November 10, 2017 Bryce Roberts via Medium : How We Think About Returns
About 5yrs ago the team at Basecamp (fka 37Signals) stopped editorial work on a section of their site they called Bootstrapped, Profitable and Proud (BPP). The stated purpose of the site was to “profiles companies that have over one million dollars in revenues, didn’t take VC, and are profitable”. Today, many view profitability as limiting or the acknowledgement that a founder has lost interest in hyper growth and has been lulled into the ease of running a mere “lifestyle business”. (read more…)
CATEGORY: alternative financing, profitability, resilience
November 9, 2017 Luke Kanies via Medium : If You Take Venture Capital, You’re Forcing Your Company To Exit
Modern venture capital is obviously successful, as demonstrated by the fact that five of the world’s six largest companies were funded by it. But success is as much about what you say ‘no’ to as what you say ‘yes’ to, and venture capital is no different. In addition to delivering massive collateral damage in the course of its work (more on that later), the prevalent VC model rejects all ideas that do not fit within its narrow definition of a “suitable” investment. (read more…)
CATEGORY: risk, VC, winner take all
October 27, 2017 Pitchbook : First-time funds keep on rolling
Unless you're Aaron Judge of the New York Yankees, rookies rarely perform better than veterans. But that's not the case for private equity funds. In our latest PE analyst note, we analyzed first-time global PE fund returns against the broader PE landscape. Even with the disadvantages that come with rookie funds—less experienced staff, smaller infrastructure, fewer back-office resources, etc.—first-time funds have outperformed follow-on funds by a significant degree. (read more…)
October 26, 2017 Founders Collective : Toxic VC and the marginal-dollar problem
Venture capital should come with a warning label. In our experience, VC kills more startups than slow customer adoption, technical debt and co-founder infighting — combined. VC should be a catalyst for growing companies, but, more commonly, it’s a toxic substance that destroys them. VC often compels companies to prematurely scale, which is typically a death sentence for startups. (read more…)
October 22, 2017 Jonathan Lu via Startup Grind : Using Experimental Design to set sales strategy in a SaaS Startup
Tom Tunguz, a partner at Redpoint Ventures and author of Winning with Data, recently wrote an insightful article titled Monte Carlo Simulations Of Inside And Outside Sales Teams In A SaaS Startup about the value of a balanced inside/outside sales approach. He ran a simple Monte Carlo simulation to express in probabilistic terms the benefit of following a barbell portfolio approach a la Nassim Taleb: balance the high predictability / fast sales-cycle of your inside sales team with the slow sales-cycle / high upside of your field sales team. From one math nerd to another, I loved Tom’s analytical approach to quantify what is qualitatively intuitive, and found myself wanting more. Experimental Design enriches this conclusion by showing the value of thicker barbell plates: empower those field sales reps who you rely on to swing big to get more at bats, and those inside sales reps who you rely on for consistency to close with greater regularity. (read more…)
October 20, 2017 Pitchbook : 2017 PE & VC Fund Performance Report
2016 marked the fifth consecutive year of positive net cashflows for both private equity and venture capital; however, net cashflows decreased significantly from 2015 to 2016. With investment activity remaining robust in 2017 while the pace of exits continues to decelerate, we expect the downward trend in net cashflows to persist. (read more…)
CATEGORY: valuation, VC
October 12, 2017 YCombinator : The Hidden Forces Behind Toutiao: China’s Content King
Toutiao launched in 2012. The app uses machine and deep learning algorithms to source and surface content that users will find most interesting. Toutiao’s underlying technology learns about readers through their usage – taps, swipes, time spent on each article, time of the day the user reads, pauses, comments, interactions with the content and location – but doesn’t require any explicit input from the user and is not built on their social graph. Today, each user is measured across millions of dimensions and the result is a personalized, extensive, and high-quality content feed for every user, each time they open the app. (read more…)
CATEGORY: customer acquisition, growth, product-market fit
October 12, 2017 Jon Westenberg via Medium : No, Trello Didn’t “Fail To Build A Billion Dollar Business
I have no real interest in billion dollar companies. I’m interested in companies that serve their customers, build amazing products and make money. If they happen to reach a billion, that’s great. But getting to a billion is not a goal that keeps me up at night. (read more…)
CATEGORY: growth, leadership, valuation
October 12, 2017 CRV via Medium : SaaS Waterfall Metrics 3–2–1
The calculations and definitions of SaaS businesses are fairly standardized, but the format of the data exchanged and reported on is all over the map. Having spent five years in the VC industry and seeing pretty much every variation of an up and to the right ARR chart out there (and down and to the right), I’ve decided to post my preferred format. Ideally this will prove helpful for startups and investors often juggling terminology and answering the question: “How did you do in Q1? (read more…)
October 9, 2017 Bryce Roberts via Medium : “Venture Scale”
In my experience as an investor over the last 15yrs, this is far and away the most used reason for investors to pass on making an investment. The idea, the product, the market, the team is simply not “venture scale”. (read more…)
CATEGORY: risk, VC, winner take all