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Best of LinkedIn: Venture Capital CW 33/ 34 · Best of LinkedIn: Strategy, M&A & Investments

• 0:00
  Speaker 1: provided by Thomas Allgeier and Franus, based on the most relevant LinkedIn posts about venture capital in calendar weeks thirty-three and thirty four.
• 0:08
  Speaker 1: Frennus supports general partners in identifying relevant limited partners across multiple sources researching connection strategies coordinating event attendance and running structured outreach campaigns that turn cold lists into scheduled conversations and committed capital.
• 0:22
  Speaker 1: you can find more info.
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  Speaker 0: So today we're taking a look at why the vast majority of founders are desperately chasing Mathematically engineered to dilute them out of existence.
• 0:36
  Speaker 0: Yeah, we're basically bypassing all that superficial market noise To look at the unvarnished structural reality Of the VC landscape right now.
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  Speaker 0: Right so the concentration a capital The breakdown of fund reserve models and uh the predatory term sheets That are kind of filling the void.
• 0:51
  Speaker 1: yeah We have this massive institutionalized venture apparatus Out there but what we're seeing across all the professional feeds is A heavy like foundational pushback against the standard fundraising playbook a real fundamental rethink of the cost of capital right now.
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  Speaker 0: We definitely are, David Y recently published a thesis that hits at the absolute core of this structural mismatch.
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  Speaker 1: oh yeah he basically
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  Speaker 0: argues that the vast majority of founders shouldn't even be in the same room as VC.
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  Speaker 1: Right because venture capital isn't.
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  Speaker 1: this generalized business building tool is
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  Speaker 0: no exactly.
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  Speaker 0: it's a highly specific financial instrument and its designed to force hyper growth so you can return.
• 1:33
  Speaker 0: But the broader market narrative has somehow convinced founders that launching a company, you know intrinsically requires raising priced rounds and just going into this blitz scaling phase.
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  Speaker 1: Which completely ignores the fundamental mechanics of capital structure?
• 1:48
  Speaker 1: Right I mean a profitable agency or manufacturing firm Or even as specialized healthcare provider.
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  Speaker 1: they can be exceptional high margin businesses.
• 1:57
  Speaker 1: Oh absolutely.
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  Speaker 1: And using venture capital in those scenarios it's like rocket fuel.
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  Speaker 1: It's incredible if your specific payload requires leaving the atmosphere, but it's highly combustible and usually fatal.
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  Speaker 1: If you just need to like drive a reliable hybrid down the highway...
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  Speaker 0: That's a perfect way to put it!
• 2:15
  Speaker 0: And The Math David points out is just brutally simple.
• 2:18
  Speaker 0: But he gets continually ignored.
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  Speaker 0: debt is structurally cheaper than equity dilution and organic revenue Is just fundamentally superior to fundraising Always.
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  Speaker 0: Owning eighty percent of a ten million dollar business that actually generates free cash flow is an objectively superior asset to owning, you know eight percent of highly diluted startup eventually crashes into liquidation preference wall
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  Speaker 1: Exactly and we're seeing real time operational proof anti-VC playbook gaining traction.
• 2:47
  Speaker 1: We are!
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  Speaker 1: Look at Mark Ichiba's timeline with border pay.
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  Speaker 0: Oh yeah, that's a great example.
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  Speaker 0: Right
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  Speaker 1: he hit six thousand dollars in processing volume and got completely ghosted by his investor pipeline
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  Speaker 0: Zero term sheets
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  Speaker 1: zero termsheets zero replies And instead of running another you know Six month outreach campaign just to manufacture venture validation
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  Speaker 0: Which is what everyone tells you to do
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  Speaker 1: right?
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  Speaker 1: Instead of that He stopped pitching opened as IDE and Just built the underlying infrastructure.
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  Speaker 0: and that pivot completely changes the entire operational discipline of a company because when you're starved outside capital, You can't just subsidize user acquisition.
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  Speaker 1: and he didn't.
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  Speaker 1: He built a full B to be cross-border financial infrastructure like core APIs White label rails, dual iOS and Android production approvals.
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  Speaker 1: Yeah!
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  Speaker 1: And today border pay is processing fifty thousand dollars in daily volume across seven hundred registered businesses...and it's all completely organic.
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  Speaker 0: That's wild.
