Fresh Insights

Analyses, Musings & Observations

Founder Ownership at Exit

The list below shows founder or CEO ownership of 199 tech companies at IPO. The median level of founder ownership shown is 15% while the average is 20%. A few things to consider: The range is wide. Snapchat cofounders Evan Spiegel and Robert Murphy owned a combined 44% of Snapchat before it went public. Mark…
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VC ownership at exit

When tech companies exit by going public, how much of the company is owned by venture investors at that point? We looked at 199 tech IPO’s to find out. The data is below. Our big take-aways are below. Venture owns ~50%. Venture and other major investors own on median 53% and on average 52% of…
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Cash efficiency in SaaS

Cash efficiency is one of the most important metrics in SaaS. Since the revenue at SaaS companies is largely recurring, we measure it as ARR / net investment. Formulaically it’s revenue / [equity + debt — cash]. We did an analysis looking at cash efficiency of the 73 most recent publicly traded SaaS companies at the time…
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The investment required to IPO in SaaS

We looked at the net investment of the past 73 SaaS IPOs to determine how much capital it took them to get to IPO. According to that data, it takes $301mm on median and $643mm on average. The average is skewed by Mcafee, Palantir, Snowflake, Dynatrace, Powerschool, Evercommerce, Informatica, and Slack, all of whom raised…
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Rounds needed to go public

How many rounds has it taken the latest crop of tech companies to go public? Below is the data from the last 73 SaaS IPOs going back to October 2017 (MongoDB). Software. On median, publicly traded software companies raised through their Series E before going public. Note that Palantir went all the way through their…
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Getting 3 year contracts in SaaS

If you’re a SaaS business selling to enterprise, chances are good you’re selling 1 year contracts, paid up front, with auto-renewal subject to a 60 day out and automatic annual price escalators. That’s a fine, traditional contract structure in SaaS, but more and more we’re seeing companies open with longer contract terms. For instance, MeridianLink…
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The wrong way to drive upgrades

If you’re depending on your customer base to add users as a way to drive upsells, you’re doing it wrong. Here’s why: Charge based on value, not seats. You shouldn’t be charging the customer based on the number of seats/users they have on your platform. You should be charging based on the value and ROI…
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Contribution Margin Data in SaaS

Bill.com, SumoLogic, and Confluent are public SaaS companies with excellent customer performance. In their prospectus’, each of these companies was generous enough to share beautiful contribution margin data. Specifically, Bill.com shows the contribution margin of customers acquired in 2017, and SumoLogic and Confluent do it for customers acquired in 2018. It’s a very nice illustration…
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Board Meeting Best Practices

We’ve been a part of many board meetings.  Below are some of the best practices that should be adopted for a smooth and productive meeting.   Voting matters should be socialized prior to the board meeting. Don’t surprise board members with a vote they haven’t had time to think through, especially if the matter goes…
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Automatic price increases in SaaS contracts

Maintaining net dollar retention over 100% is critical to the health of your SaaS business and getting a premium valuation. One easy hack to improve NDR is to include automatic price escalators in your annual contracts with customers. Our portfolio companies do this, and the automatic price increase upon renewal is anywhere from 5% to…
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