Deal Abstract
Arlan Hamilton is using her venture investing experience to spin up her own fractional operations outsourcing firm.
Financials (VRB)
| Question | Notes |
|---|---|
| 1. Fundraising Target? | $5000000 |
| 2. Fundraised So Far? | $219078 |
| 3. Pre-Money Valuation? | $25000000 |
| 4. Previous Year's Annual Revenue | $39176 |
| 5. Previous Year's Annual Net Income (+ Profitable, - Burning Cash) | ~$-419617 |
The 6 Calacanis Characteristics ("Sow Passion, Not easy mediocrity", or S2 P6 N18)
| Criteria | Yes/No |
|---|---|
| 1. A startup that is based in SV? | False: Los Angeles, CA |
| 2. Has at least 2 founders? | False: Two |
| 3. Has product in the market? | True: Revenue generating |
| 4. 6 months of continuous user growth or 6 months of revenue? | True: Generating revenue, $39k*4=$156k booked in 2021 in 4 months. |
| 5. Notable investors? | True: Precursor and Backstage |
| 6. Post-funding, will have 18 months of runway? | True: Needs about $600k |
The 7 Thiel Questions (Every Time Man Profits, Don't Dismiss Serendipity)
| Question | Score | Notes |
|---|---|---|
| 1. Engineering? | 2 | Not much of an engineering innovation so much as a qualified pipeline of talent |
| 2. Timing? | 3 | Pretty good timing with ops talent being laid off |
| 3. Monopoly? | 1 | Very small percentage of small market, lots to grow |
| 4. People? | 2 | Right person, but my concern is that right now it's just one person who is also running a fund |
| 5. Distribution? | 3 | Has good distribution through the companies that Backstage is funding |
| 6. Durability? | 2 | Not sure why another firm couldn't do this |
| 7. Secret? | 2 | Backstage's combination of W2 perks, access to customer pipeline, and the timing of layoffs means this is demand for ops talent is going to grow at a venture speed |
What has to go right for the startup to return money on investment:
1. Demand for fractional ops people goes venture speed; 2. High need for customers and runners to find new clients (like Airbnb); 3. Business grows to $1bn off of fractional ops people alone
What the Risks Are
1. Take rate not very high and only off one-time transactions; 2. Where is the stickiness of the product; 3. Is this a main company or a side project?
Bonus Muhan's Notes
The more I read about Arlan, the more I realize there's more material I need to review to understand her story. This includes her book 'It's About Damn Time', and her season on 'Startup' the podcast.
Updates
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Review these deal memos every time the startup raises a new round
Test if original thesis still applies
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So, did I invest?
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