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  Speaker 0: They
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  Speaker 1: spent zero dollars on paid acquisition.
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  Speaker 1: It's basically a masterclass of how getting ignored by capital allocators can act as the ultimate forcing function.
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  Speaker 1: Right He didn't build pitch deck he built cash flowing engine And he still retains one hundred percent of the equity,
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  Speaker 0: which is the bootstrapped ideal.
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  Speaker 0: But let's look at the other side of the barbell for a second.
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  Speaker 0: Okay because when companies do successfully raise in this current climate The underwriting requirements have shifted so dramatically.
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  Speaker 1: Yeah They really have.
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  Speaker 0: Leon Eisen highlighted this dynamic and the medtech space that has basically fundamentally altering How early-stage capital is deployed across the board?
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  Speaker 1: Ah, right.
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  Speaker 1: The absolute elimination of budget friction
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  Speaker 0: Exactly
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  Speaker 1: Yeah.
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  Speaker 1: He pointed to Renata Medical closing a twenty five million dollar round.
• 4:35
  Speaker 1: But they didn't raise that capitol on like a promising clinical trial.
• 4:39
  Speaker 1: They raised it because Medicare reimburses hospitals and extra twenty two thousand six hundred eighty five dollars every single time they use Renata's device.
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  Speaker 0: And that just fundamentally changes the sales cycle and the risk profile for the investor, honestly when no budget this quarter is mathematically removed from their procurement process... The VC isn't really underwriting to go-to market risks anymore!
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  Speaker 1: ...the pair reimbursement is literally hardcoded into adoption.
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  Speaker 1: Right?
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  Speaker 0: The hospital isn't weighing the device against its own CAPEX or OPEX constraints.
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  Speaker 0: so friction drops to zero.
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  Speaker 0: Institutional capital is aggressively backing guaranteed revenue pathways now, not technological experiments.
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  Speaker 1: Which perfectly gives us the context for that wild data point.
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  Speaker 1: Eisen shared about the total inversion of a funding ladder?
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  Speaker 0: Yes!
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  Speaker 0: The seed round data...
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  Speaker 1: The average seed round is now sitting at thirty-three point seven million dollars.
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  Speaker 1: It's actively surpassing the average series A which is hovering at thirty two point eight million.
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  Speaker 0: That is insane.
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  Speaker 1: The traditional staging of capital deployment is entirely broken.
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  Speaker 0: It is because the seed stage has stopped buying discovery,
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  Speaker 1: right?
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  Speaker 0: To clear an investment committee at the seed level today you need commercial assets that historically belonged in a Series B data
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  Speaker 1: room.
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  Speaker 1: Yeah like we're seeing seed term sheets contingent on full power test reactors running at MIT or...you know fully executed, thirty million dollar enterprise partnerships.
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  Speaker 1: Right
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  Speaker 0: the risk premium for early stage capital has adjusted so aggressively that literally no one is funding The Whiteboard phase anymore.
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  Speaker 1: and because That bar is set So astronomically high founders are spending like twelve to eighteen months just trying To engineer enough traction even get a meeting.
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  Speaker 1: And that systemic desperation is breeding this secondary market of highly predatory, totally misaligned dynamics between founders and supposed capital partners.
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  Speaker 0: Because opportunism thrives in a buyer's market?
• 6:36
  Speaker 0: It
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  Speaker 1: really does.
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  Speaker 0: Sean Gold actually recently issued a stark warning about a cottage industry actively preying on cap table desperation.
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  Speaker 1: The intro fees?
• 6:45
  Speaker 1: Yes,
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  Speaker 0: he specifically called out advisory firms demanding a thirty thousand dollar upfront partnership fee just for the privilege of routing a deck to their syndicate network.
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  Speaker 1: I mean that is functionally attacks on desperation totally.
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  Speaker 1: if a startup is operating on six months of runway Demanding they hand over a month of operational capital Just For A Warm Introduction Is Predatory.
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  Speaker 1: Yeah If an investment committee is genuinely convicted on an asset, the first check shouldn't be coming out of the founder's operating account.
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  Speaker 0: Right and we all know professional advisors in bankers charge retainers for structured M&A engagements.
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  Speaker 1: Sure
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  Speaker 0: But selling an expensive promise based on a LinkedIn headline that just says Capital Partners Is A Huge Structural Hazard.
