Notation Operating Manual
Table of contents
- Why We Exist
- Who We Are
- Notation in Practice
- Our Core Values
- Our Investment Process
- Our Investment Decision Framework
- How We Work
- Things We DONT Do
- Our Home
- Notation In The Wild
- Copyright and license
Why We Exist
Our mission is to be the most helpful venture firm in the world for founders on day 0 of a new technology company. We believe all the glory to be had is in working with founders before what they’re building becomes obviously of value, even if it means investing in products and markets that (initially) seem fringe.
We focus on 8-10 new projects per year that tend to be tech heavy, scalable software products, and based in NYC.
Who We Are
Notation is a community of people dedicated to helping one another succeed. This includes the founders of Notation portfolio companies, our advisors, LP’s, and our broader network. We have two full-time partners at the firm:
Alex Lines - Focuses on hard tech, infrastructure, and product at Notation. He's a software engineer and has been building products and companies in New York for over ten years, most recently at betaworks.
Nicholas Chirls - Focuses on product, marketing, and capital raising at Notation. Previously, Nick was Head of Seed Investing at betaworks, and also led product for several internal betaworks projects as well as previous startups.
Through our slack channel, email lists, events, and other places where we build community, we encourage every person in our network to participate. Over the past few years, for example, this has led to a significant number of key hires, customers, and investor introductions. Notation is a diverse professional community that respects one another, but we also find ways to enjoy each other’s company, and try to have some fun along the way :-)
Our core limited partners and advisors include some really amazing people, who are more than willing to spend time with and help the Notation portfolio companies. We’ve also found that the Notation founders regularly find ways to help one another without our direct involvement, which we love because it shows that the community we’re building stands on its own.
Notation In Practice
We've raised two separate funds for Notation. Our first fund was an $8M proof of concept fund that we raised in 2015 to invest in 30 NYC based pre-seed stage companies. Our second fund is a $28M fund that we’re currently investing. Both funds include a combination of institutional and individual limited partners that are critical to the Notation community - we’ve listed all of them publicly, which we think is unique for a venture capital firm. In our current iteration, our average check size is $400k and we prefer to lead or co-lead the first financing, which tends to be about $500k-$1M total. These numbers are on average and not one size fits all or hard rules.
What does a “first-check” investor actually mean? To us, it means (1) working with founders at the true beginning of a company, in many cases simply an idea or potential market that has become an obsession. We love side projects, and there’s very little we’d consider “too early” to be potentially investable. It also means (2) a disciplined approach to running an early stage experiment in order to learn whether or not it makes sense to continue onwards. This is why we prefer founding teams who choose to raise capital thoughtfully and appreciate resource constraints, rather than simply raising as much money as possible from whoever will pay the highest price.
We occasionally consider companies that are further along, what most folks these days consider “institutional seed” (team built out, product in market, some early data), but this represents a smaller part of our practice (maybe 1-2 opportunistic investments per year).
If you think that we can be helpful given the way we work (more details below), please do reach out! The best way to get in touch is either through someone in our network, or simply by sending us an email directly. We do our best to respond to every message we receive.
Our Core Values
- To bring the deepest levels of respect, professionalism, and empathy to our work every day.
- To work extraordinarily hard for the founders we partner with, and to build a firm of lasting value in NYC.
- To always value diversity of thought, culture, gender, race, sexual orientation, and all our many differences.
- To always try to do the right thing and to do the things we say we’re going to do.
- To strive to be intellectually curious and optimistic about our future.
- To value teamwork and collaboration amongst our partnership and with all of the founders in the Notation network.
- To win by building great products, valuing our collective customers, and creating significant financial outcomes.
Our Investment Process
The goal we set for ourselves is to get to an investment decision with the founders that we meet within one month after the initial introduction. Both full-time Notation partners will meet separately with founders that we’re in process with, and then we generally do a final partner meeting with the full team when appropriate. Our diligence during this period includes market research, reference calls, and any other available information that we can dig into. We try not to “over-diligence,” understanding that the founders we meet are often extraordinary early in the company building process, and in many cases simply coming to us with an idea and a thoughtful strategy / go-to-market. We also invite founders to diligence us during this process, and we’re always happy to provide Notation founder or LP references.
If we choose to work with one another, we use preferred equity docs based on those found at seriesseed.com, or plain vanilla SAFEs, although we much prefer equity because we believe it creates cleaner cap tables and is best practice for startups. We aim for this final investment execution stage to get done within a few weeks after committing to a new investment and/or issuing a termsheet.
Our Investment Decision Framework
Team - We look for founders that are (1) deeply passionate about the problem they’re trying to solve, (2) builders by nature (product focused and technical), (3) have unique insight or unfair advantage in the market they’re operating, and (4) are compelling high-integrity leaders (inspiring, good communicators, strong work ethic, plus growth-mindset).
Markets - We look for markets that are (1) initially fringe but can become mainstream, or (2) are large, but feel old and broken, or (3) science fiction and feel like the future.
Product - We look for products that are (1) deeply focused on a core customer, (2) creative in their simplicity and implementation, and (3) are defensible via their network or data over time.
How We Work
During a project’s infancy, there are many ways in which we can add value to a founding team - This depends on the specific company, and we don’t believe in a one-size-fits-all manner of working with any given startup. That said, just like the founders we work with, Notation as a firm has resource constraints, so we do tend to focus on a few key areas where we believe we can add unique value:
Setting Key Milestones – This may be the single most important thing we do. It’s our job to help the founders we partner with define their key milestones, particularly when it comes to raising additional capital. For example, if we invest in a marketplace company, it’s our responsibility to have a really good idea of what metrics like GMV and net revenue need to be in order to confidently raise a Seed or Series A round. Together, we use these key milestones and work backwards with founders to help them plan their product, team, and customer development roadmap. As a final note, we sometimes meet startups that may never need to raise another round of financing – we wish more startups would consider this path, and we welcome partnering with founders that would like to pursue this strategy.
Team – Is there anything more important for a startup in the first year? We don’t think so. We encourage most teams we work with to stay as lean as possible while building the initial product, and rarely do product teams we work with grow beyond 5 people before institutional seed or Series A. We’ve helped build dozens of teams in the past decade, going back to our work at betaworks, and we view it as core to our firm to help founders find and recruit the initial management team.
Product and Technical Reviews – We don’t pretend to understand any given market or customer set nearly as well as the founders we work with, but we can help with product roadmap planning and prioritization, as well as code reviews and technical diligence (and we do so often).
Customer Development – In coordination with the broader Notation network, we want to be responsible for helping founders that we work with acquire early customers. This is particularly relevant for the b2b companies that we work with, but has applied to consumer facing companies as well. We get our hands dirty here, and although these forms of early sales don’t tend to be scalable over time, they’re important in getting the startups we work with to their first few dozen customers.
Capital Raising – If we’ve done our job and helped founders to properly plan for their key milestones, they’re typically in a good position to raise a meaningful seed or Series A round (assuming they’re not already break-even). Leading up to a fundraise, we work closely with Notation founders to (1) help them craft their story and vision for the future, as well as their pitch deck, (2) target (and make introductions to) the right investors, and (3) run as efficient an investment process as possible.
Beyond (“The Call Before the Board”) – After a Notation portfolio company has raised a subsequent institutional round of financing, we generally take a step back. This is how we scale what we do at Notation, allowing us to work closely with new founders and companies. Because we don’t take board seats, we’re closely aligned with the founders that we work with throughout the lifecycle of their company, which often allows us to be the “call before the board.” Although communication over time becomes less frequent, we take this long-term role very seriously, and are grateful to the founders who have chosen to work with us and trust us with this responsibility.
Things We DONT Do
- We don’t take board seats or make board level executive decisions, which includes hiring and firing the founders we partner with.
- We don’t run your company, build your culture, or pretend to understand the market you’re tackling, the problem you’re solving, or your customers as well as you do.
- We don’t kid ourselves that what we’re doing as investors is nearly as difficult as what you’re doing as founders. Respect.
- We don’t shy away from giving you our honest feedback or thoughts, even if it’s hard to give. We expect the same in return!
We’ve found that one of the most effective ways to build community is simply by getting like-minded people in the same room. We do this in the following ways:
- Workshops - These are short tactical sessions that we typically host every couple months on topics like Mission/Vision/Values, hiring, diversity, among many others.
- Dinners - We usually host one dinner per month for founders, limited partners, or other folks and functional roles in our network.
- Community Events - We usually host one broader community event twice per year, which serves to bring our larger network together. These are meant to be both functional and fun.
We’re based in Brooklyn, NY. We started out working above Threes Brewing (thx guys!), and have now been in the Cobble Hill neighborhood for the past few years. We have a humble and quiet space that allows us to work efficiently, and occasionally roast our own Notation coffee. We hope you’ll visit us.
Sometimes we invite Notation founders to work with us out of our space, but unfortunately we don’t have room for everyone, so it’s mostly when the timing lines up. Working out of Notation is never a requirement, in fact we usually discourage “co-working,” particularly at the large co-working spaces because more often than not they’re expensive and distracting. We believe one of the most important parts of building a startup is the culture the founders choose to create on day 0. So we encourage folks to be thoughtful about how they want to do that, and to do it their own way.
Notation In The Wild
We also host a popular podcast called Origins, which focuses on the limited partner community.
Finally, we have an email list that we’ve never quite figured out how to use appropriately, so we suggest you follow Notation on twitter or medium for regular updates, BUT, we may do some larger events for the Notation community in the months to come, so feel free to sign up for our email list on our homepage just in case :-)