Weekly Roundup: Doubling Down 🎲

Happy Friday, DVC! Consumer tech giant Xiaomi just released the newest version of its “CyberDog” - a $3,000 robot dog that “can dance, ride skateboards, and even do backflips”.

I always knew the future would be scary, but I had no idea how demoralizing it would be to see a robotic terrier accomplish all my life goals so easily.

Startup Discussion & Weekly Poll:

Last week we gave an update on our Doriot Venture Club startup portfolio and highlighted The Good, The Bad, and The Ugly Ones We’re Actually Pretty Optimistic On.

Our other investments must have read the newsletter and gotten jealous, because this week we received a flurry of updates that even more are raising new funding rounds from the crowd! (Not financial advice)

• Farm To Flame Energy (Deal #36): Raising at $50M valuation (4.56X increase from $10.5M in 2023)

• KingsCrowd (Deal #3): Raising at a $10M valuation (77% decrease from $45M in 2022/23)

• Equity Multiple (Deal #35): Raising at a $105M valuation (16% increase from $90M in 2023)

• RAD AI (Deal #9): Raising at a $53.84M+ valuation (2.99X increase from $18M in 2022)

To Reinvest, or Not to Reinvest?

As you’ll learn in our Fantasy Startup® simulation, the chance to “double down” on your past investments is one of the best parts of the startup journey (besides an exit!).

But, while it’s exciting to see price action in our DVC portfolio, it’s important to temper expectations with some lessons we’ve learned over time:

1. Higher valuations don’t equal more success:

Valuations in most RegCF deals are set by the companies and (Spoiler Alert) they’re not always based in reality. Investors still have to decide if the new price is fair and has the potential to earn a positive return over time.

2. Conversely, lower valuations aren’t always a “nail in the coffin”:

While the dreaded “down round” can be devastating to previous investors, it can also be a chance for companies to reset expectations, prioritize, and come out stronger. Investors have to decide whether they still believe in the team, idea, mission, and path forward. No one likes a down round, but who doesn’t love an underdog?

3. The “Funding Story” Matters:

Whether you’re backing a medical cure or plowing millions of dollars into a Wi-Fi-connected juicer (RIP Juicero 🪦 ), investing in startups means having faith that some dream can become a reality. But as beautiful as that is, the dream stage can only last so long before a company needs to “put points on the board”.

At each new round, investors should ask themselves whether the company is making real progress in their mission or whether they’ll be “raising money forever”.

DVC’s Framework:

While there’s a ton of nuance in deal analysis, a question we like to ask is: “Is this a Raise of Opportunity? Or, a Raise of Last Resort?”

In a Raise of Opportunity, a company should be able to show significant progress, learnings, and a clear plan to use investor funds to execute on their vision. In these cases, they’re coming from a position of strength.

A Raise of Last Resort is, well, the opposite. It suggests that despite a team’s best efforts, they’re still trying to figure things out and might just be using funds to keep the proverbial lights on.

It’s a tough distinction to make, and arguably there’s a time and place for both. But, it’s a crucial question to ask before committing your hard-earned capital.

Last Week's Results:

Last week we asked you to share how many startups you’ve invested in… and 85% of you said “15+ startups”! Nice to see fellow Diversification Enthusiasts™️ around these parts 👋 

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:

• KingsCrowd, Equity Multiple, Groundfloor

Deal Review #76 Summary:

Over the past 2 weeks we looked at Humanity - a startup building an app to help users live healthier for longer!

Sadly for Humanity (the company, but maybe the whole world too 🤷 ), DVC’s Investing Members collectively decided not to fund an investment in the company’s current Wefunder campaign.

While Humanity boasts impressive unit economics (for acquiring/retaining customers) and health tech is growing, the market is already saturated with competitors like Apple Watch, Oura, and Whoop.

It’s unclear from the company’s campaign how they plan to differentiate or achieve their ambitious 5-year growth plan. And unfortunately, our efforts to 1) host the founders for a live discussion and 2) ask even simple Q&A questions both went unanswered.

Looks like “DVC is out!” on this one!

Thank you for reading & participating! Have a great weekend and see you for a new DVC Deal Review next week!

Sincerely,

Team DVC