• 7:26
  Speaker 1: And Kevin Jirovich actually compiled a highly cynical, but honestly incredibly accurate checklist of the red flags dominating the twenty-twenty six landscape.
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  Speaker 0: Oh I love that list!
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  Speaker 1: It was so good.
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  Speaker 1: he pointed out the behavioral tells right?
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  Speaker 1: Like an associate saying interesting fourteen times in a screening call
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  Speaker 0: or A partner whose first available calendar slot is literally three quarters away.
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  Speaker 0: Q
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  Speaker 1: one twenty twenty seven
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  Speaker 0: yeah But You know, the behavioral tales are frustrating but structural traps are the ones that actually destroy the exit waterfall.
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  Speaker 1: Oh definitely
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  Speaker 0: We're seeing funds loudly branding themselves as founder-friendly on social media, while quietly packing a three x liquidation preference into their term sheets.
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  Speaker 1: Yeah let's talk about the mechanics of that for a second because A Three X Liquidation Preference isn't just a downside protection clause.
• 8:16
  Speaker 0: No it is not.
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  Speaker 1: It is a cap table nuclear weapon Right.
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  Speaker 1: So if a VC puts in fifteen million dollars and you exit for fifty million they take thirty five million off the top.
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  Speaker 1: before single common share sees a dime.
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  Speaker 1: It turns a seemingly successful mid-market exit into a zero dollar event for the founders and employees.
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  Speaker 0: It's awful!
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  Speaker 1: it is the equity equivalent of high interest payday loan...it
• 8:40
  Speaker 0: really is, and creates toxic misalignment on board.
• 8:44
  Speaker 0: The founders realize three years in that they are functionally just working as indentured servants to clear preference stack
• 8:51
  Speaker 1: And friction isn't external right?
• 8:53
  Speaker 1: No.
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  Speaker 1: Gerald Durand brought up a massive structural vulnerability regarding friction within the founding team itself.
• 8:59
  Speaker 1: Oh,
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  Speaker 0: co-founder data?
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  Speaker 0: Yeah
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  Speaker 1: his data shows that sixty five percent of startup failures stem directly from co founder disagreements.
• 9:06
  Speaker 1: right yet vendor capital historically mandates a co founder setup to mitigate key man risk which leads to these forced arranged marriages.
• 9:16
  Speaker 1: just to check a box for the investment committee.
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  Speaker 0: Yeah, but let's look at the cap table damage when a solo founder makes an unchecked pivot though.
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  Speaker 0: Okay
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  Speaker 1: fair
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  Speaker 0: Are VCs really just funding co-founders to check a box?
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  Speaker 0: Or is it required risk mitigation policy because solo founders operate with massive vine spots?
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  Speaker 1: That's a valid pushback
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  Speaker 0: Right?
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  Speaker 0: If you don't have a peer to challenge your assumptions, You can easily burn through ten million dollars before the board even realizes The product roadmap is compromised.
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  Speaker 1: Yeah but see I think that's A false sense of security.
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  Speaker 0: How so?
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  Speaker 1: The VC heuristic favors redundancy To appease their own limited partners.
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  Speaker 1: Okay But managing a forced marriage creates operational paralysis.
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  Speaker 1: Yes, a solo founder might execute a flawed pivot but a misaligned co-founding team spends six months passively fighting over the pivot while burning runway.
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  Speaker 0: Well that's true.
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  Speaker 1: And in market demanding hyper efficiency structural paralysis kills companies significantly faster than an unchecked blind spot.
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  Speaker 1: The actual failure rate suggests the venture mandate for co-founders has evolved into a real liability.
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  Speaker 0: That's a fair point, and that structural paralysis is exactly why we track these dynamics so closely Absolutely.
• 10:25
  Speaker 1: And by the way if you're utilizing this level of structural analysis to navigate your own capital allocation Make sure you hit subscribe on the deep dive.
• 10:33
  Speaker 1: So don't miss our future additions.
• 10:34
  Speaker 1: We are constantly monitoring those shifts.
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  Speaker 0: Yeah, and those shifts at the micro level are entirely downstream of the macroeconomic concentration happening.
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  Speaker 0: At The Fund Level right now.
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  Speaker 0: so
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  Speaker 1: true
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  Speaker 0: we really can't analyze founder investor friction without understanding the math breaking down inside the mega funds.
