Seb Johnson 📊🇪🇺

I’ve spoken to over 2 dozen MDs at PE firms I can confidently say that the arb of figuring out how to implement Vertical AI at portfolio companies is very real right now It will fundamentally change underwriting for those who can do it predictably and unlock generational returns. Most are aware they need to act. Very few have.

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One of the leading pre-seed VCs in the UK recently made their Term Sheet publicly available. It brought up a topic that I've been meaning to post about for a while: What are the circumstances where it would be acceptable for a founder to lose their entire shareholding (i.e. be a bad leaver). This is a hotly negotiated topic, especially if you work with good lawyers. The starting position of the pre-seed fund in question is not uncommon across the whole VC industry (in fact the majority of funds have similar wording) but a position that I believe is entirely unreasonable and deserves a significant update. Three conditions I disagree with: 1️⃣ 'material breach of the employment contract' At first read, this might sound reasonable - but it includes things like meeting your responsibilities (which are constantly changing as a founder), standards of behaviour and work ethic, attendance at key meetings, reporting requirements like updating your data policies, misuse of company laptop for personal use, etc Should these really result in losing all your shares? 2️⃣ Resigns within 24 months For example, if you experience a serious illness and have to leave the business. 3️⃣ Commits a criminal offence (other than road traffic offence) If you dive into this clause, it's actually laughable that only a road traffic offence is an exception. As a reminder, here are some ways someone in the UK can receive a criminal offence: - Swearing in public - Being drunk in a pub - Cycling on the pavement - Not paying for a plastic bag in a shop - Not paying for your TV licence - Letting your garden become overgrown (lol) - Sending a letter without a stamp (lol^2) - Carrying a plank of wood on the pavement - More recently, posting an offensive memes on X You get the picture. Are these usually enforced? No. But does that matter if your livelihood is on the line? Can you rely on your investor's trustworthiness to be 'reasonable'? Perhaps, but investors change jobs (on average every 3 years), and you never know what your relationship will be like 5 years down the line. Does it even matter at pre-seed? Well, you're setting a precedent for future rounds where VCs often follow your terms if they are 'market'. How to fix them? ✅ Fortunately, there are very simple changes to be made. 1️⃣ Select the items from the employment contract that are reasonable to include. For example, if you start a competitor whilst working, you lose all your shares. 2️⃣ Remove or add in an intermediate leaver definition 3️⃣ Update the wording to include a criminal offence which has a specific negative impact on the business. Cycling on the pavement (technically a criminal offence although rarely enforced) should never result in the possibility that your entire shareholding is at risk. 🤨 Am I being unreasonable? Do you agree 'market' bad leaver terms should be changed?

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The difference between a great VC and the average VC is almost unbelievable. Some investors view themselves as *personally responsible* for providing a ton of warm intros to founders, then back-channeling feedback about the founder’s pitch to help the founder improve. Talked to a founder last week who was doing 4 sales calls *per day* through just warm connections from their investor. No, this won’t scale or last, but it is invaluable in the $0-1M ARR stage. Another example: I spoke last week with a fund wanted to understand my “pull” framework and the physics of startups. They heard about it from their portfolio companies, so they dropped everything to understand it and see if/how they could apply it to better serve their portfolio. The average founder has very low expectations of their VCs, for good reason: the second-best thing a VC can do is not actively harm a startup, and even this is rarer than it should be. If your investors aren’t foie grassing you with customer intros… mine their networks, sit down with them, and try to help them get started with a nice blurb. It’s worth an afternoon. And if they look at you like you’re an unwashed peasant when you try, tell them I told you to ask. Maybe they’ll read up on pull and avoid actively steering you into the iceberg with their ideas on how you can go “$0-10M ARR in 47 minutes via community-led growth”. Who knows.

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If you're a founder building in AI, this is a moment to pay close attention. Google Cloud’s new VC trends report nails what I’m seeing across the Google for Startups network—and the implications are big. The report outlines 7 key VC trends showing how AI is transforming industries, shifting investor priorities, and creating new opportunities for startups across industries and regions. Here’s how I interpreted it: 1. AI isn’t a vertical anymore It’s becoming foundational, touching everything from legal to logistics. Founders who treat AI as infrastructure, not a bolt-on, are pulling ahead. 2. Non-tech sectors are ripe for reinvention Manufacturing, agriculture, and education may not be the “sexy” industries, but they’re where AI is unlocking real efficiency and defensible value. 3. Fintech is evolving fast VCs are backing startups solving actual infrastructure gaps like cross-border payments, embedded finance, and B2B workflows. Less flash, more function. 4. Healthcare and cybersecurity are becoming AI-native Startups in these sectors aren’t just using AI—they’re built on it. It’s changing diagnostics, threat prevention, and how teams operate entirely. 5. The capital map is shifting Conviction-led investing is rising beyond Silicon Valley. Local VCs with deep domain knowledge are leading meaningful progress across LATAM, Africa, and Southeast Asia. What I read in the report very accurately reflects what I’m hearing from founders globally, from Tel Aviv to Nairobi and London. AI isn’t just changing products—it’s changing how startups think, act, and scale. What’s the overlooked opportunity in your industry that AI could unlock? Or better yet, what’s stopping you from building it?

