD on the startup. We're investing. We're happy with that. And they, they usually get the, the highest percentage ownership in that, in that race.

And yeah, so this is also where the world of VCs, it can get, you know, a little bit more granular as well, depending on whether the fund is an evergreen fund or if it's a corporate VC attached to a larger conglomerate, or if it's a small VC fund, or if it's connected with a PE firm as well. And the reason why this is important is that

their organizational structure will be closely tied to who their limited partners are. And ultimately it will be the limited partners of the VC that dictate their thesis and on whose raising a future fund is dependent on. And also worth noting that depending on where

the certain VC is in the life cycle of their fund that will also dictate their investment decisions. So VCs would be usually actively deploying capital in the first four to maybe five years of their fund life cycle and then the second half of the fund life cycle the last five years.

Eva Dobrzanska (26:47.89)
the investment amounts for new investments can be either completely depleted or much smaller, and they might have a reserve for follow-on investments. So obviously, those VCs who have the reserve for follow-on, it is very strategic and it's very important because they want to make sure that they are backing the best companies in the portfolio because oftentimes,

the returns of the entire fund can be driven by only one or two companies from their entire portfolio. You know, the outside returns. So the 20% of the portfolio will deliver 80% of the returns. And that's why also VCs are so motivated to find the next unicorn.

and to bet on those companies that have genuinely have the potential and show the right signals of being able to produce that outsized returns.

Mudassir (27:56.027)
Okay, thank you for explaining that in so much depth. One very sort of, I don't wanna say it's a difficult question, but in some way it is. Like what value all these startup incubators and accelerators add to any idea? To a lot of people, and that's a very wide notion, especially on Twitter because that's a place where everybody rants. You know, there's this notion out there that, you know, all these incubators slash accelerators, they're just fancy.

Eva Dobrzanska (28:12.037)
Mm-hmm.

Eva Dobrzanska (28:25.742)
Mm-hmm.

Mudassir (28:25.743)
pitch their creators and just a bunch of graphic designers and storytellers. That's all they do. So yeah, what value does incubators and accelerators add? That is one. And two is why a founder has to give up that much equity to any of these accelerator and founders early on. Because sometimes they ask for a lot of equity. Sometimes like 20%, 30%. Isn't that unfair in many cases?

Eva Dobrzanska (28:53.434)
Yeah, so I wish there was a simpler answer to this, but the answer is it very, very much depends. And the question... sorry.

Mudassir (29:02.179)
Depends on what?

Eva Dobrzanska (29:06.27)
Yeah. So the question that the founders need to ask themselves is what do they need to build their startup that they can't get themselves, that they can't organize themselves? Because so I'll give you an example, you know, on the example of what we do at LogDojo, we take 10% of equity in the startups that we incubate and we take them on at the idea stage.

And when we're talking idea stage, that means we've got founders coming to us who might not yet have even incorporated the company. It's simply just an idea. It's a couple of slides. That's it. Um, and the question that the founders should consider is whether all of the support that we can help and give them is worth it, or could they do it themselves? Because technically everything that the accelerators and incubators offer, if you ask me.

You could probably do it yourself. You could probably go out there and, you know, like learn about all of it all and Google it and connect with the right people and really go out there and put yourself off their network with the right people, ask them the right questions, ask them to make the right introductions for you and teach them, find mentors who will teach you the right things and do a full

Mudassir (30:13.871)
Hmm.

Mudassir (30:20.859)
Okay.

Eva Dobrzanska (30:28.874)
research from the ground up on what tools and platforms you should be using, you probably would make a couple of mistakes on the way. But like, yes, would you get there in the end? And would you be where many of the startups who went for an accelerator are? Probably yes. But the time and effort and money that it would take you is significantly larger. That's why it's called an accelerator. Accelerator accelerates.

You can get them yourself, but you'll get accelerated with that if you use the help. So on the example of what we do at BlockDojo, we... So the biggest... I'm going to start with the biggest value adds basically of why founders choose to choose it is because we help them make progress on their MVP. So we help them to build their MVP.

We've got an in-house developers and consultants as well that make the progress on their basic tech specs and then the clickable prototype going into the MVP as well. That is the huge value add that's most important to them. Second most important thing typically is that we provide physical office space in London as well. So the founders can, they come in every day, the program is full-time and face-to-face. Not only they meet, you know, between 8 to 9.

other founders in the program, alongside whom they're building together, but they are exposed daily to industry experts, mentors, advisors, exited founders, and investment professionals who we get to come in on a daily basis to give workshop lectures, fireside chats, founder stories. And yes, you could develop that yourself.

all of that ecosystem, you could go on LinkedIn, you could, you know, like cold email and you could do it all. But the time that it would take you to get there, it would probably be larger. And then we obviously we also assist with stuff like, you know, like pitch decks, financial modeling, cap tables, data rooms. And those, you know, those are important. Those are like the physical products that you get out of it. But the more intangible

Eva Dobrzanska (32:47.242)
thing, which is your learning, your network, and even providing the sense of camaraderie and motivation to build a startup. Building a startup, so many founders say that, and we hear that from everywhere, building a startup can get super lonely. Your end is by yourself, especially if you're a solo founder. It could be very, very easy to give up and get discouraged.

when you're just working from your bedroom, just yourself, just by yourself, sending of emails daily. So if another ecosystem and a hub of startup building and an intensive three months long incubation period, if that is worth to a startup founder to use this as their beginning ramp on which they can jump on and really like, you know, like

get that initial boost in, then yes, that's when they will be like, okay, yes, it is worth it for me. If you've got someone that's more introverted and they focus better when they're working by themselves, by all means, maybe not necessarily, maybe they shouldn't do an incubator slash accelerator. So the main question that the founders should be asking themselves is, how much help do I need? How much am I willing to pay for it?

