Fresh Insights

Analyses, Musings & Observations

Tech company cash efficiency metrics

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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Capital raised by tech companies

What’s the level of investment needed to build a tech company that goes public? The data and observations from 151 tech IPOs are below. Software businesses needed $137mm of equity. On median, publicly traded software companies raised $137mm through their Series D before going public. Note the average equity raised of the 11 companies that IPO’d…
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Tech co’s need 4 to 5 rounds to exit

How many rounds has it historically taken tech companies to go public? Based on the data from 150 IPO’s, the answer varies depending on industry. The data and observations are below. On median, publicly traded software companies raised through their Series D before going public. On median, software companies take 10 years to exit. Social…
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Revenue multiples in consumer tech

Below are revenue multiples for publicly traded consumer tech companies we follow (B2C). Industries vary widely. Commentary is below. Social media is settled around ~8x. The median revenue multiple is now 7.5x and the last 4 quarters are averaging 7.9x. While the revenue multiple is still strong, it’s down from a highs of ~14x in…
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How long it really takes to 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 151 tech companies in various industries that have IPO’d…
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Tech founder ownership at exit

Snapchat cofounders Evan Spiegel and Robert Murphy owned a combined 44% of Snapchat before it went public. Mark Zuckerberg owned 31% of Facebook, Sergey Brin and Larry Page owned 31% of Google, the founders of Eventbrite owned 35%, and Reed Hastings owned 24% of NetFlix. These are remarkable levels of CEO ownership upon going public/exit,…
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You hate your VC. Now what?

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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Stop Optimizing for ACV

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 companies tend to…
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Profitability at exit is hard

Venture backed companies like Uber, WeWork, and Spotify, are unprofitable. Is this the norm or just a trend for the more recent vintage of high flying companies? To answer that question, we took a look at the operating income and free cash flow of 119 tech companies at the time they went public going as…
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The SaaS M&A Report – Q3

We recently got Software Equity Group’s SaaS M&A Snapshot for Q3 2019. SEG is an investment bank focused SaaS companies and they put out fantastic data on what they’re seeing in the market. Key observations from their latest report are as follows: Deal volume is still high. There were 314 M&A transactions in SaaS in…
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