UpsideDown VC User Manual v2.0
We’ve undergone some <small-ish> changes in terms of how we operate and we’d like to use this manual to be as transparent as possible in terms of our working style. Hopefully this manual will help us engage better. Inspired by Zach Coelius’s User Manual.
Communication
We treat warm decks the same as cold decks. The best way to submit your information is on our application system. Once you answer the questions on the portal, it goes into the “screening” tab of our operating system. Expect the following wait times for the following stages:
7-10 days for initial review
Scheduled first call as soon as possible after that
5-7 days for either rejection, follow up, or offer
Due diligence: depends on how quick you provide the information to Stepex (our partners)
Sign documents, wire money and add to Slack channel.
Currently, the way we reach founders is I (Jon) Linkedin DM you to let you know the status of the next stage while we polish up our email automation systems. So do make sure to check up your Linkedin regularly.
During calls, we’ll generally ask you about things we noticed on either the deck/website/demo that we found interesting. We expect you to know everything about your business, and as much as possible about your industry. If not we deem it to be a yellow flag.
If we reject you, we will generally tell you the areas you could’ve improved on. Do not take this personally- this is only to help you get better as a founder. You can choose to completely ignore our advice (and sometimes you may be correct in ignoring our advice) but if multiple investors end up telling you the same thing that we did, you might have to start thinking about some changes or pivots.
It is important to note that we are temporarily pausing investing until the autumn, but if you are willing to be patient until that time, we can issue a “soft offer” for investment that you can take to build up momentum for yourself.
Investing
We invest Friends and Family/Pre-Seed and Seed. With our first 7 investments, we used strictly our hybrid debt-equity instrument (the CFEA) but from now on, we will be offering both straight equity tickets in addition to our state of the art CFEA.
To recap, here is how a CFEA works:
Initial capital is given as a “founder loan,” of which a founder only starts paying back when his/her income exceeds £2500 a month.
In the process, a founder buys back his/her potential equity, up to 100%
If the founder raises a round in excess of £700K, unpaid debt converts to equity automatically.
Which instrument we choose to invest with comes down to your startup stage, what you are building, and the long term ceiling of what you are building. Generally speaking, CFEAs are for Friends and Family Round founders and Pure Equity tickets are for Seed Round founders. With “Pre-Seed” founders (first institutional round) it depends on where we project what you are building, as well as what you’d prefer to receive. A potential unicorn gets a SAFE note. A CPG with a lower ceiling (but still a clear path to revenue generation) gets a CFEA.
Here is our minimum criteria for each stage. Notice when we say “minimum”- hitting these points does not automatically guarantee a cheque from us. But it does save you the embarrassment of an automatic rejection. Anyhoo:
Friends and Family/Pre-Seed:
UK HQ’d
SaaS and Consumer Goods
Capital Efficient
A validated idea, with tangible evidence of initial demand
Pre orders > Phone numbers > Emails
A realistic path to a minimum £50M exit
An idea that’s not a “tarpit.” Examples:
An individual earning potential of at least £30K per year (by which we will validate via Stepex through the usage of resumes and skillset analysis)
Seed:
UK HQ’d
SaaS and Consumer Goods
Capital Efficient
Working prototype/MVP/proof of concept
A realistic path to a minimum £50M exit
We also follow on <at a discount> for founders who have successfully gone from Friends and Family round to Seed.
Regardless of stage, we’re happy to be first cheque investors. We will never lead rounds though, but we’re happy to try to make intros to potential leads if you need.
Misc:
If you are trying to build a product where the main moat is technical, and you yourself are not technical, you’re not putting yourself in a good position because you become far too reliant on your team to produce anything tangible. Having a non-technical main founder only really works when the moat isn’t technical.
How we provide value
Currently, with a smaller portfolio we give each one of them a decent amount of access to our time- we’re generally all reachable via IM and we try to help wherever we can (such as introductions, strategy sessions, and feedback on product and deck).
We still plan to do those things with the next fund, but support will be much more structured and limited in scope due to the sheer number of portcos we’ll be tacking on. It’ll probably look something like this:
Founder enters request for help in the community platform
Either one of the partners or a future head of community coordinates the help in due course
Anything time-consuming most likely won’t get done (but we’ll point to resources).
We will also have a dedicated portfolio Calendly that founders can use to book calls with us on a first come, first serve basis.
How we track your progress
Currently, we do a half hour call with each portfolio company every month, where you get a chance to tell us your highs, lows, and asks for help. With the next fund, we will switch to a much more streamlined approach. Each founder fills a monthly questionnaire with similar types of questions (highs, lows, this month’s MRR, asks for help, etc.) and the answers get uploaded and fed into our operating system.
Relationship to the Ecosystem
We’re happy to get coffees with people who:
Believe in our mission and want to invest in us
Believe in our mission and find some mutual synergies with us (dealflow, podcasting, event collaboration, community)
Anyone who likes us as individuals
Personal
Myself, Sam and George like to imagine ourselves as easygoing, approachable, and straightforward people. None of us are perfect, however, so do provide us feedback if there’s any way we can be doing better.
Links
Request a deck by emailing info@upsidedown.vc