For the average 2013 venture backed tech IPO, half of the startup's enterprise value is explained by its growth rate, while none of it is explained by profitability. For equity investors in 2013, growth trumps all other considerations. Of the 25 IPOs I surveyed, both pending and completed, only 20% are profitable. On average, these startups operate at about -20% net income margins but are growing at 162% annually. The market has spoken and startups have responded.
iGoogle is dead. Mobile killed it. In 2008, iGoogle represented 20% of traffic to Google. Seven years later, the mobile phone is the home screen of choice for a billion people. The typical mobile phone user checks their phone 110 times per day. I suspect iGoogle's most avid users visited about 10 times daily. By that math, mobile home screens generate an order of magnitude more engagement. If Google or any company wants to provide the home screen to those billion people, that home screen must be a mobile app.
Quietly mentioned in yesterday's press conference about Google's Android update is a new feature that will change the way people use their mobile phones, search deep-linking. With KitKat, Google is applying its world-class crawling and search technology to the content and data within mobile applications.
Every SaaS business suffers from churn. If churn isn't managed properly, the lost revenue from churned customers offsets new revenue and the business flat-lines or suffers negative revenue growth, which can be devastating to the business.
I've seen startups employ three patterns for offsetting churn: acquiring new customers faster, upselling existing customers to buy more software, or structuring pricing to grow with customers. Each strategy requires different levels of investment but achieves similar results. These strategies are often deployed in addition to a customer success team, which require their own investment.
How do you validate an idea for a product before it has been built? Last week, a founder of a SaaS business and I were wrestling with this question. It's a question without a universal answer. But we came up with quick and dirty rule of thumb for his business. Can he hit his quota?
There's an interesting phenomemon occurring in founder compensation for post-Series A companies: founding CEOs are swapping cash for larger equity stakes in their companies. Founding CEO salaries, post Series A, have fallen by about 24% while founder equity has increased by 32%.
There's an endless debate in Startupland about the ideal founding team. Should the ideal team be entirely computer scientists? How important to success is having an MBA/business person? What about the stories of billionaire dropouts? I've aggregated the academic backgrounds of 30 of the top startups of the past few years and analyzed the make up of each of those founding teams.
This week, Netflix announced its US userbase grew to 31M subscribers surpassing HBO for the first time. The magnitude of Netflix's milestone is hard to overstate. In a bid to compete with Netflix, HBO has partnered with Comcast, which serves 21M subscribers, to trial an Internet-only subscription plus HBO, the first time HBO is available to US consumers without a full cable subscription. It's a clash of behemoths. Separately, the NY Times revealed they have amassed more than 700,000 digital subscribers who provide upwards of 20% of circulation revenues and grow about 40% year over year...
Intent to purchase is the engine of the consumer web. Creating and capturing intent motivates almost every dollar invested into ecommerce and advertising. Intent is also the fuel for the Internet's most successful business model, Google's AdWords + Search. As the internet has evolved, so have the ways of creating and capturing intent. Each new technique has leveraged data in a novel form to discover consumers' wishes. I believe we're at the beginning of an entirely new wave called anticipatory computing.
Financial statements are the Rosetta Stone for a business. They are the most succinct way of communicating how a business operates to management teams and boards, who weigh the trade-offs of different investments. In the early stages of the startup, financial statements aren't used much as a management tool. They are most often used to keep an eye on monthly burn rate....