Fresh Insights

Analyses, Musings & Observations

SaaS best practices in CS and sales

Last week we met with a SaaS business that in our view is doing literally everything right.  Below some of my notes which I think any software executive will find helpful.   Customer Success.  At this company, customer success reps are specialized by industry so that they can speak the customer’s language and develop some…
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VC Ownership of tech co’s 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 131 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 51% and on average 53%…
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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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Q2 SaaS M&A report

We recently got Software Equity Group’s SaaS M&A Snapshot for Q2 2020. SEG is an investment bank focused SaaS companies and they put out fantastic data on what they’re seeing in the market. They’re also a great firm if you’re looking for a banker (softwareequity.com or I can make an intro). Key observations from their…
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R&D spend at SaaS companies

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 90 publicly traded SaaS businesses at the time of IPO and 2 years prior to get a sense for how…
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Venture capital may not be 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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Measuring cash efficiency in tech

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 prior to exit

What’s the level of investment needed to build a tech company that goes public? The data and observations from 161 tech IPOs are below.   Software businesses needed $135mm of equity. On median, publicly traded software companies raised $135mm through their Series D before going public. Note the average equity raised of the 16 companies…
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How long will it take 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 156 tech companies in various industries that have IPO’d…
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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 us for…
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