Fresh Insights

Analyses, Musings & Observations

Negotiate with your VC

I just read a book called Never Split the Difference by Chris Voss. Chris was one of the premiere FBI Hostage Negotiators in the world, and his tactics could be useful for negotiating with customers, vendors, and of course your VC. Excerpts from the book are below.   Create warmth by using first names. “I’m…
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Tech founder ownership levels

Snapchat cofounders Evan Spiegel and Robert Murphy owned a combined 44% of Snapchat before it went public. Mark Zuckerberg owned 31% of Facebook, Sergey Brin and Larry Page owned 31% of Google, the founders of Eventbrite owned 35%, and Reed Hastings owned 24% of NetFlix. These are remarkable levels of CEO ownership upon going public/exit,…
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The acceptable level of SaaS burn

Of the 62 SaaS businesses that have gone public which we follow, 51 of them were not profitable at the time they went public; that’s 82%. Clearly a certain level of burn is ok so long as you’re growing, but what is that level? Can you lose $1 for every $1 of revenue? Can you…
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SaaS best practices

Last week we met with a SaaS business that in our view is doing literally everything right.  Below some of my notes which I think any software executive will find helpful.   Customer Success.  At this company, customer success reps are specialized by industry so that they can speak the customer’s language and develop some…
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Protecting founders from dilution

Valuation is more important than capital raised to preserve your ownership. To determine this, we looked at founder ownership relative to equity raised for 110 publicly traded tech companies. Our goal was to see if founders that raised less capital owned more equity upon exit, and vice versa, founders that raised more capital owned less…
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VC may not be for you

A good friend of mine just exited the business he founded for $25mm. Since he built the business on so little outside investment, he owned 52% at exit and took home $13mm. This type of exit brings up an important point: too many founders take a typical venture approach which is to focus on the…
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Tech company cash efficiency metrics

Cash efficiency is as important as growth, especially when you’re a fast growing, cash burning startup with limited capital. One measure of cash efficiency is revenue/total capital invested. When you’re in early revenue the metric will look abysmal, but as the business grows and realizes economies of scale (generally $2mm+ of revenue), the measure improves….
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Capital raised by tech companies

What’s the level of investment needed to build a tech company that goes public? The data and observations from 151 tech IPOs are below. Software businesses needed $137mm of equity. On median, publicly traded software companies raised $137mm through their Series D before going public. Note the average equity raised of the 11 companies that IPO’d…
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Tech co’s need 4 to 5 rounds to exit

How many rounds has it historically taken tech companies to go public? Based on the data from 150 IPO’s, the answer varies depending on industry. The data and observations are below. On median, publicly traded software companies raised through their Series D before going public. On median, software companies take 10 years to exit. Social…
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Revenue multiples in consumer tech

Below are revenue multiples for publicly traded consumer tech companies we follow (B2C). Industries vary widely. Commentary is below. Social media is settled around ~8x. The median revenue multiple is now 7.5x and the last 4 quarters are averaging 7.9x. While the revenue multiple is still strong, it’s down from a highs of ~14x in…
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