For SaaS businesses, I’ve found the rule of 40 to be a useful management tool. The basic idea is that as a SaaS business, you want your growth percentage plus your EBITDA percentage to be 40 (or better). So if you’re growing at 50% per year, you can “invest” in growth by having a 10% burn (expense as compared to revenue). If you’re breakeven at 40% growth, that’s also great. But if you’re only growing 30% you’ll need at least a positive 10% margin to stay healthy.
I’ve found myself explaining this concept to lots of founders lately, so if you need a simple walkthrough of what the rule of 40 is all about, I hope this 8 minute video with examples is helpful.
There’s also a good argument that the “rule of 40” doesn’t really matter much until the SaaS business is at $15M-$20M+ in revenue run rate.
About ten days ago I caught up with Elad Gil, a Silicon Valley veteran who has written a new book, High Growth Handbook. Even halfway through the book, and I can already tell this is a book that is a valuable asset for those who are running fast-growing companies. It is equally helpful for those of us who aspire to grow fast. Elad has written one of the best books for the Silicon Valley entrepreneurial ecosystem. Continue reading "Elad Gil on startup advice & his book, High Growth Handbook"
Have you ever found yourself in a situation where you’re in a group that is debating something–such as whether to take on a new investment–for a very long time?
Let’s say your group is healthy and high-functioning. Normally decision making feels natural and strong, and you have a rhythm going for how you make decisions. But suddenly you have this potential investment and the group is debating at length, but having a difficult time coming to a decision.
Keep in mind, I’m not talking about when you have many strong “yes-es” and many strong “nos.” That’s a very different situation, and you should have a process in place to deal with that.
What I’m posing here is a different kind of scenario. Maybe one person is lightly championing the idea, and other people in the group are generally supportive, but sort of wishy washy about it. You can all
We’re living at a time when valuations are very high, as Fred Wilson and Ari Newman have both recently pointed out. When valuations rise, so do the caps on notes, which are upper limits on valuation at conversion.
In many cases the caps are very high because the entrepreneurs are telling the investors that they’re super confident they’re about to raise a larger round and they just need to “bridge” the company to that larger round. The reason the entrepreneur want a high cap is to signal a high price for the next equity financing of a larger amount of money. If they accept convertible notes now at a low cap, how could they possibly justify a higher equity price in a few short months when this larger financing is bound to happen?
For example, a company may be raising $1M in notes at $15M pre-money valuation cap with a
An interesting report came out this week from the Center for American Entrepreneurship, detailing the progress that’s been made in American startup communities over the last three years. The report specifically looked at how the number of “first financings” — that is, the amount of startups receiving their first round of venture capital finan…Read More
This week’s “from the Heartland Tech channel” section includes an op-ed from Bill Baumel, the managing director of the Ohio Innovation Fund. He lays out the challenges that the Midwest still faces in securing more venture capital, including a mindset that doesn’t think big enough. These few sentences in particular from Bill struck me: Too many star…Read More
As I was scrolling through my Twitter feed yesterday, I came across another report proclaiming to have determined the best states for business — this time from CNBC. CNBC’s report hits most of the right notes in identifying what makes a location ideal for businesses: a well-educated workforce, the cost of doing business, the number of busines…Read More
Quality time with your loved ones isn’t the only benefit of working away from the office.
In fact, I’ve found that one of the best things I can do to increase my productivity and to start knocking off those particularly pesky tasks on my to-do list is to get out of the office. A bit counterintuitive, yes, but true nonetheless. The office is a hive of productivity, and hives are noisy. Sometimes so noisy and hectic that it’s nearly impossible to sit down and see something all the way through, especially the problems and solutions that require a fair bit of focus. More often than not, there are just too many fires that need to be put out, too many meetings that need to be had, and too many phone calls that need to be answered or made in order to start tackling that list of ‘important but not necessarily
GUEST: Using a framework developed by the Ewing Marion Kauffman Foundation, PitchBook recently identified three factors critical to a robust VC ecosystem: density, resources, and talent. Those three qualities are important. However, the report doesn’t encompass (nor is it meant to) some of the building blocks of those three factors. Over the…Read More
Yesterday the news broke that PillPack is being acquired by Amazon for $1 Billion.
I’m incredibly happy for TJ Parker and Elliot Cohen, co-founders of the pharmaceutical delivery startup. They started the company at Techstars in Boston in February 2013, and raised $4 Million around the time they completed the accelerator program. A couple years ago at a Techstars Q&A they discussed how their respective backgrounds led to the founding of the company, and described some of their early experiences with raising money.
Through their hard work and dedication, these founders have taken PillPack from an innovative idea to a $1 Billion company.
