market matters

from CB insights:

Opinions vary quite a bit among both operators & investors, with technology investors tending to have the most divergent (and strongest) opinions.

 

Many investors say they don’t look at TAM for new markets, because it’s often too small or undefined to even be interesting or valuable. In these cases, doing any sort of TAM analysis is actually misleading and will make you overlook opportunities. What was the TAM for something like Airbnb (couch surfing) or Amazon (books) when they started?

 

On the flip side are many investors who view the market as critical and perhaps the top dimension when evaluating a company.

Cloud Judgement

The Q3 Report

A very detailed and relevant method of assessing the value of SaaS public companies. Worth a read.

Link to blog post – Cloud Judgement 

“Q3 earnings season for cloud businesses is now behind us. The 61 companies that I’ll discuss here (which is not an exhaustive list, but is still comprehensive) all reported quarterly earnings sometime between October 26 – December 9. New additions to the analysis from Q2 include Snowflake, Asana, JFrog, and Sumo Logic.  In this post, I’ll take a data-driven approach in evaluating the overall group’s performance, and highlight individual standouts along the way. As a venture capitalist, I naturally cater my analysis through the lens of a private investor. Over my ~4.5 years at Redpoint Ventures, I’ve had the opportunity to meet with hundreds of entrepreneurs who are all building special companies. Through these interactions, I’ve built up mental benchmarks for metrics on which I place extra emphasis. My hope is that this analysis can provide startup entrepreneurs with a framework for how to manage their businesses around SaaS metrics (e.g., net retention and CAC payback).”

Dive in!

Q2 Report also available here

EV 100x sales – why not?

The company logo for Snowflake Inc. is displayed on a banner to celebrate the company’s IPO at the New York Stock Exchange (NYSE) in New York, U.S., September 16, 2020. REUTERS/Brendan McDermid

 

Snowflakes in the sky

Snowflakes in the public eye

Valuations of the roof

Warren Buffet entering in the tech loop

Interesting stories of people becoming billionaires

Snowflake and their impressive IPO!

 

barbaric ventures

I’ve taken part and witnessed  several big discussions about changes to how VCs should manage these times of higher uncertainty in the market.

If we should delay or even stop investing in new startups, change our approach to investments (e.g. look at new areas of interest and forget several sectors altogether), put in more protective clauses to have more guarantees if we invest from now onwards, due to these weird and very uncertain times…

The article below is very good and provides insights and details about the typical clauses that can influence investment discussions between VCs and startups now and in the near future.

Personally, I do not like most of the barbaric approaches (it’s a bad way to engage in a long term relationship that should be managed with equilibrium and fairness), but a few might make sense (if we do not over engineer everything in the process). Overall, I believe that VCs (specially the early stage ones) will have to still take the plunge and assume the risk (it’s their job to do so), but there can be fairer ways of having in place some more checks and balances that simply were most of the times put aside in the last upward movement of the VC market, due to mostly competitive deal discussions that typically were skewing things to a more founder friendly approach…

Medium post by Fred Destin

VC terms — Return of the Barbarians.

I hate complex terms in venture investments. Value is created by backing exceptional companies that return your fund, not by word-smithing aggressive legal agreements. In the last decade, we’ve seen cleaner and simpler terms become the norm, which has been great for everyone and created more alignment.

However…

Founders beware. OG venture capitalists like myself remember vividly the days of full ratchet wiping out entire cap tables and leaving founders with nothing.

As we’re entering a new ice age, I’m hearing that paring knives are being sharpened and old weapons might get taken out of storage. I’m hoping I’m wrong and VCs will keep their term-sheets clean, but in case they don’t, here’s a detailed look at the arsenal that these barbarian investors can draw from.

So saddle up, grab you shield and get familiar with the subtleties of Participating Preferred’s, Full Ratchet Anti-Dilution, Pay-to-Plays and more by reading further. As Andy Grove would say, only the paranoid survive.

Here go the details – read more here