Office Hours with Travis Bryant


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It’s time to start SaaS Office Hours again! Starting on May 14, I’ll be hosting a monthly event from the Redpoint San Francisco offices called SaaS Office Hours. During these two hours, we will discuss the tactical issues and questions facing seed and Series A SaaS companies in a small group. That’s why we call them Office Hours. We’ve done them in the past and they’ve been a great success. Rather than deliver presentations, SaaS Office Hours are meant to be casual, tactical and collaborative. Sometimes, we’ll invite guests for off-the-cuff conversations and Q&A focused on focused questions like how should I build my startup’s marketing team? How can I evangelize my product to developers? How do I create the right kind of recruiting process? In the past, we’ve welcomed guests Pete Koomen (founder of Optimizely), Kenny van Zant (architect of the flywheel GTM), Bill Macaitis (CMO at Zendesk and Continue reading "Office Hours with Travis Bryant"

The Three Strategic Questions Facing AI Agencies


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Since writing The AI Agency: A Novel GTM for Machine Learning Startups, I’ve been meeting many companies who operate this way. These startups use machine learning to disrupt an industry traditionally dominated by agencies: law, accounting, recruiting, translation, debt collection, marketing…the list is long. I will publish a landscape soon on the area. If you’re operating an AI Agency, I’d love to hear from you. In meeting many of these innovative businesses, I’ve observed they face three strategic questions. First, to sell to the agency or to be the agency? This is an early strategic question, perhaps the first strategic question an AI Agency will face. Many startups start out selling to agencies and then run into a wall. Classic agencies don’t value the software enough to engender pricing power, develop fast sales cycles, or change the operations of their business to maximize the value of the ML innovation. Continue reading "The Three Strategic Questions Facing AI Agencies"

Hustle As Strategy


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In a world where there are no secrets, where innovations are quickly imitated or become obsolete, the theory of competitive advantage may have had its day. Realistically, ask yourself, If all your competitors gave their strategic plans to each other, would it really make a difference?
In 1986, Amar Bhide wrote “Hustle as Strategy” for the Harvard Business Review. At the time, he was an assistant professor at HBS. He examined the dynamics within the financial services market. Why was Goldman Sachs earning so much in profits relative to its peers? It’s not a powerful new strategy that a new leader infuses into the organization. Instead, it’s about focus and hustle.
Opportunities to gain lasting advantage through blockbuster strategic moves are rare in any business. What mostly counts are vigor and nimbleness.
Finance, like many other industries, and many software segments, sells a commodity. What differentiates the best Continue reading "Hustle As Strategy"

Viewing Valuation as a Discount of Future Value


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Why does growth rate matter so much? Why does growth rate influence valuation so much? I was reading a book recently written by a hedge fund manager who discussed valuation frameworks. His explanation was one of the best I’ve come across. If your business is growing at 100% next year, then 90% the year after, and then about 80% the year after, the business will have grown by 3.4x. That’s the way I’ve always looked at company. But this hedge fund investor said it a different way: 85% of the value of the business will be created in the next 3 years. At 10% growth, the company’s value today is 77% of the value in three years. The value won’t change that much. It’s already the most of the size it will be. Same cup, same water, just a different perspective. The chart above shows how this changes with Continue reading "Viewing Valuation as a Discount of Future Value"

Do SaaS Startups Still Require Less Capital than 10 Years Ago?


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In 2014, I published a post called Do Startup Require Less Capital to Succeed than 10 Years Ago? It’s been five years and time to see how things have changed. In the analysis, I created a metric, the return on invested capital (ROIC). ROIC is the number of revenue dollars that one venture dollar bought. In other words, at IPO, how much revenue per VC dollar did the company generate. In 2014 we saw increasing efficiencies over time, which was very exciting because it reaffirmed the efficiency of SaaS go-to-market. The chart above updates that analysis. As a reminder, the bars represent the ROIC for 4 year buckets starting in the year marked on the x-axis. Startups going public from 2006-2009 showed a median ROIC of 0.42. One venture dollar bought forty-two cents at IPO. In 2010, one venture dollar bought $1.24 of revenue at IPO. If we
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Five Reasons to Sell End-to-End Products in Early Markets


