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If you do the maths how investing in a company plays out, with a 1m investment from a 100m fund into a startup with a valuation of 10m, if sold for 1bn, will probably give the investor a ~50x return (depending on dilution) which is only 50m. That’s not even enough to pay back the fund. This is why investors have to model every investment and be convinced that very large outcomes are possible and the valuations investors are willing to invest at, usually reflect the calculation they make.

7percent Ventures was founded to seek out the most ambitious founding teams who want to transform markets and ultimately change the way the world works, for the better. We’re mostly venture, part capital.As you can read here that 7percent is ex-founder led. We’ve been where the founders who pitch us have: starting a company, raising money, failed, succeeded, done the hard graft. As founders we’ve knocked on hundreds of doors to get investment and as fund managers we’ve done the same to raise our VC fund.

At 7percent founders are our customers. We have a no-nonsense communication style, opting for openness over optionality and do our best to empathise with the founder’s perspective.

We’ll tell you bluntly what we think and why we will or won’t invest, because that is what we wanted as founders.

We also add value via a highly curated adviser network 7EVN and our team’s own entrepreneurial experience to lean on.

We at least attempt to reply to every inbound, though as a small four person team with over 2,500 inbound decks every year, we’ve sometimes been slower than we would like.

Finally, we’re not afraid to take big leaps into the future. In fact, that is what we care about. A stepchange in capability or a fundamental shift in the way a market works. If you can’t explain why you’re 10x better in some way and can win, we’re the wrong VC.

The number seven is a lucky number in a number of cultures.

Rate of growth differentiates startups from other types of business and the 7% number represents a week on week growth rate which usually means your startup is doing something right. 

The growth KPI, your ‘north star metric’ should be one of revenue or a proxy for revenue, some other metric which will define future value in the business; e.g. user base. Each company is different.

You’ll need to be doing 7% WoW (or around 30% MoM) growth of your north star metric consistenly for 6+ months, to raise a great Series-A. This is almost universally the case, but there are always exceptions of course.

Deeptech companies don’t have a growth rate like that early on, because they are usually pre-product and sometimes still building the technology even at Series-A. That’s fine. But once you launch a product into market, we’d want to see that aggressive growth. 

We believe rate of growth defines a startup over a more traditional business. Paul Graham, Founder of Y-Combinator wrote at length about startup growth here which echoes our thinking as well as anyone.

It is also said there are seven fundamental types of catastrophe – and we’d like to help you avoid catastrophes.

Yes. $250k-$2m tickets (as well as angel cheques), as early stage as possible.

Driving the business toward a key “north-star metric” enables an early stage startup to avoid distraction and clearly track the impact of iteration, product optimization and success or failure of product/market fit.

Too often we hear founders say “we’re focused on” and then list three or even five things. That’s not focus.

Failure to focus means distraction by lots of things which will keep you and your team busy, they might even be genuinely important, but with limited cash runway (and thus limited time) every hour counts towards demonstrating, through an aggressive growth rate with a curve up and to the right, that you’re solving a painful problem for a someone in a great way and have found a scalable way to go to market, even if initially in a specific vertical, segment or territory, of your SOM.

As with all rules there are exceptions. For deep-tech startups or startups who are pre-product, week on week growth may not be an appropriate measure, but the need focus and urgency remains, to drive the business to the next key inflection point of technical development, which will enable you to go back to market and raise your next round, to accelerate faster still.

The most appropriate north-star metric may change over time and can be different for each business. For example, a marketplace startup might begin by focusing on inventory growth, before switching to transactions (thus customer growth) before moving on to GMV (growth and retention).

Other types of startup may from day one be able to use week on week or month on month revenue growth, which is ideal.

Other metrics are still important (in our marketplace example they could include liquidity or LTV:CAC) but early on we believe you need to work out what the singular headline target is – and which other metrics feed into moving the dial with that number.

Business decisions should cascade down from that north star metric and your weekly, monthly and quarterly goals should drive that north star metric up. A north star metric is a way to choose what NOT to do, as much as what to do.

