Fresh Insights

Analyses, Musings & Observations

Bad advice from good investors

Below are some of the things investors say to early stage companies that is just wrong.   “Don’t take the first offer you get.” While true, this is a very misleading statement to make to a crowd of early stage founders.  It’s wrong to make early stage founders believe they will get all kinds of…
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What CEOs should and shouldnt do

We’ve invested in 23 companies since our founding and we’ve seen some CEO’s use their time much better than others.  In our view, below are the tasks a CEO should prioritize.   Partnering.  One of your priorities should be to build partnerships with bigger companies.  The reasons: i) larger partners ultimately become strategic acquirers that…
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Remove customer friction

How many clicks does it take someone to actually purchase your product? How many steps are between your customers’ dollars and your product? Do everything you can to make the purchasing process as frictionless as possible, because extra steps and friction are costing you sales.   While that seems obvious and intuitive, in practice companies…
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q3 Tech Valuations

Below are revenue multiples for publicly traded consumer tech companies we follow (B2C). Industries and therefore multiples vary widely. Commentary is below.     Social media popped to 13x. The highs in 2017 were ~14x, but a more normalized multiple historically has been around ~9x. Snapchat is at 18x after falling from 40x in Q4…
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1 in 3 wont be CEO at exit

When you finally exit or IPO, will you be the CEO or will someone else be running the company? It’s a great question so we dug into 135 tech IPO’s to figure it out. Specifically, we looked at the CEO at the time of IPO/exit and compared it to the list of key founders to…
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SaaS valuations higher than ever

Despite the current tumult, SaaS comps are showing unbelievable strength: of the 83 SaaS companies we follow, the average public SaaS business is trading at 17.9x revenue while the median is 12.2x. Interestingly, the gap between the average and median is still large (5.7x), meaning more attractive SaaS companies are being rewarded with big premiums….
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The right level of dev spend

We looked at the R&D spend of tech companies at IPO and in years prior to answer the question ‘what is the right level of spend on R&D’. The data is below and varies by industry.   SaaS spend is consistently a quarter of revenue. Leading up to the IPO, SaaS companies spent on median…
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The makeup of SaaS headcount

What percent of SaaS employees should be in R&D, or sales & marketing, or G&A? It’s a question that was recently posed to us, so we dove into the prospectus’ of 31 large and recognizable SaaS companies to find the data. Observations are below.   Median headcount. The median headcount of the dataset was 867…
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Strategic investors can hurt you

Often we hear founders get excited about strategic investors — corporations making venture investments — because the founders think the strategic investor will assist with the product roadmap, become a customer, intro the company to new customers, add credibility, and potentially acquire the company at some point. However, strategic investors have not been a benefit to our companies. Below…
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One way to grow in SaaS: M&A

Today Unity Software goes public. One very interesting graphic in their prospectus is below, which shows their journey to becoming a public company. It’s been a long road for Unity (founded 2004) as it is for most every successful company, but one thing that stands out is the number of acquisitions they’ve made along the…
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