And how much can I actually do myself? And how much of it am I happy to do it myself?

Mudassir (34:23.931)
Okay, that's a valid point. So two things that you mentioned that I wanna touch now on. So there's one thing that I wanna take into as much depth as you can, which is the essential of fundraising and how you prepare any startup that's coming in just an idea phase and you just prepare them for pre-seed, so all of that. But before that, I wanna take your opinion on this thing because...

Eva Dobrzanska (34:27.49)
and then.

Mudassir (34:52.415)
You've done an amazing job reviewing hundreds and hundreds and thousands of ideas and just, you know, bringing all those people to block dojo. And you also consult people and amazing things that you're done. So my question to you is, how do you value just an idea.

Eva Dobrzanska (35:07.521)
Yeah, yeah, yeah.

Mudassir (35:08.695)
Because once there's an MVP, once there's numbers and there's TAM and there's market sizes and all these tangibles, some are tangibles, it's easier. But when it's just an idea, it's just an idea. So how do you do that?

Eva Dobrzanska (35:24.195)
Yeah, yeah, there's a number of things to look out for and, you know, like, obviously, I classify them into green flags and red flags. But essentially, what you're looking for is how...

Mudassir (35:40.161)
Can you please say that again? So the.

Eva Dobrzanska (35:44.51)
Yeah, so, sorry, can you say something again? Cause I can't hear you now.

Mudassir (35:48.651)
Yeah, so I'm saying can you please say the same thing again because you typed something so it's going to be in the in the audio. Yeah, no problem. No problem.

Eva Dobrzanska (35:55.282)
Ah, sorry, okay. So yeah, so generally when you're looking at businesses at an idea stage, the most important thing to, to assess here is how reasonable and how thought out that idea is, and a lot of it comes down to the founder. So one of the criteria that I apply to the startups and we do it at

assessing whether there is the right founder market fit. So that would be one of the first green flags that we look for. So the founder market fit would be whether the founder has relevant experience from the sector in which they want to build their product. Do they have the right networks in that sector? And have they felt the pain point themselves? Do they understand the sector? Do they understand its intricacies?

I also like to scrutinize the competition slide in the pitch deck. One of the red flags here is when if we've got a founder and he comes to me and they say, we have no competition, that is a red flag. There's always competition for every startup idea that you have. I guarantee there is at least 50 other people who have that idea right now in the world.

When it comes to the market size slide, I like to scrutinize it because I want to see whether it is realistic. In the last years, especially when we're talking about the AI space, data analytics, big data, or even fintech, we've seen this incredibly super, super high market sizes, like time in trillions.

and then some billions and everything and so on. That is not realistic to me. That is inflated, that is outside. That's just numbers that you grabbed from Google and that's it. And they don't tell me anything. But if we've got a very well thought out slide, you know, like from the ground up where a founder has done the research and you know, like comes to us and says, okay, I've spoke with my potential.

Mudassir (38:02.287)
Yeah.

Eva Dobrzanska (38:18.606)
target market and I've narrowed it to that specific subset of people. And then I looked up on LinkedIn, how many people on those positions work in my city. And then I looked up how many of them work in the other major cities across the UK, which I intend to target. And based on that, I think I will be able to reach out to about, let's say,

50% of them, because that's how many replied to my first messages when I messaged people, it was about 50% that replied. If they show us that they did market research like that, and then they extrapolate their initial experiences and say, based on that, I think my serviceable, obtainable market in the first year is this and this many millions. That's good.

That's well researched. That shows that they know what they're talking, they're realistic about it. And that should also be supported by a detailed go-to-market strategy. So, go-to-market strategy is one of my favorite slides because what I look for it is a very high level of detail. And what I like to see, and you don't see it in that many pitch decks, but what I like to see is...

You know, let's say on the gold market slide, you could say, okay, so advertising word of mouth partnerships, right? When we get to the partnership slide and someone tells me that like, oh yeah, partnerships will allow us to grow. Um, let's say 30% in that year. The question that I like to ask when I'm speaking to the startups, I was like, okay, what partnerships give me a name? Give me an example. Who could you partner with? Um,

Mudassir (39:59.351)
Yep. Yeah.

Eva Dobrzanska (40:02.742)
And if they give me a name, it's like, OK, cool. So what do they do and what could they want from you? How would you partner from them? Have you thought about it? So that's really, on the early stages, it's the art of really digging in deep into every single word that is included on that pitch deck to make sure, does the founder know what they're talking about? Or if they don't.

do they recognize where their drawbacks might be? And do they recognize that like, okay, I don't know how to do this, but I know where to look for help. And maybe I'll bring in a technical co-founder who can fill in that gap. Or I don't know how to reach the sector, but one of my good industry connections, you know, like they're a recruiter, they'll be able to like help. So it's really signals like this.

that you are just trying to spot someone who has thought a little bit about everything. One of the biggest pieces of advice that we've heard from the exited founders and investors that have been coming in and giving the founder talks is that as a founder, as a CEO, you really need to know everything about your business, what's happening in and out. You need to know about every single expense. You need to know about every single thing that's happening in

every single area of the business. You know, once the company grows, once there's more people and so on, like that's when it really becomes this living breathing organism that is larger than the sum of its parts. But on the early stages, when you're the founder, you need to have pulse on everything.

Mudassir (41:49.699)
Yeah, and I also think based on my experiences and based off like dozens and dozens of VCs and founders that I have hosted, at the beginning you don't have a business. That's the reality. It's just like, it's a stream, it's just like, you know, it's a story, it's an idea, it's all of that. So you don't have a lot of business. And I think founders who don't focus on all the things that you mentioned, you know, especially the GTM. And I personally think that TAM is one of the most...

