How many founders regret raising from VCs?

You shouldn’t regret raising from VCs. After all, no one forces you to raise venture capital. In most scenarios. Perhaps you should regret who you raised from, though. Why no regrets in general? Well, there are I think 2 basic rules for founders and VC capital:
  • Raise it if you need it to get going. If you need it, no regrets. In my first 2 start-ups, I needed venture capital to get off the ground. Yes, there were conditions and dilution. But it didn’t matter. It was the only way to make it happen. It was binary. Required. So there should be no regrets here. I’d never have made a nickel or built either of my first 2 start-ups without VC capital.
  • Raise if it’s cheap and low drama. If you don’t need more money, but the price is good, your burn is low, and the drama is low … Continue reading "How many founders regret raising from VCs?"

What’s the best (geographically speaking) sales organization for enterprise SaaS in the US at $1M ARR/$30k average deal size? Do we have to/should we meet to close?

I think at $30k ACV, you’re in the range where being in Silicon Valley is worth the huge expense. Silicon Valley / SF is incredibly expensive. Rents, salaries, and perhaps most importantly, turnover. I’ve invested in 5 French start-ups. SF costs 2x Paris, fully burdened. It’s crazy. I think in 2018, it’s hard to justify a large sales organization in the Bay Area unless the unique expertise in SF is worth the cost. Self-service, freemium SaaS, apps that are inexpensive — you can start a sales team in SF, but scaling is very hard. Reps are too expensive, the churn is too high, and the numbers just don’t work after the first 5–10 sales reps. $30k ACV is probably the cut off. Here, you’re edging into a true solution sale. And having an experienced VP of Sales and VP of Marketing that know how to sell and market solutions is Continue reading "What’s the best (geographically speaking) sales organization for enterprise SaaS in the US at $1M ARR/$30k average deal size? Do we have to/should we meet to close?"

The mystery of the public marketplace

Note: This is the second article in a three-part series on valuation thoughts for common sectors of venture capital investment. The first article, which attempts to make sense of the SaaS revenue multiple, can be found here. The two most highly valued private tech companies (outside of China) are Uber and Airbnb, checking in with valuations of $69 billion and $31 billion, respectively (according to the Crunchbase Unicorn leaderboard). Like some of the most valuable companies in the world (Alibaba, Facebook, and Google), both also happen to be marketplace businesses, and their success has helped encourage a rush of venture capital investment in similar business models over the past several years. However, despite all this investment, public comps for marketplaces remain far thinner than those for SaaS — as of early January 2018, there were 42 publicly traded billion-dollar SaaS companies*, whereas only 14 marketplaces have broken
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The mystery of the public marketplace

The two most highly valued private tech companies (outside of China) are Uber and Airbnb. Both also happen to be marketplace businesses, and their success has helped encourage a rush of VC investment in similar business models over the past several years. But despite all this investment, public comps for marketplaces remain far thinner than those for SaaS.

The mystery of the public marketplace

 The two most highly valued private tech companies (outside of China) are Uber and Airbnb. Both also happen to be marketplace businesses, and their success has helped encourage a rush of VC investment in similar business models over the past several years. But despite all this investment, public comps for marketplaces remain far thinner than those for SaaS. Read More

Can You Scale Sales in the Bay Area? $30k ACV is Probably The Cut-Off

Silicon Valley / SF has gotten incredibly expensive. Rents, salaries, and perhaps most importantly, turnover. I’ve invested in 5 French start-ups. SF costs 2x Paris, fully burdened. It’s crazy.

And sales teams have gotten particularly expensive, because they don’t quite scale the same way engineers do.  You can pay great engineers a ton, eventually, because 1000s of folks can use the same software.  But you really do need Y reps for every $X00K of new bookings.  Sales gets more expensive as you add customers.  Engineering generally goes the other way, if you are doing it right. Why have sales teams gotten so exepnsive in SF?  It’s not just salaries and bonuses.  Those actually haven’t grown 2x in the past 5 years.  But the fully burdened cost probably has grown 2x, because:

How to Get the IRS to Fund Your R&D

Each year the US government provides billions of dollars to innovative businesses for developing new or improving existing technologies, products, materials, and processes, under the Research & Experimentation Tax Credit (R&D Tax Credit) program. The R&D Tax Credit is a general business tax credit under Internal Revenue Code section 41 for businesses that incur research and development (R&D) costs in the United States. The US R&D tax credit has been around since 1981. Previously, the program would periodically expire and be renewed by Congress. Businesses wishing to include this in their long-term budgeting plans couldn’t count on the credit being around for certain. But, in 2015, Congress made the R&D tax credit permanent as part of the Protecting Americans from Tax Hikes (PATH) Act of 2015 and also made key changes so that small businesses that are not profitable could benefit from the credit. The R&D tax program can be
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The Endless Dilemma on Personal Pay and Performance

Editor’s Note: This article first appeared on LinkedIn here. Does the following sound familiar?
“We want to reward people for their individual performance. We want it to be fair compared to others. We also expect that our top performers will see extraordinary rewards. Individuals control their own destiny / impact and therefore their rewards too…Yes yes yes. Lets do all of that!…Hmmm but how?”
Here are some practical ideas on how to successfully solve this dilemma:

1. Build a total rewards strategy first.

I am amazed at how many companies fail to take this foundational step. The answer typically is “We already have that in place. We know what matters when we give out compensation.” But my experience is that most organization don’t have this crystalized and are not as well aligned as CEOs and leaders think they are or want to be. I could write a
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Private Equity as an Exit Option for SaaS Startups

At Saastr, Jason and I discussed the role of private equity in SaaS on stage as a potential acquisition path for SaaS startups. Private equity hasn’t been a common exit route for venture backed startups in the past. But that’s changing. The chart above depicts the total disclosed value of US venture-backed SaaS startups which have been acquired by PE firms since 2010. The aggregate value has grown from zero to about $13B over that time period.

Private Equity as an Exit Option for SaaS Startups

At Saastr, Jason and I discussed the role of private equity in SaaS on stage as a potential acquisition path for SaaS startups. Private equity hasn’t been a common exit route for venture backed startups in the past. But that’s changing. The chart above depicts the total disclosed value of US venture-backed SaaS startups which have been acquired by PE firms since 2010. The aggregate value has grown from zero to about $13B over that time period. That’s roughly equal to the \$14B spent by corporate strategics in the same market. Said another way, PE firms are spending as much buying SaaS startups as corporate acquirers. What’s changed? There’s a surfeit of capital in private equity. The excess increases prices and valuation multiples for acquisition targets. The result? PE firms pay the same or greater multiples than corporate acquirers, which hasn’t been the case in the past. Deal sizes
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