Julien Barbier

Three kinds of AI startups I’m especially excited to invest in and work with these days: 1. The Surprisingly Valuable Niche Workflow — small enough for OpenAI not to care about; big enough to make $100M per year. Sooo so many opportunities out there, from logistics to finance to healthcare to construction to manufacturing and on and on. 2. The Full-Stack Software Company — founders are realizing they can move up the value chain, to not just sell software to other businesses, but use their own software to provide end solutions to customers. Our own portfolio has inspired us here, from industrial solutions to life science to agrochemical to admin services and more. 3. The Bold Consumer Bet — it’s time for a new generation of consumer mainstays that are AI-native and fit the way people use software today. We don’t often invest in consumer apps, but we have seen great examples of this in language learning, personal finance, fashion, dating, social, messaging, etc. All three are great examples of building at new frontiers of the software-addressable economy, where advances in AI have opened up new opportunities for software founders. A good litmus test for this thesis: “If I had this idea 5 years ago, could I build it?” If the answer is no or maybe, you’re on the frontier. If you’re building something cool in one of these areas — or anywhere else on frontiers of the software-addressable economy — please get in touch with us at character.vc We’d love to learn from you. And we’d love to share how we help founders bridge the gap from possible to PMF in these categories.

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Distribution First, Monetization Later   Some of the most fascinating tech cos start with deceptively simple playbook: get distribution first, figure out monetization later. It sounds obvious, but it’s one of the hardest journeys. As they ride on the back of a sharp entry wedge - product that spreads like wildfire, with low CACs, but with limited ability to charge users Think of content plays - Whatsapp, TikTok, Pocket/Kuku or Fintechs -PhonePe, CRED (CC bills), Groww (direct MFs). They cracked an urgent painkiller use case but the trade-off was low ARPU.   Consumers voted with time / freq of use, not with wallets. So the real battle begins not in Act 1, but in Act 2 - converting eyeballs into $$.   The Act 2 Battle Act 2 is when the narrative shifts. Valuations, which in private markets can be driven by story/ user love, eventually have to converge with public market metrics - revenue, profits. Suddenly Q is: what will these users actually pay for? This is where the best founders earn their stripes: - CRED expanding to instant line of credit - packaged not as “loans” but as lifestyle liquidity, with single-bank partnership + <5 min approval (vs Paisabazaar catalog model) - Groww layering F&O on top of MFs - catering to India’s gambling instinct with a mobile-first, clean UX. - ShareChat/Eloelo driving creator gifting/ PK battles through live rooms via micropayments. - TikTok extending into TikTok Shop, micro-drama series These have produced some of the largest outcomes. Implicit bet is that owning demand is more valuable than owning supply early on. For every success, there is a death valley: cos that couldn’t crack monetization.   Few realizations stand out: 1) Cross-sell isn’t easy. It only works if the adjacency feels obvious. Avg cross sell adoption for any player lies in 10-15% range. CRED doing lending makes sense. Doing travel/ commerce? Less obvious. 2) Each new revenue line is a mini start-up. CRED’s PL or Groww’s F&O were not “features,” they were 0 to 1 journeys of their own. Distribution helps, but it doesn’t guarantee right-to-win 3) High freq use case is non-negotiable. It means higher shots at goal to cross sell. It also has to be quality of engagement, e.g., 2 sec UPI payment is too short to provide visibility to lending/ insurance offerings 4) Quality of data becomes moat. Consumertechs often rely on cross walk - offering what user is most likely to watch; in fintech, it's prop data that can help banks/ AMC match-make accurately 5) Act 1 wedges are “low friction” (bill payments, messaging, short videos) → habit-forming but shallow. Act 2 wedges require high trust + complexity (credit, investing, commerce). Often requires DNA shift 6) Fundraising is oxygen (often initial moat). Most players live on story-driven capital until monetization arrives. Virality ensures low CAC, but cash burn remains essential   History suggests that Act 1 is about love, Act 2 is about money. Only founders who master both build enduring outcomes.

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If you are an early-stage startup founder looking to raise money from VCs, then this guide on how VCs decide to take a first meeting would be super useful. This guide includes: 1. Team – How does a VC know your team is excellent? 2. Company – Describe what your company does in one sentence 3. Market – What is the market opportunity and why will it be big? 4. Business model – How do you make money? Who pays? What are the margins? 5. Geography – Where is the team based? 6. Number of Employees – How big is your team? 7. Timing – Why is now the right timing for your company? 8. Traction – What are the traction metrics that show what you have achieved so far? 9. Fundraising – How much do you want to raise? 10. Fundraising History – Who have you raised from, how much, and when? 11. Fit – What about this particular investor (or firm) makes you interested in meeting with them? 12. Referrer – Who introduced you to the VC? For a complete list and more details on each factor, take a look at the guide below. Credit: NFX ~~~~~ ♻️ Found this helpful? Repost it so your network can learn from it, too. And follow me, Fazlur Shah, for more content like this. #startups #entrepreneurship #venturecapital #investing

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YC S25 Demo Day recap: 4 checks, a $9M ARR surprise, and why hardtech is back 🔽 - YC made smart operational tweaks (faster check-in, silent headsets) that actually improved founder–investor collisions. - The room mixed YC regulars with a growing cohort of “we don’t do YC… except we kind of have to now” funds. - Hot rounds were closed or oversubscribed before the first pitch; if you need 3 meetings, you’re out. - The 1-minute pitch is a spark, not the sale. The real work happens in the long breaks, DMs, and handshake emails. - We wrote 4 checks this batch, including one company at $9M+ ARR and multiple bets in defense/hardtech. - My filter hasn’t changed: traction > taste. I’ll pass on shiny devtools with no acquisition engine. - Post-Demo Day: keep the YC pace; we stay close, help with GTM, and build a founder community that compounds. Read the full post here: https://lnkd.in/eTPuTcZb

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What's going on in the venture capital market? While we see very large, highly valued rounds for AI companies, many founders struggle to secure funding at all. 😳 I see 4 founder profiles in the market: 1️⃣ Serial founders or scale-up executives → They raise big rounds (+20m valuations) led by Tier1 VCs. 2️⃣ Founders with traction (100-200k ARR) → They usually find a pre-seed lead after multiple VC talks and then fill rounds quickly on average valuations. Only works for VC Cases. 3️⃣ Founders with little traction but competitive markets → They struggle with endless VC conversations that often lead nowhere. Better off raising angel rounds or bootstrapping. 4️⃣ Software founders bootstrapping → They build MVPs, start selling, and skip early rounds altogether—or wait for better momentum. What are pre-seed investors looking for in 2025? 👉 Proprietary data sources 👉 Strong domain knowledge (vertical SaaS is a win!) 👉 Real customer traction 👉 Deep-tech with a clear edge Fundraising strategy matters more than ever. Here’s what works: • Cluster VCs - don’t pitch your dream fund first. • Use early NOs as free feedback to improve your story. • One term sheet creates momentum - then the round fills up fast. What has been your experience raising in this market❓ #fundraising #venturecapital #investments 📸 Fabian Klima

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