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Preference stacks in venture capital
Structure can be more important than $ raised
Happy Tuesday Brex community,
In the venture funding journey, founders must astutely prioritize understanding preference stacks. These terms, dictating the order and scale of investor payouts upon exit, are fundamental to your startup's financial trajectory, transcending mere contractual details.
Before any funding round, a nuanced grasp of preference stacks is indispensable. Opting between a "1x preference" — investors reclaiming their initial outlay first — and a "2x preference" — doubling their investment on exit — carries significant implications for the allocation of residual profits. Consider a $200M exit with a $50M investment: under a "1x preference," investors retrieve $50M upfront, while a "2x preference" escalates this to $100M, profoundly impacting how the rest is divided among founders and employees.
For founders, these terms require strategic foresight in negotiation. The deal's structure often overshadows the sheer amount raised, influencing your startup's long-term prospects.
Speaking of VC funding, if you just closed a VC round and interested in becoming a new Brex client, we have an offer of $1K cash back if you sign up by month end, email [email protected]
Growing together, Michael Morgenstern
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Startup of the Week 🤩
Ethan Ding, Co-founder & CEO TextQL
TextQL is building ChatGPT for the data warehouse, bringing the cost of every data driven operation to zero.
They're doing this by integrating across existing data catalogs, business intelligence tools, semantic layers, and warehouses under a unified semantic ontology. This ontology enables business operators to make complex data decisions w/o code - and execute the actions via workflow automation. Ethan and them hope to create a new paradigm that enables every single human on the planet to be able to carry out data driven operations as intuitively as sending an email.
Ambassador’s perspective: Every single problem is a data problem, yet businesses of all sizes still rely on technical staff to interpret, organize, and manage data. TextQL is growing rapidly because they bring autonomy to data science and simplify complex for business users. A seed stage business, with solutions in market for 6 separate industries, speaks to their pending scale.
Emerging Manager Spotlight 🤩
Zoe Weinberg Founder & Managing Partner @ ex/ante
ex/ante is an early-stage venture focused on agentic technology: tools that support human agency and user control over privacy, data, assets, and information. The fund invests in pre-seed and seed-stage companies spanning data infrastructure, cybersecurity, AI/ML, decentralization & web3, and information integrity.
ex/ante is headed by Zoe Weinberg (ex-Goldman, Google, World Bank, National Security Commission on Artificial Intelligence) and Michael Mosier (ex-Espresso Systems, Chainalysis, former acting director of FinCEN, OFAC, DOJ). ex/ante was incubated within Eric Schmidt's family office, which anchored the fund alongside Protocol Labs, with participation from Union Square Ventures, Ford Foundation, Cendana, Marc Andreessen & Chris Dixon (a16z), Fred Wilson & Brad Burnham (USV), Kirsten Green (Forerunner), and others.
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1/ 6 key takeaways & 📊s on the expanding emerging manager landscape from @StepStoneVC's recent report: Venture capital: Shedding the "access class" label. 👇
Read the full report here:
#VC#EmergingManagers
— OpenLP (@Open_LP)
6:13 PM • Feb 5, 2024
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