Raising money for a startup is expensive. The typical legal fees for a Series A are about 1% of the total money raised: roughly $40k on $4M. Of course, this doesn't factor in the time for the process and the dilution of the investment. But if your startup is considering an IPO be prepared to pay eight times as much in fees. Across 360 venture backed technology IPOs in the last 10+ years, 8.8% of the dollars the startup raises in the initial public offering is paid to investment banks, accountants and attorneys.
When startups are acquired, there are many considerations in accepting an offer. Does the vision of the acquirer fit the startup? Will the startup operate independently or be integrated? What is the price and structure of the transaction? Most of these questions have to be answered through extensive conversations with suitors. As for the structure of the acquisition, there's data that can be used for benchmarking. I've assembled about 2400 M&A events of venture-backed technology companies since 2000 to compare the fraction of the total consideration which is stock and cash.
Bitcoin has captivated the imaginations of many with its quasi-anonymous, hyper cost-efficient payment network. The potential for Bitcoin to change foreign exchange is hard to overstate. In the same vein, the technologies that enable the internet of things (IoT) like Bluetooth Low Energy and Apple's Beacons and Electric Imp's infrastructure will transform the way we interact with the physical world to something akin to the mall in Minority Report.
I was lucky enough to spend some time with Monica Adractas, a former McKinsey partner who is now Churn Czar at Box. She and I chatted about the challenges in managing churn and her view on how to handle it. I thought she had some terrific insights and a clear understanding of the methods to reduce churn from her experiences. These are my notes from that conversation.
Sam Altman argues in How to Grow Huge] that the only way for a startup to grow really large is to create products that people love and promote. As the user base grows, users attract ever larger numbers of users to the product, producing compounding growth. The point is a terrific one and I think it can be generalized. To grow really large, startups have to create proprietary distribution channels.
A key component in a startup's formula for success is educating customers about the product and driving sales. The sales and marketing teams of a startup are responsible for this. There are many ways to structure sales and marketing teams.
For retailers of any size from startup to Fortune 50, the tablet application has become more important than the mobile application. IBM's annual Black Friday ecommerce report, which tracks 800 internet retailers proves the point.
I first learned about Sankey diagrams in my thermodynamics class and they've since become one of my favorite data visualizations and analysis tools. Sankey diagrams, like the one above of visitors to this blog, show the flow of things. Originally created for measuring the flow of energy through powerplants, they are incredibly useful for content marketing analysis, visitor analysis or any other kind of funnel analysis.
The typical mobile phone's home screen is occupied by more than 30 applications. A digital tragedy of the commons, each additional mobile application a user downloads decreases the odds of an average application re-engaging a user. After all, the time spent on mobile isn't increasing fast enough to cover the marginal application.
At its core, a startup's advantage in the market is the speed created by focus. When a team is well orchestrated, they can accomplish amazing things. Creating an environment that fosters communication best is therefore an essential part of startup management. But how best to do it? Founders have to balance span-of-control with span-of-managerial-responsibility. In an article this week's New Yorker, Amazon's founder/CEO Jeff Bezos is quoted on the subject with a contrarian point of view: