Why You Probably Need More Money That You Think To Be a Professional Angel Investor


This post is curated by Keith Teare. It was written by Jason Lemkin. The original is [linked here]

Q: How much money do you need to be an angel investor?

You can dabble, but to do it right, you’d want to have at least $5m+ total to invest in all assets. So that you can do $500k-$1m in your angel investments.

Why?

Angel investing is risky, and

  • To do it right, you probably need to do 30–50 deals. Fewer, your odds of hitting the 1 big deal, the 1 unicorn, to make up for the losses goes way, way down.
  • At $25k per deal, then, you need $750k-$1m to do 30–50 deals. Sometimes you can do less per deal, but most Silicon Valley-style start-ups look for $25k+ checks from most angels.
  • You could — easily — lose it all. Losing > 10% of your assets is stressful. Losing 20%+ is downright scary. Too scary. You won’t take the right risks if the downside is too large.
  • If you are too worried about losing it all, you won’t invest enough, or in enough. Either not enough per deal, or worse, not in enough deals. Then you may not have enough diversity to hit 1 unicorn.

Sure, you can dabble with less. Take 5% of your cash and put it into whatever, just to learn.

But if you want to make real money from it, having less than $5m overall to invest in all assets, and investing > 10%-20% of that in start-ups, will hold you back from success.

View original question on quora

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How much bigger is a series B investment compared to series A?


This post is curated by Keith Teare. It was written by Jason Lemkin. The original is [linked here]

Q: How much bigger is a series B investment compared to series A?

While the answer of course is “it depends”, generally speaking, a B round should be 2x-3x the size of an A round.

Why?

  • Well, generally speaking, the increase in the size of the next round roughly suggests an increase in valuation.
  • And to raise the next raise, say a B from an A, you need to make progress. A lot of it. And if that progress is real (say 2x-3x more revenue, better metrics, a stronger management team), valuation should go up 2x or more.
  • And finally, if you double the valuation AND sell the same amount of the company, then the amount raised will also … double.

This is very rough. You might choose less dilution in the Series B. Or the valuation might not quite double.

But usually, if the B isn’t >2x the A … the company isn’t totally crushing it. And the expectations go up for each round. So it’s also harder to raise a B if you aren’t 2x-3x stronger than during the A.

View original question on quora

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How much bigger is a series B investment compared to series A?


This post is curated by Keith Teare. It was written by Jason Lemkin. The original is [linked here]

Q: How much bigger is a series B investment compared to series A?

While the answer of course is “it depends”, generally speaking, a B round should be 2x-3x the size of an A round.

Why?

  • Well, generally speaking, the increase in the size of the next round roughly suggests an increase in valuation.
  • And to raise the next raise, say a B from an A, you need to make progress. A lot of it. And if that progress is real (say 2x-3x more revenue, better metrics, a stronger management team), valuation should go up 2x or more.
  • And finally, if you double the valuation AND sell the same amount of the company, then the amount raised will also … double.

This is very rough. You might choose less dilution in the Series B. Or the valuation might not quite double.

But usually, if the B isn’t >2x the A … the company isn’t totally crushing it. And the expectations go up for each round. So it’s also harder to raise a B if you aren’t 2x-3x stronger than during the A.

View original question on quora

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Are there too many VC dollars seeking too few viable business opportunities in 2020?


This post is curated by Keith Teare. It was written by Jason Lemkin. The original is [linked here]

Q: Are there too many VC dollars seeking too few viable business opportunities in 2020?

Of course not.

On the one hand, to any of this that have been doing this for a while, there are a ton of new funds in market (1,000+ new funds since 2016!) and the exiting funds have raised vastly more capital than before. We’ve had 2 records years in a row of VC investment:

But … but look what’s happened in tech and the Cloud:

Explosion!

The top tech companies alone are worth $5 trillion together!

There are >100 public tech unicorns and far more private ones.

All in, there is a fairly tiny amount of venture capital relative to the long-term value of the companies they invest in.

And as tech continues to expand and grow its role in the economy, so should venture capital grow, at least at the same rough pace.