It’s always such an honor to be able to use Techstars’ worldwide network to help entrepreneurs succeed. Congratulations TJ and Elliot, and thank you for letting all of us here at Techstars be a part of your journey thus far!
What makes an effective Key Performance Indicator (KPI)? How do you design your metrics to help your company achieve its objectives?
First off, a good KPI will actually help you make a decision. The information should clearly tell you where you’re at and give you something actionable to do.
Secondly, a useful KPI will typically be a ratio—one thing divided by another. For example, if your goal is to decrease your employee attrition rate, simply knowing the number of people who leave per month isn’t meaningful. If ten people left last year and 15 left this year, that sounds like things are moving in the wrong direction. But what if your total number of employees has increased dramatically in that time? Let’s say you had 100 total employees last year, but 200 this year? As a ratio of the total number of employees, your attrition rate has actually improved.
I just wrapped up 2 days of speaking at MoneyConf in Dublin, an annual conference dedicated to all things fintech. In contrast to previous years, at least 50% of the programming involved blockchain technology. I shared the stage with two early FPV portfolio companies, Blockchain and Bitpesa, and connected with a number of old friends in the sector, including Ethereum co-founder Joe Lubin, academic and entrepreneur Emin Gun Sirer, and Circle founder Jeremy Allaire. We talked about the sector’s growth and challenges, tokenization, and regulation. There was little hype, real conversation and hyper-focus on overcoming current challenges and building what’s next. It was refreshing to be amongst the early adopters who keep it real, and I came away more convinced than ever that we’re in good hands…
The big news over the past couple of days was new research that linked stablecoin Tether to Bitcoin price manipulation :
The best brands imbue consumers with positive feelings and emotions that drive loyalty and are fundamentally trustworthy. This is true across fashion and apparel, travel and hospitality, technology, and myriad other categories, yet when it comes to health and wellness, very few brands, outside of some in fitness (think SoulCycle or Equinox), have emerged that cater to a consumer’s mind, body, and spirit. While some like LOLA, Hims, or Headspace have started to make a name for themselves, there is still a distinct void and as an investor, it is up to me to determine whether this void is an opportunity for entrepreneurs or if it’s the status quo for a reason. Perhaps there aren’t meant to be brands in every category within consumer health and wellness, but my working hypothesis is there should be dramatically more than there are today.
The headline macro trend is that there’s a growing Continue reading "Building Brands for Mind, Body, and Spirit"
I’ve been friends with Alex Iskold for over a dozen years (I was an angel investor in GetGlue, which USV funded.)
Alex has been the Managing Director of Techstars NY for a number of years and I think he’s now run seven programs and built an impressive portfolio of around 80 companies.
I’m a huge Alex fan and love his writing. Recently, he put together a bunch of great blog posts on his site under a heading Startup Hacks. He has divided them into the following topics: Fundraising, Managing Investors, VC and Business Intros, Metrics and KPIs, Product and Marketing, Productivity, Founding Team, and Accelerator.
I’ve read them all. Some of my favorites include:
“The two worst things to be as a startup is too early or too late. Too late you can’t recover from, but you can survive too early if you have a great CEO and loyal investors.”
This quote in Dan Primack’s newsletter (via Axios) from Paul Maeder, investor and board member at the recently public Carbon Black, which started its journey 16 years ago reminded me of my conversation with Silicon Valley legend and serial entrepreneur, Andy Bechtolsheim.
Hoping to give Europe’s surging startup ecosystem a shot of adrenaline, the European Union today announced the creation of a massive new fund-of-funds program dubbed VentureEU. So far, the EU has committed $505 million of its own budget to the project, which now faces the challenge of raising the balance of the $2.6 billion fund from private…Read More
I have been hearing about Bird for a few months and have often wondered what was all the buzz about. I wanted to see the product up close, to try and figure out the reasons for all the excitement. And that happened this past weekend when three Birds showed up mysteriously outside our residential building. And finally, it all made sense — though, not in the way you would expect. Continue reading "Why Bird Interests Me. And No Not That Way"
If you have a personality that gets ruffled easily or don’t have an even temper, don’t invest in startups. It’s funny, as the startup community builds in Chicago more people are being drawn to it. Some people want to invest in it. They might join an angel group to learn the ropes, but that isn’t always the best way to learn. Some angel groups are good for mentoring, others are not. Some are just organized check writing societies.
Some just start writing checks. That will teach you the hard way! But, you do have to be willing to write checks and take the risk if you are going to invest.
I think the first thing you need to do is take an inventory of your psychological self. Do you have the psychological make up to be a startup investor? It’s a totally fair and responsible question to ask yourself. Contemplating