E-3 Visa Renewal without Travel via I-129

I’m the US right now in the midst of the COVID-19 pandemic and lockdowns/shutdowns across most of the economy. One of my friends and colleagues happened to have his E-3 visa expiring next week, and so the usual options of a visa dash started closing down pretty fast. Canada closed their borders on March 16th, and while Australia will have you back (if you can get there), the Consulates have limited their operations from March 17th which basically means unless you have a mail-in application, you’re going to be waiting a long time to get your visa approved. Even if you got your passport back via a mail-in renewal, the chances of making it back into the US this side of June is pretty questionable. 

There is, however, some good news: you can apply for your visa on-shore and as long as your employer sends in your application before your visa expires, you’ve got an immediate extension of up to 240 days where you can continue legally working in the US.

This approach is normally a lot less attractive because it takes a lot longer – at the time of writing, the Vermont Processing Center was taking 3.5-5 months. Compared to a quick trip to Vancouver, Toronto, Mexico City or back to Australia where you can get in and out in around 1 week, this slow process was pretty unattractive. However, with COVID-19 in full swing, flights suspended, consulates basically closed and borders closed, the I-129 route (and being stuck in the US while they adjudicate your case) is actually not such a bad thing.

The I-129 Form

The I-129 Form is not a new concept – it has been around a long time. Most folks doing E-3 initial visas or renewals, however, don’t know about it or choose to do it because it is a lot slower.

You can download the I-129 form from the USCIS here. They also provide really quite clear and helpful advice on completing the application (ie, what boxes to tick for what you need to do) in their I-129 Instructions PDF.

The way it works is that you get your LCA (which could be also difficult in these times) and send in the Petition (the employer is the petitioner) to the Vermont processing center (at the time of writing). The form and the additional materials come to about 60 pages, but the good news is that E-3 visas (once again) get off pretty lightly – most of the higher cost and additional paperwork is for H1-B and some other visas.

The instructions PDF at the time of writing said the following information would be required along with the I-129 form:

For all classifications, if a beneficiary is seeking a change of status or extension of stay, evidence of maintenance of status must be included with the new petition. If the beneficiary is employed in the United States, the petitioner may submit copies of the beneficiary’s last 2 pay stubs, Form W-2, Internal Revenue Service (IRS) transcripts of the beneficiary’s federal individual income tax return for the three most recent tax years, and other relevant evidence.

Principles of Extension

From an employment perspective, as I understand it there are two things someone on an E-3 visa needs to remain legal in the US – permission to be in the US, and permission to work in the US.

Permission to be in the US (the I-94)

Whenever we cross the border into the US, the guy/girl behind the counter at CPB (in between asking about our work and taking our fingerprints) is creating a new I-94 for us. The I-94 is the document that gives us permission to be in the US. Per the USCIS FAQ on extending your stay:

“..the admissons (sic) stamp in your travel document or the I-94/I-94W shows how long you are permitted to remain in the United States, but your nonimmigrant visa (if a visa was issued) does not. A visa only shows when and how many times you may seek admission to the United States from abroad based on the classification noted on your visa.” (emphasis added)

As long as your passport is valid and you apply before your I-94 expires, you’re generally able to apply to extend your stay from within the US.

When it comes to our I-94s, I honestly don’t know why they give us 2 years from date of arrival – I’ve seen I-94 dates extend beyond the expiry of a passport, and except for showing up the date our visa is granted, it also means the I-94 expires after our visa. Considering how inflexible/crazy the whole system is, it is pretty strange to me that they do it. I’ve also heard that it isn’t guaranteed that your I-94 will go for 2 years from the date of entry, so it might be laziness by CPB officers who just know the visa is a 2 year visa and so set the expiry of the I-94 to be that long. If it is laziness, that’s great, because having an I-94 expiring in the future is critical to being able to do the extension via I-129 process.

Permission to work in the US (the E-3 visa)

Since this is about extending your visa, this is where the focus of the application/process is. I still have a few questions at the time of writing about how this all works, but given the alternatives right now are close to nil, I figured this was posting about (was going to wait until the process completed, but COVID-19 has a lot of people unable to travel so having something out there is better than nothing).

An important note here is that for an E-3 visa extension/renewal/modification, it is ideally the (new) employer who is petitioning USCIS on behalf of the employee (the FAQ at for Temporary Nonimmigrant Workers calls out E-3 as one of the visas that someone can submit their own I-129 for).

The easiest method (and only one I’ve tried) is the extension of same role for same employer, and I’ve read conflicting information about whether this approach works for changing employers – H1-B and H2-A statuses are specifically allowed to change employers while the I-129 is being processed, but E-3 might get caught in the rule “The employee cannot begin working for the new employer until USCIS approves the petition.” (see this FAQ under “Changing Employers” heading)

For the extension of a visa for the same employer (from this FAQ):

To extend the period for which a nonimmigrant employee was admitted, an employer must file a new Form I-129 petition for the employee. Generally, the employee may continue working for the same employer for up to 240 days or until USCIS makes a decision on the petition, whichever is sooner.