Early stage companies should aim for between 5 and 10% week on week growth of your north star metric; ideally revenue but if not revenue it could be user signups for example (if user signups represent the future value in the business from which revenue will be generated). 

5 to 10% week on week is not sustainable forever but should be achievable early on (e.g. your first couple of million in revenue or your first million users). 

Paul Graham, Founder of Y-Combinator, wrote an excellent blog on startup growth we recommend you read.

Why partner with us attempts to answer this question. Any other benefits of working with 7percent?

An invitation to The ICE List tech Founders group:

Co-Founded by 7percent Founding Partner Andrew J Scott in 2009, this is ICE is a not-for-profit tight-knit group of Founders, Investors and key ecosystem players who travel, do away weekends, dinners and off-sites to share knowledge, war stories and build friendships.Access to the other Founders in our portfolio.

We have an email group where you can reach the other 200 portfolio founders and aluni. In 2024 we also hope to bring everyone together into one place for a weekend of shared experiences, discussions, learning and fun.

Introductions to follow on investment via 7EVN and our wider network. Our goal as a Seed investor is to make sure we agree a strategy to get you to your next funding round.

The team has experience in the U.S. aswell as the U.K. This can be critical when you want to expand to the U.S. or have to raise money outside of the U.K. or Europe.

Most decent investment funds have a network of friends, colleagues, trusted suppliers and alumni to call on. 

At 7percent we have gone a step further and brought together seasoned entrepreneurs, specialist and corporate operators who can add value or specific knowledge at the right time in the right way for your startup, via our platform: 7EVN, and we pay them by sharing some of our own management carry (our investment returns).

7EVN Advisors are ex-founders, colleagues and friends who are experts in their field, many from the top startups in the world (Meta, AirBnB, Oculus, etc).You can use this network for introductions, explore joint ventures, gain introductions to customers or even eventual M&A, as well as tangible help when you need it providing advice for specific areas of your business adhoc e.g. data science, SEO, product virality, sales, etcetera.

All these advisors are themselves investors in our fund and incentized by us because we share our own partnership management carry (fund profits) with them. You can pick up the phone or send an email for advice without worrying if they’re going to expect share options or payment. Simple.

We believe in using standard plain English terms, which represent market norms, with nothing onerous. Typical terms:

You can expect to give away 10-30% at each round of investment, depending on how “hot” you are. Early stage rounds are a function of round size. And how much you can raise is a reflection of what the market thinks you can sensibly spend to get to your next major inflection point. How “hot” you are is driven by numerous factors but it manifests as how many termsheets you have – i.e. how many people are competing to invest.

MFN clause - a most favoured nation clause means that if you do a down round or give away better terms after we have invested but before any SAFE or ASA converts, we are able to switch to those better terms. This provides some down round protection.

Co-founder vesting – if not already in place.

An effective board, or agreement to put one in place – one or two people with appropriate experience at early stage is plenty, any more are a distraction.

Regular monthly board meetings – although 7percent do not take board seats and while it might sound bureaucratic, there are very obvious reasons why a monthly check-in with a supportive board is great for your startup and you as a founder(s) to pause and consider whether you’re focused on the right things and delivering to targets. A month is a long time in startup land.

Agree weekly or monthly projections for your north star metric – and a check in call once a quarter in the first 12 months, to see how you’re doing and how we can help.

We recommend that all founders send all investors a brief monthly email update.

Closing fees.

Board seat fees (and we rarely take board seats and when we have we have not charged fees).

Fees paid as cash back or a levy on the money we have invested. Expensive legal fees (we won’t charge any legal fees if the template docs are used, if we negotiate and have to engage counsel then we’ll pass on our fees at cost).

Pre-emption rights – preventing you from raising from someone else.Equity control of your business – we take a minority stake.

Board control – we don’t take board seats.

We don’t usually invest outside of UK, Europe or the United States.

Founder(s) must still be working full time in the business and have control of the business.

Any university, inventor, or silent owner must have a small, minority stake. This will vary, but should usually be 10% or less, unless the person invested real cash.

