Both Sides of the Table

DECEMBER 27, 2011

” I mention journalists here because they perpetuate the myth that focusing on profits is ALWAYS the right answer and then I hear many entrepreneurs (and certainly many “normals”) repeating the same mantra. I have had this discussion with many a first-time entrepreneur. Simplifying: Revenue -. Operating Costs.

Startup 418

Startup Revenue Technical Review Flash 418

Both Sides of the Table

SEPTEMBER 22, 2012

And so do entrepreneurs who are quick to pivot to new businesses or to sell in an acquihire. It’s been high tide since 2009 so an entire batch of entrepreneurs don’t know what low tide even looks like. And the “stay lean” argument isn’t only good for entrepreneurs, it can be good for VCs, too.

Silicon Valley 390

Silicon Valley Venture Capital Startup Technical Review 390

Both Sides of the Table

SEPTEMBER 28, 2014

So if your costs are $500,000 per month and you have $350,000 per month in revenue then your net burn (500-350) is equal to $150,000. In a world where the economy only heads in one direction (read: 2009-2014) most investors & entrepreneurs forget to pay attention to gross burn.

Burn Rate 383

Burn Rate Balance Sheet .Net Valuation 383

Both Sides of the Table

MARCH 19, 2013

The line of reasoning goes, “Services businesses are not scalable and the market won’t reward this revenue so make sure that third-parties do your implementation or clients do it themselves. We only want software revenue.” If you’re an early-stage enterprise startup services revenue is exactly what you need.

Technical Review 403

Technical Review Software Review Startup API 403

Both Sides of the Table

JUNE 28, 2018

My friend Michael Broukhim, founder & co-CEO of FabFitFun and I recently had a catch-up meeting for 3-miles on the Santa Monica “Bird Trail” No company has ever elicited so many questions by friends, colleagues, entrepreneurs, fellow VCs and journalists as has Bird, the company that pioneered the electronic scooter as a service market.

San Francisco 256

San Francisco Valuation Technical Review Los Angeles 256

Both Sides of the Table

MAY 28, 2018

There are many things a VC is looking for in reviewing your business plan but beyond things the like the quality of revenue, margins, OPEX and CAPEX there’s a really simple rule I call, “Cash In, Cash Out, Milestones Achieved.” One entrepreneur refrain I sometimes hear is “We want to raise some extra money for M&A activities.”

Burn Rate 247

Burn Rate Valuation Pre-Money Valuation Dilution 247

Both Sides of the Table

AUGUST 8, 2009

Your friends and advisers tell you that this means you need revenue because in this economy VC’s will only fund businesses with revenue. So if it’s not necessarily revenue that’s preventing an investment, then WTF is traction? Unfortunately your advisers are wrong. VC’s are the same.

Technical Review 309

Technical Review Term Sheet Venture Capital Revenue 309

Both Sides of the Table

NOVEMBER 3, 2009

There were tons of young entrepreneurs showing their latest Web 2.0 I will quote a prominent, well-known entrepreneur whom I like and respect and who told me when he was raising money, “I don’t know how much I’m going to charge for my product so why should I create an artificial spreadsheet?&#. Here’s why.

Business Plan 334

Business Plan AJAX Venture Capital Technical Review 334

Both Sides of the Table

APRIL 26, 2016

Perhaps the most misused terms I see these days from entrepreneurs involve CAC (customer acquisition costs) and LTV (life time value) and a lack of understanding these critical components is driving many companies to premature failure. So I spend an inordinate amount of time with entrepreneurs focused on payback. End of story.

Metrics 150

Metrics Cost Acquisition Startup 150

Both Sides of the Table

FEBRUARY 9, 2013

I never lived beyond my means and it’s always a warning sign for me when evaluating companies and entrepreneurs. Note to said entrepreneurs – you’re not missing anything. The ones who lease expensive cars to look like they made made it while they rack up credit card bills. I like more understated types.

Software Review 398

Software Review Technical Review China Mexico 398

Both Sides of the Table

MARCH 25, 2016

In our industry we applaud the efforts for entrepreneurs to have tried and we know that today’s failure can bring the experience for tomorrow’s success. It turns out that to build a successful company you ultimately need this strange thing called “revenue” that people don’t just hand you: You need to earn it.

Startup 150

Startup Seed Money DC Software Review 150

Both Sides of the Table

JUNE 18, 2015

I rarely talk to any startup entrepreneur or VC who doesn’t feel it and somehow long for simpler times despite the benefits we all enjoy from increased enthusiasm for our sector. For entrepreneurs there’s too much money sloshing around. They’re doing how much in SaaS revenue? My general advice is to do less.

