Fresh Insights

Analyses, Musings & Observations

Venture investing is getting harder

We received a great presentation from the NVCA that reviewed the venture capital market in 2018.  One of my favorite slides along with commentary is below.       New VC Funds.  The number of new VC funds in 2018 was roughly flat with 2017 and lower than the figure from 2014 to 2016.  256…
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VC favoritism on the coasts will increase in 2019

We received a great presentation from the NVCA that reviewed the venture capital market in 2018.  One of my favorite slides along with commentary is below.       Fund Size.  Fund sizes for non-coastal VC have increased slightly to $25mm, although this figure is in line with 2013.  Fund size on the coasts however…
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Venture capital data in 2018

We received  a presentation the NVCA made recently that reviewed the venture capital market in 2018.   It’s a great presentation and the NVCA is the authority: NVCA advocates for public policy that supports the American entrepreneurial ecosystem.  One of my favorite slides along with commentary is below:     VC fundraising.  Venture capital firms raised…
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The right level of founder ownership

Snapchat cofounders Evan Spiegel and Robert Murphy owned a combined 37% of Snapchat before it went public.  Mark Zuckerberg owned 21% of Facebook, Sergey Brin and Larry Page owned 31% of Google, and Reed Hastings owned 24% of NetFlix.  These are remarkable levels of CEO ownership upon going public/exit, but such high levels aren’t always…
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SaaS companies spend 23% of revenue on R&D

Building out, maintaining, and upgrading a technology stack requires a constant commitment to developers and engineers, so what is an appropriate level of development or R&D expense for a successful SaaS business? We looked at 74 publicly traded SaaS businesses at the time of IPO and 2 years prior to get a sense for how…
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Becoming an investor

This weekend I met someone that asked the following: “I have $5,000.  How should I invest it?” He’s an electrician with a young family, some savings, and he’s new to investing.  He probably expected me to steer him towards angel investing or venture capital, but those are completely wrong for a new investor.  If you’ve…
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Strategic investors can hurt you

Often we hear founders get excited about strategic investors – corporations making venture investments – because the founders think the strategic investor will assist with the product roadmap, become a customer, intro the company to new customers, add credibility, and potentially acquire the company at some point.  However, strategic investors have not been a benefit…
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Venture capital may be wrong 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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Cash efficiency is critical to exit

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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