I don't know, like the word, I'm just lacking a word here, but I think it's a widely misunderstood metric that most people put on the slide. It's like $10 trillion, okay, cool. Doesn't help at all, so yeah. Thank you, thank you for sharing all that. Okay, so coming to the main, you know, fundraising aspect of this entire episode that I wanna talk to you is...

Eva Dobrzanska (42:29.454)
It doesn't tell us anything. Yeah.

Mudassir (42:43.395)
When you prepare a startup for pitch deck, sorry for front raise, not for the pitch deck, so how do you help people, how much money they should raise and at what valuation they should raise?

Eva Dobrzanska (42:58.458)
Yeah, yeah, yeah. So typically what we're seeing, you know, like nowadays in the space, like, you know, like with UK, the valuations are definitely dampened compared to 2021.

Mudassir (43:09.335)
Yeah. Is that a good thing?

Eva Dobrzanska (43:13.566)
I think yes, they're more realistic now. I would say they are more realistic. You know, the 100X multiple on revenues were never reasonable to start off with. And we can see it now, you know, like after every high comes a low, we can see it now that is reflected in the performance or maybe let's say the underperformance of many of the VC funds who have bet on those.

Mudassir (43:25.229)
Yeah.

Eva Dobrzanska (43:43.378)
you know, really high valuations and actually they are not producing the growth that had been promised. And also this is the reason why, you know, we've had this like big shift and change in how investors scrutinize the startups. That's why so many founders these days are saying that, oh yeah, I'm a particular seed level VC, but the results that they want from me is almost like series A.

Mudassir (44:07.904)
Yeah.

Eva Dobrzanska (44:09.582)
Yeah, I mean, now suddenly we're not just talking revenue metrics, we're talking profitability. We're talking sustainable operations and being able to, you know, like paying attention to not just how many users you have, but the quality of them, retention or your churn. And, you know, like how much can you, like I said earlier, upsell to them. So it's really getting a little bit more granular. And the reason why this is all important

Mudassir (44:15.16)
Hmm.

Eva Dobrzanska (44:37.642)
is because that will impact your valuation. So as you said earlier, when it's just an idea, it's, I mean, it's, it's worth close to nothing. It's that's the reality. It's, it's worth close to nothing. It's just an idea. Exactly. Typically the rule of thumb that I like to use is that pre-product, your valuation is less than a million. Post-product, you can go one million and up.

Mudassir (44:50.755)
That's reality. Yeah. Yep.

Eva Dobrzanska (45:04.938)
But there needs to be the product first, needs to be some users, needs to be some revenues, and this is ideally what investors want to see. Typically, the startups that graduate from our program at BlogDojo, they leave it with a basic MVP slash prototype. They've got some initial traction. Some of them have their first customers at the end of the program. And typically they raised 250K at a pre-money valuation ranging from

1.2 million to about 1.5 million. That would be the pre-seed averages, I would say, in the UK.

Mudassir (45:44.207)
That's a good valuation, I would say. Even in this market, yeah. It's a good one.

Eva Dobrzanska (45:46.334)
Yeah, exactly. And, you know, they leave our program with a support of mentors. They leave our program with initial traction. There could have been a pivot as well. We've had a number of pivots. Bulletproof five years financial modeling template that has been modeled on series A level startups and it's quite advanced.

and all of the other things that we do with them. So, yes, that's their valuations. At the seed level, generally, what I'm seeing is about pre-money valuation of between 3.5 million all the way up to 9 million. And that really depends on the sector that you're in. Typically, if you're high growth enterprise software.

business, your valuation tends to be on the higher end of the spectrum. Also, if you are capital intensive, let's say you're a mobility solution, micro mobility, urban mobility, creating small transportation vehicles, the valuation will be higher and the funding needs also will be higher because it's hardware, it's hard tech. So, and then also if you are in a sector that is set to be

in a high growth trajectory. So obviously we're talking data analytics and AI and so on. Then yes, the valuation is likely to be higher as well. So I think I would say the valuation depends obviously on your traction so far, but also very much on the industry trends in which your startup is in. And yeah, the best way to set your valuation is to benchmark against other startups that, you know, have been.

in your space, raising successfully and so on. Because that's how you can really gauge basically the buy and sell prices of what's happening in the market. Series A later on, if we're talking, then we're talking from like 15 million pre-money to 20, sometimes even 30 million. And then we naturally do have the outliers. So I don't know if you've heard about Mistral AI.

Eva Dobrzanska (48:08.374)
Um, but they are raising it. So I don't want to give any misleading, uh, numbers here. I would need to, I would need to Google it to double check, but last year, if I remember correctly, they've incorporated last year and at the time they were only four weeks old since incorporation, they have raised something crazy amount. They did. They've raised, I think maybe a hundred mil.

Mudassir (48:08.975)
Have it.

Mudassir (48:14.771)
Mm-hmm.

Mudassir (48:37.007)
Holy... Wow.

Eva Dobrzanska (48:37.99)
or either at 100 mil evaluation. Again, I would need to double check. I don't want to fact check me on this, but yeah, Mistral AI has started off on an insanely high raise. They're trying to compete against open AI essentially. And then they recently raised again at an even higher valuation. So we're talking billions. And yeah, it's insane. So you always have those outliers.

And I think it would be very interesting to see what happens with them later. And, you know, we're only going to see this in about five years time, 10 years time. Right. And in hindsight, we will know what happened. Like, same as, let's say, WeWork, right? We've got WeWork. And then after Adam Newman left WeWork, he intended to start Flow. And I think two years ago already, he has raised like 300 million, I think, for Flow.

Haven't heard of-

Mudassir (49:36.471)
Yep, yep, yep. Yeah, yeah, he has. He has $300 million for the second company, and that too by Andreessen Horowitz. So which is a surprise, given all that he has done before.

Eva Dobrzanska (49:44.082)
Exactly. And yeah, but the thing is, like, you know, like now it's like, a year later, or maybe even two years later now, where is flow today? What has been done? How has that 300 million has been deployed? Where's the employees? Where's the cash burn rate? Where's the growth rate? You know, what's happening? We don't know. So yeah.

Mudassir (50:00.751)
Yeah.

Mudassir (50:12.152)
It's a different sort of conversation that, you know, maybe, I don't know if we should be having an art, but do you think there's this sort of a dark side to the VC world where like many, many people would face a lot of scrutiny and there's a tough competition, like who should, like people are applying like right and left and I don't know, like one out of a thousand people would just ever get to like a hundred million dollar valuation and people have such a hard time raising a couple million dollars around these days.

And then comes, you know, hot sharks like Adam Newman. So 300 million again, with a disastrous sort of thing that he has built, 300 million again, and then again. I don't know what's happening with the flow, so hopefully they're not doing any good. Not hopefully, but I think that they're not doing any good. And then now he's buying VWork again, or thinking of doing the same thing again. So do you think there's this sort of a dark side to that venture capital ecosystem as well? Like, you know, there are certain people.

who are like outliers, they can do whatever the heck they would want to do. So what do you think?

Eva Dobrzanska (51:11.458)
Yeah, yeah, yeah. Well, the way I would say this here is that one of the risks of the VC model is that it can actually boost businesses that are not economically viable. And I like to take the example of Uber in here because Uber's valuation is something like, I think the last time I checked, I think like 88 billion. And that was compared against the revenues of about 33 billion.

Mudassir (51:28.355)
Yeah.

Eva Dobrzanska (51:40.678)
So like, you know, like, yeah, less than one third. And then Lyft that is valued at four billion, the revenue actually exceeded it. The revenues was like above five billion. So and whilst, you know, like I think it is, you know, Uber story is essentially synonymous with global scale growth. Yet the company is far from being profitable. When you look under the hood, when you look at what's actually happening, you know, like the e-billion dollar margins are suffering.

Mudassir (51:50.756)
Yep.

Hmm.

Eva Dobrzanska (52:10.266)
And yeah, so one of the risks of venture capital. And if you look at what's actually happening on the consumer side, you know, especially over the last year, you know, we've had, you know, like hikes and then like, you know, like rising inflation and everything. And that actually caused riders to want to save more money. And there was a shortage of drivers as well that the Uber was experiencing. And we've seen

Mudassir (52:22.707)
Yep.

Eva Dobrzanska (52:39.322)
Uber raised prices by as much as 40%. Whilst everyone kind of like migrated over to the other apps like Lyft, Bold, FreeNow and all of the other competitors. So the point, long story short, the point I'm trying to make in here is that with VC backing, it can be hard to see what the consumers want.

And it's important to let the consumer decide if you have a viable business model through profits and through sustained revenues that are coming from them, rather than you getting money based off of a pitch deck in the VC founding grounds.

Mudassir (53:22.487)
Yep. Yeah. Yeah, totally agree. And you mentioned Uber, which is somewhat of a SaaS thing, because it's tied to consumer as well, so it's not primarily a SaaS. But

But we have seen a lot of CPG startups, especially here in the US. They raise money like right and left, and 20 million rounds, and 25 million rounds, like crazy, crazy valuation, and they're just selling the same CPG things. And now most of them are just filing for bankruptcy and this and that, right? So a lot of the time it looks like most of the times these wrong businesses are kind of pushed and just drove like kind of crazy, and the economics never works.

And that's the downside to that. But yeah.

Eva Dobrzanska (54:08.642)
Yeah. And so I've not really operated across the CPG space much in my, you know, like in my time with startups, but it somewhat surprises me. For example, you know, I don't know if you know Blank Street Coffee. It's a VC backed new coffee chain. And I was quite surprised to see that it backed it. Like I've never, ever heard about VCs investing in a coffee chain, but they did. And so on. And again, you know, like hindsight will come.

in the next five years. So like, we'll see, we'll see the full story then. But I thought that was an interesting move. The good benefit of that is that their coffee is super cheap.

Mudassir (54:41.701)
Yeah.

Mudassir (54:53.271)
Okay, so going back to the main idea that we had, so what are the essentials of creating an effective pitch deck in terms of a template, in terms of a structure, so if you can spend a decent amount of time explaining how the heck do you create a good pitch deck that converts? By that I mean you actually get investors to listen and they pay attention to whatever you're writing. So what exactly is that?

Eva Dobrzanska (55:17.042)
Yeah. So that's my favorite topic because I, well, yeah, I, I design pitch decks as well with my clients individually. Um, and, and I really like that. And before I talk to, you know, like slide by slide, I like to give a couple of tips first. Um, and that goes alongside pitching as well. So the most important thing when you're pitching is that

Mudassir (55:21.213)
Okay, go ahead.

Eva Dobrzanska (55:45.422)
Typically, how I like to do this is that whatever's on your biggest header title and the slightly smaller sub headers, however, still in a large enough font so that people can read it, do not say that in your pitch. Do not waste your breath on reading out to people what they can see right in front of themselves and on the screen because it's the worst use of your very limited time when you're pitching to VCs.

Generally a VC pitch, I would say should be up to four minutes. In BlockDojo when we've got our investment committees, we give startups seven minutes, which I think is generous. But I think it's better to have your very snap, short and to the point pitch that is short and then leave more time for your Q&A. You can keep the pitch deck shown on your screen still.