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  Speaker 1: Right, and the roundup data from the first half of twenty-twenty six paints a staggering picture.
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  Speaker 1: that concentration Oh
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  Speaker 0: it's unprecedented.
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  Speaker 1: US companies raised more venture capital in each one than any prior full year on record but eighty six percent of that capitol was concentrated entirely an AI
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  Speaker 0: and the European data mirrors it perfectly.
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  Speaker 0: Really?
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  Speaker 0: Yeah, with over sixty percent of their forty-four billion euros deployed in H one just swallowed by AI native models Wow!
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  Speaker 0: And this level of extreme concentration is actively breaking traditional VC reserve models.
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  Speaker 1: How so
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  Speaker 0: Well a standard fund has modeled on an assumption that two X to three X valuations step up between rounds.
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  Speaker 0: That allows GP to deploy their reserves To maintain pro rata ownership.
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  Speaker 0: But
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  Speaker 1: the AI native rounds are stepping up valuations by five X to ten X in a matter of months.
• 11:41
  Speaker 0: Exactly, so a fund that modeled a three million dollar follow-on check suddenly needs fifteen million just to avoid getting washed out at their own winter.
• 11:49
  Speaker 1: Oh man!
• 11:50
  Speaker 1: So the portfolio math collapses.
• 11:52
  Speaker 0: It completely collapses.
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  Speaker 0: GPs are scrambling to spin up complex SPVs or execute crossfund investments Just to defend their positions which creates massive structural drag.
• 12:02
  Speaker 0: Yeah.
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  Speaker 0: Meanwhile the capital fleeing that concentration is aggressively pivoting into defense tech, which exploded from one point six billion in twenty-twenty to fourteen points six billion.
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  Speaker 0: In the first five months of twenty twenty-six institutional capital is fleeing software margins for sovereign resilience and hard assets.
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  Speaker 1: Yeah, and to understand the friction in these current valuation models you really have to look at how aggressively investors are reverse engineering their required returns right now.
• 12:31
  Speaker 1: Saw Hill S broke down The Venture Capital Valuation Method highlighting How funds Are Modeling Forward Revenue Multiples To Justify These Toxic Rounds Because
• 12:40
  Speaker 0: It's Entirely Exit Driven Math.
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  Speaker 1: So like if they project six million in earnings at a fifteen PE, They cap the exit at ninety million.
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  Speaker 0: Right and then take their target internal rate of return Yeah And the fund duration Back into exact ownership percentage to hit that hurdle rate.
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  Speaker 1: This is where the dilution treadmill starts spinning out of control.
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  Speaker 1: Oh yeah Because round one requires five percent ownership But when round two requires a thirty percent IRR target and around three requires twenty-five percent, the cumulative required ownership stacks exponentially.
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  Speaker 1: The fund suddenly needs twenty five percent of the company at exit just to return their specific tranche capital.
• 13:29
  Speaker 1: right if the startups valuation doesn't step up perfectly in line with those aggressive forward multiples?
• 13:34
  Speaker 1: The founders are thrown into a toxic dilution spiral where every new check just wipes out.
• 13:39
  Speaker 1: they're remaining equity
• 13:41
  Speaker 0: which brings us to the ultimate principal agent blind spot, as highlighted by Mike
• 13:45
  Speaker 1: S. Oh this is
• 13:46
  Speaker 0: fascinating!
• 13:47
  Speaker 0: You have these venture funds running incredibly punitive valuation models on founders but first-time fund managers are currently in the market making the exact same structural mistakes with their own LPs.
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  Speaker 1: It is brilliant, Irony!
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  Speaker 1: It
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  Speaker 0: really is.
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  Speaker 1: An emerging GP launching a fund is functionally a pre-seed startup asking for institutional capital with no track record.
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  Speaker 0: Exactly and just like a founder prematurely obsessing over there came an holding structure.
• 14:16
  Speaker 0: these emerging managers are over complicating their SPV mechanics management company structures before they have a single dollar of committed capital.
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  Speaker 1: Right, they burn cycles chasing tier one institutional LPs who legally cannot underwrite a first-time fund.
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  Speaker 1: Yes Completely ignoring the family offices and high net worth individuals that actually anchor emerging managers.
