👋🏾 Hi friends!

Well time certainly flies when you’re having… fun?

It’s definitely been a tough year, and a lot of of founders I speak to are out there trying to keep things afloat. Alongside trying to raise capital in August (which is a tough time to raise), they’re otherwise grinding away trying to get their business to where it is breaking out rather than breaking down.

But that doesn’t mean we shouldn’t all take a beat and get some down time to recharge and reflect. I did just that this weekend, for precisely 28 hours - just me, myself and I. Along with my books and my journal.

I got through 3.5 books on my self imposed retreat and came out of it feeling calmer, more focused and ready to get back to business.

But I understand that it may be tough for you to make that time for yourself, especially if you feel as though you’re putting out fires every time you turn around.

So whether it’s for one day or one minute, I hope you get a chance to bring yourself back to that feeling you had when you first started - anticipation, excitement and drive.

In the meantime, read on to see how Uber managed to make a dog biting a man news, my advice to a founder struggling with their cap table and a deep dive into KPIs and metrics. All of that is followed by a slightly more sober look at what’s happening in venture in this week’s Lowdown.

Remember, if you have any feedback or if there’s something you’re desperate to see me include, just reply to this mail or ping me online - I’m very open to conversations.

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With that said, let’s get into it.

Dog Bites Man

This is an old journalistic aphorism about the fact that only things that run contrary to our expectations become news.

The full quote goes:

Well, it used to be that businesses - at least those that had listed on one of the worlds great stock exchanges - were expected to be profitable. News would break on any large misses on their estimates, whether positive or negative, and share prices would swing on the back of them.

One ride hailing business has finally made “Dog Bites Man” news by reporting its first quarterly profit in, well, ever.

$326m in operating profit to be precise.

But rather than this milestone being a cause for celebration, their share price actually dipped due to missing their revenue target for the quarter.

If I were Uber, I’d take the W though.

How can did I add value?

This week I had a similar experience with another preseed founder who reached out for some assistance.

Having raised an earlier round, they were now using a platform product to raise their next. But they were concerned about whether their share price was correct and they were also fretting about their model and whether they had built in enough scenarios.

They wanted to get a CFO in to kick the tyres on it all and make sure it was all as it should be.

For further context this is a pre revenue business raising an angel round.

And this conversation is no different from dozens I have had with various founders over the years.

And my advice has not varied. Ever. So here’s what I’d always say:

Your cap table is too important, and your equity too valuable to not get it right.

The great thing about platforms is that they take a lot of the pain out of raising a round, but unless you have really understood your previous and current fundraising documents (dox) you can run into a lot of trouble.

So I always recommend that founders spend a bit of money on a good lawyer that understands how financing contracts work and make sure it’s all clear so that you can enter into rounds with your eyes open.

The reality is that a fundraise is less about the numbers than it is around the legal dox surrounding those numbers. So whilst CFOs can certainly help, it’s better to hand over the dox to the people who can professionally draft them up.

At pre-seed and pre-revenue your model is less of an investment tool than it is a representation of your assumptions expressed as numbers

As a founders, you shouldn’t be spending any significant amount of cash on getting a financial model built at this stage of your business.

My advice is always to find a friendly advisor (or better still, an existing investor) who can kick the tryres, feed back on any issues and help you get it into a good state.

(I also believe any investor interrogating a financial model at pre-seed in any detail either hasn’t invested at pre-seed before or is trying to look like they are some form of business guru).

On this particular occasion, I advised that the founder send me the model so I could stress test it a bit as a favour. I let them know that if I thought there was something seriously amiss or in need of a proper change, we could discuss the value of making changes and go from there.

I have said it before, and I’ll say it again:

• Pre-Seed / Pre-Revenue - Use a financially savvy investor / advisor.

• Post-Seed / Pre-Revenue - Fractional CFO ~0.5 - 1 day / week.

• Post-Seed / Post Revenue - Fractional CFO ~1 - 1.5 days / week

• Series A / Pre-Series B - Fractional CFO 2 days / week

• Series B+ - Full time CFO

And at all stages you should be scaling your operational finance team appropriately so that you can really use your fractional CFO for the strategic work they do best.

I’m always happy to tell founders what they need to know, rather than what’s most expedient to me. So, if you’re a founder and just want a quick chat to get a bit of a steer, feel free to reply to this mail 😊