The VC might ask you, can you go back to explain something? It's absolutely fine. Leave more time for Q and A. Um, and I, I've got a template. I've, I've got basically a master template that I've created for the pitch decks. Um, what I like to start them off with is, um, first sentence that brings the whole business together, your elevator statement. Um, it's really, really important to nail this down.

A good elevator statement should state your business model, product, target market you are going after and the pain point that you're solving, which is a summary of many of the different slides of your pitch deck that you will have. An example of it that I could give, for example, let me have a think. We are a female led B2B SaaS DeFi FinTech business.

that allows our consumers to invest in crypto easily and without risk. Stuff like that. Um, and.

Mudassir (57:51.732)
Just as simple as that. OK, cool.

Eva Dobrzanska (57:54.142)
Exactly. Yeah. If you, if you say it on the first slide, it sets the entire tone for it. The investor knows what they're looking at. There's nothing worse than reading through a pitch deck and you are on the penultimate slide and I still don't know what are they trying to build? Is it a mobile app? Is it a platform? What is it? So, yeah, set the tone like this. It really, really helps. Then you've got your standard

problem slide. Some of the best problem slides that I've seen would be the ones that could include quotes from the target market people that you spoke to. On the problem slide, it is also, if you want to save space on the number of slides, the problem slide could be also when you introduce your target personas, because you're going to be talking about the pain points experienced by a specific subset of people.

your target market. So, this is where it can be, you know, like joined together quite nicely. Moving on to the solution slide. Solution slide is where you explain what is it that you're actually building. Is it a web application? Is it a mobile app? Is that a platform? Or is it a number of those things, you know, like that you will be rolling out one by one in different phases in time.

That's the space to explain it here. A good practice always is to include mock-up pictures on this. It's basically to help the investor visualize what they're working with. And the solution slide really should go in detail to show the core functions of your product that address that specific problem that your users are having. Again,

If you've done some market research, if you've spoken to, let's say your early adopters or maybe even friends and family or your industry friends and you've asked them for certain feedback and they said something about your idea or they said something about the product that you're planning to build, then yes, put it on this slide. It's good practice as well. Next up, I would say, is your competitive advantage.

Eva Dobrzanska (01:00:20.874)
and the competition slide. I actually like to expand the competition slide into a landscape mapping slide, this is what I call it, and on the

Mudassir (01:00:33.372)
What do you mean by that landscape mapping?

Eva Dobrzanska (01:00:36.535)
Yeah, so landscape mapping, I've not really seen that many people do that. And this is kind of like my own, I wouldn't go as far to say that my own proprietary slide, but basically this is something that I started evolving and working on to how to showcase it. The closest thing that I could compare it to is the business model canvas template. However, business model canvas is talking about a business model.

landscape mapping is talking about the external players in the market, what's around you. So how I normally go about this slide is that you would place the logo of your startup, let's say in the bottom left corner and you go from there. So whoever other people's logos are the closest to you, they are competing to you most directly. And the more outward you go,

the less of a competition they become and the more of a co-opetition or maybe even partners they become. And so suddenly you've got the slides that shows competitors, co-opetitors, partnerships, potential acquirers, potential buyers, potential investors, and we've got this beautiful landscape mapping.

Mudassir (01:01:50.568)
Yeah, potentially close. Yeah.

Eva Dobrzanska (01:01:59.62)
For one of the founders that I was designing his pitch deck, we also decided to go a step further and include some of the operational considerations. So we did one box that showed all of the different logistics providers that he will need to use, the engineering and construction companies that he will engage for the assembly, and the different companies across the supply chain.

that he will need to use. So we've mapped out like all of the different people he will need to speak to in the course of his operations. And the reason why it's so great to see it is that when the investor looks at it and they see all of the exact names and all of the exact things to be done in each of the boxes, so to say, they'll know that they're talking to a founder who has done their research and they know what to do.

Because let's say you've got an investor who's like, okay, I'm going to transfer you the money right now. You're raising 2 million. Perfect. I'm transferring the 2 million to your bank account right now. What is the first thing you do tomorrow? Like what are you going to do?

Mudassir (01:03:06.427)
That's a good question. That's a very good question to ask. A lot of people don't know, like okay, if I were to get 10 million tomorrow, when am going to spend that?

Eva Dobrzanska (01:03:13.556)
Exactly. Yeah. Whereas with that, with that founder that I was working with, fantastic. Not an issue. Okay. Perfect. First thing we need to do, we need to call this supplier. We need to form a partnership. They require this much prepayment. We can send it to them. We can get it all going. That's what they're looking for. And that's what I aim to help my clients showcase in the pitch deck. And we oftentimes do this research together to really,

get granular. And again, I like those questions. I like my follow-up questions because I will get really, really detailed, you know, to ask them like, okay, how will you transport this product? How will you get it here? And then what, and then what, and then what you do. And that's when really the devil's in the details. So, so where you get really, really detailed. After the market landscape mapping slash competition slide.

What follows naturally is your competitive advantage slide. You need to be able to showcase how are you different from what's already out there and how will you differentiate yourself based on that. And a lot of it, again, this will come from your users. I cannot stress this enough more of the importance to...

maintain dialogue with your early adopters, nurture your users. And also if you're building any platform or a marketplace or, or a web app of any kind, the best thing that you can do for yourself is to make giving feedback as easy as possible from your users. If you're asking for feedback in an email that is hidden somewhere in the contact us page,

no one will give feedback to you. No one will leave it there. But if you can put in the right structures and maybe even incentives in place for people to give you feedback or even like vote on the features, one of the founders that I was advising, they decided to come up with a system where sometimes you would have this like bubble that comes up with a thumbs down and thumbs up, sorry, thumbs up emoji. And

Eva Dobrzanska (01:05:33.002)
the startups could vote on so many features. They announced it that like, oh yeah, you'll be able to vote on all of those features. If you like it, if you're happy with it, put the thumbs up. If you don't, if you never use it, thumbs down. And that's so important so that you can actually find out in which way do you need to move to actually achieve the product market fit.

