Fresh Insights

Analyses, Musings & Observations

The components of an M&A bid

Someone wants to buy your business? Awesome.  Before you spend a bunch of time with the acquirer, below are the details you’ll need to know.  Much of the language is taken verbatim from a bid instruction letter that one of our investment bankers supplied us with.   Purchase price and form of consideration.  The purchase…
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SaaS revenue per employee

We took a look at the employee count and revenue of 84 publicly traded SaaS companies to determine revenue per employee. The data is below and shows a median of $260k. For newer companies that IPO’d after 2018, the median is $232k.   Observations are below: Correlation is strong. The correlation between employee count and…
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LTV and cohort goals in ecommerce

The holy grail of ecommerce is to grow your cohorts over time. In other words, the customers you acquire today spend even more the following year and year after that, such that your existing customer base is a source of growth. It’s a very healthy position to be in as you aren’t dependent on acquiring…
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Learnings from Twitter’s early days

Recently I read Nick Bolton’s book “Hatching Twitter.” It is the story of Twitter and it is fantastic. Below I paraphrased some of my favorite sections, but if there is any book about startups to read, this is it.     One of the founders had started Blogger. “Ev explained that Google had approached Ev…
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Tech co’s dont need to be profitable

I cringe writing that title because we’re believers in cash efficiency and achieving cash break even. However, when we looked at 129 tech companies at IPO, 93 of them were not profitable (72%) and 79 were not generating positive cash flow (61%). The data and additional observations are below.     Ecommerce, Hardware, and Gaming…
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The most important SaaS metric – retention

Net dollar retention is the most important measure in SaaS. There are two ways to measure it: gross dollar retention and net dollar retention. Gross dollar retention looks at how much of the customer base you’ve kept year over year without including upgrades. For companies with annual contracted recurring revenue, it can be summarized as ARR…
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Lessons from a boostrapped exit

We recently had the chance to catch up with Chris Wood, one of the founders of Clario Medical Imaging, about his successful exit to Intelerad.  Clario Medical Imaging is workflow management software for radiologists.  Learnings from Chris’ story are below.   At first, Clario was unsuccessful.  Clario started in 2005.  The company had the license…
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Founder paydays at exit

When a startup founder shepherds his company to a successful exit (IPO), what are the paydays like? We dove into major tech IPO’s since 2018 to find out. Note that paydays aren’t necessarily what the founders took home at the IPO (shares are usually subject to a 6 month lockup), rather they’re what the founder…
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SaaS M&A exploded in Q3

We recently got Software Equity Group’s SaaS M&A Snapshot for Q3 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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Managing relationships with VC

If you’re a startup on angelist, crunchbase, or have had 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 good thing.   These…
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