Startup Digest Reading List: Fundraising Tips, Bad Board Members, Data Infra, and OpenDoor

Issue #127 • October 19 • View online • Suggest a link

Startup Reading List

A weekly curated newsletter on startups and technology.

Welcome to this week’s edition of Startup Digest’s Reading List featuring stories I found interesting on startups and venture capital.

Hope everyone had a wonderful weekend relaxing, working, or spending time with friends and family. 🌞

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Written by Chris McCann, General Partner @ Race Capital, former Greylock Partners. More about me.

Practical Advice for Navigating the Fundraising Process

Marc McCabe, from Airbnb and Sequoia Scout, has helped many companies through the fundraising process; here he gives some tactical fundraising tips. It’s well worth a read. Here are a few points that stuck out to me:

The Series-A is the “product market fit round.” For this one you want to show you’ve convinced a slice of your market that your product is valuable enough to pay for (or if it’s free, used very regularly), and that this user base is growing.
Seed rounds are intended to explore an idea and find some fit in the market, raising a Series A helps you pour more fuel on the fire.
The key materials to prepare before a fundraise include: Blurb to share, teaser deck, full deck, and metrics deck.
This will be painful, but know that some VCs just won’t be interested in your company or will be too focused on other deals. Silence, or outright rejection, are tough pills to swallow for any founder, but this is normal.

Email to a former board member

Ryan Caldbeck, the founder and former CEO of CircleUp, wrote a scathing note to a former board member of his.

These kinds of internal issues are rarely talked about publicly in the startup world, so it’s an important window into the operations of a company. It’s also an important reminder of what not to do as a responsible board member.

Pick your investors wisely as these relationships are long term and it’s best to choose people who have your back and are trustworthy.

Emerging Architectures for Modern Data Infrastructure

The data infrastructure market is large and growing, but still widely misunderstood. The A16Z team breaks down their viewpoints of the market including architectural diagrams of how the various pieces fit together.

TLDR: Data infrastructure serves two purposes at a high level: to help business leaders make better decisions through the use of data (analytic use cases) and to build data intelligence into customer-facing applications, including via machine learning (operational use cases). The broad subsectors of the entire data infrastructure picture include:

the underlying data sources
ingestion & transformation of the raw data,
overall data storage
the retrieval of historical data
predictive data modeling
overall output including: dashboards, analytics, and applications.

This is an area we at Race Capital have spent a lot of time working in and are currently incubating two companies in this area. If you’re working on a new startup in the data infrastructure space, we would love to hear from you> chris@race.capital

Unpacking Opendoor’s S-4 Filing

OpenDoor is about to go public via a SPAC for $4.8B and Nima Wedlake from Thomvest Ventures wrote a great analysis of the company.

OpenDoor is an internet native real estate company that purchases homes directly from buyers and sells them on the market, all of which are handled natively through digital products. The company sold 18,799 homes in 2019, generating $4.7B in revenue.

While there are network effects that are benefiting OpenDoor (biggest dataset of home purchases, they have a huge network of subcontractors, and a lower cost of repairs) there are some things to watch out for.

Opendoor projects a 47% year-over-year decline in revenue in 2020, due to COVID.
During a recessionary environment, the company would have a lot of inventory on its balance sheet.
The multiple of OpenDoor is much higher vs. competitors (Redfin, Zillow, etc)
Competitors are launching competing products so expect margins to compress in an already challenging environment.

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This Startup Digest Reading List goes out to a wide membership base of founders, technologists, investors, and operators. Feel free to share with others, sign up here: https://startups.startupdigest.com/

Techstars Startup Digest Startup Reading List is curated by:

Chris McCann - General Partner @ Race Capital, former Greylock Partners
chris@startupdigest.com

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Startup Digest Reading List: Fundraising Tips, Bad Board Members, Data Infra, and OpenDoor

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