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2022

  • 2 min read

VC Modelling

Venture Capital financial modelling notebook

I've always wanted to cover how captables are modelled. Using this github repo, I show how can we build captables, calculate expenses and EBIT, and company valuations.

Link to github repo.

Free Cash Flow:

Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.

There are two main approaches to calculating FCF. The first approach uses cash flow from operating activities as the starting point, and then makes adjustments for interest expense, the tax shield on interest expense, and any capital expenditures (CapEx) undertaken that year.

The second approach uses earnings before interest and taxes (EBIT) as the starting point, then adjusts for income taxes, non-cash expenses such as depreciation and amortization, changes in working capital, and CapEx. In both cases, the resulting numbers should be identical, but one approach may be preferred over the other depending on what financial information is available.

EBIT

Earnings before interest and taxes (EBIT) is an indicator of a company's profitability. EBIT can be calculated as revenue minus expenses excluding tax and interest. EBIT is also referred to as operating earnings, operating profit, and profit before interest and taxes.

Valuation

A business valuation is the process of determining the economic value of a business, giving owners an objective estimate of the value of their company. Typically, a business valuation happens when an owner is looking to sell all or a part of their business, or merge with another company.

Pre/Post Valuations

Pre-money and post-money differ in the timing of valuation. Pre-money valuation refers to the value of a company not including external funding or the latest round of funding. Post-money valuation includes outside financing or the latest capital injection.

Captable

A capitalization table is a table providing an analysis of a company's percentages of ownership, equity dilution, and value of equity in each round of investment by founders, investors, and other owners.

Todo

  • Add how to model captables
  • How EBIT is measured
  • Formulas for measurements
  • Add info about termsheets
  • 1 min read

How to Cold Email

How to write a good cold email?

If you're looking for job,internship, customers or fundraising, a cold email is your best shoot at reaching out(unless you know people from the organization).

The beauty of cold emailing is that it's a direct and upfront ask, you know what you want, if you don't define and send that email.

  • One line about who you are, and what do you do.
  • Hello {receiver}, I'm {name}, studying/working with {name} and I wish to {request}
  • Sharing about yourself
  • Adding 2 to 5 lines about the key highlights which make you a good fit for the request you've asked.
  • Be direct, short and crisp. Writing essays isn't saving anyone's time. Be concise and respectful.
  • Quantify and share your proof of work. If you worked on a feature, show the time it saved or costs reduced. If you gained 100 customers, add that. Show numbers so people understand you better.
  • Add all relevant links in the email. The reader isn't gonna spend his time looking you up. Respect their time.
  • One line about who you are, and what do you do.
  • Close the email wiht a call to action. Add a personal touch, get as personalized as possible!

Sounds interesting? Write a cold email and get what you want! Drop me text at LinkedIn if it helps.

  • 1 min read

Venture Capital Memos

Venture Capital Memos

A very common question asked by aspiring VCs is where do we learn how investments are made? VC is largely a learning on the job role. Feedback cycles take years at the minimum.

How do you think like a VC?

Enter investment memos: these small documents highlight the usual decision making process of a Venture Capital fund. Many at times, fundraises have memos as well.

List of memos to learn

Memo templates

Note :I am in no way involved with any of these funds. If you wish to learn more about VC, drop me a line at LinkedIn

  • 5 min read

Venture Capital investments in Open Source

Problem :

Understanding FOSS technologies and investing in open-source tech.

Commerical platforms put you at the mercy of closed-source companies. You are subject to vendor lock-in and rent-seeking behavior.

No way to combat prices, raise features and get community support.

Solution

Monetized open-source projects give some or all of the code away for free.

With the ability to change it.Projects are monetized via services, premium features, hosting and more. Contributors are users themselves.

Freemium plans for user-acquisition, lower CAC, better retention

Key Players

Projects

  • WordPress • The most popular website builder
  • Plausible • Google Analytics alternative
  • Elastic • Search, analyze and visualize data
  • Medusa • Shopify alternative
  • Builder • Visual website builder
  • Posthog • Alternative to Mixpanel and Amplitude
  • Supabase • Firebase alternative
  • Semgrep • Static analysis tool
  • AnonAddy • Anonymous email forwarding
  • Penpot • Figma alternative
  • Canonical • Linux OS

India:

  • Appsmith: Raised from Accel India
  • Tooljet: Raised from Nexus Venture Partners

