Fresh Insights

Analyses, Musings & Observations

Moving to California improves your odds dramatically

California has always been a magnet for venture capital, attracting 50% to 60% of all  venture capital invested annually.  But, does this mean California is where the most successful tech companies are? After all, raising capital is not synonymous with success.   To answer the question, we looked at the headquarters of 139 publicly traded…
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Advice on selling your business from an investment banker

Recently an investment banker named Tom Metz was kind of enough to share his book with me entitled “Perfect Your Exit Strategy”.  It’s about going through an exit with an investment banker.  Below are direct quotes I found most informative but it’s well worth the read. “Business owners should begin thinking about their exit strategies…
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Startup learnings from the best founders in the world

Founders at Work interviews founders of well known technology companies about their earliest days.  It’s well worth the full read, but below I summarized portions that really stood out to me. Introduction   “Perseverance is important because, in a startup, nothing goes according to plan. Founders live day to day with a sense of uncertainty,…
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You don’t need to be profitable to exit

I cringe writing that title because we’re sticklers for cash efficiency and achieving cash break even. However, we looked at tech 94 companies at IPO and determined 72 of them were not profitable (77%) and 60 were not generating positive cash flow (64%).  The data and additional observations are below.     Ecommerce, Hardware, and…
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The hidden upside of debt covenants

Debt covenants can be scary. If you trip a covenant such as minimum net revenue, minimum liquidity, or minimum EBITDA, you’re in default.  Your lender: i) will look to you to remedy the situation immediately (perhaps by raising more equity which means dilution); ii) may increase the pricing of the loan in the form of…
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Are Strategic Investors Important? No

Entrepreneurs are always looking for “Strategic Investors” – corporate VC such as Intel, Verizon, SAP, Microsoft, etc.  The view is that these investors provide not only capital, but also guidance on the product roadmap, engineering/dev resources, critical introductions, and they’re often customers themselves.   For instance Cloudera was 22% owned by Intel prior to the IPO. …
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Customer success is all about contact

Recently we met a company with phenomenal net revenue retention. They almost never lose a customer and have a tremendous level of upgrades, easily outpacing churn and downgrades. Below are key learnings from their customer success team:   Frequent contact is critical.  The Company has weekly meetings with all of their big accounts.  Smaller accounts…
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Stop giving shares to “Advisors”

A founder of a startup at the seed stage recently asked “so what’s the right amount of equity to give to advisors?” The answer is none.   Here is why.   No one cares who your advisors are. We’re a Series A investor and never have I ever asked “so who are your advisors?” It’s just…
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SaaS performs well in a recession

SaaS Capital, a lender to software businesses, put out an excellent research piece which examined the performance of publicly traded SaaS businesses during the recession.  The 3 page research report is well worth the read, and we decided to summarize some of the findings. Below is the data and under that are observations.   The…
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Starting a consumer products business

Recently we spoke to Austin Eudaly, founder of Tom & Sheri’s Products, Inc. which produces a premium wrinkle releaser spray for clothing for consumers.  Founded in Dallas where the company also does the bottling, Tom & Sheri’s is off to a strong start. Austin shared with us his experience and insight in starting an ecommerce/CPG…
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