SaaStr

JANUARY 27, 2024

Dear SaaStr: What are some common reasons for the failure of startups? My experience across leading 30+ seed investments, including 4 billion+ exits so far, on why startups fail: Not 200% committed to winning no matter what. How can these mistakes be avoided to increase their chances of success? Just not a huge one.

Startup 206

Startup Scale CTO Pricing 206

SaaStr

JANUARY 2, 2024

ARR, Zendesk today gets 14% of new business from startups. On top of that, if you look at their top accounts globally, 33 of the top 50 customers by ARR are startups. This is where they started, but startups weren’t adopting the product as much with a discount, and there was a lot of conflict with the sales team. A free term.

Startup 177

Startup Scale Underperforming Technical Team AWS 177

SaaStr

MARCH 25, 2024

Dear SaaStr: How Would You Invest a 5 Million Dollar Payout From an Acquisition? He still hadn’t figured out how to invest it! Here’s my best advice: First, resist the urge to invest in anything specific at first. Don’t invest in restaurants or real estate ventures you don’t understand.

Acquisition 189

Acquisition Investment Startup Marketing 189

SaaStr

DECEMBER 25, 2023

G2 had us back for another great deep dive on just where SaaS investing is there days, and it was a great panel: Accel Partner Arun Mathew Inspired Capital Founder & Managing Partner Alexa von Tobel Salesforce Ventures Managing Partner Paul Drews and Jason Lemkin! Low investment multiples pose a key challenge.

B2B 207

B2B Investment Venture Capital Scale 207

SaaStr

SEPTEMBER 13, 2022

Dear SaaStr: How Soon Do Startups Get Notified by VCs About Their Decision to Invest? Once a VC really wants to invest … you’ll know. Assume a VC doesn’t want to invest if you don’t hear back. More here : The post Dear SaaStr: How Soon Do Startups Get Notified by VCs About Their Decision to Invest?

Investment 181

Investment Startup Data Business 181

SaaStr

FEBRUARY 19, 2024

I don’t see it at the truly most successful startups. The issue is that it undermines trust in the investing, and hiring, processes if the founders don’t come last. But investing in startups requires a tremendous amount of trust. The post Tech and Startups Have Changed. Mock VCs if you want.

Startup 220

Startup Venture Capital Investment Scaling 220

Tom Tunguz

MARCH 8, 2022

Startups create products. When a business is ready to scale, a startup ought to develop an organizational roadmap. The question for early-stage startups is how to start building this structure. Most startups begin either with a product marketer or a demand generation specialist. Who should be the first marketing hire ?

Startup 361

Startup Acquisition Product Marketing Scaling 361

SaaStr

FEBRUARY 10, 2024

Dear SaaStr: How Big of a Return Are VCs Looking For in a Startup? 3x “net” (of fees and costs) is pretty darn solid, though for the fund overall — the cumulative returns of all the investments (usually 15–40) in a given fund. So if the VCs don’t “see” the chance of 10x or more, they’ll pass on investing.

Venture Capital 227

Venture Capital Startup Investment Leadership 227

SaaStr

APRIL 8, 2024

Dear SaaStr: Why Do VC Backed Startups Seem To Almost Always Be Running Out of Money? The #1 issue I see is not understanding what investments really are accretive — and which aren’t. Venture capital, if you raise it, is there to invest. And so the money goes far, far faster than anticipated. appeared first on SaaStr.

Sales Hiring 186

Sales Hiring Scale Startup Venture Capital 186

SaaStr

AUGUST 27, 2023

Dear SaaStr: How are Funds Invested by Venture Capital Firms? It varies of course, but roughly for bigger funds: Funds tend to invest in 20–40 startups over 2–4 years. Another way to see the math is that most funds put 1%-2% of “the fund” into each investment — initially. Sometimes a bit more, but not too much more.

Venture Capital 178

Venture Capital Investment Startup 178

SaaStr

SEPTEMBER 14, 2023

But with that out of the way, let’s talk just enough about financial accounting to explain why Big Tech Companies both acquire smaller ones — and do corporate VC investment. Because in the short-term, it often costs basically close to nothing to acquire a smaller startup with cash on hand, or do a corporate VC investment.

Acquisition 227

Acquisition Investment Headcount Banking 227

Tom Tunguz

OCTOBER 7, 2021

Passive venture capital investing is a relatively new idea. As later stage investors permeate venture capital, they are amassing index funds of startups. If the public equities market is any indication, passive investing is here to stay. Will venture capital investment dollars be split 50/50 as the public equities market is?