If you’re the employer, you need to submit a new I-9 (asserting you’ve checked the validity of the visa/work rights of an employee), and since you can’t eyeball a visa that isn’t yet in their passport, you should:

write “240-Day Ext.” and the date he or she submitted the Form I-129 petition to USCIS in the margin of Form I-9 next to Section 2

Special Note if you have dependents:

While the employer files the I-129 for your E-3 visa, you need to file a single I-539 Application to Extend/Change Nonimmigrant Status for all of your dependents and get them processed at the same time. From the same FAQ above:

If your employer files a Form I-129, Petition for a Nonimmigrant Worker, to extend your stay and your spouse or unmarried children under age 21 also want to extend their stay, they need to file (paper based or e-file electronically) using Form I-539, Application to Extend/Change Nonimmigrant Status. They can all be included on one I-539. It is best to file the I-129 and I-539 together so that they can be adjudicated about the same time. Remember, though, that they are separate applications. Therefore, you and your family members (and your employer) must follow the instructions and attach all supporting documents with each application, even when filing the forms together.

What I haven’t been able to determine is what happens when USCIS actually comes back and says “sure, you’re approved to extend stay”. The visa in the passport is still showing a date that has expired, so you won’t want to come back across a border without getting a new visa in your passport – I don’t know if you can then apply for a fresh visa on-shore or if you’re basically going to be looking at your next international trip also incorporating some time on a visa-run.

How to get useful feedback on your business idea

A startup mailing list I’m on recently had a customer-development survey link posted to it for an idea I thought was absolutely terrible. It is another “buy food from an app and have it delivered to you” product, but in this case they take inputs from you about your food preferences, dietary issues, etc and a personal chef puts together a menu for you, cooks the food and delivers it themselves.

I didn’t think it was a terrible idea as a consumer – but as a business it is pretty much doomed. This is due to:

  • High customer acquisition cost (especially in mobile today) and a small addressable market who’ll actually pay (a lot more) money for more healthy, convenient food (as opposed to those who say they will).
  • High churn. Having used a number of these product before, the reality it that you get to the end of a busy week where you ate out once or had something after work you didn’t expect and then you look at those expensive leftovers in the fridge at the end of the week and cancel. If you go on vacation/holiday for a week, you cancel and you don’t come back.
  • Horrible unit economics. Even if you find people affordably and they stick around more than for any other service who’ve tried this, your main variable input cost is labor which has to be geographically proximate to your high income buyer, so that won’t be cheap. Your other key input is food, which is perishable and the personal menu thing eliminates economies of scale in procurement and production.

Like most of the other app-driven food businesses I’ve seen raise money and fail here in San Francisco, it seems like a great business to make a small fortune with – as long as you start with a big fortune!

It got me thinking though: how in the hell did this nice, smart guy think it made sense to build this business?

I could be wrong, but my hunch is the cause lies in how he validated his initial business idea. The process is usually:

  1. The entrepreneur has an idea they think is awesome. Sometimes it comes as a result of trying too hard and for too long to think of something (so the relief of being done is a payoff enough in your mind). Smart people have lots of shit ideas – that’s normal unfortunately.
  2. The entrepreneur pitches this idea to their friends and family as their idea. Your friends and family like you a lot, so they’re very disincentivized to say something that will hurt you. This, combined with the “everyone get a trophy” view of life (reward for trying!) means you get reinforcing feedback from most. Those who have critical feedback will tell you in a way that is non-specific so they don’t make you feel like an idiot.
  3. The entrepreneur gets encouragement and validation and moves forward. The journey they embark on soaks up their savings and a decade of their life, often on a shit idea they fell in love with and in no small part because the people who care the most about the entrepreneur didn’t want to hurt their feelings.

The solution to this problem is to reverse Step #2.

You’re still going to have ideas, and you’ll be emotionally invested and too close to them so you need external input.

You’re still going to pitch friends and family and folks you know because they’re the only ones who’ll listen to you long enough to hear you out.

But instead of telling them about your idea, you tell them about “this startup” you recently met with and you’re thinking of investing in them.

Then tell them about the idea of “this startup”, and for extra seriousness tell them you’re thinking of investing the money you’ve saved for a house downpayment (or mortgaging a house you already own).

Then you’ll get real feedback on whether what you’re doing makes any sense to them as a buyer (and they’ll extrapolating to include their own friends, experiences, colleagues, etc). They’ll tell you what they really think. Many people will tell you you’re insane to invest money in a way that has risk (see Loss Aversion for more on this), and you should politely park the financial advice feedback. What you’re looking for is objections or insights into the problem that you’re trying to solve (through the fiction of “this startup”). Welcome all the objections, and understand them, because if the people you’ve asked are your target market, you’ll be facing anyway, often unseen and unheard, in that target market. This negative feedback helps you to get ahead of them.

