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A founder asked me if we had reached the point that SaaS is commodified. "Can you build a venture scale SaaS company anymore?" He made three key points to support the argument.
We've seen quite a bit of volatility in the valuations of publicly traded software companies over the last 5 years. In 2014, the average software company traded at 7.7x forward revenues - the sum of projected revenues over the next 12 months. Two years later, that multiple dropped 57% to 3.3x forward. Today, we're exactly where we were in 2013, at 5.4x, which is coincidentally, is the average over this time period.
Harry Stebbins published a podcast with David Beisel this week in which they discussed the importance of voice. David says, "Voice is the most natural user interface possible." I think the biggest challenge for voice is the skepticism and cynicism engendered by a decade or two of poor experiences. It's no longer the technology.
The cash conversion cycle is a key metric for startups, but one that often isn't talked about until a business hires a CFO. Once a business established product market fit, the cash conversion cycle is a key metric of a company's cash efficiency - how quickly a company can convert a dollar of investment into a dollar of cash flow.
Would you compare a bootstrapped SaaS company to a seeded company? At what point does the bootstrapped company have to raise if it's profitable, if ever? One founder asked me this question recently.
Invest Like the Best is one of my favorite podcasts. Hosted by Patrick O'Shaugnessy, Invest Like the Best profiles investors from many different disciplines. Recently, New York seed investor Jerry Neumann spoke on the show and talked about three key ideas on the technology innovation cycle.
At some point in the life of most SaaS companies, the business will be faced with the question, when should we move up market? The strategic question might be catalyzed by increasing cost of customer acquisition in the core SMB segment. Alternatively, a surge of large customers paying for the product might trigger the question. Or account executives might raise it. Whatever the reason, this is a key strategic question.
Last week, I wrote about the decline of investments in San Francisco startups. On Hacker News, this post engendered a lengthy conversation on the challenges facing founders and start-up employees in San Francisco. In short, the cost of living in San Francisco has reached untenable and unacceptable heights for many.
Just where is the US venture market relative to the rest of the world? After most US analyses I publish, a few founders in other geographies ask questions about their own. These inquiries made me wonder, how has the global market evolved?
Tell me three numbers and I can estimate the amount of capital your startup will need to raise. Which figures are those? The startups' revenue target, the average revenue per customer and the average cost of customer acquisition.