Predictions

  • Monetized open source projects will become more ambitious.
    • NocoDB and Baserow are Airtable alternatives.
    • n8n is an alternative to Zapier and Integromat.
    • Medusa is a Shopify alternative.
    • Supabase is a Firebase alternative.
    • Appsmith is a Retool alternative.
  • Networks will become public goods. Centralized networks have been one of the most effective ways to generate wealth.
  • The Global Open Source Services Market size is expected to reach $60 billion by 2027, rising at a market growth of 17% CAGR during the forecast period. The term 'open source' refers to a kind of licensing agreement, which enables users to independently alter a work, combine work with big projects, use a work in different ways or develop a new workout based on the authentic.
  • The rising number of skilled developers is solving for India for the world. More developers have contributed to Open Source from India than any other country.

Growth

  • Self-service selling dramatically reduces the cost of selling and servicing transactional, lower-revenue deals. The product becomes a vehicle for allowing customers to expand their spending through executing upsells, particularly in usage-based pricing models. Chargebee offers 2 self-service plans in addition to a free offering, which enables SMB and mid-market customers to grow with the platform without needing to talk to sales.
  • Data-driven targeting uses product data in sales targeting and upsells motion; for instance, providing your sales team with a list of customers who are above their usage limits and ready to pay. Nearpod collects data around which teachers are actively using its platform and then leverages this to encourage school districts to become customers.
  • New or premium feature adoption can be improved by guiding users to that feature with product popups and callouts based on their usage patterns and use-case. MURAL surfaces new features in-app with contextual triggers, while also providing an in-depth changelog to demonstrate all of the value they are continuously adding to their product.
  • Community development involves fostering a community of users who can help each other understand the product and develop new innovations in usage. This community will form a key source of product advocacy and evangelism, with paying customers advocating to free users, and free users evangelizing the product to prospective users. You should support and foster the community by providing forums and events (user conferences and smaller gatherings) where they can interact, uplifting the most active users of the community, and ensuring company employees interact and become members of the community themselves. Postman has fostered an active community of developers using the product and continues to invest in it.

Opportunities

  • The counter position to compete with incumbents. Make it hard for them to mimic your strategy. Copying should lead to cannibalizing their existing business. Medusa is a Shopify alternative. It's unlikely that Shopify will open source. Even if Medusa becomes a formidable competitor.
  • Permissionless contribute to open-source projects. Use open-source contributions to build a portfolio and find jobs. Laszlo Block, former VP of People Operations at Google, says the number of Google employees without a college education is rising.
  • Open-source alternatives avoid platform risk, vendor lock-in and rent-seeking behavior. Use code that you can fork and self-host. Platforms can raise prices without providing more value because switching costs are high.
  • Turn complaints into contributions. Accept pull requests. Along with feature requests. Augment your dev team with open-source contributions.

Security

  • securing serverless in the public cloud, perhaps by isolating serverless workloads in the public cloud with granular account-level segmentation, and limiting exposure through the use of blast-radius architecture
  • rethinking authentication for transient serverless workloads by using ephemeral credentials and short-lived tokens, which are key risk mitigators for credential exposure
  • protecting your availability in a serverless landscape with robust perimeter security that deploys public and internal functions at discrete gateways
  • upgrading risk assessment, governance, and awareness by, for example, adopting policy as code for the codification of organizational policies; using regulatory frameworks in automated governance pipelines for cloud-service provisioning; and deploying all serverless workloads using an embedded DevSecOps pipeline

Risks

  • Consulting: Services are less scalable than hosting and dual-license models. Consider marginal costs before you choose this strategy.
  • Community Backlash • Moving free features to paid tiers may lead to a backlash.

Key Lessons

  • Users are the real winners of monetized open source. Public goods have less lock-in.
  • Value creation does not automatically lead to value capture. Two-way rating systems, proof of stake protocols, and airdrops are uncornered innovations.

Issues

  • IP rights will be hard to enforce in the new world. CryptoPunks creators are under fire for an inconsistent approach to derivatives. Bored Apes are slightly more lenient. NFTs gave us digital scarcity. Legitimacy and social consensus will rule the day.
  • Wealthy benefactors will use open-source projects to prop up closed ecosystems and attract talent. See Apple with Swift and Meta with React.
  • 1 min read

Blog Post Title From File Name

Hello World

The main motive behind this blog is to share what I write and share who I am, in a minimalist way. Instead of going for a fancy framework, I choose GH pages+Jekyll for ease of maintaning it.

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