This is probably the most important thing an early stage startup founder can do, but also realize you can’t do it 3x times a week. Save this for the ideas that you really really think have legs, cause you can only do it once a month at the most, but seek out negative feedback bias – the positive stuff is much more commonly the path to ruin.

Stopping Autoplay Videos on News Websites with Adblock Plus

Like many Aussie and Kiwi ex-pats I know, checking in on the news in the old country is both a habit and an escape, but the constant attempts by the old print media to “reinvent” themselves as broadcast/video media had lead to an irritating and increasingly prevalent feature on news articles – the Autoplay video.


For the many folks out there already using an AdBlocker, here’s how you can add a couple of custom rules you can add to AdBlock Plus to stop these videos from running.

  1. Click on AdBlock and choose “Options”.
  2. In the top menu bar, click on “Customize”.
  3. In the lower part, click on the “Edit” button next to the “Manually edit your filters” heading.

When you’re there, add the following two lines to the list of filters to block:


The first one will block videos from running on smh.com.au, theage.com.au and (probably AFR) as the videos themselves come down from Fairfax’s account with Akamai, a content delivery network. Note that it is just blocking requests with videoId= in them – so other stuff coming from Fairfax’s Akamai account will still work.


The second one will block videos on websites powered by News Limited (such as news.com.au, and if you’re one of *those* people, dailytelegraph.com.au). It means hard-blocking the video server used by news.com.au.


The third one blocks anything with Brightcove (the name of the vendor that provides the video tech) in the title on the New Zealand Herald – since the NZ Herald is still using Shockwave, you basically need to stop the Brightcove player from loading it all rather than blocking the content you don’t want to autoplay.


I’m well aware that this isn’t the most elegant solution – having a way to set the JS preference/cookie to respect the “Never Play” and have it work even when you’re using Incognito mode would be much nicer – but this gets the job done pretty quickly using an extension used by millions.

Hope this helps other people avoid this irritation, especially when you’re reading the news at your desk at work and you don’t want some shittly produced video screaming out of your computer speakers.

Oh, and if you’ve got your own examples to add for your fav news websites, please add them in the comments!

Watching ABC’s iView from outside Australia without a VPN

As an Aussie expat, it is a shame that all the awesome stuff on ABC’s iView site is locked away. Aside from wanting to keep across what’s going on back in Australia, there’s truly world-class content produced regularly for 4Corners, Foreign Correspondent and stacks of great documentaries too.

The good news is that it is actually really easy and inexpensive to get this content where-ever you are in the world using a service called Unotelly and either your web browser or a copy of their Android app.


Unotelly is an awesome and inexpensive service (can be as cheap as US$3/month) which uses some trickery around DNS (which is like the internet’s phone directory) to trick the ABC servers into thinking you’re in Australia when you’re not.

Unlike a VPN (which requires you to designate a destination and puts a bunch more stuff between you and the stream you’re trying to watch), the Unotelly service just tricks the providers at the point of authentication/connection, and then the actual stream (which you want to be fast) comes down without anything between the server and you watching the video.

After signing up for an account (which you can trial for free for 8 days) and getting the service set up (they have a handy wizard and how-to guides for many services), you simply use the “Dynamo” config screen and scroll down to find the reference to ABC iView. Check the “Australia” radio button, and then head on over to iview.abc.net.au and start watching.


Note: if you’ve previously been to iView and gotten the “Sorry, you can’t watch this from outside Australia” message, you might need to clear your cookies or use an incognito/private window to get past the fact they’ve previously blocked your browser.

Watching iView on Android

If you’ve got an Android device, you can also get iView going on your phone, which then also allows you to use your Chromecast to watch iView programs on your big TV screen.

While anyone who’s in Australia can install ABC iView from the Play Store, if you’re outside Australia you’ll be told the app isn’t compatible with any of your devices. This isn’t actually true – it is a policy choice by the ABC, and has nothing to do with compatibility.

Thankfully, the folks over UKTVApps.com have provided the installer files for ABC iView (and SBS On Demand) you to download and install manually on Android. I downloaded and installed the iView app and because my phone is using my home WiFi (which is configured to use Unotelly for DNS now) I just had to fine up the app once installed and start watching!

Watching NBA without Blackouts or a VPN (and much more!)

As a big fan of the NBA (and particularly my adopted home town team, the Golden State Warriors) I was pretty excited to get into this year’s season. While previous seasons have been aided by borrowing the Comcast credentials from a friend and streaming games via the CSN Bay Area channel (laptop to HDMI to TV), the friend in question has now moved away and cancelled their account, and I was stuck trying to work out the best way to watch games. After a bunch of trial and error, I think this is the best way for cord cutters to stream the NBA without being jammed with an extra $400 a year in cable fees.

