Alex Pattis’ Post

Conventional investors are bound to be affected more by the PR stunts of many startups. The reason is that they are just doing PR and the business may not be a viable one or a sustainable one. They get funds from conventional investors, increase the revenue, expenses also increase, and do a lot of marketing and PR, and when the fund is expected to be exhausted go for the next fundraise and repeat the same activity. It is a vicious cycle. The problem that persists is that in all the PR stunts they do, they just focus on telling people about their revenues and not about the expenses they have incurred or the decrease in losses or the EBITDA generated because none of these matrices would be a positive one. The revenue would be growing, and so is the expenses and these companies never will be profitable. Nor do these companies focus on compliance as their main focus is on PR and public stunts. The people who are most affected by this would be conventional investors who do little Due Diligence about these companies and they trust the PR and outside noise and invest in these companies mostly for a fixed ROI model. To pay the fixed ROI for the first investor these companies will have to raise funds from a second investor and to pay the ROI for the second investor they have to raise funds from a third investor and yet again another vicious circle. Professional investors are never gonna invest in these companies as these companies will never pass the basic DD test and the investors stay away from these companies for their good. The founders of these companies may not be doing this as a fraudulent activity or anything, they just get excited by the PR, revenue growth and other things. But at some point, they have to focus on making the company profitable and do justice to the investors and society. Many founders have made the company profitable and sustainable after making heavy losses in the initial years because they gained wisdom from these mistakes and many other founders just keep on doing the PR stunt as that is the only thing that helps in generating money through conventional investors. This is an alarming situation for all the conventional investors out there- a little bit of Due Diligence on the companies that you invest through your CA may help you save a lot of your hard earned money.

Founder friendly and investor friendly do not have to be at odds with one another. Truth is founder friendly is the path investor friendly. One of the craziest things I observed in my first you as a VC is how afraid founders are to tell VCs what type of outcome they want. I mostly get the sense they are telling me what I think I want to hear. That looks like... "I want to grow a big company and IPO." or "I want to growth a big company and have a big PE exit." Come on! That's not what you want. That's what you think I want. Today, more that ever, that path is not clear. It's murky at best. Fund dynamics and the crazy valuation market of 2021 have made VCs evaluate companies through the lens of their fund or their mistakes, not on the merits of the founder and the business they are looking to fund. I'd much rather a founder tell me, "I'd love to run hard for 3 years toward $10M in ARR and target $50M-$75M acquisition by one of the platform players in the space." Why? It narrows the focus and is very tangible. It's a timeline and an outcome that's easy to rally around. That impacts everything! Hiring, operations, finance, sales, marketing... everything! This allows me to build a targeted plan for that founder and their company. As an investor, it's simple, the faster you get capital returned, even modest returns, allows you to put that capital to work in other places diversifying your risk. The traditional model of 1 in 10 successful outcomes carrying the whole portfolio in a 10 year period is not only bad for the investor, but the founder as well. I can't tell you how my LPs I've connected with who've told me they've had their private allocation locked up with no returns for 5, 10, 15 years... Obviously sucks through the lens of the investor, but think about all of the founders in that same timeframe who have been grinding to meet the metrics of the fund vs. the metrics that could financially change their life forever. In Revenue Capital was built on two fundamentals. 1. Founder Friendly: that's looks like hands on GTM support designed around an outcome they want to achieve. 2. Investor Friendly: that looks like returning capital in 2-4 years targeting 3-5x returns. If you are a founder of a B2B vertical SaaS company, we'd love to talk with you and learn about what you want to accomplish. If you are an investor looking for returns from private venture investing, we'd love to talk to you as well. Founder friendly, meet investor friendly. #cheatcode

Great feature from Riley Kaminer for our portfolio company, Paylode, covering their incredibly successful seed round. The information provided in this post is for educational and informational purposes only and is not intended to be investment advice or a recommendation. Struck has no obligation to update, modify, or amend the contents of this blog post nor to notify readers in the event that any information, opinion, forecast or estimate changes or subsequently becomes inaccurate or outdated. In addition, certain information contained herein has been obtained from third party sources and has not been independently verified by Struck. The company featured in this blog post is for illustrative purposes only, has been selected in order to provide an example of the types of investments made by Struck that fit the theme of this blog post and is not representative of all Struck portfolio companies. Struck Capital Management LLC is registered with the United States Securities and Exchange Commission (“SEC”) as a Registered Investment Adviser (“RIA”). Nothing in this communication should be considered a specific recommendation to buy, sell, or hold a particular security or investment. Past performance of an investment does not guarantee future results. All investments carry risk, including loss of principal. https://lnkd.in/ejNPYB4V

