Every time you communicate with one of your investors whether it’s over email or over the phone, ask for something. The right way to do this is to be specific. Below are examples of the wrong way and the right way.

The wrong way is to be too broad. For instance, “we’re looking for talent in the area,” or “please make intros to any enterprise class customers you know.” These comments are too broad and the broader the ask, the less likely it is you’ll get help. Your investors aren’t going to reach out to any professional they know or make email intros to every enterprise class client in their rolodex. Additionally, broad asks don’t indicate an urgency of need. …

Managing your working capital is a topic that glazes the eye, but in this environment it’s very important. In all likelihood, your customers are asking to delay payments and your vendors are asking to accelerate them, so if you don’t pay attention to working capital management, you could put yourself in a tough cash position.

The easiest and most intuitive measure of working capital management is “days outstanding” often referred to as DSO. When applied to accounts receivable, it measures how quickly you’re collecting cash in days, and when applied to accounts payable, it measures how quickly you are paying vendors in days. For receivables, it’s calculated by dividing the amount of accounts receivable during a given period by the total value of sales during the same period (usually a quarter, month, or year), and multiplying the result by the number of days in the period measured. For payables, it’s the same math except your divide AP by all costs and operating expenses. …

Below are revenue multiples for publicly traded consumer tech companies we follow (B2C). Industries and therefore multiples vary widely. Commentary is below. Side note: if you’re looking for data on SaaS multiples, it’s here.

Social media popped to 19.9x. The highs in 2017 were ~14x, but a more normalized multiple historically has been around ~10x. Snapchat is at 34x, near it’s IPO multiple of 40x in Q4 2016. They lost nearly $833mm in EBITDA on $2.1bln of revenue, but continue to grow at 40% YOY despite the FB threat. Pinterest lost $263mm in EBITDA on revenue of $1.3bln but still trades at 28.2x. The most acquirable of the group, Twitter, trades at 11.6x …

SaaS comps have never been stronger: of the 93 SaaS companies we follow, the average public SaaS business is trading at 22.6x revenue while the median is 14.1x. Interestingly, the gap between the average and median is wider than ever (8.5x), meaning more attractive SaaS companies are being rewarded with big premiums. Also of note, 60% of companies are trading at 10x revenue or greater (all time high). The data is below.

Negative EBITDA, positive cash flow. The median SaaS business had trailing twelve month revenue of $505mm, EBITDA of -$2mm, but positive operating cash flow of $61mm thanks to up-front collections on annual contracts. So long as you’re growing (the median annual growth rate is 24%), investors will overlook negative EBITDA especially if the business is cash flow positive after working capital changes. …

I recently read Losing the Signal by Jacquie Mcnish and Sean Silcoff. If you were addicted to your Blackberry, it’s a must ready. It’s also a fantastic read if you want to learn how to avoid mismanaging your market position. Below are some of the passages we learned from.

Blackberry had no security equal. “No other phone maker operated its own in-house network, a rapid, encrypted, and tightly sealed system ensuring reliable high-speed traffic.”

Blackberry started in digital ads. “It was late 1989, five years after Lazaridis and Doug Fregin founded RIM. Their inaugural Budgie communicators never took flight because businesses didn’t share the designers’ excitement about the bulky digital advertising system. At the time RIM was surviving by designing electronic components in a berth above a Waterloo bagel store. …

I recently read How to Turn Down a Billion Dollars, The Snapchat Story by Billy Gallagher. The book is fantastic and full of lessons. It’s well worth the read, but below are some of the passages we learned from.

Snapchat really started as a sexting app. “He wouldn’t have to worry about sending a hookup a picture of his junk! And girls would be way more likely to send him racy photos if they disappeared.”

The seed round is the easiest to raise. “But the descent from seed-funded startups to Series A and B is often much steeper than people expect. Raising some money for an idea is not that difficult. …

Airbnb just went public in a debut that’s been widely celebrated. We dug into the company’s prospectus and learned some interesting facts about their business and travel trends.

Cash flow is highly seasonal. ABNB makes all it’s money in Q3. As you can see, that’s pretty much the only quarter in which the company is comfortably EBITDA positive in any given year. This is due to the fact that the bulk of ABNB’s customers travel in Q3, hence revenue is earned at that point.

Airbnb generated EBITDA. During 2017 and 2018, the company did generate material positive EBITDA. In 2019, they swung back to a loss due to rising costs across the board, and it looks highly likely they’ll burn again in 2020. …

When Bill.com, one of the charts in their prospectus shows the major milestones in the company’s history. The chart is below.

The thing that really stood out to us about this graphic is that the company makes it a point to highlight major partnerships and integrations, and indeed you can see the commensurate step up in revenue that occurs. Docusign’s prospectus has a similar graphic (below) and as you can see they also highlight partnerships and integrations as they were critical to growth.