Capital Chronicles #27

Hello there! Welcome to Capital Chronicles, saving you hours every week with ~2-3 minute summarised insights from the best venture builders, investors and capital allocators out there.

As subscriber #TBD, read on for the latest…

🛠️ On venture building…

The startup playbook has evolved in the post-ZIRP, AI-first era (Growth Unhinged): eight new and emerging best practices for breakthrough software startups, in contrast with conventional approaches, include building minimum ‘remarkable’ products, attracting audiences through storytelling, hiring ops to test growth channels, leading with product experiences, focusing on retention and word-of-mouth, leveraging AI for lean operations, unifying go-to-market efforts around target customers, and maintaining capital optionality.

Replace the conventional approach with emerging practices to achieve breakout growth.

🧭 On venture investing…

Categorise the disruption and quantify cost impact to measure a technology moat (Equal Ventures): understanding competitive advantage requires distinguishing between "disruptors" and "enablers" and analyzing how technology alters industry cost structures. For early-stage startups with an undeveloped moat, the concept of "moat trajectory" is crucial. Proving the "first point of moat" becomes a key hypothesis after establishing the business's initial wedge and flywheel, serving as a foundation for future competitive advantage.

Measure the technology impact on industry cost structures to determine the true viability of an economic ‘moat’.

📖 Learning resource…

New logo velocity: the key to fueling companies through the growth plateau (ICONIQ Growth): Many software companies encounter a growth plateau after reaching the ~$20M scale. Exceptional software companies reach $1M ARR and then maintain 10-20% quarterly new logo velocity as they scale towards $10M. By establishing a strong foundation of logos early on, companies are better set up for upsell and cross-sell opportunities as they scale, and the source of new ARR shifts towards the existing customer base.

Use ICONIQ's key question set and detailed report metrics to identify a company's propensity to break through the growth plateau.

📊 Market insight…

Overall venture funding continues early 2024 trends (Carta): preliminary fundraising data indicates median pre-money valuations and cash raised remained relatively steady compared to previous quarters across most funding stages. There's a sense of cautious optimism, particularly with Series C valuations showing positive movement. Round sizes have consolidated, with Series E+ round sizes returned to Q1 levels after a notable spike in Q2. Overall consistency with Q1 and Q2 levels points towards funding environment stability.

Track Carta’s first cut of the venture funding trends for Q3 2024.

🎲Lucky dip essential reads…

• A Software-Driven Autonomy Stack Is Taking Shape

• Personal Effectiveness Strategy. Managing Signal vs. Noise

• BVP’s Roadmap on Healthcare AI

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Josh