Fresh Insights

Analyses, Musings & Observations

Advice from the 2008 recession

Software Equity Group, an outstanding investment bank that has sold some of our companies for us in the past, put on a webinar with 3 CEO’s who lived through the Great Recession.  Their advice was excellent.  I paraphrase some of it below.   Normalcy will be delayed.  During World War II, normalcy was ultimately achieved…
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Post-mortem on a SaaS death

At the link below is one of the best startup post-mortems I’ve ever read. It’s by a founder of a company called Moz. The business had fantastic growth out of the gate, took on major VC money, tried to scale too quickly letting hiring and costs got ahead of growth, and ultimately they had to…
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What big funds look for in a CEO

Recently, we got a hold of an investor letter from one of New York’s finest late stage venture funds.  The letter shared insights into what the fund looks for in a management team, which resonated with us.  Below we share these points, verbatim.   We like CEOs that are patient with us and believe that…
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The case against accelerators

Years ago, accelerators provided a lot of value for upstart entrepreneurs.  Someone with no startup expertise that needed real guidance and mentorship regarding business formation, business models, processes, and investor introductions could get all of the above from a boot camp style accelerator.  But as the accelerator model has become more popular and accelerators have…
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Upsells are the new growth driver

Net dollar retention is the most important metric in SaaS. If you’re over 100%, revenue from upsells is outpacing revenue you’re losing from downgrades and churn. It means you’re keeping the customer base forever, and your current customers are a major source of growth. The latter is a wonderful bonus that isn’t well understood and…
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Building an ecommerce powerhouse

“By Invitation Only” is the story of Gilt Groupe. While Gilt may not have been a great outcome for some investors (it ultimately exited for $250mm but was at one time a unicorn), the book has a number of great take-aways for ecommerce businesses.     It’s easier to move a brand down market than…
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Controlling SaaS churn

The bane of every SaaS business is churn. Nothing is more discouraging than a great sales month being offset by a heavy month of churn. Churn happens at every SaaS business and the general rule of thumb is 20%+ of annual gross dollar churn is a problem, 10% to 15% is good, and anything lower…
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Cash efficiency compounds founder ownership

There’s a compelling reason to keep burn down and be cash efficient: it limits founder dilution. The less money you raise, the less dilution founders absorb, but what many founders don’t realize is that the relationship is not linear. In other words, being cash efficient has a compounding effect on limiting founder dilution: in a…
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Revenue multiples in B2C

Below are revenue multiples for publicly traded consumer tech companies we follow (B2C). The data is as of March 31st. Industries and therefore multiples vary widely. Commentary is below.   Social media fell hard to 6.9x. The highs in 2017 were ~14x, but in this environment, ad sales will be down hence multiples have contracted…
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Layoffs done right

At some point you may have to lay off a chunk of your team to reduce burn, especially now.  Large layoffs at a startup are particularly challenging because the team is small (less than 30 people), everyone works in the same office, and the impact to the culture can be dramatic.  Additionally since group layoffs…
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