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  Speaker 1: They
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  Speaker 0: lack the very traction they demand
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  Speaker 1: from founders.
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  Speaker 1: Exactly So because traditional mega funds are structurally paralyzed by these AI rounds And Emerging GPs are stumbling on their own fun mechanics.
• 14:47
  Speaker 1: Founders are having to bypass Sandhill Road entirely.
• 14:51
  Speaker 1: You can't run a spray-and-pray outreach campaign when the capital is this segmented.
• 14:56
  Speaker 1: The smartest operators are leveraging geo arbitrage and hyper niche capital maps to find cleaner term sheets,
• 15:03
  Speaker 0: right?
• 15:03
  Speaker 0: Because geography and thesis fit are completely converging.
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  Speaker 0: Nick Katz an Alejandro Cremades analyze the maturity of the European ecosystem.
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  Speaker 1: Okay
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  Speaker 0: And you know the legacy strategy was simply to establish a London presence To tap index atomico or seed camp.
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  Speaker 0: But the institutional depth has entirely decentralized now.
• 15:23
  Speaker 0: Yeah,
• 15:24
  Speaker 1: you look at Paris and the ecosystem is commanding massive capital through Eurzeo Kima Serena & Daphne And Berlin has built an ironclad infrastructure with project A HV Atlantic and Cherry.
• 15:36
  Speaker 1: Yes The strategic takeaway here Is that founders are arbitraging these regions.
• 15:41
  Speaker 1: You don't build a target list by city anymore?
• 15:50
  Speaker 0: often means avoiding the three X liquidation preferences demanded by a generalized mega fund operating outside its core thesis.
• 15:57
  Speaker 1: Right, and this hyper segmentation is dictating the US market as well you know?
• 16:01
  Speaker 1: Ksenia Moskolenko provided a really granular mapping of The Florida Ecosystem which has quietly matured into a full-stack capital market.
• 16:11
  Speaker 0: It Really Has.
• 16:12
  Speaker 1: You have Florida funders handling the preceed early proof tranches moving up through Rue Capital in Ocean Azul all the way to ARK investment management scaling, The Later Stages.
• 16:22
  Speaker 0: And this specialization is getting incredibly narrow across-the-board.
• 16:25
  Speaker 0: Yeah!
• 16:26
  Speaker 0: Laura Zunisova highlighted funds where pre-seed isn't just a discovery check it's their entire mandated asset class.
• 16:33
  Speaker 1: Oh right like Zeta.
• 16:35
  Speaker 0: Right zeta Venture Partners is deploying one two five million specifically for AI native BtoB platforms underwriting the tech risk before any commercial traction exists.
• 16:44
  Speaker 0: Wow And Overlook Ventures is deploying highly concentrated checks purely into risk infrastructure, fintech and AI.
• 16:51
  Speaker 1: Tonio Lawson also mapped a critical segment profiling eight black lead venture firms deploying capital from pre-seed through Series A. Firms like Impact America Fund Fiat Ventures and Rare Read.
• 17:02
  Speaker 1: Ventures are managing significant institutional capital across fintek healthcare and consumer markets.
• 17:10
  Speaker 0: The liquidity absolutely exists in the market.
• 17:13
  Speaker 1: It does.
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  Speaker 0: It is just retreated into highly guarded thesis-driven silos
• 17:18
  Speaker 1: Exactly, so all of this complex capital mapping the defensive valuation math The structural alignment at the board it all serves one singular mechanism the exit.
• 17:30
  Speaker 1: and to close out This deep dive we have to examine an absolute masterclass in postfunding execution from a team that actually survived the gauntlet.
• 17:37
  Speaker 0: Yeah, Malad Aloukozai detailed the operational history of the Afghan brothers who originally built webs.com from a dorm room
• 17:45
  Speaker 1: right
• 17:45
  Speaker 0: and they exited to Vista print for one hundred and seventeen point five million dollars
• 17:50
  Speaker 1: which is incredible!
• 17:51
  Speaker 0: And in The Venture Ecosystem A nine-figure exit Is usually the terminal event For a founder.
• 17:56
  Speaker 1: yeah you take the liquidity buy an island and transition into angel industry
• 18:00
  Speaker 0: Exactly, but instead they took every operational scar from that first run raised institutional capital from Excel Bessemer and Y Combinator And built true bill.
