In 2017, we had a death in the portfolio. Once all the employees left, the only remaining assets were some patents, servers, domains, and a lot of code. Eventually we managed to sell that intellectual property (“IP”). Here is what we learned.
Set expectations. The value of IP is a small fraction of what the company was once valued at; it’s maybe 1 to 5 cents on the dollar. Any acquirer of the IP is unlikely to do an all cash deal, so don’t be surprised if the final consideration is a blend of cash, stock, royalty, earn out, or…
There is no dataset explicitly outlining salary levels at early stage companies, but we can see salaries from tech companies prior to IPO. The data below shows the salaries of 162 tech company CEO’s at IPO. A few observations stand out:
Some of the best CEO’s take the lowest salaries. For instance, Marc Benioff of Salesforce took a salary of $1 at IPO, Patrick Shiong of Nant Health took no salary, Jack Dorsey at Square took only $3,750, and Jeff Bezos at Amazon took only $64,333. …
Fresh Works just filed their prospectus (S1) to go public. Below we summarize the major points which we found interesting for running your SMB focused business.
Fresh Works is large and growing, and unprofitable. “total revenue was $172.4 million and $249.7 million in the years ended December 31, 2019 and 2020, respectively, representing a year-over-year growth rate of 45% We had approximately 35,800 customers using our Freshdesk family of products as of December 31, 2020. We incurred operating losses of $29.7 million and $56.1 million in the years ended December 31, 2019 and 2020.”
Fresh Works has raised billions, and…
While the value of any SaaS business is derived from recurring revenue (ARR), do not forsake non-recurring revenue streams. If you do, you’re ignoring free financing and a way to make the product stickier. Non-recurring revenue streams like onboarding fees and installation fees are a fantastic source of cash. Other non-recurring revenue streams such as ongoing services or support are great for staying in touch with the customer, which prevents churn and uncovers upsell opportunities.
We looked at revenue data at the time of IPO for the last 58 SaaS companies in order to determine the appropriate mix of recurring…
Allbirds is about to go public. Their S1 is out (prospectus) and below are some of the key insights on their business. There is a lot to learn from Allbirds about omni-channel and ecommerce sales. Later in this blog, we show insights from Warby Parker’s prospectus.
AllBirds insights from prospectus
There are 27 stores of which 12 are outside the US. “In 2020, our digital channel represented 89% of our sales, while stores accounted for the other 11% of our sales (down from 17% in 2019).” The first store was opened in 2017. “All U.S. stores that were operating in…
Below is a continuation of a recent blog post about a book called Never Split the Difference by Chris Voss. Chris was one of the premiere FBI Hostage Negotiators in the world, and his tactics could be useful for negotiating with customers, vendors, and of course your VC. The original blog we wrote highlighted some of the key excerpts of the first half of the book. Below are excerpts from the second half.
Compromising should not be the default. “I’m here to call bullshit on compromise right now. We don’t compromise because its right, we compromise because it is easy…
I just read a book called Never Split the Difference by Chris Voss. Chris was one of the premiere FBI Hostage Negotiators in the world, and his tactics could be useful for negotiating with customers, vendors, and of course your VC. Excerpts from the book are below.
Create warmth by using first names. “I’m sorry, Robert, how do I know he’s even alive?” I said, using an apology and his first name, seeding more warmth into the interaction in order to complicate his gambit to bulldoze me.”
Rather than saying ‘no’, ask a question that forces problem solving. “While I…
Warby Parker is about to go public via a direct listing. Their S1 is out (prospectus) and below are some of the key insights on their business. The business is very impressive, and there is a lot to learn from Warby about omni-channel and ecommerce sales.
It’s been an 11 year journey. “When we launched the business in February of 2010, less than 2.5% of glasses were sold online — yet we believed that if we offered high-quality, uniquely designed glasses for a reasonable price point, with mechanisms to try them on like our Home Try-On program, and outstanding customer…
Building out, maintaining, and upgrading a technology stack requires a constant commitment to developers and engineers. What is an appropriate level of development or R&D expense for a successful SaaS business? We looked at the last 126 SaaS IPOs at the time of IPO to get a sense for how successful SaaS businesses allocate to R&D. The raw data and observations are below:
R&D spend is 24% of revenue. Leading up to the IPO, SaaS companies spent on median 24% of revenue on R&D. As you can see there is almost no deviation between the financials reported at IPO and…
Strategic investors, defined as corporations that make venture investments, can be a valuable source of capital but are they critical? No. We dug through the filings of 178 tech companies and found that only 29 of them had a strategic investor (18%).
Some industries have more prevalence of strategic investment than others. For instance, 5 out of 10 hardware companies had a strategic investor.
All the companies listed above are very successful as they’re all publicly traded today or were at one point, so we’ve concluded you do not need a strategic investor to be successful given that only 17%…
