Fresh Insights

Analyses, Musings & Observations

How long it really takes to exit

How many years will it take you to exit? 10 years is the generic answer, but that’s wrong. The data says depending on what industry you’re in, it might take as long as 11 years (hardware) or as few as 4 years (payments). We looked at 151 tech companies in various industries that have IPO’d…
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Tech founder ownership at exit

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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You hate your VC. Now what?

This happens.  Occasionally you and your investors/VC won’t see eye to eye or worse yet, you’re sideways with your VC and the relationship is acrimonious or hostile.  While I’ve never had a hostile relationship with a founder, certainly there are times where we’ve been in disagreement on major issues or a founder isn’t happy with…
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Stop Optimizing for ACV

Average Contract Value is (“ACV”) is a vanity metric that should be looked at as part of a group of ratios that include number of qualified leads, close ratio, sales cycle, and other critical sales metrics. It shouldn’t be put on a pedestal. Here is why: The world’s biggest and best software companies tend to…
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Profitability at exit is hard

Venture backed companies like Uber, WeWork, and Spotify, are unprofitable. Is this the norm or just a trend for the more recent vintage of high flying companies? To answer that question, we took a look at the operating income and free cash flow of 119 tech companies at the time they went public going as…
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The SaaS M&A Report – Q3

We recently got Software Equity Group’s SaaS M&A Snapshot for Q3 2019. SEG is an investment bank focused SaaS companies and they put out fantastic data on what they’re seeing in the market. Key observations from their latest report are as follows: Deal volume is still high. There were 314 M&A transactions in SaaS in…
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The Series A Valuation Report – Q3

What valuations are founders asking for when they raise their Series A? Since May 2018, we’ve had conversations with 517 companies about their Series A rounds. Below is aggregate data on these raises with names redacted to preserve confidentiality. Figures like revenue, valuation, and round size are medians from conversations with founders. Remember the valuations…
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SaaS multiples are holding strong

SaaS multiples are higher than they’ve been since we’ve tracked the data (Q4 2014): of the 79 SaaS companies we follow, the average public SaaS business is trading at 11.6x revenue while the median is 8.8x. Interestingly, the gap between the average and median continues to be large (2.8x), meaning more attractive SaaS companies are…
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How to measure SaaS sales efficiency

There are many ways to measure SaaS sales & marketing efficiency. One of the simplest is to look at revenue booked over a given time period divided by sales & marketing spend during the period (New Rev/S&M). While the sales & marketing expense in a period may not necessarily be attributable to a given period’s…
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Find your churn floor

Peloton’s prospectus (known as an S1) is fantastic in that the company shares a lot of data about the business. One trend however, really jumped out at us: while user engagement is increasing dramatically, churn is not declining. Below is a more detailed graphic which shows the trend. As you can see, old cohorts are…
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