The awesome NBA League Pass – and its massive flaw

The League Pass service from the NBA is awesome. You can choose to buy a season-long package for a single team or the whole NBA, and you can stream games from lots of different devices – pretty much perfect.

Except for its massive flaw.

I don’t have a lot of spare time, so I tend to just watch the games of the team I follow: the Warriors. Buying a team-pass for $120 comes out to a bit under $20/month (given the length of the regular season), which seems like a fair deal.

As you’d expect, the team play half their games at home, and half their games away through the season. Unfortunately, though, the club (or the NBA?) has done a deal where Comcast (the monopoly Cable TV provider in San Francisco and most of the Bay Area) is the only provider allowed to show games in the San Francisco Bay Area, via their CSN Bay Area channel. This means, after buying the NBA League Pass, 50% of the games I want to watch aren’t available to me – the League Pass service applies a blackout.

I called Comcast (because the NBA League Pass can be provided through your cable provider too) to see whether buying it through them would unlock the blackout, but unfortunately it doesn’t; buying through the cable company is just a reseller billing thing with all the same restrictions. The only way to get all of the games would be to upgrade by package costs by 50% to get the one channel I need, at a cost of around $400 per year. This is only 50% more than buying League Pass, but like most people forced to buy from a monopoly, I’ll do almost anything I can to avoid giving that pack of arseholes any more money on principle alone.

Overcoming the Blackout without a VPN

Now, like any techie out there knows, the strongest solution to this problem is the same solution to ham-fisted online censorship or security/privacy overreach by bone-headed sovereign governments – a VPN.

The effect of a VPN is to take your internet connection here in, say, San Francisco, and tunnel or connect to another country. When your data pops out of that other location, you’ll look like you’re actually in that location, so if you want to get around things like these League Pass blackouts you can use a VPN to appear to be somewhere else.

Unfortunately, there’s a few issues with VPNs, mainly around hassle and performance. The ability to tunnel is cool conceptually, but when you’re trying to stream a real time game in high quality video, having to have all that data go via another country to get into the tunnel (as well as the overhead in encrypting/decrypting it) isn’t ideal. Additionally, most VPN implementations are “all or nothing” affairs, where every bit of traffic going out from your network goes into the tunnel. (Note: while it is possible to define just some traffic to use the VPN via routing tables, the idea of having to keep track of all of the NBA League Pass server addresses to make sure I’m routing the traffic right is more hassle than I’m prepared to put up with).

So, ideally, I was looking to overcome the backout without needing to implement a full VPN if I could help it.

The great news is there is a solution out there, and it can actually save you money too!

Unotelly – overcoming geoblocking/blackouts without a VPN

Unotelly is an inexpensive online service designed specifically to help regular people get around the headaches of this sort of geo-bullshit with a minimum of effort. The way is works is that you update the DNS settings of your device (usually you do this at the router – the thing which connects you to the internet) so that the act of going to a website like watch.nba.com gets tweaked and fools the NBA servers into thinking you’re somewhere else in the world.

The folks at Unotelly have put together a handy guide, and the good news is that it really works well! Basically, once you’ve got the Unotelly service active, you turn on the “South Africa” option in the Dynamo section of their control panel, and then you can go to the NBA League Pass website and sign up for an account.

When you’re signing up to league pass you’ll need to have a postal code for South Africa when getting your account – I used a part of Cape Town (postcode 8001) and it worked fine. It also allowed me to change the billing address on my credit card to be my address here in the US, and while the signup on the NBA site was frankly slow and clunky, it did work in the end.

With Unotelly, I’ve now got the ability to fire up a game in my Chrome browser and then hit the Chromecast option and have it stream in super high quality to my TV. Because I’m not using a VPN, the delivery of the video stream does not go via South Africa – this is just used for the account sign in and auth piece, which means I can watch my Warriors games without any blackout restrictions at all.

Oh, and the saving money bit? Because of the end of the commodities boom and the incompetence/corruption of Jacob Zuma’s government in South Africa, their currency has plummeted around 25% this year. This, combined with the NBA’s choices about what each country can afford to pay means the price of a single-team league pass right now (middle of the season) is less than US$60! So, with 4 months to go I’m spending $15/month with the NBA and $3.50 a month for Unotelly to watch any Warriors game without blackouts.

And there’s more!!!

The great thing about the Unotelly service is that your subscription with it unlocks more than just NBA League Pass – check out my other post on how you can also stream free content from ABC’s iView app (normally restricted just to Australians) using the same Unotelly account.

Advice for folks “putting my feelers out to find opportunities” in SF/Silicon Valley

From time to time someone will email (or be introduced via email) who’s exploring career opportunities in San Francisco or Silicon Valley. Here’s a variation of an email I recently wrote to answer this question – hopefully by putting this somewhere Google can find it I can help more people who are wondering how to have a look at the epicenter of the tech boom for themselves.

To start with, pick a conference or event that is here in a field you’re into and come. Plan to spend 2 weeks or so – aim for an AirBNB or some other form of non-hotel short term rental.

Do a lot of networking upfront – LinkedIn is very well used here.

The main conferences will have plenty of opportunities for Meetups – using Meetup.com and Eventbrite is the best way to find them; they’re often free and sponsors often pay for the hospitality/drinks so they’re great on multiple levels.

Make sure you time your run between the start of September and the middle of November, or then between February and the middle of June. These are the main conference and business seasons – the “holidays” (which is the last 6 weeks of the year from before Thanksgiving until January) and the summer break up these two seasons, and everything you’re looking for – networking, connections, insights – slows down a lot.

The other comment to make is that the Bay area is absolutely inundated with folks – from great schools with great resumes and networks – who want to get into opportunities in the tech space coming out of business schools etc. For 20 years all these folks went to New York and tried their hand at consulting or investment banking or something else that pays smart people very well.

This decade so far, the Bay Area is the new “New York” where smart people come to make their mark, even if they aren’t naturally tech folks or with tech skills – lots of smart folks want in even if they don’t quite know what it is they want into (or have any specific skills or backgrounds to help them stand out other than being smart and going to good schools etc).

I’m just telling you this to set expectations that an email or intro from someone who is “exploring opportunities” isn’t going to get you far – this place is insanely competitive, but if you say “I’m an engineer who helped define the MPEG standard for variable bandwidth video streaming in 10 years ago with a focus on low-power decompression and I’m looking for a new project in the VR space” you’ll get much more of a hearing.

Americans (at least on the west coast) are also very polite, will rarely tell you no (partly because they want to have the option to re-engage if it turns out you do have something special to offer) and a lot of the non-operators in the industry (VCs, lawyers, advisers, marketing people etc) make their money harnessing smart ideas from smart people (operators) so they rarely turn down a chance to chat with someone just in case they’re the next big thing. So, keep that in mind as you evaluate the connections you form (and whether they’ll progress from a genuinely polite conversation and a promise to ‘keep in touch’) while you’re here.

Best of luck – this place isn’t easy, but then being the commercial center of the industry that’s reshaping the world probably shouldn’t be easy anyway 😉


Why Uber (and Lyft) Win (over taxis): Public support 500x more than cabs

Got an email from Change.org inviting me to sign two competing petitions. One of them is to ban “illegal” Uber in one state of Australia, and the other is to change the rules to allow Uber in another state.


On face value, the numbers are pretty clearly running in Uber’s direction (at time of writing).

So, on this basis people are 4:1 in favour of Uber – which is why in pretty much all democracies the rules are changing to support what people want over the interests of a cartel.

Then I had a look at how long these petitions have been published and promoted. The Taxi protecting petition has been running for 8 months, but the Uber supporting petition has been running for 2 days.

This means, in time adjusted terms, the ratio of support for Uber vs Taxis is around 500:1 (i.e, the average number of signatures in the taxi-protection camp is 7.3 per day, but Uber-support is seeing 3354 per day).

Obviously these are two change.org petitions so these statistics are not in any way mathematically rigorous and the people who sign change.org petitions tend to be younger and more tech savvy, but 500:1 is a massive tilt – enough to tell you why any country where the citizens expect their governments to not run a protection racket at the expense of the populous Uber (and Lyft etc) win.

Avoiding chavs/bogans/white-trash while on vacation in Majorca

Port de SollerThis summer my fiancee and I took a vacation to Europe, and we decided to go to Majorca (also spelled Mallorca) for our “relax by the Med” part of our trip.

One of the hardest things to work out what was how to avoid the hordes of chavs (also known as bogans or white trash) who I’d heard take cheap flights from all over the UK to Majorca. Having been stuck in the past in hotels with the loud, obnoxious and proudly ignorant folks (we’ve got plenty of them in Australia too, where they ruin Bali) I was hoping to find a review or some advice on how to avoid them.

Unfortunately, I didn’t have much luck – the tourist industry in Majorca needs their money as much as anyone else’s, and the only reviews in Tripadvisor forums were clearly clever and funny spoofs – so no use there 😦

Thankfully, we took a chance on Port de Soller, figuring it would be further from the airport in Palma and chavs are as lazy as they are ignorant (unless there’s an all you can drink inclusion in the package deal, in which case they’ll go anywhere).

Turns out we got lucky – Port de Soller was a great choice, a super lovely place on the coast with amazing mountains around it and a really nice feel. It had a great cross-section of visitors, including couples, young families, grown up families and elderly folks too. Everyone was friendly and I wouldn’t hesitate in recommending the place if you’re looking for a truly beautiful part of Majorca without hordes of chavs, bogans or white trash.

The SaaS Fundraising Death Zone

TL;DR: the ecosystem of early-stage investors (angels, seed and VC) has a structure and set of incentives that creates ideal (or even necessary) points in a SaaS startups life for raising capital. Unfortunately, changes in the ecosystem have created what I call a “Death Zone” between Seed and VC tiers of investors which can seriously affect the ability of a SaaS startup to raise the capital they need to grow, and in some cases, survive. For most SaaS startups, the death zone occurs where they are doing between $50K and $200K in MRR: the startup is too big to raise from Seed funds, but too small to raise from VCs, and because it is counter-intuitive, it is a major risk to SaaS entrepreneurs running successful, growing startups.


Building a SaaS company is hard but rewarding. After bootstrapping AffinityLive for its first few years (very very difficult), I decided that the time was right for us to engage with investors and raise capital to accelerate our growth further. Fundraising is always hard work, but I didn’t realize until I was well into the process that I’d made the mistake of trying to fundraise at a time in the business’ life that I’ve since come to call the SaaS Fundraising Death Zone.

This post is an attempt to help other SaaS founders out there not repeat my mistakes, because while our outcome has actually been really awesome, the probabilities of success were much lower and the effort required to get a great outcome was a lot higher than it would have been if I’d known this information a couple of years ago. I hope this post is helpful, and feel free to share it with other founders you think could benefit from it (Twitter, Facebook, mailing lists, etc).

Early Stage Investor Types

Before explaining the Death Zone, it makes sense to summarize the different types of early stage investor active in the ecosystem. This is just my experience and perception, but since these observations underpin my lessons learned, it makes sense to spell them out here.

Angel investors are those early stage folks who mostly write $25K-$150K checks out of their personal funds to back a company early. They’re usually people who’ve had a good exit from the industry or have risen in it enough to qualify as an Accredited Investor – they’ve got their own nose for picking winners and often their main payoff is the emotional satisfaction from investing (paying it forward, giving back, being able to share the excitement of the early stage journey from a front row seat) – early stage companies are so risky most Angels would get better financial returns from playing table games in Vegas. As a very small time angel investor myself (through Startmate) I treat every check I write as a donation in the balance-sheet of my mind.

Seed Funds
Seed Funds are those early stage investors who mostly write $750K-$1MM checks for companies that have shown some promise and have achieved more traction or have a more compelling team/vision/opportunity that allows them to bypass (or combine) angel investors. They tend to raise smaller funds (anywhere from $10MM around $100MM, but they’re raising more too) to invest in startups, and most of the time they’re backing companies based on their belief of their ability to get to a Series A.

Most of the time these Seed Funds are newer and as they prove out their track record they raise larger and larger funds which let them write bigger checks and graduate into “VC Funds” land – you could argue that some of the names below are already there.

Prominent examples of these types of funds are SoftTech VC (2015 fund was $85MM), XSeed (2012 fund was $60MM), 500 Startups ($100MM in 2013), Illuminate Ventures and Costanoa Ventures ($135MM in 2015).

VC Funds
VC Funds are the folks with the big firepower – they raise many hundreds of millions, sometimes into the billions from their investors to then put to work investing in startups. Names like Kleiner Perkins ($525MM fund in 2015), Sequoia ($700MM in 2010), Andreessen Horowitz ($1.5B in 2014), Accel ($475M just for early stage in 2014), Greylock ($1B in 2014) and Benchmark ($425MM in 2013) are prominent in this category.

These funds invest in companies they think can be IPOs and billion dollar exits, and while some of them do seed investing (often writing $500K checks alongside others) they really get into the game and place their bets at the Series A stage (all the partners I’ve spoken to at these firms who do seed investing just to get the inside run on the Series A) and then follow on (or join in someone else’s party) in Series B and later stages.

OK, now we’ve gotten that out of the way, let’s look more closely at SaaS companies, and more specifically, the rule of thumb around how they’re valued.

SaaS Valuations

Valuations are a funny thing – the true answer is that a company is worth what someone will pay for it. In early stage SaaS, however, when there’s a lot of uncertainty but there’s some proof points, a good rule of thumb is to consider the valuation of the business as being 10x annual recurring revenue (ARR). Applying this rule of thumb, if you’re doing $50K in monthly recurring revenues, your current rule of thumb valuation $6MM.

Now, if your SaaS business is growing fast (more than tripling or doing 200% a year in revenue growth), you can expect to see this multiple move up to 15x-20x. If you’ve tapped into something super lucrative and frictionless (Zenefits, Slack) you’ll see these multiples go a lot higher because investors are happy to overpay now if they’re very confident you’ll be worth that higher price very soon. While we all like to obsess about outliers (and aspire to be one), it makes sense to look at the more general case of a successful SaaS business that has solved a real problem and is doubling revenues year on year.

The reason for bringing up valuations is that the process of raising equity funding involves “selling” some of the company to new investors (although mostly by issuing new stock, so the company gets the money, not existing shareholders). You might think that raising $2MM for a company that is valued at $6MM is much the same as raising $2MM for a company valued at $40MM – you’re just selling a smaller percentage of equity – but you’d be wrong because investors have different needs.

Incentives for Early Stage Investors

For everyone in the early stage except the Angels (and sometimes also them), there’s a very strong incentive for an investor to buy 15%-20% of startup when they invest in a funding round. In fact, from talking to dozens of investors and many more entrepreneurs about it, the percentage is actually the fixed aspect in the investing formula – increasing the check size just increases the valuation, but the percentage is the piece that is fixed in place.

The reason for this is that investors know many of their investments are going to be duds and return nothing at all, some will return nicely, and occasionally they’ll get a massive home run which makes almost of the money in the fund. It is known as a power-law, and Peter Thiel and Marc Andreessen do a great job explaining it. The consequence of this arrangement is that investors want to make sure they have a meaningful piece of each company they invest in (they believe each one will be the home run when they invest, otherwise they’d pass) so the returns are great if they’re right. They’re also conscious of their own time in selecting and then working with/helping a startup they invest in – if they only have 5% of a company, they’ll be a lot less excited to work alongside those founders than they would be for a company they own 25% of.

So, if the percentage is the thing that investors doggedly stick to and the valuation rises and falls with the check size (amount they invest in that round), why is there a death zone? Well, it turns out that check size is in many ways defined by the size of the fund and funds aren’t nearly as flexible as we’d like.

Fund Size and Check Size

The early stage business model for a fund (Seed or VC) is pretty similar – the fund raises money from Limited Partners (LPs) who are looking for a return on their investment – usually they’re wealthy family offices, college endowments, pension funds, etc. When the LP invests in a fund, they’re handing over their money for a period of 10 years (roughly). The fund then invests that money in startups, front-loaded often into the first 3 years, and then “follows on” with the successful businesses to keep their percentage as high as possible through future rounds of investment.

Seed Fund Check Sizes

To use a specific example, let’s look at a Seed Fund which has raised $60MM (to keep the math easy). With a $60MM fund, the investor is basically saying they’re going to invest $20MM a year for the first 3 years (leaving the back 7 for the companies to “exit” and return the cash through an IPO or sale). In reality, though, they’re not spending $20MM each year – when they invest they keep funds in reserve for each investment so they can “follow on” in future rounds and maintain their stake. While the ratio of first money to follow on reserve for each fund varies a bit, from the early stage funds I’ve spoken with the ratio tends to be around 1:2, or one third up front, two thirds for follow on.

This means of the $20MM per year they’re trying to commit for the first three years of the fund, they’re actually writing $7MM in new money checks, and keeping $13MM to follow-on with the future rounds of funding for the successful companies.

Dividing this $7MM through, if they’re doing 8 deals a year (two a quarter is a good rule of thumb), they’re writing an average $875K check, meaning they’re probably tapped out writing checks much past $1MM for their first money in.

VC Fund Check Sizes

Now let’s look at a VC fund like Greylock Partners. They have the same fund lifespan (10 years), but they’re working with $1B (which is up from the $500MM fund they raised in 2005). This comes out to $333MM a year in the first three years of the fund’s life. These bigger funds aren’t putting all of their fire-power in at the early stage, but given the big multiple returns happen there it is probably fair to assume they’re putting half of their fund into early stage investments ($166MM a year), and using the 1:2 ratio between first round and follow on reserve, this means they’re needing to put to work $55.5MM a year in early stage deals. Assuming the fund is doing 8 of these Series A deals a year, they’re having to write a check of $6.93MM for each of those deals for the numbers to fall out. Looking at actual data, the average Series A round was $6.9MM in 2014, so this isn’t a bad general guess (and anecdotally prestigious firms like Greylock don’t fit into the average so the thought of them writing $7MM+ checks as part of above-average Series A deals makes a lot of sense).

You might be thinking, “well, these guys have a lot more money to play with – so why wouldn’t they do a deal where they buy 20% of my awesome startup for $3MM, spending half the money they do on average? That makes us a bargain!” In practice, this doesn’t happen much because the VCs know they have limited bandwidth and they really need to shovel this money from their LPs into startups to make it all work. If they were to invest an average of $3MM in a deal, they’d have to work twice as hard for their management fees – and they didn’t buy that place in Jackson Hole to leave it empty for months at a time.

They could of course write the same big check with your startup at a lower valuation, but then they’d be taking 40% of the company – crowding out the other shareholders, especially the ones who need to work their butts off for the next 5-7 years to get the company to an exit, which is why only predatory investors do this in the early stage.