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Founder sat through a VC's Annual Day and came back with some insights: - LPs give GPs an even tougher time with Qs than GPs give their portfolio founders. - Founders unnecessarily think their VCs are hardcases. And he now understands better the pressures the GPs are under, to deliver. My insights: - Being asked tough Qs is good. Great, even. You should worry when your investors aren't doing deep analysis. - VCs ask Qs not just to founders, but also to others in the industry when making their thesis about a sector. - Tough Qs lead to First Principles thinking. #startups #venturecapital #FirstPrinciples

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Is the UK Venture Capital Market Heating Up?? Here are some Venture Capital key highlights from the past week: 1.- Signs of increased activity for 2025? Hope so.... UK startups raised a whopping £15.5 billion in VC funding last year, with Q4 seeing a 33% jump to £4.4 billion (reference KPMG UK) 2. - Funding gets you further..... The latest Startups 100 Index reveals that the top 10 UK startups have an average funding of £24.9 million, while lower-ranking companies average £4 million. This suggests a significant funding gap between top-tier and other startups in the UK ecosystem. (reference BusinessCloud) 3. - AI investment surge: AI startups in London hit an all-time high, securing a record $3.5 billion in VC funding in 2024, accounting for 32% of overall VC investment in the city (reference - British Private Equity & Venture Capital Association (BVCA)) 4. - Great to see some strong regional momentum! Nearly half of VC-backed businesses in 2023 were based outside London, with cities like Bristol, Edinburgh, and Manchester emerging as key innovation hubs. (reference - British Private Equity & Venture Capital Association (BVCA)) 5. - In case you missed it - The British Growth Partnership could be enormous for this ecosystem Government support: The British Business Bank is set to establish the British Growth Partnership, aiming to encourage more UK pension fund and institutional investment into high-growth companies (reference - British Business Bank) ------------------------------------------------------------------------ We're in a new normal across venture capital. It's not easy out there but keeping an eye on the data can give you an insight into how the market is thinking. Good companies, in large markets with robust unit economics get funded. Focus on building your business the right way. Remember, every company is different. Have a great week everybody and good luck out there!!!

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Six weeks ago, I began using Lovable to create a new financial model. The two main reasons were: ▪️ I have seen a lot of bad financial modelling in Scotland and wanted to build something better that is free to use for founders. ▪️ Understand AI better. Can someone without programming skills create something useful that competes with paid services? To start with, the last question. Yes, AI is far more capable than I thought in building a functional program. It can be annoyingly stupid, thinking it is right when it is clearly wrong and breaking things that previously worked. However, it does work. I will leave it to the users to decide how good it is. These are some of the existing features. ▪️ P&L, Balance and Cash Flow statement ▪️ Asset-, Market and Intrinsic based valuation methods ▪️ Detailed unit sales that include o.a. deferred income, working capital needs and churn rates. ▪️ Industry benchmarks for over 30 margins, ratios and multiples Below is a link to the Alpha version of the model. It is still full of bugs, and I want to add a lot more functionality, but it gives an idea of the direction I'm heading. The coming weeks I will spend bug hunting plus improve the model. In the long term, I plan to develop the following features. ▪️ Export the results in a usable PDF and CSV format ▪️ Allow users to comment on assumptions. Founders can explain their thinking, while investors can question assumptions. ▪️ The ability to save the model and then send it to another user. ▪️ A guide that explains the terminology, how to use the model and interpret the results. ▪️ Automatically import peer group data ▪️ Add paid features, but I will keep it free for early-stage founders who can't or don't want to pay for a financial model. Feel free to add in the comments what you would like to see added/changed https://lnkd.in/eXGbDNbZ

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Firstly, this isn't a post about Europe vs US. They're different beasts at different stages of development… However, as a European VC, it's critical to be connected to the US VC market. If you are, on average, you'll get bigger markups for your portfolio by taking advantage of the UK/US arbitrage among other things. Two examples of this are Lawhive and StackOne from our portfolio. Both have founders who've moved to the US and both have raised from GV (Google Ventures) with deep US ties of course. Same with companies like Mimica (Khosla Ventures), Carwow (Bessemer Venture Partners, Accel) and many more. You need to be able to pick the phone up to tier 1 US VCs and get them to meet your portfolio. So when Adam Shuaib, PhD, Millan Suri and I went to SF a few weeks back, we tried to cover as much ground as we could, meeting about 40 of the tier 1 US funds like Founders Fund, Greenoaks, Sequoia Capital, Thrive Capital, Andreessen Horowitz…. It takes time to build this network but the rewards are great. As you can see, we also went surfing.

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