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Ten years ago, startups pulled capital from the capital markets. A startup raised money, executed for 12-24 months then sought more capital on Sand Hill, flaunting milestones to justify a higher valuation.

Today, a global investor base pre-emptively shoehorns dollars into the most attractive startups, saturating the balance sheet with cash every six to nine months. I call these mark-to-market rounds.

Mark-to-market rounds press private markets closer to public markets in three ways.

Tokens are the paid customer acquisition channel of web3. By analyzing how web3 companies invest tokens, we can calculate the cost of customer acquisition (CAC) for a crypto company.

When a user spins up a validator to verify transactions on a blockchain, stresses the testnet and is rewarded with tokens, stakes tokens to generate yield, burns tokens to transact, or receives an airdrop for tweeting, a cryptoco expends tokens to acquire a customer.

Since 2016, public software has witnessed four corrections. Today, we’re in the midst of the fifth. Also, 2014 to 2016 saw a 57% reduction in multiples and of course after 2008. But let’s look at the most recent five years.

This chart shows the median and the 75th percentile of enterprise value/forward revenue multiple for the basket of public stocks which were public at that moment in time.

At Redpoint, we’ve been spending more time in crypto. The foundational layers of the next wave of technology innovation are constructed today. In some ways, they parallel their forebears in classical infrastructure. In others, these businesses are completely novel.

We met the Mysten Labs team (Adeniyi Abiodun, Evan Cheng, George Danezis, Sam Blackshear) and learned about their history developing technology for Facebook’s crypto infrastructure. The more we listened, the team’s depth in distributed systems, cryptography, and programming languages amazed us. This team is responsible for developing Facebook’s blockchain (Diem) and the Move programming language, two fundamental projects within the ecosystem.

A few weeks ago, Office Hours at Redpoint welcomed Claire Hughes-Johnson, former COO at Stripe and VP at Google. Claire’s operational experience is one-of-a-kind, and the conversation focused on scaling startups.

I remember joining Google in 2005. In the halls, I heard colleagues say great things about how terrific a leader Claire is. When I read Elad Gil’s High Growth Handbook and saw Claire’s unauthorized guide on how to work with her, I knew we needed to have her on the show.

Founded by Sanjit Biswas, former CEO at Meraki and John Bicket former CTO at Merakihttps://www.samsara.com/, Samsara builds software to manage physical operations: truck fleets, mining, food & beverage, oil & gas. If a business has to manage physical assets with drivers, there’s a Samsara product for it. Incidentally, the name Samsara is the cycle of life and death in Sanskrit.

The software provides safety, video based coaching, dispatch productivity, and logistics efficiency by instrumenting vehicles and other assets with video and telematics (systems that send data to computers for analysis.) Atop these sensors, Samsara software executes workflows, provides drivers with apps, monitors equipment, and provides managers and executives visibility into the operations of a site.

Words like Loaded Pistols. What an arresting title for a book. I decided to read it just based on its cover. In the first few pages, I learned that it’s a book about rhetoric.

What is rhetoric? I met a few people in college who studied it, and I thought it had to do with logic or philosophy. I was wrong. It’s the art of convincing others with words.

Rhetoric formed a major part of educational curricula before the mid-20th century, but has fallen out of favor for other disciplines. I wish it hadn’t.

When investing in a crypto startup that will issue a token, an investor considers two prices - the price of the equity and the price of the token. There’s a rule of thumb used today that states the token should be worth 3-5x the equity.

A founder informed me the rationale is that a share in a company has a lien on the future dividend streams, but a token has a lien on profit share of the GDP around an economy and that economies tend to be 3-5x larger.

Imagine an AE closes two contracts for $100k ARR. The contracts are identical twelve month contracts except for the payment terms.

Contract A requires annual prepayment - all the cash will be paid tomorrow. Contract B relaxes payment terms to monthly payment, 12 monthly installments for the next year.

Is the payback period for each contract the same?

On one hand, I could plug the numbers into the formula blindly and reply yes, they are identical.

The 100x ARR multiple might be the fundraising meme of 2021. Before, most investors used forward ARR multiples to value companies, but recently, the 100x multiple seems to be a benchmark for SaaS companies raising rounds.

Where did this figure originate? How does it compare to the public markets’ valuation of companies?

Let’s look at the data. Here are the estimated ARR multiples for public SaaS companies. I estimated ARR as the annualized revenue of the most recent fiscal quarter.