Software Review 150

Software Review Turkey Portfolio Syndicate 150

Both Sides of the Table

APRIL 4, 2011

Most people under estimate the challenge of winning “share of mind” the least understood concept with tech entrepreneurs. Revenue Metrics. Revenue metrics are one of the first things I ask for from the startups in which I invest. I like to think of revenue drivers. At 99 cents they’re disposable. In 6 months? In 3 months?

Metrics 346

Metrics Startup Acquisition SEM 346

Both Sides of the Table

OCTOBER 19, 2014

We are often asked how companies get funded, why VCs make the decisions we make and what we’re looking for in entrepreneurs. At Upfront we’re totally fine funding entrepreneurs who have done multiple businesses in the past – in fact we like it. But I’m guessing the narrative is similar elsewhere.

Technical Review 373

Technical Review North America Los Angeles Cofounder 373

Both Sides of the Table

JULY 6, 2016

I even prefer to fund entrepreneurs who have experience some level of set-backs in their careers or startups because I think it brings a humility to decision-making that I find healthy. I talk about failure a lot because I think it can be tremendously instructive and I think that success without failure often masks underlying lessons.

South Korea 261

South Korea Silicon Valley Los Angeles Japan 261

Both Sides of the Table

OCTOBER 11, 2016

Entrepreneurs are supposed to have insights that others don’t have and we’re supposed to be good judges about which entrepreneurs and executives have both the most clever ideas and the right skill sets to do transformational things against all odds. It has grown recurring revenue by more than 500% and deal-size by 276%.

Venture Capital 150

Venture Capital Fractional CTO Cofounder Early Stage 150

Both Sides of the Table

FEBRUARY 7, 2011

Equally, I encouraged entrepreneurs to spend time getting to know their future VCs early because getting a feel for your chemistry is far more important than how the VC is ranked in some survey. Equally, I encouraged entrepreneurs to thoroughly reference check their VCs – you’ll learn much more from this than anything else.

Entrepreneur 330

Entrepreneur Tunisia Egypt Iran 330

Both Sides of the Table

SEPTEMBER 12, 2010

“Hi [entrepreneur], I hope all is well. I know the firm well and I know the entrepreneur & his business well. If the goal is simply to get the basic details (revenue, customers, staff numbers, prior funding) then no judgment is required. So I have to imagine many other entrepreneurs felt the same.

Programming 294

Programming Entrepreneur Private Equity Equity 294

Both Sides of the Table

MAY 6, 2018

The best entrepreneurs in our industry focus on it year-round as opposed to just once every 18 months. Let’s say you have built a SaaS company where a large part of the early revenue comes from a few big customers or a large part of the revenue is services based vs. software based. Let me give you an example.

Revenue 236

Revenue Valuation Portfolio Restful 236

Both Sides of the Table

JUNE 5, 2011

I have conversations with entrepreneurs and other VCs on a daily basis about fund raising, the prices of deals, how much companies should raise, etc. These are not scientific, just anecdotal and just trying to provide some transparency for entrepreneurs on what I’ve seen the market. million post-money valuation with no revenue.

Pre-Money Valuation 336

Pre-Money Valuation Valuation Silicon Valley Stock 336

Both Sides of the Table

SEPTEMBER 17, 2011

I’d say about 80% of the experienced entrepreneurs & VCs I know privately agreed with me. I know it’s much sexier to race around talking about buying up companies than it is tweaking your business operations to accelerate revenue, reduce churn and grow faster. Naturally some didn’t. What will it do?

Operations 292

Operations CTO Hire Startup Early Stage 292

Both Sides of the Table

JANUARY 11, 2014

And if there is a term for that which helps entrepreneurs stay focused on these good and true objectives then I’m all for it. If you are early in a platform (Zynga to Facebook, AngryBirds to iOS, Maker Studios to YouTube) you catch a major marketing wave where acquiring customers and growing revenue is exponential.

Technical Review 384

Technical Review Hockey Stick SEM Channel 384

Both Sides of the Table

JANUARY 6, 2014

And here’s an important point that I think modern entrepreneurs often forget: Investors are “co-owners” of your business. There are just as many bad entrepreneurs who do bad things. It surprises me that this is even controversial but in this day-and-age it sometimes is.

Technical Review 325

Technical Review Early Stage Software Review Los Angeles 325

Both Sides of the Table

JUNE 22, 2011

This was an audience of mostly first-time entrepreneurs. It is great for entrepreneurs and great for VCs. So here is what I have been telling entrepreneurs privately for the past 6 months. Ah, but today’s Internet companies have real revenue! What a bubble means for each entrepreneur. I believe that.

