What amount of revenue is required for a healthy exit for a startup in an industry that is worth tens of billions?

If you are going to sell — $10-$15m in recurring revenues is a GREAT time to sell. Relatively speaking, at least. $10m or so in ARR is often in my experience a “local maximum”. When your traction will be most valued by potential acquirers, because you’ve proven you are a market leader, with real revenues ($10m+), that the acquirer believes they can “easily” scale to hundreds of millions and beyond: And at $10m-$15m in ARR, usually you haven’t raised too much venture capital. So it’s fairly easy to get a deal done where everyone wins. More here: Acquisitions — If You Do Sell, Try to Make Sure It’s At a Local Maximum I’m not saying you actually should sell. But if you are going to sell — this is often a good time to do it. You can grow another 2x or 3x in revenues from this point, and not Continue reading "What amount of revenue is required for a healthy exit for a startup in an industry that is worth tens of billions?"

Do You Have a Weak Investor Syndicate?

Screen Shot 2016-02-25 at 12.59.42 PMNow that we’re in a Touch Less than The Best of Times, an important but subtle issue is coming up for a lot of start-ups. A Weak Investor Syndicate. What does this mean? A Weak Investor or Syndicate, or group of investors:
  • Is all tapped out and has no more money to invest in the company.  This can happen even with great funds and investors.
  • Doesn’t want to do its pro rata.  Even if it has plenty of money; AND/OR
  • Can’t bring you good leads for the next round.  This can happen even if the current investors have fancy fund names.
Note something important.  This can, depends on scenarios, happen even if you have the best brands in your start-up.  And conversely, sometimes no-name funds can make a strong syndicate.  Social signals can be confusing here. First, as CEOs and founders — you need to know this.  Because if you Continue reading "Do You Have a Weak Investor Syndicate?"

Your Sales Efficiency Will Probably Plummet Toward $10m ARR. Plan For It.

Screen Shot 2016-03-20 at 5.49.30 PMWhen a great SaaS business starts to come together, and crosses Initial Traction ($1-$1.5m), growing nicely (8-10%+ Month-over-Month Growth) … often times, the founders start to see the first bit of real economic returns on the model.  It finally starts to make sense, this SaaS stuff. As you cross $2.5m, $3m in ARR, you can start to see a path to real cash flow and financial independence, even though you aren’t there quite yet.  Even if leads are still a bit lumpy, outbound is still stretching itself … you at least learn how to close by this point.  It’s repeating, and repeatable … finally. And often, if you are capital efficient, your marketing cost will be close to $0 at this point (you are barely spending anything to acquire most customers), and your sales costs are pretty predictable.  Your Magic Number is often well under 1.0 — you often
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Continue reading "Your Sales Efficiency Will Probably Plummet Toward $10m ARR. Plan For It."

Right Co-Founder … Wrong CEO

Screen Shot 2016-03-12 at 3.26.29 PMOn the investing side of life, the toughest meeting of all for me at least is probably the Right Co-Founder, Wrong CEO start-up.  Great product, driven team, good early product-market fit, great vision.  Check, check, check and check.  But clearly — the Other Co-Founder should be CEO. I always have to pass. And I think this is also one of the toughest companies to think about joining — or not — as a VP as well. It’s all looking strong, and yet … it’s really the other co-founder that should be CEO. Screen Shot 2016-03-12 at 3.26.29 PMThis happens with some regularity in SaaS, I’ve learned (and to be clear:  I’m not talking about any company I’ve invested in, am an advisor to, board member of, etc – :) Because when it’s still a very small team, with no true management team … co-founders can kind of hack it to $1m-$2m in ARR together.  And both really Continue reading "Right Co-Founder … Wrong CEO"