After the competitive advantage, another crucial slides that I would like to see in a pitch deck is the, like we talked about this area, the market size, the opportunity. So that's when we talk about the total addressable market and, you know, like sizable obtainable market and time some, we would also want to see financial projections and financial projections at the pre seed level are quite interesting because.

whatever you put in there, chances are it's going to be completely different, most likely. Whatever product you are pitching to investors, seasoned investors will know that chances are this product will be something completely different in the next six months. And that is absolutely fine. But what they are looking for in your slides, and especially in your financial

Mudassir (01:06:35.171)
Yeah.

Eva Dobrzanska (01:06:55.73)
is to see whether the projections you made are reasonable, well thought out, does the math make sense, does your reasoning make sense and is it realistic. That's what we look for. So from founders, I want to see that they have an understanding of what's their burn going to look like, how much money they're going to need every single month and how many new

users slash customers can they realistically get in the certain time frame of periods. So that business acumen skills, business acumen really comes out here and that's what the investors are looking for. Traction slide. I always say that even at

pre-revenue, pre-protecide, they are already certain milestones that you have hit. And there are certain traction points that you can still mention. And usually this would be coming from certain research that you have done. So let's say the strategic partnerships that we have mentioned earlier. Have you identified a number of individuals with whom you could partner? If yes, have you already reached out to them?

pre-orders or pre-launch signups from potential customers. This is another sort of like a golden nuggets of advice I always give to founders. If you can start a wait list as soon as possible, do it. And it's as simple as creating a basic landing page which outlines what your product will be about. And then, you know, letting people leave their email, leave the email, I'm interested.

If you don't want to ask people for your emails, if you want to lower this barrier even more, then they can just click again, thumbs up. Do you like this idea? Yeah, thumbs up. I've seen people do polls on LinkedIn. I've seen people collect feedback at events and conferences, you know, like handing out QR codes, sign up for a wait list, when we launch you're gonna get a discount or when we launch you're gonna get something. And it is

Eva Dobrzanska (01:09:17.03)
a different narrative when you go into your pitch deck and you say that we have not even yet launched, but we have a thousand signups on our waitlist waiting for our product to be released. One of my favorite examples of this here is the development of a game called Paralives, which is the upcoming life simulation game. So we're thinking The Sims.

Mudassir (01:09:30.936)
Yep.

Eva Dobrzanska (01:09:46.386)
I think it's actually created by the fans of The Sims. The game has been in development for about three or four years now, and they've got a Discord channel that has... I need to look this up, but I think they've got something like 80,000 on there. People. It's huge. It's insane. And the people are talking. Like I had to mute all of the notifications from it because it was constantly nonstop.

Mudassir (01:10:04.535)
My god, that's huge. That's huge. Yeah.

Eva Dobrzanska (01:10:16.05)
Every month, they organize discussions with their fans of what they want to see in the game. And everyone gives their ideas. Oh my God, it would be amazing if you can do this or that or so on, I would love to see this. And then people vote on each of the answers because it's all in Discord, so you can upvote. And then the developers take the answers that received the most attention and they actually develop that into game features. They are on Patreon.

as well. They have an incredible community, incredible following. People give them money just for them to develop that game. It's one of my favorite case studies. And obviously, I can't wait for the game myself. But yeah, I just think it's amazing of how they went about it and how they created this almost like cult-like following. Obviously, they are capitalizing on their much bigger predecessor, The Sims.

which have kind of like tumbled down and the fans weren't that happy with the game with its newer iterations. And suddenly there comes a new incumbent that is doing something virtually the same in the same space, but better. And I've had this note somewhere where I've actually looked at a number of different businesses and I found that a lot of the times it's the second runner up that ends up being a unicorn.

and then they end up doing it great. So, you know, before Facebook, we've had MySpace, which kind of flopped and then Facebook grew to be a unicorn. Before Airbnb, we've had Couchsurfing. It didn't work out either. Yeah, there's something about being the second runner up that really, yeah.

Mudassir (01:11:56.053)
Yep.

Mudassir (01:12:03.383)
Yeah, yeah, yeah. Thank you for just, you know, painting this picture and just going in as much depth as you can. So what we do is we have this in the open audience, so very, very fortunate to even talk about that. So before you're coming on the podcast, anybody comes on the podcast, we just send out this note, hey, you know, I was coming tomorrow, send us all the good questions that you can think of. So we get like all kind of crazy questions.

Eva Dobrzanska (01:12:32.171)
Sorry, I can't hear you just now. Oh, got you now, yes.

Mudassir (01:12:34.107)
Can you hear me now? OK. So what we do is we have this sort of an audience, and we just ask them the question, like send us a question that we shouldn't be asking you. So I want you to just ask those questions, some of those you have already mentioned in the answers already. So I just don't want to repeat that. But in no particular order, I just want to take your opinion on that. So the first one is, what are the metrics founders should care about?

at a seed level at series A and series B beyond.

Eva Dobrzanska (01:13:08.718)
Okay, so I operate across the early stages, so I wouldn't be able to talk to series A or series B, C, D, S. Yeah, yeah, yeah. So one of the earliest of the metrics that we go into our financial modeling is the LTV to CAC ratio. CAC is your customer acquisition cost and LTV is the lifetime value.

Mudassir (01:13:17.231)
Seed and pre-seed. Let's do it.

