Weekly Roundup: Airline Ideas ✈️

Happy Friday, DVC! In a win for travelers everywhere, this week US regulators ruled that airlines must give automatic cash refunds to passengers on cancelled or delayed flights.

It’s weird though… still no rules on what happens when they run out of Biscoff cookies or when the doors fall off mid-flight 🧐

Startup Discussion & Weekly Poll:

If you’ve browsed any of the RegCF platforms this week or have tried to maintain Inbox Zero™️, you’ve probably seen the flood of notifications that many startups are closing their funding rounds soon on April 29, 2024.

Contrary to popular belief, no, this has nothing to do with the Mayan calendar or the phases of the moon… The true answer lies in a far more powerful supernatural force: SEC regulation ⚖️

The Rule (simplified version):

To raise money via RegCF, the SEC regulations state that 1) most companies need to provide 2 full years of financial statements, and 2) companies have 120 days to share the financial statements from their most recently completed fiscal year.

Example: If Startup XYZ’s “fiscal year” ends on December 31, 2023, it has until May 1, 2024 to share its 2023 financials.

How it Looks in Practice:

Let’s say Startup XYZ launched a Community Round on Wefunder in January 2024. If it wants to continue raising money past May 1, 2024, it will have to release its financial statements for 2023.

However… if it shuts down the round on April 29, 2024, it isn’t legally required to publish its updated 2023 financials. Instead, it only has to share its 2021-2022 books.

The Impact:

Now, this might seem a bit sneaky… but it isn’t necessarily a bad thing. After all, a full financial review/audit and refiling forms with the SEC can get expensive. Plus, it’s easy to understand why a company might not want to share its books with the world (competitors included).

As investors, however, it’s important to be aware of this since it can put us at a disadvantage when deciding to invest or pass.

For example: If it’s April 2024 and you’re considering investing in Startup XYZ, the 2021 & 2022 financials provided are now 1+ years out-of-date. Hardly what I’d call an “informed decision”…

What you can do about it:

In DVC we’ve found that you can still get a solid understanding by directly asking a founder about their most recent financials in the Q&A.

The Bad: If the founder dodges the question by saying something like “We’re still sorting out our books from last year”, it’s probably a red flag 🚩 

The Good: However, if the founder says something like “Disclaimer: These aren’t official, but we had $[XXX] in revenue, $[YYY] in costs, $[ZZZ] in profit/loss, and [insert additional context of your choice…]”, it’s probably a good sign they care about providing relevant info to investors.

• Example: KingsCrowd’s Founder Chris Lustrino did an excellent job of this in their current round. But of course, it’s still important to take any unofficial numbers with a grain of salt 🧂 

That’s it for today’s PSA! Vote and share your thoughts in this week’s poll!

Last Week’s Results:

Last week we asked if it was important for founders to engage with the community during a RegCF round… and 57% of you said “Yes - It’s called a community round for a reason!” ✅ 

But, that’s still a pretty divided crowd… the other 43% said it was more nuanced. Here’s a great piece of feedback we received:

Vote for New Deals:

Help select DVC's future deals! Please view the options, upvote your favorites, and suggest your own!

New companies suggested this week:

• Universal Transit

Deal Review #80 Update - Farm to Flame Energy:

In case you missed it, this week we’ve been looking at Farm to Flame Energy - a startup providing medium and large commercial operations with renewable and affordable electricity!