Univerisity spin outs should have no onerous terms in perpetuity hanging over the business or revenue line. If working in partnership with a research group at the University, the startup should have first right of refusal at a pre-agree cost, to take any future IP related to the core IP into the business on an exclusive basis.

IP should be fully owned by the business or in the process of being transferred into the business in full.

The usual good standing of the founders and the business, with no pending legal disputes or red flags with KYC or AML.

The money invested up until 2018 was private money generated by the entrepreneurs who are partners in the fund. Since 2018 we have some of the best LP (Limited Partner) investors in the industry, from institutional investors like Atomic, British Business Bank and Molten Ventures, to HNWs and experienced founders such as Taavet Hinkrus (WISE) and Karel Obluk (AVG).

We are our own investment committee. All partners contribute opinions during our weekly IC (Investment Committee) but the team are able to recommend making an investment without consensus. We believe this helps us avoid the perils of group-think.

We keep operational costs low and do not operate as a traditional VC having large fancy offices. In this respect we operate more like angels investors. 7percent team success is aligned with our own investors success. For example, our fee load across the 10 year lifecycle of Fund 2 is just 15% and we recycle those fees (meaning we recycle profit into new investments).

Taking Fund 2 as an example, we pay back our investors in full before we take any profit ourselves. As is typical for a VC fund, the waterfall looks like this:

1. Limited Partners (investors in the fund) receive all their money back

2. Recycle fees (profits are invested into startups up to the fee load, if within the investment period)

3. Further profits (shared between investors and 7percent with 20% going to the team and our 7EVN advisor network and the rest to LPs)

Yes, if your startup is performing we sometimes invest via an SPV (special purpose vehicle) to take up our pro-rata. But we don’t lead future rounds. We believe you should take stage-appropriate funding, meaning take Pre/Seed money from a Pre/Seed fund, not a Series-A fund, because if then that fund does not lead your Series-A round, other investors will wonder why, making it harder for you to raise.In 2024 we expect to have an opportunity fund to take up our pro-rata in our portfolio.

If you have a round led by a new VC we’ll follow-on.

In other scenarios, where there is no clear next round lead investor (for example a bridge round) we’ll always be transparent with you about whether we think your startup growth is tracking appropriately. We’ll also try and help you solve problems and remove blockers to your success, along the way, if it is not.

We recognise that an investor simply saying you need more traction as feedback on the likelihood of investment (or a follow-on investment) is unhelpful.  Whenever possible we’ll give you specific metrics that mean we’ll be able to re-invest and articulate to you what we believe success looks like and what we believe the rest of the investor market will respond positively to.

The follow-on rate can be a contentious issue for both funds and startups. The hard truth is that if your startup is making decent progress we’ll reinvest. If your startup is tanking/failing, we probably won’t – but then neither is anyone else likely to.

We believe you should only try and raise money when you can and we’ll very happily help you formulate a strategy to make that possible. 

Throughout, we will be honest with you every step of the way about how we feel you’re doing and help you however we can to resolve any problems along the way. We’ve been founders ourselves and all raised money, so we know what it feels like to be in your shoes.

Yes. We’ve led or co-led around 15% since 2020.

Please make sure you understand the size, stage and type of investments we do. If your vision does not involve changing the world for the better, we’re not the firm for you.

Your deck must include:

1. A vision which describes the impact you want to have on the world and what problem you solve.

2. How you solve this problem and why your solution is 10x better.

3. Reasons why you and your team have an unfair advantage over others, to deliver on this vision.

4. If you’re in-market include your current week on week growth rate (or equivalents) for your north star metric. If not, your progress to-date developing your technology.

5. A breakdown of the market size and your initial bridgehead target market size and description.

6. A narrative about how you go from where you are today, to world domination: your go to market strategy.

7. An articulation why your startup will be a multi-$bn company and why others who do this or something similar, will lose.

It’s not mandatory but if possible get a personal introduction to one of our partners; this is a people business and a good recommendation from someone we respect, goes a long way.We try to reply to every enquiry, provided it fits our stage and thesis. If you send us a Series-A pitch for yet another marketplace, app or SaaS product of which there are hundreds doing the same thing already, don’t expect a reply.