Startup Digest Reading List: Cap Tables, Open Source, and Fintech Product Expansions

Issue #125 • October 5 • View online • Suggest a link

Startup Reading List

A weekly curated newsletter on startups and technology.

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Welcome to this week’s edition of CM weekly featuring stories I found interesting on startups, venture capital, and fintech.

My partners and I at Race Capital, decided to share the process behind how we invest, how we evaluate companies, our typical check sizes, etc. If you’re a founder and meet any of these criteria, let’s chat! > chris@race.capital

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

See where AI is headed at NVIDIA GTC

Hear from leading experts on what markets AI is going to disrupt next, attend interactive training sessions led by NVIDIA solutions architects, and network with fellow startup CEOs, VCs, and enterprise executives at NVIDIA’s GPU Technology Conference (GTC) October 5-9. The startup track will be hosted by NVIDIA Inception, an acceleration program that nurtures cutting-edge AI startups and scaleups with go-to-market support, expertise, and technology. Register for 20% off with code CMSTARTUPS.

Cap Tables 101

The cap table is the ledger of who owns what in a startup, and is one of the most important documents of a company. While in theory this would be a straightforward spreadsheet, it gets complicated fast due to convertible notes, pre vs. post conversions, option pool additions, and many other terms.

Chris Harvey from the Law of VC breaks down what cap tables are, the math behind them, and some of the key terms you need to know about as a founder or investor. TLDR: for convertible notes, the two most important terms are valuation cap, discount rate, and capitalization conversion metrics (pre vs. post & outstanding vs. fully diluted). It’s a great refresher for all entrepreneurs and investors.

Open source paradox

As more and more of the enterprise software is built in open sourced, and used within businesses, the challenges of maintaining and improving the underlying open source infrastructure is of utmost importance.

However, as Salvatore Sanfilippo, the creator of the open source database Redis, points out: the paradox of open source is (1) The maintainers of open source are not entitled to do fixes or changes for customers using the software (2) Users are free to change it themselves; however, it does not guarantee implementation back to the core library.

Both sides care about quality but neither side is entitled to work for the other.

Product expansion conundrum for fintech (application) startups

In the fintech space, on the application side (i.e. Affirm, Robinhood, SoFi, etc), most companies start off with one narrow product targeting a specific use-case and hope to expand to multiple products. The thinking is if consumers trust them with one financial feature (personal loan), this can be transferred to another financial feature (auto loan).

However, as Rohit Mittal of Stilt (a fintech startup) points out, this transition to multiple product lines has not been very smooth for most fintech startups out there. Each of these different financial products has very different market dynamics and winning one category does not grant you success in another.

On a broader scale, the promise of fintech was to “unbundle the banks” so it is sometimes odd to see these same players try to re-bundle all of these financial services into new consumer applications. I do believe product expansion on the financial infrastructure side (banking as a service) will be much more promising than the consumer side.

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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/

See where AI is headed at NVIDIA GTC

Hear from leading experts on what markets AI is going to disrupt next, attend interactive training sessions led by NVIDIA solutions architects, and network with fellow startup CEOs, VCs, and enterprise executives at NVIDIA’s GPU Technology Conference (GTC) October 5-9. The startup track will be hosted by NVIDIA Inception, an acceleration program that nurtures cutting-edge AI startups and scaleups with go-to-market support, expertise, and technology. Register for 20% off with code CMSTARTUPS.

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: Cap Tables, Open Source, and Fintech Product Expansions

See where AI is headed at NVIDIA GTC

See where AI is headed at NVIDIA GTC

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