Following this week's post on Benchmarking HubSpot's S-1, Josh and Nikos raised an interesting question on Twitter. What are the right ways to benchmark SaaS companies in their early days and through to IPO? I have always used years-since-founding as the time axis to compare companies, because if I were a founder, that's how I might think about benchmarks. But after their comments I wondered if there were better ones.
One of the best ways I've found to understand SaaS companies is to pore through their public filings. A few months ago, I analyzed Box's S-1. In this post, we'll look at HubSpot's IPO filing and compare their journey to a public company to a basket of about 40 other publicly traded companies, in the hopes that this data will help other founders chart their path to IPO.
Does a startup's location impact its M&A prospects? We've already determined there is no material difference between the follow-on financing rates by geography. But do acquirers behave similarly to investors?
Earlier this week, Google celebrated the tenth anniversary of its IPO. I re-read the Founder’s IPO Letter and found this passage which captured so much about Google's values: Google is not a conventional company. We do not intend to become one...We will not shy away from high-risk, high-reward projects because of short-term earnings pressure. Some of our past bets have gone extraordinarily well, and others have not. Because we recognize the pursuit of such projects as the key to our long-term success, we will continue to seek them out.
Though the term k-factor, a measure of the vitality of an application, has waned in popularity since Facebook's sheep-throwing glory days, the idea of spreading a product through referrals lives on. We all know a good referral mechanism when we see one. Dropbox's invite-a-friend feature which awards free storage for both the inviter and the invited is the canonical example and resulted in torrid growth for the company. In April 2010, Dropbox users sent 2.8M referral emails. It's these kinds of referrals, those that align the incentives of both parties and ones that are natural to the product, that seem to work the best.
Consumer companies on the whole tend to grow faster and do so will less spending on sales and marketing, and research and development than SaaS companies.
If you're a founder or potential founder and looking to raise seed capital, you're entering possibly the most attractive period in a decade to start a business. A few weeks ago, we analyzed the impact of Series A and later stage VCs in the seed market. In the past four years, traditional VCs began to invest in seed-stage companies, which led to a rise in the number and size of seeds. But there's another, more important force within the seed market: institutional seed investors.
Earlier this week in a post on Quartz Mark DeCambre asks the question, Are IPOs Dying Because of Huge Growth Rounds? The chart above shows the 36 year trend in the number of tech IPOs. And as DeCambre points out, so far through 2014, the ten largest startup financings have yielded about twice as much capital as the ten largest IPOs. To paraphrase Mark's question, can startups raise just as much capital in the private markets as in the public market, without the hassle of public market regulation? Let's look at the trends over the past decade and across all IPOs and MegaRounds to get a better sense of the trends in the number of MegaRounds and IPOs, the total amount of capital raised by startups using each mechanism and the average round size over the past decade.
Yesterday, I spoke to a small group of people at Google. By coincidence, the presentation was held in the same building I used to work in, and a wave of nostalgia swept over me. Participating in Google's speaker series brought back memories of when I was in the audience seven or eight years ago. I'll never forget the first time I met Paul Graham in that very same room right after the first Startup School. Nor the crash-course on negotiation I took when we were negotiating with Facebook and MySpace. Nor the management class on having difficult conversations with colleagues, among countless others. Returning to Google reminded me that great companies constantly invest in their people, helping them to understand the world inside the company and outside the company.
When I started in the venture business and met software companies, I never heard the words customer success during pitches or throughout diligence or in board meetings. A few years later, customer success has become equal in importance to sales and marketing and engineering and product within SaaS companies. The steady increasing drumbeat of the Customer Success mantra is reflected in Google search traffic, which has tripled since 2009 for the term. So, why now?