7 Things Reid Hoffman Wish He Knew Before Pitching LinkedIn to VCs. Very insights and Reid Hoffman's thinking 1/ Choose the Right Investor: Forget the myth that startup financing is only about money. Look for investors who can bring more than just funds. Great investors can expand your network and provide valuable insights. Seek out investors who add value and show interest in your problem. 2/ Start with Your Investment Thesis: Don't begin your pitch with your team slide. Open with your investment thesis, stating key points. Build confidence in your investment thesis throughout the pitch. Even for seed rounds, focus on the investment thesis first. 3/ Data Pitch vs. Concept Pitch: Decide if your pitch is data-driven or concept-driven. In a data pitch, lead with existing data to impress investors. In a concept pitch, emphasize your vision for the future. Concept pitches rely more on promised future data. 4/ Address Your Risks: Don't avoid discussing risks; investors expect them. Identify and address one to three key risk factors. Failing to acknowledge risks can harm your credibility. 5/ Acknowledge Competition: Claiming no competition is unrealistic. Acknowledge all types of competition. Express your competitive advantage clearly. Show why you'll stand out in the market. 6/ Pitch by Analogy, Reason with Caution: Use analogies in pitches to help investors understand. Be cautious when reasoning by analogy in strategy. High-level pitches benefit from analogies. 7/ Plan for the Next Round: Think about the round after the one you're raising. Prepare for subsequent rounds and future investors. Series B investors may want to see Series A results. Be mindful of the VC "crack" cycle and raise wisely. What did you disagree with? 7 Reid Hoffman Learnings 1/ Pick a VC for fit more than just money 2/ Start with your investment thesis, not your team 3/ If you have traction, show numbers. If you have a story, tell that 4/ Investors know there are risks. Don’t hide from them 5/ You always have competition 6/ Pitch by analogy but don’t necessarily reason by analogy 7/ The last round you have is before you exit. Plan for that

VCs always assess the exit value for potential investment opportunities. This is why founders should also pay attention to it when talking to investors. One useful metric is to analyze EV/Sales multiples for public companies and M&A deals over the last few years in your niche or an adjacent industry. At I2BF Global Ventures, we heavily invest in B2B SaaS. We would like to share with you two articles by Sammy Abdullah, the Founder and Managing Partner of Blossom Street Ventures. He regularly publishes valuable statistics for SaaS businesses. EV/Sales Multiples in Q1 2024 for Public SaaS Companies Out of the 109 publicly traded SaaS companies, the median multiple was 5.72x revenue, while the average was 7.27x. 25% of companies are trading at 10x revenue or greater, with the peak being 60% in Q4 2020. 5 companies trade above 20x, whereas 35 traded above 20x in Q4 2020. Additionally, the gap between the average and median is 1.6x, indicating that premium SaaS companies are receiving slightly higher valuations. However, this gap is narrower compared to 2020 and 2021 when it was approximately 5.8x. The median SaaS multiple is in the lower range since Q4 2014, ranging from 4.6x to 14.1x (see the graph below). https://lnkd.in/dAAaYaRf EV/Sales Multiples for SaaS Companies in M&A Deals since December 2020 Based on data from 35 public SaaS companies acquired, the median EV/Sales was 8.9x and the average 10.3x trailing twelve-month revenue. Only 10 acquisitions were made by strategic investors paying higher EV/S, while the rest were made by private equity investors. Salesforce paid the highest multiple of 33x revenue for acquiring Slack. https://lnkd.in/ddjXMurQ We hope these statistics will be helpful to you. Good luck with your fundraising efforts!

