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(8) – Finale – Past Track Record and How to Participate?
Continuing from the last post, Reza said that the first startup wasn’t considered a success, as it didn’t meet the initial expectations. They originally thought they could deliver 3-10x returns to early investors, but that didn’t happen, and in the end, they returned the principal back to them, or converted their shares into this new startup if investors indicated interest. Some of his peers who dropped out of Harvard at the same time already built unicorns, and he felt really frustrated during that period. However, if it weren’t for that experience, they wouldn’t have found the market pain points and seed customers for the current venture, and many of the early investors who got their money back reinvested in the current company, so it wasn’t entirely in vain.
He continued, “Even though it didn’t meet expectations, things are still going fine now. The company has been established for a little over 3 years, and our ARR is already at 8.5 million. I’ve been using the profits from the previous company to invest in the current startup, delaying the need for institutional funding. If we took VC money now, we’d lose out on a lot since our valuation is increasing every month.”
I became interested when he mentioned institutional investors and asked, “So, are VCs reaching out to you now?”
He responded, “Of course. With AI, a proven product, and rapid revenue growth, plenty of VCs have approached us. But we’ve been able to delay taking their money for now. Startups generally only have a 24–36 month window to prove they have unicorn potential. My last startup was in a big market, and we reached 8 million ARR in under 4 years. But the AI market now is much bigger, and the numbers are proving faster growth. We’re confident that by the end of 2025, we’ll hit 12 million ARR in under two years. So right now, I’m using the revenue from the previous company to fund the burn rate myself instead of taking VC money.”
Then he added with a twist, “That said, we’ve nearly finalized a deal with a well-known VC.”
I responded, “Wait, weren’t you just saying you’re not taking VC money for now?”
He replied, “At this point, bringing in any investors is essentially like handing them free money. But to raise the subsequent A round quickly, we’re only considering VCs with significant brand. This VC is a good fit because of their reputation and the fact they can help us close the A round afterwards because they are very well known. We’re considering letting them come in with a pre-A round valuation of about XX million, with plans to hit 12 million ARR by mid-to-late 2025 and then raise the A round at around 100 million valuation with their help.”
I asked, “So if institutional investors come in, does that mean there’s no opportunity for us individual investors? How can we particulate now?” I asked.
He said, “Before the institution comes in, the valuation is still at the price you originally invested. Once the institution is in, we won’t be accepting individual investors. There’s probably still a few months of window left, so feel free to add to your position 😂”
And then I increased my position 😂
My thinking is that the business volume has increased, but the current valuation hasn’t gone up much, and the risk is lower now. The logic makes sense, the data looks good, and the chances of success are significant in my opinion (but what do I know since my track record in angle investing has been 0% return so far lol). So, I added a bit more to my position, sticking to my usual principle: only invest a small amount that won’t affect my quality of life if it’s lost. If it comes back later, it’ll be a pleasant surprise. I will continue to update on the real progress in my weekly newsletter.
As usual, I also made a video with Reza discussing this project, where we cover a lot of the specific data and developments I didn’t mention. For those interested in learning more, feel free to check it out and contact us for the full set of materials. You can also chat with us about just anything 😁
A new series is coming up next, and it’s another passive income method that most of you haven’t heard of or tried before 😂