Venture Capital 363

Venture Capital Investment Government Startup 363

Andreessen Horowitz

FEBRUARY 22, 2024

a16z crypto is a venture capital fund that has been investing in crypto and web3 startups — across all stages — since 2013.

Investment 98

Investment Venture Capital Startup 98

SaaStr

FEBRUARY 21, 2020

Q: How does an investor protect himself when investing in a startup? Investing in startups actually requires a lot of trust by VCs and investors. This is more common in angel investing than you might think. And a lot of startups have some bad behavior here. It’s actually pretty hard. Not saying you would.

Investment 190

Investment Startup Banking 190

SaaStr

JANUARY 8, 2024

But it isn’t, so I’m going to try to help by being brutally direct: No VC on Planet Earth Wants to Invest in a Startup with Mediocre Growth None. Ask them if they’d invest again. Snail image from here ) The post Look, No VC Wants to Fund a Startup With So-So Growth. They’re in for a dollar.

Startup 310

Startup Investment Business 310

Andreessen Horowitz

MARCH 21, 2024

a16z crypto is a venture capital fund that has been investing in crypto and web3 startups — across all stages — since 2013.

Investment 82

Investment Venture Capital Startup 82

SaaStr

NOVEMBER 25, 2021

Traditional VCs usually reserve another 1x-2x of their first check for later investments. If the synergies are real, they’ll happen irrespective of some token investment. An investment won’t create a partnership. An investment may anoint one vendor in the space as the preferred vendor over competitors. Be realistic.

Outsourcing Services 337

Outsourcing Services Investment Venture Capital Pricing 337

Tom Tunguz

JULY 19, 2018

Differentiators are your startup’s competitive advantage. When a startup has established product market fit, the differentiator is clear. As the product team talks to customers, they are likely to hear feedback encouraging more investment in MMRs and neutralizers. Neutralizers mitigate competitive threat. Push through.

Investment 240

Investment Startup Churn Engineering 240

SaaStr

DECEMBER 18, 2023

So there’s an issue venture-backed startups need to be extra aware of in 2024: Reserves Exhaustion. Not the whole VC firm, but the specific fund that invested in you. Not the whole VC firm, but the specific fund that invested in you. It’s literally when a specific VC fund runs out of money. Even Really Good Ones.

Startup 206

Startup Investment Scaling 206

SaaStr

SEPTEMBER 14, 2023

But with that out of the way, let’s talk just enough about financial accounting to explain why Big Tech Companies both acquire smaller ones — and do corporate VC investment. Because in the short-term, it often costs basically close to nothing to acquire a smaller startup with cash on hand, or do a corporate VC investment.

Acquisition 194

Acquisition Investment Headcount Banking 194

SaaStr

AUGUST 9, 2022

Investments I've made that didn't work out: – Momentum investment – CEO a bit of bulls**t artist – CEO good at sales but weak product team / CTO. Investments I've made that had so-so outcomes: – CEO not better than me – CEO couldn't control burn rate – Not really SaaS.

Investment 256

Investment Sales Recruiting CTO Startup 256

Tom Tunguz

AUGUST 1, 2022

How much value does a successful software startup create per dollar of venture investment? Let’s call the value generated per venture dollar the MOIC (multiple on invested capital). Over the last 30 years, a venture dollar invested in a successful US software startup generated $10 of value.

Startup 325

Startup Software Pricing Investment 325

Tom Tunguz

SEPTEMBER 16, 2017

How much should a SaaS startup invest in sales and marketing at different stages of the business? Sales and marketing investment depends on many different factors including establishing product market fit, the business’s sales model (inside, field, freemium), and not least, cash balance and fundraising capacity.

Investment 274

Investment Startup Marketing SaaS 274

SaaStr

APRIL 10, 2023

However, what many businesses may overlook is the startup segment. Often, startups are lumped in with small businesses, yet this approach fails to recognize what motivates and attracts these early-stage companies. Why Seek Out Startups? How is it that you want to sell to startups differently than the rest of your customer base?”

Startup 196

Startup Scale SMB Venture Capital 196

Tom Tunguz

APRIL 27, 2022

Reflecting on this question a founder posed this week, I remembered how we came to be here, the three eras of startup pricing: cash-flow, multiples, and discount-to-future-value. The art of startup pricing in a recipe. $5m Startups were priced first on forward-revenue multiple. Web3/crypto startups are often priced this way.

