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Startup Reading List - Zuckerberg on Unity, Investment Memos, Fintech Partnerships, and Improving VC Pitches

Welcome to this week's Startup Digest Reading List featuring stories I found interesting on technolog
Issue #122  •  September 15  •  View online  •  Suggest a link
Startup Reading List
Startup Reading List
A weekly curated newsletter on startups and technology.
Welcome to this week’s Startup Digest Reading List featuring stories I found interesting on technology, venture capital, and fintech.
This past week, San Francisco felt like a scene out of Bladerunner 2049. Hope everyone is staying safe out there with the pandemic, the fires, the smoke, and whatever else is in store.
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Written by Chris McCann, General Partner @ Race Capital, former Greylock Partners. More about me
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Mark Zuckerberg on Acquiring Unity
The memo lays out the justification on why the VR/AR space is so strategic to Facebook, the different parts of the VR/AR ecosystem, which of those ecosystem parts would have the most strategic long term advantage, and finally how Unity fits into the whole ecosystem.
Even though the acquisition never ultimately happened, it’s a fascinating read from Mark Zuckerberg directly on how he viewed the VR/AR space at the time of writing. Thanks to Sriram Krishnan for finding and hosting this memo.
Open Investment Memos
Venture capital partners put together investment memos during the deal making process before they invest in a new startup. These memos are typically highly secretive and never shared outside of the partnerships.
Bessemer Venture Partners made public some of their old memos including memos on Shopify, Twitch, Pinterest, Sendgrid, etc. An example of one is the investment memo for Twilio.
The memo details Twilio’s seed round extension of $800K where the company was doing $20K of MRR 9 months after launch. The original seed round was done at a $3.5M cap and the seed extension they participated in was on a $8.5M cap.
Really cool to see this kind of info publicly shared.
Limitations In Fintech's Partnership Model
In the fintech sector, it is typical for both infrastructure & applications to partner with underlying partner banks to facilitate checking accounts, transfers, card issuances, etc. Some of the most prolific partners of fintech companies are banks you have never heard of before including: Evolve Bank and Trust, The BankCorp, SuttonBank, etc. 
Ian Kar from Fintech Today, in his most recent posts, details out some of the limitations these partnership models bring to bear. This includes: 

  • Revenue rate split between all of the partners (underlying bank, infrastructure partner, end clients) 
  • Overall pricing model - Typically the underlying bank charges the infrastructure partner a fee and the partner charges fees to the end clients. These can be quite costly and typically increase with each additional KYC’d customer. 
  • Platform Lock In - The infrastructure API partners need to comply fully to their underlying bank partners and are constrained by what their bank can do. 
  • Clear early adopting customer segment - The embedded fintech model is still early and customers outside the fintech space are difficult to acquire. 
If you’re a founder working in this early fintech infrastructure space, I’d love to hear from you. Send me a note at chris@race.capital 
Tactical tips for telling your startups story in an investment pitch
Alex Cohen shares some great practical and tactical tips about crafting your startup’s story as you craft your first investment pitch.
The first pitch is always the most nerve racking but typically every story all boils down to these key elements: 
  • Problem
  • Solution
  • Product
  • Traction
  • Team
  • Vision (what this company will become if it wins) 
We do pre-seed investments at Race Capital so I’m always happy to look at very early or even first pitches. Happy to share real feedback as well > chris@race.capital
This Startup Digest Reading List goes out to a wide membership base of founders, technologists, investors, and operators. Feel free to share with others, sign up here: https://startups.startupdigest.com/
Techstars Startup Digest Startup Reading List is curated by:
Chris McCann Chris McCann - General Partner @ Race Capital, former Greylock Partners
chris@startupdigest.com
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