• 18:10
  Speaker 0: Yeah!
• 18:11
  Speaker 0: They just executed a one point two seven five billion dollar sale to rocket companies
• 18:16
  Speaker 1: A literal ten X scale up on their second enterprise.
• 18:20
  Speaker 0: It's wild...and the execution playbook they utilized is required reading for any M&A or strategy professional.
• 18:27
  Speaker 1: Absolutely
• 18:27
  Speaker 0: it starts with the rejection of the standard minimum viable product.
• 18:30
  Speaker 0: They engineered what Haroon termed a minimum lovable product
• 18:34
  Speaker 1: and the mechanical difference there is crucial, right?
• 18:37
  Speaker 1: Yeah MVP often means shipping broken features just to test engagement.
• 18:41
  Speaker 1: But their MLP did exactly one thing It exposed your hidden subscriptions but the UX was so flawless that it validated the acute consumer pain point
• 18:51
  Speaker 0: Instantly.
• 18:52
  Speaker 0: Locking in retention from day one?
• 18:54
  Speaker 1: Exactly, From there they applied a ruthless cack to LTV framework
• 18:58
  Speaker 0: But the didn't isolate it into marketing department.
• 19:00
  Speaker 0: No
• 19:00
  Speaker 1: Customer acquisition cost-to lifetime value became their singular operational lens for entire company.
• 19:06
  Speaker 1: They applied it to engineering hires To product feature development To geographic expansion If deployment of dollar yielded more than dollar and enterprise value They scaled this spend infinitely.
• 19:19
  Speaker 0: The discipline wasn't about minimizing burn.
• 19:22
  Speaker 0: It was about maintaining absolute capital efficiency while scaling the deployment velocity.
• 19:28
  Speaker 0: Crucially
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  Speaker 1: though, they actively overrode their own founder intuition when the telemetry dictated otherwise.
• 19:34
  Speaker 1: This
• 19:34
  Speaker 0: is the best part.
• 19:35
  Speaker 1: Yeah Haroon Was philosophically opposed to charging a subscription fee for an application whose entire value proposition was canceling subscriptions Because
• 19:44
  Speaker 0: it felt inherently contradictory.
• 19:46
  Speaker 1: Right But his growth team ran the pricing test without his explicit approval.
• 19:52
  Speaker 0: I love that!
• 19:52
  Speaker 1: The revenue metrics exploded, user churn didn't spike and he immediately tripled down on this strategy.
• 19:58
  Speaker 0: It's a realization that founder intuition gets you first.
• 20:01
  Speaker 0: eighty percent of way there Yeah But hard data dictates final twenty percent scale
• 20:06
  Speaker 1: Which brings us to mechanics for actual billion dollar exit.
• 20:10
  Speaker 1: Haroon operates in very specific M&A rule.
• 20:14
  Speaker 1: Don't consider an acquisition real until the CEO is personally involved and never throughout the first price.
• 20:19
  Speaker 1: Never!
• 20:20
  Speaker 1: A negotiation whoever anchors the price instantly establishes the ceiling for the asset
• 20:25
  Speaker 0: Is a ruthless, highly leveraged negotiations stance.
• 20:29
  Speaker 0: It really
• 20:29
  Speaker 1: is.
• 20:29
  Speaker 0: You're forcing the acquirers corporate development team to fully price The strategic value of the asset rather than letting them negotiate down from your aspirational floor.
• 20:39
  Speaker 1: And it leaves me with this final thought everyone listening.
• 20:42
  Speaker 1: We operate in this hyper-professionalized M&A landscape where every deal is endlessly modeled, optimized and de-risked by advisory teams.
• 20:51
  Speaker 1: But are too many founders outsourcing these critical final negotiations to their bankers and intermediaries?
• 20:57
  Speaker 1: That's
• 20:57
  Speaker 0: a great question!
• 20:58
  Speaker 1: Haroon's rule proves that the ultimate leverage in a billion dollar liquidity event isn't found on discounted cash flow spreadsheet.
• 21:06
  Speaker 1: It's the founder demanding the buyer CEO across-the-table holding the line and forcing market to fully price.
• 21:26
  Speaker 0: Thanks
• 21:27
  Speaker 1: for joining us on this deep dive.
• 21:28
  Speaker 1: Don't forget to subscribe and we'll see you next time!