Startup 269

Startup Venture Capital Pricing Investment 269

Tom Tunguz

MARCH 13, 2022

Thanks to the many readers who wrote in to Guess the Startup on Friday. I had three goals for the Guess the Startup Post. After all, an investor looking to buy the best database investment will have to choose between Ethereum and Mongo (amongst others). growth rate in a year would be the envy of most seed stage startups.

Startup 304

Startup Scale Retention Enterprise 304

SaaStr

JULY 29, 2022

But what about startups? Most VC funds “carry” startup investments at their last round price, unless their value has been materially impaired. Even if the startup isn’t quite a rocketship anymore, most smaller VC funds will stay hold it at the same value. And in the middle are growth funds and investments.

Startup 282

Startup Venture Capital SaaS Cloud 282

SaaStr

SEPTEMBER 2, 2023

But there are multiple ways to build a leader, and startup don’t always start off with high NRR even if they end up there. This relationship is a rare example of increasing returns from investment in upsells and cross-sells. This is a rare example of increasing returns from investment in upsells and cross-sells.

Startup 241

Startup SaaS SMB Banking 241

SaaStr

MARCH 28, 2023

SVB failing was a stunning moment in the history of startups. The bank startups had used for decades. A week ago this morning, our bank balances still read as follows: pic.twitter.com/h4kTDaDFeb — Jason Be Kind Lemkin  (@jasonlk) March 19, 2023 So … where did startups that took out their cash put it?

Startup 252

Startup Banking Finance Consulting 252

SaaStr

MAY 12, 2023

This is consistent with my experience and across 30+ investments. More at the full report here : The post SaaS Capital: Across 1,500 SaaS Startups, Yearly Contracts Don’t Actually Increase NRR appeared first on SaaStr. So keep increasing that NRR target as you march to $20m ARR!

Startup 305

Startup SaaS Retention Churn 305

SaaStr

AUGUST 1, 2022

Because in the Best of Times, there’s always more money to invest in top performers — and even mid-pack performer s. That really leaves just $120m to invest. (Yes, Yes, there are ways to “recycle” to get the amount available to invest up, but that’s not super important for this analysis). checks on average ($2.5m

Venture Capital 274

Venture Capital Startup Investment Pricing 274

SaaStr

DECEMBER 23, 2019

Q: Will VCs who invested in my startup be happy to exit with a 4-5x return after 4.5 So why isn’t 4x-5x good enough on any individual investment? So why isn’t 4x-5x good enough on any individual investment? If you put all the fund into 1 investment, then a 4x-5x return would be plenty. It’s hard to say.

Investment 232

Investment Startup 232

SaaStr

MAY 5, 2023

[link] So personally, with SaaStr Fund , I am what is called a “Solo GP” I’m the only general partner, and that means most of the eventual gains from any investment do go to me. So if SaaStr Fund is lucky enough to invest enough to own say 10% of your startup, that’s sort of like me owning 2% personally. (20%

Startup 223

Startup Investment 223

SaaStr

JULY 19, 2021

Q: How do VCs and investors find companies to invest in? Later stage VCs (Series B/C/D/E, etc) have it somewhat easier — they track startups breaking out and just reach-out. They track every startup that gets funded. They track who else invest. Because there are so, so many startups and not enough data (and awareness).

Investment 216

Investment Startup Data Revenue 216

Tom Tunguz

JULY 15, 2017

The article pointed to the seeming collapse in the amount of venture capital raised by San Francisco startups relative to other regions. The slowing of venture investment more broadly across the US serves as a backdrop to San Francisco’s particularly strong correction. Now it’s the Valley startups’ turn to raise.

Investment 203

Investment Startup Venture Capital Trends 203

SaaStr

SEPTEMBER 8, 2023

Dear SaaStr: How Do You Respond to a VC Who Says They Don’t Invest in Your Space? They almost certainly don’t invest in your space, at least not as your stage, with your risk profile, etc. -> At a higher level, you basically can’t convince a VC to invest in a space, an idea, a startup they genuinely aren’t interested in.

Investment 171

Investment Startup 171

Tom Tunguz

OCTOBER 3, 2022

There’s a prevailing narrative that the health of the Bay Area startup ecosystem faces challenges. San Francisco’s share of startup rounds by count has fallen from its perch ten years ago. In 2021, San Francisco Bay Area startups raised $126b. In 2019, US startups raised $126.4b. to $360b invested per year.

Startup 291

Startup Finance Investment Marketing 291