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On July 13th at 10am Pacific, Office Hours welcomes Lars Nilsson, VP of Global Sales Development at Snowflake.

Having worked at five startups which went public - Snowflake, Cloudera, ArcSight, Riverbed and Portal Software, Lars is an expert in sales. He’s lived through many different go-to-market models and structures, through economic cycles.

With all the changes in the broader macro-environment, sales leaders may be wondering how to prepare for lengthening sales cycles, pricing pressure in conversations, and an internal focus on efficiency. During this session, we’ll cover those topics and others.

Last week, I installed Github’s Copilot, a machine learning tool that helps engineers write software. I often code in R, Go, Ruby, markdown, bash and other languages to automate some task or update my CRM, so I was excited.

I typed in def get_tweets_for_user(username) in ruby. Copilot completed the entire function in less than 5 seconds, like a GMail smart reply but for programming. I entered my API credentials, executed the program, and it ran. 5 minutes’ work compressed to a tab-key-press and a copy/paste.

Funnel optimization for web3 companies will become critical to their success. Token grants cost 4-7x than traditional customer acquisition techniques.

Other techniques, like incentivized referral, improve the economics but still tally 19 month payback periods. A year-and-a-half might be fine for a SaaS company selling a $50k to $100k ARR product, but long-term viability demands achieving 3-6 month paybacks of modern web2 consumer companies.

Why are the payback periods so high? Many web3 consumer experiences ask users to complete a Tough Mudder to use the product. For example:

Coinbase and Uniswap are two of the leading crypto exchanges. The market values COIN, Coinbase’s stock, and UNI, Uniswap’s token at about 3x trailing 12-month revenues. But should they be trading at similar multiples?

As the market has corrected, so have the trailing 12-month revenues (TTM)/Market Cap multiples. They move in synchrony with an R^2 of 0.79.

Just how comparable are these businesses?

Coinbase and Uniswap generate billions in revenue. Coinbase’s trailing revenue in Q1 2022 approached $7.5b with 34% net income margin (profit). Uniswap recorded $1.7b in revenue in the same period.

For web3 startups to thrive, their marketing teams will need to spend marketing dollars to acquire users efficiently. Existing marketing technology won’t work for web3.

Web2 marketing employs the cookie as the primary identifier of a person, not a wallet. There’s no bridge between web2 & web3 data, yet. The behavioral patterns in web3 differ driven by anonymity, communication patterns on discord and telegram, and the consequences of using tokens as user acquisition, as governance votes, and currency.

Yesterday, Office Hours welcomed Lee Kirkpatrick, former CFO at Twilio to share his experiences managing through three different recessions: the dotcom era, the Global Financial Crisis, and today.

Lee headed finance for the company from $15m in ARR to more than $1b. In addition, Lee shared his view on usage-based pricing and defending a startup’s great asset, talent, from poaching during the next recovery.

When Aileen Lee published “Welcome to the Unicorn Club” - the article that coined the word unicorn for a $1b startup - the average public SaaS company commanded a market cap of $1.5b.

I remember thinking a $1b M&A or IPO was so rare an investor might hope to achieve it once or twice in a career. Fewer than 15 SaaS companies traded on public exchanges then. With at least 20 firms and several partners per firm chasing unicorns, upstarts faced stiff odds.

OUCH. It’s been a brutal year for many in the capital markets and certainly for Amazon.com shareholders. As of this writing, our shares are down more than 80 percent from when I wrote you last year.

Jeff Bezos wrote this to start his annual shareholder letter in the year 2000. But he might have written it today. Amazon stock reached an all time high of $5.33 before falling to $0.298.

The round extension is the most popular fundraising round today. You won’t find statistics detailing their rise in PitchBook or Crunchbase, but “reopening the last round” or “raising a round extension” precede pitches Startupland today.

How does an extension impact a company’s cap table on average?

Round dilution from VC dollars has been declining for the past decade. These figures exclude employee stock option (ESOP) dilution.

In the last 12 years, mean seed round dilution has dropped from 25% to 12.5%. Series A has dropped from 30% to 20%; Series B from 22.5% to 12%; and Series C from 18% to 11%. Across financing rounds, dilution from capital has fallen by 30-50% in that decade.

Suppose a VC gave you, a web3 marketer, $50m to spend to acquire as many users as possible? How would you do it? Conference sponsorships? Cross-DAO messaging in Discord? Sponsored social? It would be a challenge to drive any efficiency.

The past isn’t much help, either. Web2 marketing channels don’t apply because they employ third-party cookies, a technology Google will phase out at the end of 2022. Third-party cookies enable marketers to advertise to users who they haven’t “met” online yet. Third-party cookies encrust information about which sites I’ve visited.