Now, while it isn’t necessary for a Seed or a VC firm to be a slave to these averages (they might keep less in reserve to follow on because they’re on a tear and know they’ll be able to follow on with the next fund they’re out spruiking now), and there are certainly many exceptions that prove the rule, the size of the fund certainly does define the parameters of the partners when they’re writing checks – Jeff at SoftTech isn’t likely to write a $10MM check to a startup he really likes because that means sinking almost 12% of the current fund in one bet.

Looking at the fund size, check size, incentives and SaaS valuations together exposes the SaaS Fundraising Death Zone.

The Death Zone

When a SaaS startup is very early (little product, no revenue, showing promise), Angels will often invest on a convertible note, essentially an IOU which the company converts into investor shares at a future financing round. Commonly these rounds are in the neighborhood of $500K from 10-20 individual investors on a note often capped at $4MM (which gives an implied valuation of $4MM for the startup and means the angels collectively will have 12.5% of the company when they do a priced round).

Once the company has some traction and proof points, they’ll want to go beyond the prototype engineering team and invest money into acquiring customers. To do this, they’ll often raise a round from a Seed fund with more firepower than Angels can provide. Given Seed funds will want to write around a $1MM check, and because they want to target the 15%-20% ownership stake, the pre-money valuation at the Seed stage will likely be not much more than $6MM – which using the 10x ARR principle means the startup will be doing $50K in MRR if they’re doing well, or a lower amount of recurring revenue is their growth rate is awesome.

The company then puts the funds from their Seed round to work and builds the revenues up to $200K in MRR. Using our 10x rule of thumb, this gives them a pre-money valuation of $24MM, and a check of $6MM will give the investor at the Series-A a 20% stake of the business (post money). They then keep on building, raising money on the way as they need, and then either get acquired, go public, or completely screw it up and die.

The problem is the gap between $50K in MRR (where Seed funds top out) and $200K in MRR (where the VCs start to do their Series-A deals) – and it is a gap I’m calling the Fundraising Death Zone.


Entrepreneurs who try and raise between these two points are at a significant disadvantage – they’ve basically got four difficult options.

  1. You can accept the rules of the game and raise $1MM from a Seed fund at a lower valuation than they’re worth (the $6MM cap which still gives the Seed fund the % ownership they want). A lower value means more dilution (you can only sell equity once), but the Seed fund really can’t write a bigger check and if you need capital, you might have to take what you can get.
  2. You can convince the Seed fund investor to lower their percentage requirements. This isn’t easy at all and involves great salesmanship by the entrepreneur to convince the Seed fund investor that having a smaller percentage of a massive winner for a check size they can write is better than having 0% and missing out on the winner entirely because of their fixation on maintaining a certain percentage.
  3. You can convince the VC investor to give you a valuation your business don’t deserve (now) and raise a big round, which is the more common scenario if you’ve got something great going for you (reputation, team, media buzz, VCs or their portfolio companies use the product themselves, etc). This can however be a poison pill in the medium term because you need to earn the valuation you’ve been prematurely given, and then earn a future higher valuation to ensure you don’t end up with a down-round.
  4. You can convince the VC to write a smaller check, increasing their relative workload. This also requires a lot of salesmanship and the only way to really make this happen is to make it clear you’re coming back for a bigger check in the near future at terms that will be favorable to them (the balance of a check size they want at a not-crazy valuation).

Now, this doesn’t mean fundraising in the Death Zone is impossible – it just gets a lot harder. Professional investors are spoiled for choice in the early stage with lots of companies crossing their path, and when something doesn’t fit their pattern of valuation, stage and check size, it is a lot easier for them to pass and harder for you to build competition in the deal.

The real problem with the Death Zone is that it seems counter-intuitive – surely a company that is doing $120K in MRR can raise money a lot more easily than a company doing $50K in MRR? It is more than twice as successful revenue-wise, has been de-risked more and it is a lot harder to fake $120K in MRR than it is to get to $50K with some clever but unsustainable growth hacking. Investors must be a lot more into a company doing $120K than one doing $50K!?!? While it doesn’t make sense for entrepreneurs, the needs of early stage investors and the limits on the check sizes they will write means often this isn’t the case at all.

This counter-intuitive nature is the big risk for SaaS entrepreneurs. It makes logical sense to think “hey, we’ll hold off from fundraising now until our numbers are better, we’ll get a better valuation from better investors”. But the reality is, if you blow past $50K in MRR, you’re going to want to make sure you’ve got the internal resources to more than 4x the size of the company or else you’re going to face a shitty or much more difficult path to successful fundraising – especially if you need to raise capital in the Death Zone.

I hope this has been helpful – if you’ve had different experiences or have a different perspective, please share them in the comments below!