Lessons Learned from 20 Years at the Leading Edge of SaaS

Over the weekend, I read Tien Tzuo’s book, Subscribed. Tien is the founder and CEO of Zuora, and former CSO/CMO at Salesforce, where he started in 1999. He has been working in SaaS for nearly 20 years. He’s a thought leader in the world of subscriptions, and I learned a tremendous amount from his book. There were three key themes that resonated with me. First, the shift to a subscription business model reinforces customer centricity. Second, pricing is one of the most powerful growth levers subscription companies have. Third, balancing customer mix across three-tier plans is critical to long-term success, and there is a right way to think about it. In the book, Tien talks about Fender, the guitar company. Though tens of thousands of people have salivated over Fender’s guitars - notably Wayne Campbell and his love affair with the Stratocaster - 90% of people who pick up a Continue reading "Lessons Learned from 20 Years at the Leading Edge of SaaS"

Does Winner Take Most in SaaS?

There’s a theory to the idea that winner takes most in Startupland. The startup that grows a bit faster at the beginning demonstrates more momentum. The startup raises capital sooner, hires people, builds the product, markets and sells the product, grows more, and raises capital. Repeat the process for each round of capital. Is it borne out in reality? This theory suggests that irrespective of the category, the winner should capture most of the market value. Reality is far more complicated than this simple idea. After all, most startups face turbulence in their journey. Venture capitalists finance competitors to pursue a market opportunity. M&A environments ebb and flow. Undisclosed private sales or private valuations aren’t considered. Plus, survivorship bias plagues this analysis. Setting all of that aside, I put together a basic data set across different software sectors. I examined 11 sectors which benefited from meaningful exit activity over the Continue reading "Does Winner Take Most in SaaS?"

A Deeper Dive into the Dynamics of the Seed Market

Earlier this week, I wrote about the collapse in the number of seed investments. I received many questions about the data, all the same. Why is this happening? This is a deeper dive into the data. First, there are fewer seed investors participating in the market than in 2015, about 40% fewer. Second, many of the most active seed investors and institutional seed funds are investing in fewer companies. The largest accelerators in the US buck the trend, however. The lines in gray trace the investment counts by firm. The red sketches a smoothed aggregation. Third, all but one of the most active venture capital funds have reduced their seed investment activity. In aggregate volumes have declined by half. Fourth, syndicates size haven’t changed. The average number of major investors buying at the seed has remained about 2.7 investors per round throughout the gyrations of the market. And the
Continue reading "A Deeper Dive into the Dynamics of the Seed Market"

A Deeper Dive into the Dynamics of the Seed Market

Earlier this week, I wrote about the collapse in the number of seed investments. I received many questions about the data, all the same. Why is this happening? This is a deeper dive into the data. First, there are fewer seed investors participating in the market than in 2015, about 40% fewer. Second, many of the most active seed investors and institutional seed funds are investing in fewer companies. The largest accelerators in the US buck the trend, however. The lines in gray trace the investment counts by firm. The red sketches a smoothed aggregation. Third, all but one of the most active venture capital funds have reduced their seed investment activity. In aggregate volumes have declined by half. Fourth, syndicates size haven’t changed. The average number of major investors buying at the seed has remained about 2.7 investors per round throughout the gyrations of the market. And the
Continue reading "A Deeper Dive into the Dynamics of the Seed Market"

A Deeper Dive into the Dynamics of the Seed Market

Earlier this week, I wrote about the collapse in the number of seed investments. I received many questions about the data, all the same. Why is this happening? This is a deeper dive into the data. First, there are fewer seed investors participating in the market than in 2015, about 40% fewer. Second, many of the most active seed investors and institutional seed funds are investing in fewer companies. The largest accelerators in the US buck the trend, however. The lines in gray trace the investment counts by firm. The red sketches a smoothed aggregation. Third, all but one of the most active venture capital funds have reduced their seed investment activity. In aggregate volumes have declined by half. Fourth, syndicates size haven’t changed. The average number of major investors buying at the seed has remained about 2.7 investors per round throughout the gyrations of the market. And the
Continue reading "A Deeper Dive into the Dynamics of the Seed Market"

Why Series As are Much Easier to Raise in 2018 than the Past 5 Years

In the last six years, the median time between seed and Series A has more than tripled from about 200 days to about 750 days. Why? The seed market is in the midst of some secular changes. Seed rounds have declined 63% from their peak. Total dollars invested have fallen by 37%. But the median round size is up 3x in the same time period. In other words, investors are concentrating capital in fewer startups. Consequently, this smaller number of startups has substantially longer runway, fueling a longer gestation period to series A. In 2011, the median startup raised a $0.5M seed and a $3M Series A 9 months later. Today, the median startup raises a $1.5M seed and an $8M Series A 22 months later. Some of these startups wait more than 2 years, up to 6, 7 or 8 years, to raise the Series A. The
Continue reading "Why Series As are Much Easier to Raise in 2018 than the Past 5 Years"

Why Series As are Much Easier to Raise in 2018 than the Past 5 Years

In the last six years, the median time between seed and Series A has more than tripled from about 200 days to about 750 days. Why? The seed market is in the midst of some secular changes. Seed rounds have declined 63% from their peak. Total dollars invested have fallen by 37%. But the median round size is up 3x in the same time period. In other words, investors are concentrating capital in fewer startups. Consequently, this smaller number of startups has substantially longer runway, fueling a longer gestation period to series A. In 2011, the median startup raised a $0.5M seed and a $3M Series A 9 months later. Today, the median startup raises a $1.5M seed and an $8M Series A 22 months later. Some of these startups wait more than 2 years, up to 6, 7 or 8 years, to raise the Series A. The
Continue reading "Why Series As are Much Easier to Raise in 2018 than the Past 5 Years"

What I’m Grateful For

Earlier this week, Redpoint announced its 7th stage fund of $400M. Over the past 10 years that I’ve been Redpoint, I have seen our firm learn, evolve and grow in many different ways - important ways - that fill me with gratitude and pride. First, we have and will continue to plant trees we will not see. Our founders who started the firm about 20 years ago built the firm to endure for decades. They taught us the business and invested consistently in the future of firm. We plant trees outside the firm by contributing knowledge and connections through events, publishing and networking. Second, we’ve reinforced key values that have always been, and will always be core, to our culture. We have five: founders first, think independently together (brutal intellectual honesty); open source the org (transparency inside and out); move as one, have fun (team first, individual second; Continue reading "What I’m Grateful For"