Understanding Investment Concepts

In 2006, we sold Mobile365 for $425M. However, as founders, we walked away with far less than one might expect. We raised a total of $70M before selling the company. At the time, investors pushed us to invest aggressively, and we made the costly mistake of burning through a lot of cash, often without enough efficiency. When it came time to raise funds again, the telecom bubble burst, and we found ourselves in a down round. A down round occurs when a company raises funds at a lower valuation than in the previous round, with one major consequence for founders: dilution. Since the valuation is lower, the company must issue more shares to raise the same amount of capital, reducing the founders' ownership percentage. This is exactly what happened to us, and when we sold the company, we had been significantly diluted. From this experience, I learned 2 key lessons: - Burn cash efficiently, to avoid raising funds in a desperate situation. Raising in unfavourable conditions can lead to significant dilution. - Avoid raising at an inflated valuation, and always have a solid plan to ensure your next valuation doesn’t decline. The liquidation preference could have impacted us too, but fortunately, we sold the company for a good price. And I won’t even get into the taxes—luckily, I was already in Singapore at the time.

You took a $50K pay cut for startup equity. The VCs are counting on that. Here's what they know that you don't: Last year, a friend called excited: - Head of Product role - $2M ARR startup - $120K salary - "Generous equity package" I asked one question: "What's the preference stack?" Silence. Here's what that 1% actually means: - Investors put in $10M - They get paid back 2x first - Then they get their pro-rata - Then you get... what's left The real math: $20M exit = $0 for you $30M exit = $0 for you $40M exit = maybe lunch money But it gets worse: Your 1% isn't even 1%: - Series A cuts it to 0.5% - Series B drops it to 0.25% - Series C? Keep dividing - Down rounds? Start crying The cruel truth: 95% of startup employees never see a dollar from equity. But 100% took pay cuts to get it. Before you take that "dream offer": Red flags to watch for: - "Industry standard vesting" - "Standard preferences" - "Standard dilution protection" - "Standard liquidation rights" Translation: Standard = You lose Questions that save you: 1. "What's the current preference stack?" 2. "Show me dilution scenarios" 3. "What's the exit waterfall?" 4. "How many shares outstanding?" Because here's what VCs know: Hope is expensive. Math is free. Choose math.

709 companies on Carta raised a down round in 2023. Contrarian view - seeing nearly 2 down rounds per day is a good thing. I'll unpack that in a moment, but first some more headline data: • Down rounds represented 19.7% of all rounds on Carta this year (excluding the first priced round for any companies).    • That 19.7% is the highest share for down rounds in Carta history - in a typical year it averages about 10% of all rounds.    • Bridge rounds were more likely than new primary rounds to be down. 23% of bridges were down rounds, but only 15% of primaries. This doesn't include convertible financings.    • Essentially every industry with sufficient round volume saw their highest year of down rounds this past year - the macro changes spared nobody.    As you can see in the graphic, Crypto companies were the most likely to have a down round, followed by Consumer and Education startups. So - why is this a good thing? Don't down rounds suck? Yes! They do. But they suck a lot less than going out of business. I think it's imperative that private tech shed the stigma around down rounds. Public companies are devalued every day, valuations fluctuate due to a whole host of factors - it's a little silly to assume private valuations would be up and to the right all the time. Also - a clean down round can preserve the cap table in a way a messy, structure-filled flat round does not. If the alternative to a down round is a nominal increase that comes with high liquidation preference and other terms, it is often more beneficial for the founder (and employees) to take the down round and keep building. I don't want to minimize the impact. It's a tough moment to admit valuation expectations got out of hand. And the founders have to explain the reasoning multiple times - to employees, to current investors, to prospective investors, to themselves. But I'm hopeful many of these startups will be able to grow again into a reasonable valuation that doesn't crush the future with the weight of unrealistic expectations. Kudos to the founders and investors willing to admit 2021 was a sugar high. More data like this every Thursday in our Data Minute newsletter - subscribe at the link in graphic. #cartadata #downround #startups #founders #fundraising  

Five non obvious learnings from my decade in startup investing. Long-term success in early-stage venture capital is complex, shaped by market cycles, behavioral dynamics, and systemic inefficiencies. Here are my top 5 learnings from a decade of investing in startups. Let’s see how these age over the coming decade! 1. The Best Deals Often Look Mediocre at First Most breakout companies don’t look obvious at seed stage. The best founders are often contrarian and misunderstood. Many investors over-index on early traction, but true long-term winners usually show strong founder insight, adaptability, and a unique way of thinking—even if they lack polished decks or conventional signals of success. 2. Luck is a Skill (If You Know How to Create It) “Being lucky” in venture isn’t random - it’s an outcome of positioning, information asymmetry, and behavioral adaptability. The best investors actively manufacture luck by: - Expanding surface area (helping founders before investing, building deep networks, staying top-of-mind). - Recognizing second-order patterns (e.g., market shifts before they reflect in metrics). - Embracing serendipity (following curiosity, taking unexpected meetings). 3. Portfolio Math Lies – It’s About Anti-Portfolio Thinking Traditional portfolio theory suggests you need a few outliers to drive returns. But the key is actually avoiding the wrong misses. Many VCs focus on what they invest in, but what you don’t invest in matters just as much. - Missing a Flipkart, Swiggy, or PayTM due to pattern-matching bias is far more damaging than picking a mediocre deal. - The best investors revisit why they said ‘no’ to past unicorns and refine their filters constantly. 4. The Biggest Risk is “Too Much Conviction” The more experienced an investor becomes, the greater the risk of false confidence. Early-stage VC is probabilistic, but many long-term investors fall into the trap of overestimating their ability to predict outcomes. - Markets change. What worked in 2015 may not work in 2025. - The best investors build mechanisms for self-doubt—forcing themselves to challenge their assumptions regularly. 5. Reputation Compounds Like Capital – But in Unexpected Ways Most people assume VC reputation comes from returns or social status. In reality, the most enduring reputations come from trust, founder-first behavior, and non-obvious signals: - The way you handle bad outcomes matters more than your wins. - Long-term reputation isn’t just built with founders - it’s shaped by other investors, LPs, ex-employees, and even competitors. - The best VCs give more than they take, often in ways that don’t yield an immediate return but create long-term leverage.

You know investors now definitely see sports as an asset class when J.P. Morgan, Goldman Sachs, and Morgan Stanley all decide to allocate time and resources to launching sports-focused teams / reports / indexes. 📈 ➡️ J.P. Morgan   6 months ago, J.P. Morgan launched a new "sports investment banking coverage group" to cover investments in sports franchises for their clients around the globe.   Fred Turpin, J.P. Morgan’s Global Head of Media and Communications Investment Banking declared then: “With top sports franchises in the US and Europe now valued at more than $400 billion in total, sports have become an increasingly large asset class, attracting more and more institutional investors.”   ➡️ Goldman Sachs   Last month, GS released a report called "Changing the Game: Unlocking new opportunities in sports" in which they picture sports as an "outperforming asset class generating opportunities for corporates and investors to diversify their assets and unlock value."   Here's a quote from Dave Dase, Global Co-Head of Sports Franchise:   "The days of just selling tickets and concessions are over; sports are rapidly expanding into 24/7 data management platforms that bring best-in-class customization - helping teams grow and increase the monetization of their fan base across all business verticals.”   Trends quoted in the report include:   📱 Evolving media landscape shaping a new era for sports rights   🤝 Minority stakeholders becoming an essential part of the capital structure in parallel with soaring sports teams’ valuations 🎮 Expanding range of sports-adjacent businesses 🥅 Modern-day stadiums generating new avenues for monetization   ➡️ Morgan Stanley And now, Morgan Stanley’s wealth management division is launching an investment index tied to sports leagues.   Name of the index?   The "Parametric Custom Core Sports League" strategy.   The portfolio's holdings will consist of 250 to 400 securities from companies that have sponsorship, media, advertising deals, and other associations with major sports leagues, including the NBA, WNBA, NFL, NWSL, MLS, MLB, LPGA, PGA, NHL, US Open Tennis, F1, Nascar, and college basketball.   The portfolio is aimed at high net worth sports fans with a $250k investment minimum.   It will allow them to invest in a curated index of companies with strong sponsorship, media and advertisement ties to the most prominent sports leagues.   Sandra Richards, Managing Director and Head of Morgan Stanley’s Global Sports and Entertainment Division, stated:   “We see the demand from our clients that are asking about ways to invest in sports. And it’s going to continue.”   To be noted that they'll use Nielsen Sports as its data source to track the activity, spending and visibility of the companies with exposure to professional sports leagues.

Most financial advisors can't outperform a low-cost ETF portfolio that costs 10-20 bps to own. In many ways, index funds have effectively "solved" investing. Yet many people continue to delegate their investment management to financial advisors. Why? The answer is simple: people don't hire financial advisors to maximize their investment returns. They hire them to satisfy a broader set of needs that cannot be met by simply owning index funds. This fact emerges from three survey-based studies. A 2020 study on a broad survey of ~3,000 individuals finds evidence that people hire financial advisors to satisfy needs including: -purchasing “peace of mind” -having access to the opinions of an expert -and delegating financial decisions The authors classify investor needs into five categories: -knowledge -trust -personal improvement -delegation -and investment performance They find that the most important need is trust, followed by personal-improvement. The least important is investment performance. https://lnkd.in/entQkMQA This finding aligns with a highly cited theoretical paper - Money Doctors. The authors argue that trust in an investment manager enables investors to take risks, and earn returns, that they might otherwise not obtain. https://lnkd.in/e5vbBWdc In a Morningstar study, 312 responses to the question “Please list some reasons why you hired your advisor...” were analyzed. The top motivations were to alleviate discomfort in handling financial issues, the desire to achieve a specific goal, and behavioral coaching. A similar study from Morningstar analyzed 620 responses to the question “please list some reasons why you continue to have an advisor”. “Discomfort handling finances” - with specific reasons like “peace of mind” and “money makes me nervous” - was the top overall response. Index funds may have "solved" investing, but solved doesn't mean easy. Investing is inherently uncomfortable, emotional, and makes many people nervous. The needs for trust-based peace of mind, expert opinion, and delegation cannot be solved by a financial product.

After twenty years in financial planning, I’ve noticed something very clearly. The best advisers are the most humble. They are not arrogant, they are not complacent, and they are never as impressed with themselves as others might be. They understand the responsibility they carry, because this profession is not about being right most of the time, it is about being right when it matters, and that weight never really leaves you. The best advisers still prepare for meetings properly, they still check the detail, and they still ask a colleague for a second opinion when something does not feel quite right. They do not see that as weakness. They see it as professionalism and respect for the client. There is a quiet confidence in people like that. They do not need to prove anything, and they do not assume trust. They earn it, slowly and consistently, through the care they show and the standards they maintain. Humility keeps you sharp because it keeps you curious and open to learning. Arrogance does the opposite. It makes people lazy, it makes them stop listening, and it creates the dangerous illusion that the rules no longer apply to them. Complacency is even more subtle. It creeps in over time and tells you that this case is straightforward, that this client is the same as the last one, and that you do not need to check one more time. That is when mistakes happen, and that is when trust can be lost. The advisers I admire most have stayed grounded no matter how experienced or successful they have become. They respect the process, they respect the detail, and they never forget that behind every recommendation is a person who has placed their trust in them. In the end, those are the people who build the strongest careers and deliver the best advice, not because of ego, but because of responsibility. #JustRob 🩵 #FinancialPlanning #Professionalism #ClientFirst #FinancialAdviser

Have you been watching the World Cup? Here’s an interesting angle: Goalkeepers are roughly twice as likely to save a penalty if they stand still than if they dive. Yet they almost never do. In one famous study of professional penalties, goalkeepers dived left or right around 97% of the time. They stayed in the middle just 3% of the time. Why? Because diving looks like effort. Standing still looks like they’ve given up. Behavioural economists call this “action bias”: our tendency to do something rather than do the right thing. Investors fall into exactly the same trap. Markets drop. The headlines become frightening. Your portfolio falls in value. Suddenly, doing nothing feels irresponsible. So people sell. They switch funds. They move to cash. They try to “protect” themselves. The irony? For long-term investors, the decision that feels the hardest is often the one that produces the best outcome. Just like the goalkeeper, investors - and fund managers- worry more about looking inactive than making the optimal decision. That’s why one of the most valuable jobs of a financial planner isn’t recommending investments. It’s preventing clients from making emotional decisions at exactly the wrong moment. Sometimes the best investment decision you’ll ever make isn’t buying or selling. It’s simply refusing to dive.

Part of being a great advisor is learning to hear what's beneath the words...learning to see what clients may not see about themselves. The client who constantly asks about the market may not need market education; they may need reassurance. The client obsessed with cash may not be conservative so much as shaped by a lifetime of scarcity. The person who keeps putting off estate planning may not be procrastinating as much as avoiding fear of death or irrelevance. Understanding behavior > judging it.

I've seen brilliant founders fail and mediocre ones get funded. The difference wasn't talent. It was psychology. Research suggests several psychological patterns can influence investor decisions - often operating below the conscious level. Understanding these cognitive biases might play a bigger role in fundraising success than we often realize. Here are 5 cognitive biases that could affect your funding chances: 1. Similarity Bias Studies indicate that investors may gravitate toward founders with similar backgrounds, education, or thinking styles. This explains why some VCs appear to fund certain "types" of founders more frequently than others. → Sharing authentic common ground with investors could create meaningful connection points. 2. Loss Aversion Research in behavioral economics suggests people often feel losses more strongly than equivalent gains. This explains why some investors seem more concerned about missing the next big thing than finding it. → Framing opportunities in terms of potential missed opportunities might resonate differently than only highlighting potential gains. 3. Anchoring Effect First impressions may create reference points against which everything else gets measured. → The order in which information is presented matters more than we think. 4. Digital Presence Recent data suggests that some investors now spend an average of 37 minutes researching founders online before their first meetings. → Your digital footprint might be creating impressions before you even enter the room. 5. Optimism Gap There is a natural difference between how founders and investors view projections. → Backing ambitious forecasts with solid evidence can bridge this perception gap. Understanding these patterns has helped many of the founders I've worked with navigate the fundraising process more effectively. What's interesting is how rarely these psychological factors get discussed in standard fundraising advice. Has anyone noticed these patterns in their own fundraising experiences?