Eva Dobrzanska (01:13:37.702)
of each customer, how much money they can actually pay you. Ideally, as a rule of hand, if you've got an LTV to CAC ratio larger than four or maybe even larger than five, this is really good because this basically shows that you can acquire your users at a relatively low cost. And then

the upside on what they're paying to your business is quite high. So like, you know, with five, five times more. Amazing. Um, we also naturally look at the burn rates in the early stages, how much money you're spending per month. Um, very important. And then when you know what your burn is, uh, that's how you calculate your runway or on your race. Um, so knowing how much money you'll be spending each month.

will give you a runway that is important to investors. You know, say, yeah, we're raising $1 million for an 18-month runway. 18-month runway is what I typically see at the early stages. If you can extend it to 24-month runway, even better. But typically, we're talking 18 months is the most popular one. 12 could raise some eyebrows, and 12 could be a little bit too short. And...

That's basically the main metrics when you are pre-product, pre-users. Once you have some users, that's obviously when we have way many, many more metrics to be shown. So that's when we're talking of your month on month growth, or maybe even year on year growth. This is a percentage. This metrics can be expressed in terms of your users, but then usually, once you start generating revenues, you automatically flip it.

So for example, again, as a rule of thumb, when we're talking about user growth, if your user growth is 20% per month or higher, this is pretty good. I would say that this is pretty good metrics. And then also your gross profit, your margins. That's what I would be including as well. If we're going slightly more into series A,

Eva Dobrzanska (01:16:01.762)
then I would say, for example, stuff like NDR, which I mentioned earlier, becomes interesting to VCs as well. One, there's a really, really good newsletter that I am reading, which is called Lenny's newsletter. Yeah. Lenny is absolutely amazing. And he's got a series of articles that you can find on his sub stack, which go into depth on

Mudassir (01:16:17.083)
Oh yeah, yeah. Oh, he's fantastic, yeah.

Eva Dobrzanska (01:16:30.414)
good or great growth rate. What is, you know, like good churn or like, you know, like a worse one and he gives you like all of the numbers on it. So I highly suggest that to all of the founders to check out his newsletter.

Mudassir (01:16:46.191)
Yeah, oh, he's the OG, so I know a lot about that, yeah. So off the side, you know, the starter that he built and that got acquired by Airbnb. So I know the entire team of, you know, that incubator, the one that hired him, built this thing and all the friends thing. So they were, you know, year one labs thing. So yeah, pretty, very, very much familiar with all the content that he's putting out there. So big fan of his work, so yeah.

Eva Dobrzanska (01:16:56.991)
Mm-hmm.

Eva Dobrzanska (01:17:14.474)
Yeah, yeah, yeah. And yeah.

Mudassir (01:17:18.425)
me. Awesome. Rolling back. The next one I want to ask you is how do you decide between when to use a convertible node and when to use a safe node?

Eva Dobrzanska (01:17:31.166)
Yeah, so because I'm operating across the early stage space in the UK, they actually do not get used in the UK at all. And the reason for that being is that they are not compatible with SEIS and EIS. So that's important for founders to mention. Obviously, both are investment instruments.

Mudassir (01:17:44.763)
Okay.

Mudassir (01:17:50.173)
Aha.

Eva Dobrzanska (01:17:57.678)
that are commonly used in the early stage financing and yet the more popular in the States and North America and so on. However, when it comes to the UK, if a startup is offering the SEIS eligibility or EIS eligibility for investors, they wouldn't be able to raise on a safe note or on a convertible note. So it's either one or the other.

because obviously both give significant benefits to investors. And in the UK, typically the investors would prefer the SEIS benefits because they can obviously claim under SEIS, they can get 50% of their investment back from the government. And then under EIS, it's 30% back. So that's basically the consideration here.

Mudassir (01:18:50.499)
Got it, got it, got it, okay. All right, so.

Eva Dobrzanska (01:18:53.83)
So we do have ASAs in the UK. So ASA is similar to a safe, because it basically gives future equity at a predetermined price. And say again, sorry.

Mudassir (01:19:07.055)
That's a safe. Yeah, that exactly is a safe, right? Totally.

Eva Dobrzanska (01:19:12.67)
Yeah, yeah, yeah. But yeah, so this one specifies, you know, like the subscription price, the valuation cap, and any other conditions that can be attached to those shares. But they typically would need to be ordinary shares. Yeah.

Mudassir (01:19:30.628)
Got it. How do you help founders navigate the challenge of valuation? How do you do that?

Eva Dobrzanska (01:19:38.918)
Yeah, so again, really, really depends on the sector. But as I mentioned this earlier, when we were talking, I think the

Mudassir (01:19:48.288)
Can I add one thing on top of that? So I think that that's a question that you have already answered in one way or another, I think at the beginning. So the question that I wanna ask you is, when the founders come to you and they say, oh, our company is valued at, suppose just giving arbitrary number, our company is valued at $10 million. And then same company is valued at like seven or from somebody else. How do you tell them like take seven million now?

and don't go for 10 million valuation today. Like how do you help them figure this thing out? Like what's the right valuation number for them?

Eva Dobrzanska (01:20:22.222)
Hmm. Good question. Um, my advice here would be that you don't need to raise too much than, than you need to. Um, because one of the mistakes that I've seen founders do is that if you raise, um, an evaluation that is very, very high and you know, it's fantastic. Like your company is valued super high, but suddenly you're on this train.

where you need to later on raise at an even higher valuation and even higher one. The higher valuation you raise at essentially the more risk you're putting yourself that you could be facing a down round in the future, especially if the market turns and we've seen this, we've seen this in the last three years and now, yeah, now we're at such a low point and look so many.

Mudassir (01:21:08.3)
Yeah.

Eva Dobrzanska (01:21:14.874)
of the best businesses were actually built during the down markets. It's actually better to go with a conservative valuation to start off with, but then as you grow and as your revenues are really, really showing the growth trajectory that is pretty high, that is when you can start raising your valuation.

