Endeavor Atlanta’s First Class of Entrepreneurs

Endeavor Atlanta just announced its first class of entrepreneurs. Endeavor, as mentioned before, is a global non-profit organization that seeks to help entrepreneurs maximize their potential and grow the entrepreneurial communities around the world. Endeavor is especially powerful for entrepreneurs that are looking to expand to other countries as well as get plugged into a worldwide network. Atlanta’s own chapter of Endeavor opened earlier this year and we’re excited to announce our first cohort of Endeavor entrepreneurs:

  • Dave Keil / QASymphony – Dave and his team at QASymphony have quietly built one of the fastest growing software quality assurance platforms (think software to test software). They’re at the forefront of the trend where most companies are moving away from traditional waterfall processes to agile processes (more iterative and responsive to customer feedback).
  • Hatem Sellami + Bahadir Ustaoglu / Cognira – Hatem and Bahir, along with their team, have built a retail analytics platform that helps large retailers get more value from their data. The platform is centered around customer insights, forecasting, and generally using data science to deliver better business outcomes.

Congrats to Dave, Hatem, and Bahir as Atlanta’s first class of Endeavor entrepreneurs!

Know an entrepreneur that might be interested in Endeavor? We’d enjoy meeting them and sharing the vision of Endeavor.

Private Equity as the SaaS Savior

Several years ago if you were to ask me about SaaS startups and their likely acquirers, I would have rattled off the usual suspects: big software companies that want to get in the space, non software companies that recognize software is eating the world, and the occasional out-of-left-field company that’s making a move. Nowhere on that list is private equity. Now, when people ask who a likely acquirer is for so-and-so startup, private equity is the first thought.

Historically, private equity was known for acquiring profitable companies and either combining them with other similar companies to create more scale or aggressively cutting costs to increase profitability. Regardless, high growth SaaS businesses that burn lots of capital and are rarely profitable in the early years wasn’t the target.

Just in the last few weeks, two high growth Atlanta SaaS startups were recapped (code for new investors coming in and buying out existing investors, ideally at a much higher price than the last round.) The two startups:

  • Gather ($55 million valuation) – Venue management software to manage event spaces and private dining rooms in restaurants.
  • CallRail ($160 million valuation) – Call tracking software for marketers to understand the ROI of different campaigns.

Previously, these types of startups would have raised large growth equity rounds and continued marching towards a massive exit, ideally being acquired by a strategic or going public. Instead, they decided to put money in their pocket (de-risking their position is the lingo) and bring in new partners to help grow the business. And, as part of growing the business, the goal is to make 3-5x their money in 3-5 years, as different from venture capitalists that shoot for 10x+ returns.

When SaaS startups reach modest scale (at least $5-10M+) with a strong growth rate (>80%), private equity firms will compete aggressively to buy the company.

6 Quick Tips for Large Audience Entrepreneur Pitches

Yesterday I had the chance to meet with five entrepreneurs that are pitching at the excellent Venture Atlanta conference next month. These small group feedback sessions are a great way to meet entrepreneurs and offer up some of my personal experiences as I’ve pitched over 30 VCs and personally presented live to audiences as large as 7,000 (the Mercer commencement address).

Here are six quick tips:

  1. Tell a story, not hundreds of details – Stories are the most powerful. Entrepreneurs, in love with their startup, often want to share every detail. Don’t. Tell a memorable story instead.
  2. Don’t read from a script – Multiple entrepreneurs yesterday had word-for-word scripts for their six minute pitch. People don’t want to hear from a script; people want to hear a passionate presentation that evokes emotion.
  3. Show presentation slides, not handout slides – Most of the slide decks yesterday were leave-behind or handout slides with tons of words and details. Keep the slides simple. Follow the rule that the smallest font size on the slide should be no smaller than half the age of the oldest person in the room.
  4. Make an “ask” at the end – The purpose of a pitch is to get something. Whether it’s to raise money, find new customers, or recruit a key team member, always make an “ask” at the end of the pitch.
  5. One slide per minute – Don’t overwhelm the audience with too many slides as it takes away from listening to the presentation. Plan for one slide per minute and keep the visuals clean and on point.
  6. Practice, practice, practice – Everyone can tell immediately when a pitch is well rehearsed. Entrepreneurs that wing it tend to ramble on and muddy their message. Practice the pitch until it’s second nature. Also, visit Pitch Practice for help.

I love hearing entrepreneurs give their pitch and with these six tips will make it even more powerful.

