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During Bill Binch’s Office Hours, he predicted many more software startups would achieve 200% net dollar retention. In other words, the average customer’s spend would double each year. I’ve only seen a handful of companies achieve that mark. The most notable public company is Snowflake which routinely reports NDR of 171%.

Large NDR figures are hugely beneficial to startups. They imply strong product market fit. They provide predictable revenue growth. They result in better capital efficiency, an important metric in this environment.

This chart shows the relationship between the top 100 public projects’ revenue and their trailing revenue multiple. There’s none. The correlation asymptotes to zero. At least when looking at the ecosystem as a whole.

But let’s break the data down by category into the top 5 by revenue: L1s (blockchains), DEXs (decentralized exchanges), Credit (lenders), NFT Marketplaces (buy & sell Bored Apes), & Yield Aggregators (systems to maximize interest rates on deposits).

The summer of 2021 marked an influx of dollars & interest into web3. Since then, the fourth crypto winter has dropped snow atop web3, but the revenue decline isn’t equal across web3 software.


NFT marketplace revenue collapsed 62% since the beginning of this year. This chart shows the decline in monthly revenue from January to August. L1s’ monthly revenue has followed NFT marketplaces downward, falling 57%.

The parallel revenue drop suggests L1 revenue skews to NFTs today, likely upwards of 75% concentration.

Last week, I presented an overview of the fundraising market at the Traction Conference in Vancouver. The slides are embedded above & linked here.

My brief narrative of the slides follows

The current state of affairs arose as a result of the Global Financial Crisis. Since 2008, the US experienced an unabated 12 year bull market fueled by four waves of money printing which increased US money supply by 30%+. This experiment culminated with Covid. The supply chain shocks combined with many more dollars fueled inflation, which the Fed is fighting by raising rates.

In many board rooms, the most important go-to-market number this quarter is pipeline health.

For some companies, the pipeline may be less clear than a quarter or two ago. Summer seasonality may play a role. Macroeconomics might also be lurking within the numbers.

Pipeline fluctuations are normal. But any meaningful & unexpected surprise warrants introspection. Pipeline analysis often has four parts:

1. Craft the sales sandwich to predict your GTM conversion rates & determine if close rates have changed in parallel. Sales cycle plays an important role: if conversion rates remain the same, but if sales cycles double, the pipeline initially thought to be for this quarter isn’t ready to close for a half-year.
2. Build a lead generation calculator for your business using those conversion rates to understand how much lead volume the GTM engine requires to attain plan.
3. Employ Bill Binch’s Mojo Metric as a daily measure of pipeline health for the sales team. The mojo metric captures the net daily change in pipeline across new deals, expansions, & sales cycle changes.
4. Perform a second order pipeline analysis to understand where pipeline deviations start. A single pipeline number, say $7m doesn’t mean much. But $7m ready-to-close this quartery with 80% belonging to the ideal customer profile on a $1.5m bookings number means the company is about to crush its target.

Pipeline segments across five dimensions:

Omni announced a $27m Series A. Omni builds modern BI with a consistent data model using SQL. Omni picks up where Looker left off. Looker’s fundamental innovation, LookML, enabled one person to define the revenue metric & everyone else in the organization to use it.

Omni extends that insight by building a modeling layer that learns about your data as you query it, evolving the data model with each subsequent query. That insight comes from the founding team’s shared history over more than 15 years.

Last week, Office Hours welcomed Bill Binch, former CRO at Pendo, EVP Worldwide Sales at Marketo & operating partner at Battery to share his views on building world-class sales organizations.

Bill & I exchanged emails about Deliberately Underselling as Sales Strategy. I asked him to share his views on land & expand team structure & quotas. But we covered much more. Here are three highlights from the session.

This is a paper bond from the US Treasury dated 1976. This piece of paper guarantees its holder $5000 on August 15, 1986. At the bottom, four coupons entitle the holder to $200 at the maturity date on the top right. The coupons represent the interest on the bond.

Those four little coupons would lead to the creation of a $2 trillion bond behemoth.

In 2020, revenue growth was the most important factor explaining a public software company’s forward multiple. The formula has changed since then.

Net income has surged to the highest correlate of a public software company’s multiple surpassing revenue growth. Narratives published in newspapers trumpeting the importance of profitability correctly assess investor sentiment on stock exchanges.

Revenue growth & sales efficiency round out the top 3 with gross margin & cash flow from operations margin rounding out the 5 tested metrics.

This year, private equity firms have acquired five public software companies, totalling $38b in value. Seven months into 2022, these figures exceed last year’s totals, something I wondered about last month.

Since these transactions’ details are public, we can use them to infer how the private software market values companies.

In the last decade, a software company’s revenue growth correlated most highly to its valuation multiple.