A few days ago, Simply Business published an infographic and data on the acquisition patterns of Amazon, Apple, Facebook, Google and Yahoo. Looking at that data, I wondered which acquirers pay the most for startups. Ideally, this data provides some negotiating leverage to founders selling their businesses.
From zero to $19B of business value in five years; WhatsApp's sale to Facebook is an important moment in the history of the consumer web. The deal proves distribution, reach and large user bases aren't the competitive moats they once were. Apple's App Store and Google Play have leveled the playing field to such an extent that a startup can command 10% of the market cap from a $200B company.
When a startup is confronted with the prospect of hiring a head of marketing, founders heads often spin. What should be the day-to-day tasks for this person? What skill sets are important? Because of the seeming abstract nature of marketing, founders sometimes delay finding a head of marketing until they feel acute pain, at which point they can clearly identify the attributes of the right candidate. But underinvestment in marketing, like underinvestment in infrastructure or software or product, isn’t a good idea
Great entrepreneurs can come from anywhere. But do the locations of startups affect their ability to raise follow on capital? Do seed stage companies in the Bay Area face lower likelihoods of raising a Series A because of more competition? Or is it that New York based startups, because of a smaller ecosystem, face more difficulty?
When presented with figures and numbers and statistics, it's easy to take the conclusions as fact. Numbers in a spreadsheet carry a finality, a exactitude that bely how inaccurate they can be."
Has it become harder to raise money? is a question I hear all the time. On one hand, the total dollars invested by VCs is relatively flat at just under $30B per year, according to the NVCA. On the other hand, the stories of difficulty raising series As and Bs have become a steady drumbeat."
The average seed stage startup has a 20% chance of raising a Series A according to Crunchbase data for IT startups who raised seed and Series A rounds between 2006 and 2013. But this figure varies significantly sector by sector."
Naming your startup can be one of the hardest things to do when starting a company. First, the name has to resonate with each founder. Then, the domain must be available to buy. Last and perhaps most importantly, investors need to like it because the first letter of startup's name has meaningful impact on how easily the company will be able to raise money. Whatever you do, don't pick a name that starts with the letter J. Or K. Or Q. Instead, favor names beginning with T, O and A.
How large of a seed round should founders raise to maximize their chances of raising a Series A? Smaller seed rounds are simpler and faster to raise because they typically require fewer investors. They may also require less dilution because of the smaller investment size. On the other hand, to raise a Series A, the startup needs enough runway to hire a team and prove certain milestones to Series A investors."
In What's Up with the Series A, Nikhil Basu Trivedi documents the bifurcation in the Series A market. While there are a handful of startups that raise blockbuster Series As of greater than $10M, the average Series A investment size remains relatively constant over the past 6 years just around $5.3M for US technology companies according to Crunchbase data. After reading his post, I wondered if a big seed round is a leading indicator of a big series A. In other words, would larger seed rounds provide enough negotiating leverage in fundraising conversations to bolster average check sizes and increase pre-money valuations?"