Fresh Insights

Analyses, Musings & Observations

One big investor is a mistake

Whether you’re raising debt or equity, our advice is to get as many investors/lenders as possible.  While there are drawbacks to having a lot of investors, in our view the pros far outweigh the cons. The biggest cons of having lots of investors are that it makes the cap table larger meaning you may have…
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The LTV of $1 invested in SaaS is $6+

We recently did some research showing the typical SaaS company generates $0.58 of revenue per $1.00 of investment at the time they go public.  At that level of annual revenue, the lifetime value of a SaaS customer is anywhere between $6.93 and $13.14 for each $1.00 of investment assuming your net dollar retention is 110%…
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How much cash your SaaS co should burn

Cash efficiency is one of our favorite metrics in SaaS.  Measured as recurring revenue in the latest year / equity + debt invested, it’s every bit as important as growth.   We did an analysis looking at the revenue, equity, and debt of 88 publicly traded SaaS companies at the time they went public.  Using…
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Negotiating with investment bankers

Selecting an investment banker is a lot of work.  Below are the things you need to watch for in the engagement letter with an investment banker.   Term.  The term of the engagement is generally set at 1 year.  Anything beyond that is non-market.  Note that to run a responsible sales process, it will likely…
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The best M&A advice we’ve read

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.   Plan for the exit.  “Business owners should begin thinking about their exit strategies two…
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Advice on VC from great founders

The book ‘Founders at Work’ interviews well known tech founders 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…
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The Series A Report

What valuations are founders asking for when they raise their Series A? Since May 2018, we’ve had conversations with 437 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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What follow on capital really means

Being a small fund, one common question we get is whether we have follow on capital.  Like most VC’s, we do have follow on and generally invest more than we originally did when we follow on, but like most VC’s, our follow on capital comes with strings.  Here’s what VC don’t tell you about their…
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Strategic investors dont matter

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.   demand for strategic investors lead us to ask: how important are Strategic…
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Stop giving shares to advisors

  A startup founder recently asked “so what’s the right amount of equity to give to advisors?” The answer is none.   Here’s why.   No one cares who your advisors are. We’re a Series A investor and never have I asked “so who are your advisors?” It’s just not important.  What investors care about are…
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