About This Episode

In Episode 68 of Practical Nerds, Patric Hellermann and Shub Bhattacharya dive deep into the concept of "preemption" in venture capital fundraising for construction tech startups. They explore the conditions necessary for successful preemptions, the potential pitfalls, and how founders can navigate this complex process to ensure long-term success.

In This Episode

Patric and Shub define preemption in VC fundraising as investors offering capital before a planned financing round, avoiding competition and market processes.

The hosts outline the conditions for successful preemptions, including company performance excellence, investor conviction, and the importance of building authentic relationships before any preemption attempt.

They discuss the risks of preemptions, particularly valuation challenges where artificially high valuations can create unrealistic expectations for future rounds, potentially setting construction tech startups up for difficult down rounds.

The conversation compares internal versus external preemptions, with both hosts favoring internal preemptions from existing investors who already understand the business and have demonstrated alignment with the founder's vision.

Timestamps

(00:00 ) - Introduction

(01:41 ) - Defining preemption in VC fundraising context

(03:35 ) - Conditions for successful preemptions

(11:42 ) - How rare successful preemptions actually are

(12:09 ) - Identifying genuine versus opportunistic preemption attempts

(16:28 ) - The valuation trap in preemptions

(21:26 ) - What makes a preemption "done right"

(24:32 ) - Weighing preemption against discovering true market valuation

(27:56 ) - Market volatility as a factor in preemption decisions

(32:05 ) - Internal vs external preemption: which is better for construction tech startups

(36:35 ) - Frequency of successful preemptions in construction tech

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Patric Hellermann: ⁠⁠https://www.linkedin.com/in/aecvc/⁠⁠

Shub Bhattacharya: ⁠⁠https://www.linkedin.com/in/shubhankar-bhattacharya-a1063a3/⁠⁠

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