I'm a partner at Redpoint
. I write daily, data-driven blog posts about key questions facing startups. I co-authored the
book, Winning with Data
. Join more than 20,000 others receiving these blog posts by email.
When negotiating your next fundraising round, should you talk valuation in premoney terms or postmoney terms? Premoney is the valuation before the investment, employee stock option pool (ESOP) expansion, debt-to-equity conversion and investment. Postmoney is the value of the business after all that.
A friend suggested that I read the Five Dysfunctions of a Team over the weekend. Though I'm passionate about business books, I rolled my eyes. I had seen this one on best seller lists for a long time, and never thought it would have much to offer. I admit my book-cover bias was wrong. The author has a counterintuitive assertion. Meetings shouldn't be boring.
"Evidence from science suggests that business people must be insane to use brainstorming groups." That's a shocking statement. Adrian Furnham, a professor of organizational and applied psychology at University College London, said it. It turns out it's completely true.
How quickly do the fastest growing software companies build their teams? The answer is incredibly quickly. In fact, this data bolsters the notion that management team's top priority is recruiting, especially after the business has reached product market fit and capitalized itself well.
There's a parallel between cryptoassets today and the British colonial period predating the US. In the late-1600s, colonies began to print their own money. Today, we're seeing many startups coin their own money, creating an explosion in the number of new (crypto)currencies.
I'm grateful for all the entrepreneurs who have spent time teaching me how to build their companies. Over these past few days, I have been reading the book Antifragile written by Nassim Taleb. In the book, he writes about many provocative things, but the one that sticks out with me this holiday is about innovation, and it harkens back to the original title of this blog that I chose nearly 10 years ago - ex post facto.
In the eleventh episode of Masters of Scale, Reid Hoffman interviews Peter Thiel. The episode revolves around the idea that to truly succeed, a startup must not beat the competition, but break free of competition entirely. The episode has many great points, but the one that stood out most to me is the idea of false competition.
Disagree and commit. I first read about this idea in the 2016 Amazon Shareholders letter. But the idea can be traced back to Andy Grove at Intel. Grove wrote about this topic in High Output Management. Disagree and commit is a management technique for handling conflict. There are two parts to it. First, expecting and demanding teammates to voice their disgreement. Second, no matter their point of view, once a decision has been made, everyone commits to its success. Bezos described it this way -
Founders often describe their unit economics in terms of their LTV/CAC ratio - the ratio of the Lifetime Value (LTV) of a customer to the Cost of Customer Acquisition (CAC). The CAC/LTV metric can be a powerful metric to unpack the health of the go-to-market team of a company, as Netsuite has shown. But this figure is often meaningless for early stage startups.
The startup acquisition market is off by roughly 35% year-over-year. Why the decline? One consistent response from potential acquirers is that they are waiting for tax reform to happen. If it does happen, and when acquirers do decide to pursue acquisitions, I suspect we will enter a very acquisitive environment for three reasons.