The No Cap Newsletter (004)
A bi-weekly newsletter ran by the RippleX Fellowship, covering key program learnings, industry news, and fellow spotlights. Authored by Turja Chowdhury (Cohort #9).
Welcome to Edition 004 of the No Cap Newsletter! We’ll cover industry news, key program learnings, and of course, spotlight a RippleX Fellow doing awesome things!
🚨 RIPPLEX FELLOWSHIP WINTER 2022 RECRUITMENT 🚨
The RippleX Fellowship program is now recruiting for the Winter 2022 cohort. Join our community of fellow founders and aspiring venture capitalists, learning about the intricacies of company building and venture capital through hands-on workshops and discussions.
Applications are due December 10th at 5 PM EST.
🤝 Understanding Deal Structures
Venture capital revolves around deals between startups and investors. The agreement that is made provides both parties to benefit, whether that means to receive funding or support a startup’s growth. Deal structures can vary case by case, but it’s important to recognize the difference and the one best suited for the situation.
Here are the typical types of deal structures in VC:
The sale of a company’s shares where founders sell their equity to investors in exchange for capital. Unlike debt, the founders would not “owe” the investors their money back (unless they sell in an unideal outcome, but we’ll get to that in the next edition).
Pro: Reputable investors give the company credibility through being on the cap table and the founders get experience with corporate governance (i.e. boards).
Con: Equity rounds are expensive to execute from a legal perspective, take more time, and you could run the risk of pricing the company wrong (over/underpricing) that sets a bad precedent for the next round of funding.
Simple Agreement for Future Equity (SAFE)
The investor puts cash in a company, but gets company stock (equity) at a later date, in connection with a specific event. A SAFE is not a debt instrument but is intended to be an alternative to convertible notes that is beneficial for both companies and investors.
Pro: Get the money quickly and worry about how you’re going to get to the next round of financing.
Con: Not a loan. For investors, once you invest, it all depends on the next round to converting into equity.
Short-term debt that converts into equity, typically in conjunction with a future financing round. Instead of a return in the form of principal plus interest, the investor would receive equity in the company.
Pro: For investors, you get downside protection as it is a debt instrument, usually has an interest rate, and you sit at the top of the liquidation stack (i.e. if the company sells, you get your money back first before everyone else).
Con: The valuation cap and discount can complicate future equity raises by anchoring price expectations.
Let’s Dive into the Industry
💸Big Baller Funding
Formstack - The no-code industry has seen a $2.5 billion growth between 2020-21 and aims to have projected revenue of $21 billion by 2022. As it empowers people to build tools to automate and ease work, it’s without a doubt a hot trend. Formstack, the no-code workflow automation, and productivity platform fits right into this category. It’s raised $425 million led Silversmith Capital Partners and PSG to help non-tech users to streamline and digitize business processes. Read more.
OTA Insight: The pandemic has greatly impacted the travel and tourism industry, however, OTA Insight is bullish on it’s on its bounce back to pre-covid times. The cloud-based data intelligence platform provides data and analytics tools to strengthen the hospital industry. It’s recently raised $80 million in Series B led by Spectrum Equity to continue building out business intelligence tools tailored to this industry. Read more.
CatalyzeX: The demand for Machine Learning models has spiked over the years as their applications and benefits are undoubtedly relevant in nearly all aspects of technology. However, developers often struggle to find the appropriate model best suited for their respected situation. CatalyzeX provides a new solution to search various models, provide example use cases, and direct users’ to the implementation code. The startup has raised $1.64 million in Seed funding. Read more.
💡 Fellow Spotlight
Imagine it’s late Friday night and you’re craving a bag of chips from the convince store down the street. Rather than taking a step out the front door, imagine the bag of chips and your favorite items delivered to you at a moment’s notice.
We’re excited to introduce Adipt Gupta: Co-founder and CEO of Lula from Cohort #6. Lula modernizes and enables convenience stores to shift digitally and deliver locally. From inventory to delivery management, Lula empowers local convenience stores to access a new stream of revenue despite limited resources.
By syncing to all popular delivery platforms, they provide the optimized delivery solution for both mom-and-pop shops and large chains. Oh can’t forget - they’ve recently partnered up with Uber Eats to enable on-demand delivery for customers by providing a digital listing of all the best items you’d be looking for.
The Philadelphia-based startup has received funding from SOSV, Plug and Play Ventures, and many others. As Adit continues to disrupt the delivery space, he’s been recognized as one of Philadephia’s Inno Under 25!
Interested to learn more? Check out this article from Yahoo Finance.
Interested in being featured? Looking to share exciting news? Please reach out to Dominic at email@example.com.
Authored by Turja Chowdhury (Cohort #9).