Fresh Insights

Analyses, Musings & Observations

Pitfalls of tech M&A

We just watched a company go through a very intense, distressed M&A process that fell apart in the final hour.  I want to share some of the hurdles that came up so that when you’re ready to sell, you’ll be prepared:   Protect your team from getting poached.  An acquirer is about to learn a…
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The most important B2C metric

Lifetime Value to Customer Acquisition Cost, or LTV/CAC, is the critical metric to watch for most B2C companies. Generally it’s thought that this figure needs to be north of 3x, meaning the customer is worth three times what he/she costs to acquire. Data from publicly traded companies is notoriously hard to find and indeed we…
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Over-rated: speed to market and market size

The two most over-rated factors in startups are market size and speed of expansion.  Too much emphasis on these factors could put your business at unnecessary risk and dramatically increase the chance of failure.  I’ll address each separately below.   Yesterday I had a founder whose business was in the wedding industry lament to me…
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Don’t say no to M&A

One of our companies will be visiting with a potential acquirer about what an acquisition might look like.  Even though the company is not for sale and hasn’t hired an investment bank, we’ve encouraged our portfolio company to take the meeting for a number of reasons.   Rarely do you get to choose when you…
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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 329 companies about their Series A rounds.  Below is aggregate data on these raises with names redacted to preserve confidentiality.  Figures like revenue, valuation, and round size are medians from conversations with founders.  Remember the valuations…
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Interviewing your VC

Hopefully you will be in the enviable position of selecting your VC.  If that’s your situation, you should interview your VC just as they are interviewing you.  Avoid asking the generic ‘how will you add value’ question and instead focus on these big topics:   How have you helped current or prior portfolio companies? This…
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What to do with VC emails

If you’re a startup on angelist, crunchbase, or have had any kind of publicity, chances are good that VC are emailing you about raising money.  Here are some tips to maximize the benefit of these inquiries:   Emails from decision makers are good.  Knowing principals, managing directors, and original founders at venture funds is a…
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Stop worrying about competitors

Many entrepreneurs we speak to obsess over what their competitors are doing.  They dig for information like how large the competitor is and how much money the competitor has raised.  While it’s good to know where you are in the market relative to peers, overly concerning yourself with what your competition is counter-productive.  Below are…
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Avoiding lawsuits

As the list of sureties go, add ‘getting sued’ alongside death and taxes.  Unfortunately you can and will be sued for anything at any time.  It’s not a matter of if, it’s a matter of when.  Below are the times I’ve seen companies most vulnerable to a suit:   You just raised a big round. …
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SaaS valuations made a comeback

SaaS multiples look great and made a nice comeback from Q4 2018: of the 72 SaaS companies we follow, the average public SaaS business is trading at 10.51x revenue while the median is 8.94x.  Interestingly, the gap between the average and median has never been larger for the time period shown, meaning more attractive SaaS…
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