What else? What are some more pitch recommendations?

High End SaaS Valuations Using the 2017 Inc. 5000 Data

Every year I love pouring over the Inc. 500 (now Inc. 5000). When I first read Inc. magazine in high school in the late 90s, I made it a personal goal to win the award. As a founder/CEO, I first succeeded with Hannon Hill (#247 on the 2007 Inc. 500) and then with Pardot (#172 on the 2012 Inc. 500). And, now, as a co-founder/chairman, succeeded with Rigor this year (#430 on the 2017 Inc. 500).

When looking through this year’s list, a number of well funded SaaS startups appeared:

  • Gainsight – $23.1M, 3,843% growth, #102
  • Bizible – $3.4M, 2,405% growth, #179
  • Domo – $79.9M, 2,250% growth, #192
  • GuideSpark – $24.8M, 525% growth, #856
  • Smartsheet – $64.3M, 425% growth, #1021

Let’s take Gainsight as it has the highest growth rate and look at some high end SaaS valuations from their funding rounds.

Gainsight Notes

  • Funding rounds listed in Crunchbase:
    • May, 2017 – $52M Series E
    • Nov, 2015 – $50M Series D
    • Oct, 2014 – $25M Series C
    • Nov, 2013 – $20M Series B
  • Recognized revenue by year:
  • Estimated end of year run rate (run rate is always ahead of recognized revenue for fast growing companies):
    • 2016 – $30M
    • 2015 – $17M
    • 2014 – $8.5M
    • 2013 – $3.5M
  • Published valuations:
    • Nov, 2015 – $348M post-money (source)
  • Estimated valuation as a multiple of run rate:
    • Nov, 2015 – $16M run rate with a $298M pre-money valuation making a valuation multiple of 18.6 times run rate
    • Nov, 2013 – $3M run rate with an estimated $80M pre-money valuation making a valuation multiple of 26.7 times run rate

SaaS valuations are typically in the range of 3-5x run rate and can go as high as 10x run rate for the fastest growing startups (see SaaS Funding Valuations Based on a Forward Multiple). When valuations are 18 and 26 times run rate, it’s a bet on building the category winner and a different game compared to 99% of the venture capitalists out there.

Want to explore more? Check out the 2017 Inc. 5000 and Crunchbase.

3,000 Posts, and Time for Something New

Today marks blog post number 3,000! I’ve been blogging daily for over eight years and it’s time to mark the end. Early on, I did it as a challenge to myself. Can I blog daily for a week straight? A month straight? Then, it took on a life of its own.

So, what’s next? I’m still going to blog, but instead of one per day, I’m only going to blog when I have a topic or idea I really want to share. In addition to the normal short posts, I’m going to do longer, more detailed posts.

Writing is cathartic for me. I enjoy sharing a thought that I found useful or interesting. I enjoy comments and ideas, especially when I’m wrong or there’s another dimension I need to understand. It isn’t always easy, but it is always valuable.

Here’s to the first 3,000 posts, and many more.

So long, and thanks for all the fish.

4 Ideas for Finding Customers

TX Zhuo has a good post up titled Teaching startups the art of the sale where he describes several customer acquisition ideas. Most startups struggle with sales — often in conjunction with not having product/market fit — making for a high likelihood of failure. From the article, here are four ideas for finding customers:

  1. Partner with the first three lighthouse accounts and charge them whatever they’re willing to pay (e.g. a big discount) so that they’ll be references and provide testimonials
  2. Spend time with investors and use their connections to find potential prospects
  3. Form a customer advisory board and use it as a way to entice potential customers (e.g. if you sign, we’ll add you to our customer advisory board)
  4. Deliver a good mix of targeted social, email, and event marketing alongside clear messaging to help your voice be heard

Sales and marketing is hard. Try these ideas and more to figure out what does, and doesn’t, work.

What else? What are some more ideas for finding customers?

Attributes of a Successful CEO

Harvard Business Review has an excellent article titled What Sets Successful CEOs Apart. The authors talk about a variety of research where they distill down the four attributes that set successful CEOs apart from other CEOs. From the article, here are the attributes:

  • Deciding with speed and conviction.
  • Engaging for impact.
  • Adapting proactively.
  • Delivering reliably.

It sounds pretty simple but it’s incredible hard for a CEO to consistently do all four. Want to learn more? Head over and read What Sets Successful CEOs Apart.

What else? Have you worked for/with CEOs that had those attributes?