Bootstrapping is a great way to start a business without having to give up equity or control to #investors. Figure out the key #strategies that you need to follow in order to #bootstrap your way to a $100 million company. #corpradar #strategy #business #funding

How Do You Tell A Compelling Story About Your Company To Investors? Every founder believes they have an awesome team and technology; the question is, what will investors think? In fundraising, most founders are tempted to jump straight into PowerPoint to get started. Don’t do it! Remember "It’s not about the slides; it’s about the story." So how do you tell a compelling story? - First, figure out which type of story you should be telling and make that narrative into a sandwich, emphasizing the key point at the beginning and again at the end. Next, use your problem and solution statements to emotionally and intellectually engage your audience, and be sure to adequately address all the expected areas in the deck. With all that in mind, you’ll be ready to follow three simple steps to craft your winning deck. - Choose The Right Story To Tell The first and most important thing to decide about your pitch is which story you should be telling. Fiction may have seven plot archetypes, but pitches tend to fall into one of four narratives, listed here in order of strength: Traction. This is the story you want to be telling. Maybe your revenue or user base is growing really fast (> 20% month-over-month), or you’ve closed deals with major customers or partners. If you have traction that will impress investors, then tell a traction story. Team. Maybe you don’t have wow-factor traction yet, but you and your cofounders are successful second-time founders or have a management team with impressive pedigree. In that case, tell a people story. Technology. Or perhaps you don’t have strong traction but have created a technological breakthrough in an important field. Then you could tell a technology story. Vision. This is the story of last resort. If you don’t have impressive traction, a highly regarded team, or a technological breakthrough, then you have to fall back on a vision story of how you want to change the world. Be realistic in your self-analysis of what qualifies as “impressive.” Every founder thinks they have an awesome team and technology; the question is, what will investors think? If you’re not sure which story you should tell, then get some feedback from investors or other founders. - Make A Sandwich To capture investors’ attention and help them remember you, open the pitch with your company’s single most impressive achievement to date, and then highlight that achievement again at the very end. "Open the pitch with your company’s highest achievement." We have covered this topic in detail in the attached document.👇 🚀 Check out my free newsletter for more insights: https://lnkd.in/dKZQKHg2 . #startup #venturecapital #funding #fundraising #vc #startup #venturecapital #funding #founders #entrepreneurship #startups #founderstories #startuptips #fundraising #mvp #founderlife #entrepreneur #ycombinator #startuptips #founder

VCs always assess the exit value for potential investment opportunities. This is why founders should also pay attention to it when talking to investors. One useful metric is to analyze EV/Sales multiples for public companies and M&A deals over the last few years in your niche or an adjacent industry. At I2BF Global Ventures, we heavily invest in B2B SaaS. We would like to share with you two articles by Sammy Abdullah, the Founder and Managing Partner of Blossom Street Ventures. He regularly publishes valuable statistics for SaaS businesses. EV/Sales Multiples in Q1 2024 for Public SaaS Companies Out of the 109 publicly traded SaaS companies, the median multiple was 5.72x revenue, while the average was 7.27x. 25% of companies are trading at 10x revenue or greater, with the peak being 60% in Q4 2020. 5 companies trade above 20x, whereas 35 traded above 20x in Q4 2020. Additionally, the gap between the average and median is 1.6x, indicating that premium SaaS companies are receiving slightly higher valuations. However, this gap is narrower compared to 2020 and 2021 when it was approximately 5.8x. The median SaaS multiple is in the lower range since Q4 2014, ranging from 4.6x to 14.1x (see the graph below). https://lnkd.in/dg55r-St EV/Sales Multiples for SaaS Companies in M&A Deals since December 2020 Based on data from 35 public SaaS companies acquired, the median EV/Sales was 8.9x and the average 10.3x trailing twelve-month revenue. Only 10 acquisitions were made by strategic investors paying higher EV/S, while the rest were made by private equity investors. Salesforce paid the highest multiple of 33x revenue for acquiring Slack. https://lnkd.in/dXRtgb_D We hope these statistics will be helpful to you. Good luck with your fundraising efforts!

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Originally, Jonathan Potoschnik, founder of Service Autopilot, had no intention of bringing on a private equity partner. But, in his own words: "I decided to do my homework. I met with 30-40 private equity firms and at the end of 2018 I had a mindset shift. I concluded there were some really good potential partners out there that I would be very happy working with." Though he had relationships with many firms, Jonathan and his cofounders "determined there was no way we were going to bring on a partner without getting an investment bank to help." Read Jonathan's firsthand account of how working with an investment bank enabled him to run a competitive process that zeroed in on the right partner. https://lnkd.in/ggKhue5u #tech #saas #fieldservices #investmentbanking #privateequity Clearent Advent International