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

Both Sides of the Table

JULY 29, 2010

We received so much positive feedback from our This Week in Venture Capital show walking through valuation calculations & term sheets that we decided to do a Q&A show this week to address topics that entrepreneurs want to learn about. on the entrepreneur side of the table) when I raised at too high of a price. This is wrong.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

Both Sides of the Table

MARCH 17, 2011

In the entire time I was an entrepreneur I think I never really stopped recruiting. I might be grooming them for when I have more money or more revenue. Don’t promise revenue or growth faster than you know you can achieve. He is out innovating people with 10 years’ his experience. He is hungry. He is an A player.

Hiring 399

Hiring Startup Global Revenue 399

Both Sides of the Table

JULY 13, 2013

My mom was an entrepreneur – she was kind of my inspiration for entrepreneurship. And no one could see me as anything but a startup guy, so I started a second company and called myself a serial entrepreneur. Then everyone just started calling me a serial entrepreneur. As an entrepreneur you have to suspend disbelief.

Cofounder 337

Cofounder Technical Cofounder Startup San Diego 337

Both Sides of the Table

JUNE 17, 2017

70–80% of the costs of most startups are employee costs so what you’re really talking about when a company is unprofitable is that they are growing their staff ahead of their revenue. I often ask entrepreneurs to consider, “What’s your objective? Revenue When I look at an income statement I start by focusing on the revenue line.

Stock Options 227

Stock Options Startup Dilution Venture Capital 227

Both Sides of the Table

FEBRUARY 15, 2016

This has led VC & entrepreneur bloggers alike to similar conclusions: start raising capital early and be careful about having too high of a burn rate because that lessens the amount of runway you have until you need more cash. I’m surprised how few entrepreneurs have this open conversation with their investors.

Burn Rate 150

Burn Rate Cap Table Valuation Software Review 150

Both Sides of the Table

MARCH 30, 2010

He has many of the attributes I look for in an entrepreneur and importantly he has deep domain experience in ad management. Summary view for people who don’t want to read all of the details: it helps you optimize your revenue by comparing the effectiveness of all possible monetization types: cross promotion, in-app purchasing or ads.

Mobile 282

Mobile Management Southern California Application Development 282

Both Sides of the Table

JULY 21, 2014

And importantly we’ve had revenue. I’d like to do a few posts on what life looks like on the way up and perhaps how to keep your head on straight and avoid drinking your own Kool Aid because as I often advise entrepreneurs on irrational exuberance, “ In a strong wind even turkeys can fly.” I know, I know.

Marketing 354

Marketing Incubator Turkey Metrics 354

Both Sides of the Table

AUGUST 3, 2010

There is a telltale sign of an inexperienced startup entrepreneur. How much dilution should I take for it?&# My friend’s company was pre-revenue. I’m doing due diligence on a company of another entrepreneur in LA whose company was apparently doing very well. They get premature merge elation. I understand this.

Merger 276

Merger Technical Review Early Stage Dilution 276

Both Sides of the Table

SEPTEMBER 16, 2010

This is the fourth article in a series on what it takes to be a great angel investor (and why this should matter to entrepreneurs). But I often also want to learn about a market, get to know other investors, help promising entrepreneurs get their first break as I once did, etc. Part 1 – Access to Great Deal Flow – is here.

Cap Table 283

Cap Table Angel Investor Liquidation Preference Deal Flow 283

Both Sides of the Table

OCTOBER 17, 2019

Invoca is now doing 10s of millions in recurring revenue and is growing > 75% year-over-year but it took the first 3 years to really build out the technology and acquire our initial enterprise clients. I mentioned that we sold our position in Kyriba for > $1 billion but when we invested it had virtually no revenue.

IP 223

IP Intellectual Property IRR Cofounder 223

Both Sides of the Table

JUNE 19, 2017

One of the hardest decisions entrepreneurs make when they start a company and raise outside capital is figuring out what an acceptable “burn rate” is. Gross burn is your cost base and net burn is the difference between your revenue and costs. If your revenue grows you can afford to increase your cost base.

Burn Rate 212

Burn Rate Startup .Net Venture Capital 212

Both Sides of the Table

JULY 16, 2013

The company with no revenue and a $150k burn rate that raised $2.5 I often wonder why they didn’t find a way to bring in some revenue to cover costs. Newsflash – if you had $75k revenue / month you’d have 8 months cash left in stead of 4. I see this weekly. million and has 4 months cash left. Yeah, I know.

Burn Rate 412

Burn Rate Dilution Revenue Valuation 412

Both Sides of the Table

SEPTEMBER 1, 2016

As an entrepreneur I never really knew what to make of VC return data. Here’s what I know: Most entrepreneurs I know would love to work with A16Z. Simple: it is value-added for both entrepreneur and co-investor. Does A16Z attract more than its fair share of amazingly talented entrepreneurs? Do they win competitive deals?

LP 264

LP Jordan Cofounder Limited Partner 264