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In early and developing markets, selling complete products is often a superior go to market strategy, rather than selling an innovation in a layer in the stack. This is true for five reasons. First, for early customers to generate value from a novel technology, that technology must solve a business problem completely. End-to-end products do that. Layers in the stack don’t. They optimize existing systems. In early markets, customers want to buy a car, not a better camshaft. Second, in early markets, most of the buyers don’t understand the nuances of the technology, whether it’s IoT platforms, or machine learning infrastructures, or data lakes. Everything is brand-new. So differentiating on one layer of the stack or a different feature within a layer doesn’t matter to the buyer. Why is a Kafka stream better than a Rabbit message queue? Unless you have operated large-scale internal data pipelines, you may Continue reading "Five Reasons to Sell End-to-End Products in Early Markets"

Benchmarking Zoom’s S-1:How 7 Key Metrics Stack Up


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In the past few years, Zoom has become a verb: the act of video conferencing someone. Eight years ago, Eric Yuan, former VP Engineering at WebEx left to create a business with a better video conferencing product. He and his team authored a new codec, which is far more resilient than others. The innovation results in higher quality calls. Focused on capital efficiency from the earliest days of the business, Eric has built a monster software business, with few comparisons in both absolute scale and efficiency. The company filed their S-1 on Friday. The company grew from $61m to $331m in revenue in the past three years. Zoom, growing at 148% and 119% in ‘18 and ‘19. Let’s put Zoom’s growth rates into context by comparing them to others within similar ACV ranges. Even at Zoom’s scale, across this peer set, Zoom is the fastest growing, edging New Relic by
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Puzzles, Not Problems


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Imagine-75 years ago-our Commencement date was listed as January 1, 1943. Our “last supper” date was December 12, 1942. It was in the main dining room. President Hopkins and Arthur Hayes Sulzberger, president and publisher of the New York Times, were the keynote speakers. No pomp, no valedictorian, no honorary degrees, no cap and gown, no family. The dinner ended with hugs and tears eyes. We scattered in different directions the next morning. We were facing World War II in its darkest moments…91% of the class was headed for the armed forces.
I went to a college that publishes a monthly magazine and sends it to graduates every month. In the back of the magazine, there’s a section that lists updates from alumni grouped by the year of graduation. As I read the latest issue, I found this paragraph on the first page of those alumni updates. It was written Continue reading "Puzzles, Not Problems"

Benchmarking PagerDuty’s S-1:How 7 Key Metrics Stack Up


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PagerDuty was founded in 2009 by 3 former Amazon engineers who were often on-call. To engineers, being on call means carrying a pager to respond to crises when software breaks or services go down. In the 10 years since that day, PagerDuty has built an exceptional business. Their product has evolved from on-call management, which includes routing calls, triaging alerts, and creating workflows to handle crises in real time; to an incident management platform that manages the standard operating procedures for responding to crises; to real-time operations dashboards that provide visibility and health scores for infrastructure. On Friday, the company published its S-1 and revealed to the world a very strong business. the company generated $107M of trailing 12 month revenue, services 33% of the Fortune 500, grew revenue at 48% and has a net retention rate of 139% across 10,800 customers. The average customer is worth about $10,000. Let’s
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Where Have All the Angels Gone?


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Rewind a decade. Angel investing was an important part of the Startupland ecosystem. Today, you can’t make the same argument. 2018 observed the fewest number of angel-led financing rounds since before 2010. Angels led 156 rounds last year, a figure that collapsed from 714 in 2015. In that same time period, the median angel round has fallen from $500k to $270k. And the total number of dollars invested by angels halved from a peak of $365M to $177M. Angel investing used to account for nearly one-quarter of the dollars at the very first round. Today, it’s 4.3%, an 81% decline. What’s happening to the very earliest stages of the fund raising market? The answer? Institutional seed has come to dominate the first round of capital. It’s massively outstripped any growth in angel investing, growing from about $0.5B annually to just about $4B in 8 years. Seed fund checks
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