View original question on quora

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Session Registration for 2020 SaaStr Annual Going Live for our Equality, Inclusion and Balance Program Now

We’re getting close!  Our agenda is finished for 2020 SaaStrAnnual March 10-11-12, and it’s epic!  The CEOs and CXOs of Box, Zoom, Pagerduty, Squarespace, Coupa, Zapier, Mixmax, Gainsight, Github, Stack Overflow, Figma, Shopify, Dropbox and so many other leaders!!  And 100s and 100s of hands-on sessions teaching you how to scale!

We’ll begin pushing session registration live our shortly.

If you are part of our Equality, Inclusion and Balance program, you’ll get first access to our 300+ workshops, sessions, panels and mentorship programs.   Look for an email shortly!

Registration for everyone else will open up next week.  If you don’t have a ticket yet, now is the time if you want your choice of sessions.  Strop procrastinating!  Grab a final ticket here.

You can check out the detailed agenda here.  It’s so rich that it’s a bit easier to use on

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How much should you pay a salesperson?

Q: How much should you pay a salesperson?

Three ways to simplify the answer here, especially in the early days:

  • In the end, in base salary AND commission, most sales reps take home about 20%-25% of what they close in first year deal value. So if you model sums up to that or close, you are in the zone.
  • You have to pay a living wage. No one in sales wants to work just for the fun of it. This may mean in the early days you have to pay out more than 20% of the deal size of the initial deals.
  • You probably have to pay a competitive “OTE” (On Target Earnings), or base + bonus. Or else, they will do the same work at a company with a market OTE.

Back solve for these 3 points, and you’ll have the start of your first sales rep comp plan.

Continue reading “How much should you pay a salesperson?”

Where can I find commission-only salespeople online to sell B2B software?

Q: Where can I find commission-only salespeople online to sell B2B software?

Don’t.

While there may be exceptions, I’ve never seen “1099 reps”, i.e. commission-only, work in B2B and SaaS.

There are just too many vendors, too much competition, and it’s too much work for someone with little incentive if they can’t close instantly to … pull off a deal.

You are better off:

  • selling yourself first
  • building up to being just big enough to support 1–2 reps to start. if you’re on a tight budget, look for reps with slightly nonstandard backgrounds that can still sell your product.

Remember, done right, sales professionals aren’t that expensive, once you have a tiny bit of an engine going.

Why not?

SaaStr Annual Prices Go Up to $1,999 For Late Birds. Don’t Pay That.

We know 50% of you will buy tickets to the 2020 SaaStr Annual on March 10-11-12 at the last minute.  I get it.  I often do the same.

But if you are going to go, please don’t pay the Late Bird prices of $1,999 for founders and $2,999 for VCs.  I mean you can … but … don’t.

Buy now.

Buy here and save a ton.

Late bird or not — we’ll see you then!!

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SaaStr Crosses 1,000,000 Social Followers. Lessons Learned.

So at little old team SaaStr, we historically did not really track social followers as a core metric.  We’re B2B folks 🙂  But as SaaStr grew, first we started to build a list.  That became our core community metric (list growth).  But we also wanted to track engagement on Quora more closely.  And then we saw a big pick-up on Twitter.  And after that, LinkedIn.

So we decided to do a bit of a conceit and create a “Total Social Followers” metric.  We have no idea how much overlap there is in here — probably a lot.  But at least we can measure it.  So we started measuring it about 24 months ago.  And growth in 2018 for both our list and our social followers were pretty flat.

And then in 2019, we added one element to measuring it.  We

Continue reading “SaaStr Crosses 1,000,000 Social Followers. Lessons Learned.”

As a venture capitalist, what are some red flags that would make you reject a startup immediately?


This post is curated by Keith Teare. It was written by Jason Lemkin. The original is [linked here]

Q: As a venture capitalist, what are some red flags that would make you reject a startup immediately?

First, there is a lot of marginal behavior that doesn’t lead to an immediate rejection, but does lead to immediate skepticism:

  • Metrics that don’t quite make sense. Weird metrics like “Quarterly MRR” or odd ways to describe revenue are immediate flags. If the metrics still look interesting, I might still want to meet, but I start off very skeptical.
  • Anyone but the CEO reaching out. This is close to a red flag. It has to be the CEO doing the fundraising. A co-founder is OK, but really it should be the CEO.
  • In a competitive space, not being clear on why you are different and why you win. Super clear. In some spaces, there are just so, so many vendors. If it’s not immediately clear why you’ll win, that’s close to an

    Continue reading “As a venture capitalist, what are some red flags that would make you reject a startup immediately?”