Mudassir (01:21:21.549)
Hmm.

Eva Dobrzanska (01:21:41.022)
in an exponential way, but on the early stages, I would be relatively careful. I wouldn't raise too much than what's needed, because especially when you're going from pre-seed to seed, be careful not to set the benchmark too high at the seed level, because you'll be speaking to VCs and they will ask you, OK, so how much have you raised before and what valuation? If you tell them that you raised that

Eva Dobrzanska (01:22:10.35)
pre-seed and a lot of the seed level VCs would have a valuation cap that they can, let's say, only invest in raises valued up to 10, then you've just disqualified yourself from their investment. And then, yeah, what I said earlier, it's like some of the best startups emerged from crisis and they were building the down market. So if they started off on super, super low valuations as well.

Mudassir (01:22:24.555)
Yeah, yeah, okay. What are the?

Eva Dobrzanska (01:22:40.21)
After the dot-com boost bust, we've had Google and PayPal that started around the 2000s. Airbnb, Uber, Slack, WhatsApp, they were all in 2008 after the financial crisis. You could even look at Doordash that started during the pandemic. And they start off in the trenches, they start off at the low valuations, but then they really grow later on.

Mudassir (01:23:08.699)
we agree to that. So just two more questions, and the first one is, what are the pitch, sorry, what are the cap tables red flags for you?

Eva Dobrzanska (01:23:21.094)
Basically, a cap table that is messy would be considered one that is like with so many different entries, small checks coming from a lot of different investors that haven't been aggregated under a single entry SPV. Also, what I've seen, for example, one of the messy cap tables that I've seen is that

The founder has created so many of the different share classes to offer certain benefits and preferences to different investors. That is very hard to manage and that can potentially cause friction at the later stages. So that would be an example of that. But generally...

it would be basically the case of having too many small ticket investors.

Mudassir (01:24:20.795)
Okay, that makes sense. And what are the pitch decreed? Go ahead, please.

Eva Dobrzanska (01:24:21.49)
Yeah, yeah, because essentially, yeah, this also slows down the decision making. And even you know, like when you're raising and if you've got way too many different share classes, let's say with the different voting rights and so on, if you then have clauses such as the drag along and the tag along and you have to come up with

the specific rules, let's say for a tag along, you have to come up with specific rules of which share classes must agree and how many of them and so on. And you're almost looking at every single one individually. Not only this is a huge admin cost for the founder, but also a huge

Mudassir (01:25:13.207)
Totally agree to that. All right, so the last question that I want to ask you is, is fundraising a success?

Eva Dobrzanska (01:25:21.262)
Hmm. Yeah, I would say yes. Um, I would say yes, because you get that, uh, you, you get that, uh, you get that validation from an investor who wants to make a return as well. So fundraising went on correctly. And obviously later on, if you fundraise again and you fundraise again, and then, and yet then you lead to an exit, then absolutely yes, it is, it is a success. Um,

Mudassir (01:25:28.068)
Thanks for watching.

Eva Dobrzanska (01:25:50.054)
It is, you know, like it can go the other way too. Like we said earlier, you know, like the one of the risks of the VCs boosting unprofitable models. But typically I would say yes, especially on the early stages, fundraising is a success because you suddenly have an investor that believes in your business. You've got their backing. You've got the injection of the money to continue to help your business grow.

Eva Dobrzanska (01:26:20.342)
The fundraising on the bigger picture, I would say that the fundraising only contributes to about 40% of the success. The rest, the bigger half, the 60% is down to the founder and the team and how they actually utilize that money, how they spend the funds, whether they can continue to grow the business and, and head for like the next fundraise, let's say, or ultimately towards the exit.

Not every founder that starts a business should be the one to scale it. And not every founders who scales a business should be the one to exit it. Um, so that's also quite important.

Mudassir (01:27:44.795)
Can you hear me?

Mudassir (01:28:44.036)
Can you, can you, can you hear me?

Eva Dobrzanska (01:28:45.506)
There we go, yeah, I can hear you and I can see you. Hi again.

Mudassir (01:28:48.456)
Oh, yeah, I don't know. Like, yeah. How? Yeah, hi, hi. What happened? Yeah, yeah.

Eva Dobrzanska (01:28:52.438)
Something dropped off. I've got some here. Yeah, because you just disappeared. So I've sent you an email just now, but I figured, yeah. Is the recording going to be all okay and everything?

Mudassir (01:29:00.178)
Okay.

Mudassir (01:29:04.76)
Just to be on the safe side, let's just take the last question again. It's going to be fine. I'm pretty sure about that. But just to be on the safe side, let's take the last question again. So we're going to continue. So it's recording already. Internet backups are audio only. So there's something again going on. It says, I don't know, like.

Eva Dobrzanska (01:29:08.471)
Yes.

Mudassir (01:29:25.396)
Okay, so it said something like, okay, so, you know, one of us is having, not us actually, so Riverside is having some problems with the servers. So, now, I'm going to show you how to do this.

Eva Dobrzanska (01:29:27.041)
Mm-hmm.

Eva Dobrzanska (01:29:37.39)
So I got a similar notification early, something about like a low data mode.

Mudassir (01:29:43.828)
Oh, that's the one that it turned on. That's the one that it turned on because I couldn't see you. So I thought that is maybe what was happening. Let's do this thing. Let me stop this recording. And same studio. Let's join in a minute. Maybe this is something that's happening. Yeah, let me end this one for all. And then let's just rejoin, please.

Eva Dobrzanska (01:30:00.334)
Okay, so I'll leave and join back, yeah?

Eva Dobrzanska (01:30:07.839)
amazing.