In this episode, Hall welcomes Matt Johnson of Johnson Venture Partners, a micro VC fund investing in high-growth startups in the Southeast. Matt's curiosity about the founding stories of successful companies led to a passion for early-stage investing. While JVP is sector agnostic, Matt points to his particular interest in machine learning, cognitive computing technology, and early-stage innovation in general. Matt also emphasizes the opportunities in using network effects to build teams of investors to source deal flow.

For startups, Matt advises that founders get to know the investor and understand their goals, regardless of the type of funding you're after. Matt also talks about some of the platforms and tools available to assist investors to unlock crucial data. Matt discusses his fund's thesis and highlights some of the companies he's worked with. Finally, Matt talks about the importance of discipline and focus, whether you are an investor or an entrepreneur.

Liquidation preference is a right commonly found in terms sheet.

It provides the investor the right to receive their investment back and then the remaining profits are distributed pro rata to other stakeholders.

It’s often expressed in multiples such as 1X, 2X, or 3X.

This means the investors with those rights will receive 1X their investment before distributing the remaining exit funds based on their equity-based division.

Liquidation preferences come in three forms.

Participating preferred - they get their liquidation preference and share in the equity pro rata with the other investors.

Non-participating preferred - the get their liquidation preference but do not share in the equity pro rata with the other investors.

Participating preferred with a cap - the get their liquidation preference and share in the equity pro rata with the other investors up to a Cap.

Investors often use this to compensate for what they consider to be a high pre-money valuation.
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