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Which sectors see more startup company formation than others? The answer has changed quite a bit over the last 8 years. Some sectors have hit their apogee and are declining. Others have grown by more than 3x. Yet others are growing geometrically. Let’s take a look.
Hot Spaces
Artificial Intelligence - yes, it’s a buzzword but it’s more than that. AI or Machine Learning is a new technology that will benefit nearly every type of sector and we’re still in the very earliest innings.
Earlier this year, I read Algorithms to Live By, a book that explains how to use insights from computer science in daily life. One of the rules is the 37% rule. It’s an important rule because it’s broadly applicable. But I had forgotten about it until I listened to the author on the Software Engineering Daily podcast.
The 37% rule says that if you have a decision to make, you should spend 37% of the amount of time you have.
If you must choose a long term headquarters for your startup, call an executive recruiter who focuses in that city. Ask her about each of the key roles your company will need to hire in the next 2 to 3 years. VP Engineering, VP Product, VP Sales, VP Customer Success, VP Marketing, or VP Operations.
How large is the candidate pool for each search? Which are the hardest searches to complete in this geography?
29 July
My perception of books was shattered in first grade. A friend and I were arguing about the extinction of dinosaurs. “It’s right here!” I yelled pointing to the book in my hand.“A meteor crashed, cooled the earth, and killed all the dinosaurs.“
My friend countered with a book of his own. Volcanic eruptions had blackened the sky with ash and cooled the earth, he recited. Locked in stalemate, we appealed to a higher authority.
A little while ago, we were lucky to host Guillaume Cabane at Office Hours in a new format: 30 minute 1-on-1s with a few companies. It was a huge success and a format that we will continue because of all the learning. Guillaume was kind to share some takeaways from the event below.
If you’re in B2B SaaS, you most likely have a finite TAM. For the love of ARR, please get the exact list of all accounts in your TAM (at least US).
I’ve written before about the Jacob’s Ladder of Fundraising. The Jacob’s Ladder is a children’s toy that flips over, and it’s a great metaphor for the seed market. Seed rounds are rapidly approaching and now often equal to the sizes of Series As just five years ago. The chart above shows the mean round size in the US across.
As the Jacob’s Ladder flips, a series of important strategic questions arise in the market.
Wing.vc published the Enterprise Tech 30 last week. It’s a coaches poll of the top enterprise startups broken into early, mid and growth stage. Congratulations to all the companies and in particular, the 8 Redpoint companies on the list: Mattermost, Cockroach Labs, LaunchDarkly, Tray.io, AppZen, Snowflake, Hashicorp and Stripe.
Coaches polls are fun because they provide a different perspective on the market. I analyzed the data set and added a few columns to it to see if there are any trends.
In Rethinking Customer Churn Rate & LTV/CAC, Thibaud Clement illuminates a counter-intuitive concept about churn. The faster you increase your growth rate (acceleration rate), the higher the churn rate.
Consider the same startup under two scenarios: one in which the acceleration rate is 50% and one in which the acceleration rate is 0%. In the 50% scenario, churn will be 67% higher. A surprising result.
Why does this happen? Because the odds of churn decrease with time, particularly for products with monthly billing.
When I shared the Redpoint SaaS Metrics Template, I wrote about the difficulty I had identifying key engineering metrics. I was grateful for all the responses from leaders at many startups to share their expertise. I’ve updated the template with a few metrics.
Reliability - percent of application requests that load. 1 minus reliability is the percentage downtime. This measures the durability of the application.
Availability - percent of application requests that load within a certain latency.
When we published the results of the freemium survey earlier this year, we noticed respondents targeting the enterprise observed higher net dollar retention and lower churn than those startups targeting other segments. I wondered if we could observe any other patterns about enterprise businesses, so I produced this analysis of public companies with ACVs (annual contract values) of $100k or greater.
In the series of charts that follow, the red bars indicate the value of the metric during the year of IPO.