Notation Operating Manual

The first dedicated “pre-seed” firm in NYC. We work with product-obsessed teams in the trenches on day 0:00.
View More on our Site »

Who We Are · Portfolio Companies · Origins Podcast · Writing · Twitter

Why We Exist
Our Core Values
Who We Are
Notation in Practice
Our Investment Process
Our Investment Decision Framework
How We Work
Things We DONT Do
Notation Moonlight
Events
Our Home
Notation In The Wild

Why We Exist

Our mission is to be the most helpful venture firm in the world for product-obsessed founding teams on day 0 of a new startup. We believe all the glory 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 invest in about 8 new startups per year that tend to be tech heavy, scalable software products, often based in NYC, but more selectively in Tier 2 ecosystems such as Boston, Toronto, and LA.

Our Core Values

To bring the deepest levels of respect, professionalism, and empathy to our work every day.
To always value inclusivity and diversity of culture, gender, race, sexual orientation, and all our many differences.
To work extraordinarily hard for the founders we partner with, and to build a firm of lasting value in NYC.
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.

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, LPs, and our broader network. We have three full-time team members at the firm:

Alex Lines - Focuses on infrastructure, hard tech & product. Engineer experienced in distributed systems & scalability, building products and companies in NY for over 10 years.

Nicholas Chirls - Focuses on product, growth, and capital raising. Previously Head of Seed Investing at betaworks and led product for several betaworks projects and previous startups.

Katherine Wu - Focuses on marketing, legal + regulatory, and business development. Katherine has a legal background with experience in business development and growth at Messari, a NYC seed-stage crypto startup.

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 and building a startup is really hard, but we also try to have some fun along the way :-)

Our core limited partners and advisors make up an incredible group of people, who are often happy to spend time with and help 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 three funds for Notation. Notation I was an $8M proof of concept fund that we raised in 2015 and invested in 28 pre-seed stage companies. Notation II is a $28M fund that we’re currently investing. We recently raised $42M for Notation III, which we'll begin deploying in 2021. We decided to publish the fundraising decks for our first two funds, which can be found here, and plan to publish our deck for Notation III soon. All three 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 $600k and we prefer to lead or co-lead the first financing.

What does a “pre-seed” 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 (1-2 investments per year).

If you think that we can be helpful given the way we work (more details below), please reach out to us! 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 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. Our team may meet separately with founders that we’re in process with or all as a group, and then we generally do a final partner meeting with the full team where 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 or 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 the NVCA model documents, or plain vanilla SAFEs or Convertible Notes, although we much prefer equity because we believe it creates cleaner cap tables and more clarity for investors and founders alike. We aim for this final investment execution stage to get done within a few weeks after committing to a new investment and issuing a termsheet.

Our Investment Decision Framework

Team - We look for founders that are (1) High-integrity leaders who can communicate clearly, inspire, and prioritize their strategy (2) Have complementary skills and a healthy team dynamic (3) Builders by nature (ie. Technical DNA, product-focused, and growth mindset), and (4) Have unique insight into and passion for a specific problem or market.
Markets - We look for markets that are (1) Initially fringe but can become mainstream, or (2) Large, but feel old and broken, or (3) Science fiction and feel like the future. We also look for well-timed markets where there's an external inflection point (ie. new tech, adoption, regulatory, or belief system).
Product - We look for products that are (1) Innovative product in their business model or process - That make us think differently about the problem and solution and (2) Can be defensible over time time via counter-positioning, scale economies, network economics, or switching costs.

It's important to note that we don't require every item above to make an investment - In fact for any pre-seed stage startup that would be virtually impossible. These are simply questions we ask ourselves when considering an investment, and hope founders might be ready to answer, or at least have given some thought to. Our hope is that by sharing this framework and making it transparent that we might have more productive discussions when we meet and dig in together :-)

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 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 5-10 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 believe that helping founders find and recruit the initial core team is one of the most critical aspects of our work.
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. 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 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 our honest feedback or thoughts, even if it’s hard to give. We expect the same in return!
We VERY rarely take board seats or make board level executive decisions, which includes hiring and firing the founders we partner with.

Notation Moonlight

Notation Moonlight is an 8-week program for future founders - talented engineers, product people, and builders - who are thinking about starting a company one day but haven’t yet gotten started. Perhaps you're already working on a specific project during off-hours, or still looking for co-founders, or haven't even yet settled on an idea, but you dream of leaving the 9-5 and building something of your own. Notation Moonlight is a community, network, and set of resources that rivals that of Silicon Valley, but right here in NYC.

The purpose of the program is to identify, encourage, and collaborate with future founders in NYC to help them better prepare for the journey of starting a company. Notation Moonlight is completely free, we don’t take equity — We think it's our responsibility to help level the playing field for the next generation of founders.

Events

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 quarter 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 host several larger community events per year, which serves to bring our larger network together. These are meant to be both functional and fun.

Given Covid-19 and the importance of community safety, we've been running many of these events virtually for now. We hope we can soon return to a time when we're able to spend time with the Notation community IRL.

Our Home

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 that 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 communicate quite regularly on the Internet, including twitter and our blog.

We also host a popular podcast called Origins, which focuses on the limited partner community and VC firm building.

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 :-)

srinitude / Operating-Manual