What is your advice for startup CEOs?

Q: What is your advice for startup CEOs?

For first-time CEOs, here’s my top list:

    1. Budget 24 months to get to initial traction. It always takes longer than you’d ever think, especially in B2B / SaaS. Somehow, you have to find a way to fund it, hack it, do whatever it takes to budget at least 24 months to build a real business.
    2. Maybe don’t do it if you can’t commit for 10 years. It’s OK to have optionality in the early days. But if you deep down aren’t sure you want to do this startup for 10 years, assuming it does even just reasonably well … then you don’t have the fire. At least not this for this one.
    3. Slow down if you don’t have the right co-founders. Many folks settle for the best co-founder they can find. At some level, that’s always true. But don’t settle, anyways. Make Continue reading “What is your advice for startup CEOs?”

As a venture capitalist, what are some red flags that would make you reject a startup immediately?

Q: As a venture capitalist, what are some red flags that would make you reject a startup immediately?

First, there is a lot of marginal behavior that doesn’t lead to an immediate rejection, but does lead to immediate skepticism:

  • Metrics that don’t quite make sense. Weird metrics like “Quarterly MRR” or odd ways to describe revenue are immediate flags. If the metrics still look interesting, I might still want to meet, but I start off very skeptical.
  • Anyone but the CEO reaching out. This is close to a red flag. It has to be the CEO doing the fundraising. A co-founder is OK, but really it should be the CEO.
  • In a competitive space, not being clear on why you are different and why you win. Super clear. In some spaces, there are just so, so many vendors. If it’s not immediately clear why you’ll win, that’s close to an

    Continue reading “As a venture capitalist, what are some red flags that would make you reject a startup immediately?”

Should Google acquire Salesforce?

Q: Should Google acquire Salesforce?

Maybe. It would move the needle.

A key question for the Cloud infrastructure leaders (Amazon, MSFT, and Google) is how deep do they want to go on the application layer.

The PaaS layer is huge and has become a bit of an oligopoly of a Big 3.

The application layer though is even larger, depending on how you define it. Or at least, just as large or close. Here are Gartner’s estimates of each segment:

But, the SaaS/application layer is much more diverse than just 3 main vendors. It’s very hard to even get 5% market share across the entire application / SaaS layer. But Salesforce, at ~$20b in ARR growing 20%+, has that.

So to keep the engine going, the leaders have to be asking themselves if they can leverage the SaaS / application layer to win overall in Cloud.

There are just too

Continue reading “Should Google acquire Salesforce?”

How do you hire account executives that rank in the top 5% of sales reps?

Q: How do you hire account executives that rank in the top 5% of sales reps?

You probably can’t yourself hire proven, Top 5% sales reps. I wouldn’t even try yourself. Instead, focus on finding smart sales execs that you believe in and yourself would buy your product from.

But a great VP of Sales can. The top 5% of sales reps want two things:

  1. They want a real chance to make a lot of money. A lot of it.
  2. They want to work for a great boss that takes care of them. So they don’t have to worry about their comp and commissions to be cut, etc.

You probably as a founder can’t deliver both 1+2. But a great VP of Sales will hunt for these top 5%’ers, at least a few for her team. And she’ll make sure there is a comp plan where they can make Continue reading “How do you hire account executives that rank in the top 5% of sales reps?”

Evan Rachel Wood Joins Us at 2020 SaaStr Annual!

The point of SaaStr Annual is to learn.  March 10-11-12 in SF Bay Area.

To learn how to scale.  Faster, with less stress, and more success.

  • We’ll have 300+ speakers and workshops.
  • 3,000+ braindates and mentoring sessions.
  • And 1,000+ VCs.

Everyone, sharing their mistakes, learnings, and the playbooks to success.

But having fun is also important.  To meet more people, to process things, and to just make the journey to $100m ARR and beyond a little easier.

As part of that, every evening from Monday Mar 9 to Thursday Mar 12 at Annual we have awesome activities.  Including the Out of Towners Party on Mar 9, SaaStr Nights on Mar 10, the BBQ on Mar 12 … and on Wed, Mar 11, The Big Party.

