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At Shearwater we often say to founders that if there’s strong demand for your round, that’s the best time to raise *less*. The demand lets you tap into extra funds later, when the valuation of your business is likely to be higher.
J.P. Morgan released data this month that $90 billion has been pulled from active funds in public equity markets in 2019, while $39 billion flowed into index-style funds. Passive funds (including quant funds) now control a whopping 80% of equity assets. Passive investing has won the public markets.
In the early 1980s AT&T asked McKinsey to estimate how many mobile phones would be in use worldwide by the year 2000. Their conclusion was it would be a niche market of around 900,000 subscribers. They were off by 108 million.
As investors in high growth tech businesses, it’s typical that our portfolio companies have an employee share option plan (ESOP) in place. ESOPs allow staff to feel ownership in a business and lets them benefit from growth in the value they directly contribute to. This is why ESOP is a common device around the world for ensuring alignment between founders and their employees.
Sun Tzu said: ‘If you know the enemy and know yourself, you need not fear the results of a hundred battles’. When seeking investment, it helps to understand the business model of the firm you’re pitching.
Ever wanted to sit in on a success pitch to a leading Silicon Valley venture firm?
Entrepreneurs should realise early that a rejection from a venture fund typically says everything about the *fund* and its internal issues, and almost nothing about your business and its likelihood of success.
Watch the Shearwater fund launch video.