Fresh Insights

Analyses, Musings & Observations

The amount of cash tech companies burn through to exit

What’s the level of investment needed to build a tech company that goes public?  The data and observations from 127 tech IPOs are below.       Software businesses needed $113mm of equity.  On median, publicly traded software companies raised through their Series D before going public, raising $113mm of equity to get there.  Note…
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Most companies exit by their Series D

How many rounds has it historically taken tech companies to go public?  Based on the data from 124 IPO’s, the answer varies depending on industry.  The data and observations are below.     Software businesses need 4 rounds.  On median, publicly traded software companies raised through their Series D before going public.  Note however that…
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Measuring the health of your B2C business

For any B2C business, cohort performance is critical.  A cohort is a set of customers acquired during a certain time period – for instance the January 2018 cohort is all customers acquired in January 2018.  Specifically, key metrics in evaluating cohort performance include looking at the marketing spend it took to acquire the cohort, the…
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How fast startups 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 129 tech companies in various industries that have IPO’d…
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B2C multiples are down

We follow 59 publicly traded consumer tech companies (B2C) in industries like social media, marketplaces, subscription, and ecommerce.  Given the diversity of industries, the multiples vary.  Below is the data along with a few observations.     Social media has been sliding.  The median revenue multiple is now 65x.  While the revenue multiple is still…
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What to do when you hate your VC

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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The Series A Valuation Report

What valuations are founders asking for when they raise their Series A? Since May 2018, we’ve had conversations with 222 companies about their Series A rounds.  Below is aggregate data on these 222 raises with names redacted to preserve confidentiality.  Figures like revenue, valuation, and round size are medians from conversations with founders.  Remember the…
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Measuring SaaS Health

Healthy SaaS businesses show a consistent ability to upsell their current customers every year, increasing the value of each customer cohort over time.  ZScaler, a SaaS business which recently went public, shows a wonderful example of this in their public filing.  Their cohort chart below shows the initial value of each annual cohort of customers…
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Don’t obsess over Average Contract Value

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…
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SaaS Multiples Cratered

It turns out SaaS isn’t immune to market conditions: of the 77 SaaS companies we follow, the average public SaaS business is trading at 8.07x revenue while the median is 6.66x. The average and median are down from 8.91x and 8.29x in November, respectively.  The drop in the median is significant in our view and…
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