Joining us this year is Evan Rachel World of Westworld fame.  Along with some SaaS celebrity DJs 🙂

Join us

Continue reading “Evan Rachel Wood Joins Us at 2020 SaaStr Annual!”

The Only 2 Things That Really Motivate a Salesteam

Culture matters.  Growth matters.  Mission matters.  They all matter.  You have to do this.

And that may be enough for most of your early employees.  They may even be OK with low salaries, and not even care that much about money, or where it is all going, or who they’ll report to, most of your earliest folks.

But to a true sales professional, a successful one, really only two things truly matter at the end of the day to motivate them:

  • They need to see the top reps making real money. Like, really good money. That will show everyone it is possible. That it can be done. And that maybe it isn’t even that hard if you hustle, listen and learn. Not everyone needs to make huge bucks. But the top 10%-15% do.
  • A great VP of Sales / boss. Sales is a risky career. You can get Continue reading “The Only 2 Things That Really Motivate a Salesteam”

What is the best way to tell relatively new clients that you’ll be away for 1 week?

Q: What is the best way to tell relatively new clients that you’ll be away for 1 week?

This may be controversial, but I say — you don’t.

If it’s an important client, then you have two choices:

  • Hire a customer success lead and then team. Then it’s their job to manage the accounts 52 weeks a year, and back each other up during vacations, sick days, etc. They become the front line with new clients.
  • If there’s no one to do that — then it’s you. You have to be there. If you are so small there is no one in support or success yet, then those customers are critical. You have to keep them. You can’t disappear for a week.

Bring the laptop.

And before the next time you go away, hire someone good in customer support or customer success.

So you can get away.

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10 Tips to Start Selling to Big Companies as a Tiny Startup

Q:   Why would any big business take a risk on a start-up?

They wouldn’t. Unless, the gain way outweighs the risk.

And yet … they do all the time.

If you have a product that (x) uniquely, or in an importantly superior, fashion (y) solves a real, large painful problem for a Big Co … they will buy from a start-up.  If their top vendors they use already don’t provide that unique/superior solution.

So how do you create that scenario? How do you get large customers when you don’t have any yet?

A few thoughts, 10 ideas at least:

  1. Figure our your 10x feature for large enterprises — and distill it to a headline. What is the top thing you do, that the Big Competitors don’t, that matters to a Big Customer. And that solves a big headache for them. Then, distill that down to a sentence. And Continue reading “10 Tips to Start Selling to Big Companies as a Tiny Startup”

How hard is it to raise venture capital? If you have solid traction and a great team, are your chances significantly higher than 0.05% and will you find at least one investor if you keep hustling?

Q: How hard is it to raise venture capital? If you have solid traction and a great team, are your chances significantly higher than 0.05% and will you find at least one investor if you keep hustling?

This is a case where statistics are misleading. The overall odds of raising venture capital may be 0.05%. And goodness, there are just so, so many start-ups today. So many.

But it’s a story of both privilege but also traction — and bending the odds in your favor.

Let’s look at YCombinator. According to YC, “Each batch of YC companies raises about $250M of seed capital in the weeks following Demo Day.” Investors

Woah. That’s $250,000,000 in seed capital in each YC batch. With 2 batches a year.

>50% of each YC batch does, or can raise capital. It may be much higher.

Also, if you’ve been an investor, you

Continue reading “How hard is it to raise venture capital? If you have solid traction and a great team, are your chances significantly higher than 0.05% and will you find at least one investor if you keep hustling?”

Why was WeWork such a huge flop?

Q: Why was WeWork such a huge flop?

It’s easy to be a critic. But WeWork’s big “flop” really came from just 1 factor … it ran out of investors that bought into its dream.

The bear case is/was easy:

  • WeWork was burning more cash than it brought in in revenue:
  • Crazy self-dealing with CEO, and lack of any seeming controls.
  • Potentially way over-paying for some properties.
  • A business model of turning long-term liabilities into short-term, at-risk payments.
  • A “hot desk” and low-end customer segment that couldn’t make money.
  • A public comp that didn’t support the valuation.

And yet … and yet … investors aren’t stupid. There also a bull case to be made: