Growing Into Reset Startup Valuations

One of the popular topics right now is asset prices and valuations. Everywhere you look, things are priced at all-time highs — public companies, startups, homes, cars, etc. Whether investing, or consuming, the current market dynamics are highly unusual. In startup land, with the BVP Cloud Index publishing an average revenue multiple of 23x, public Internet companies are priced to perfection. But does that matter?

Let’s say the valuation of all public (and therefore private) cloud companies are cut in half — 11.5x revenue multiples. The BVP Cloud Index average growth rate is 37%. Assuming growth stays the same (which it won’t), and valuation multiples are halved, how long will it take to grow into the previous valuations?

Let’s break down the math:

Current Valuation is $1 billion

At a valuation multiple of 23x revenue, revenue is $43.5 million.

If the new valuations were cut in half, $43.5M * 11.5 = ~$500M.

Assuming a constant growth rate of 37%, let’s look at how long it takes for the $500M valuation to get back to a $1B valuation.

Year 1

$43.5M * 1.37 = $59.6M revenue

$59.6M revenue * 11.5 multiple = $685M valuation

Year 2

$59.6M * 1.37 = $81.6M

$81.6M revenue * 11.5 multiple = $940M valuation

Now we know: if valuations get cut in half, it’ll take just over 24 months to grow back into the previous valuation, assuming a constant growth rate. And, assuming continued growth, the startups will dramatically appreciate in value once again post valuation reset.

Growth, growth, growth. As long as there’s strong growth ahead, valuations can be drastically reset and there’s still great value creation in the future.

Continued Startup Momentum in Atlanta

Wow, last week was an amazing one on the announcements front for the tech and startup scene in Atlanta. For years, we’d have one or two big announcements per quarter. We’ve had four just in the last five days. Momentum!

Let’s take a look.

MailChimp Acquisition by Intuit for $12 Billion

This is one of the largest bootstrapped acquisitions of all-time. Nothing Atlanta specific, this is one of the biggest deals in the world for a bootstrapped tech company. In addition to the founders becoming multi-billionaires, the staff is getting $500 million as bonuses and equity awards. One of the big ideas is that success begets success in a startup community, and having tons of new millionaires (and billionaires!) in the community will help fund the next generation of startups.

Roadie Acquisition by UPS

A logistics startup in a logistics town acquired by one of the largest logistics companies in the world. Yep, that’s Atlanta for you. Roadie, which provides same-day delivery, announced their acquisition by UPS for an undisclosed price that is rumored to be a huge number. Per Crunchbase, Roadie has raised $62M since their founding in 2014.

Stord Raises $90 Million at a $1.1 Billion Valuation

The unicorn stampede continues. Local supply chain and logistics startup Stord announced a $90M round at a $1.1 billion valuation led by Kleiner Perkins. Stord is especially interesting as it came out of CREATE-X at Georgia Tech and is only a few years old. More logistics in Atlanta.

GreenSky Acquisition by Goldman Sachs for $2.2 Billion

The buy now, pay later space is on fire (Zoolander, so hot right now) and GreenSky, which specializes in home improvement financing, just announced their acquisition by Goldman Sachs for $2.2 billion. GreenSky was one of the more recent Atlanta startup IPOs and it’s great to see they found a long-term home.

All in all, a pretty amazing week for the tech and startup scene in Atlanta. I’m excited for the what the future holds.

Customer Onboarding Effort and Retention

During the early Pardot days we’d be out pitching venture capitalists and they’d always ask about customer onboarding.

How long does it take to get a new customer live?

What are the steps involved?

How much manual labor is required?

We’d outline the process of how it’d take 30-45 days, how it was “productized services” with a repeatable template, and that it’d usually require 10 hours of manual labor plus some group webinar sessions. All in, it might be $1,000 of work to get a new customer up-and-running. Then, inevitably, the investors would ask how we can bring that cost down. How could we make it more self-service? Knowing that some could be automated but most effort is manual making sure the CRM sync was working, that the landing pages looked correct, that the emails rendered in the inbox, etc.

I felt we were inferior. We weren’t self-service freemium. We had wonderful humans helping make our customers successful, and that took time.

Only later did I realize that this was actually a positive, and not a negative.

The more effort it takes to onboard a customer, the more committed they are to the product. The more committed they are to working through the inevitable kinks. The more likely they are to renew, assuming a good experience.

There’s a direct correlation between onboarding effort and retention rates. Yes, exceptions exist but more effort to get on means more effort to leave. In SaaS, renewal rate, gross and net, are two of the most important metrics, and onboarding effort correlates with better renewal rates.

The next time the topic of effort to onboarding new customers comes up, know that in addition to generally increasing the chance of customer success, it also correlates positively with renewal rate. Put the effort in and reap the rewards.

Startup Executive Bonus Plans

Over the years I’ve seen a variety of bonus and incentive plans for startup executives. Ideally, equity compensation alone would drive the appropriate behaviors to optimize what’s best for the business but bonuses and incentive compensation are commonplace as the startup scales.

In the early years, below a few million in revenue, it typically doesn’t make sense for an executive bonus plan as the business doesn’t have enough repeatability, there are few executives, and it isn’t worth the overhead. With time and success, a bonus plan should be added.

There are a few guidelines I like to think through for a startup executive bonus plan:

  • Keep it Simple
    Too often, I see plans that are overly complex. The main goal of the bonus plan is to drive behavior that aligns with the business goals. Multiple priorities equals no priorities. For an initial plan, err on the side of being too simple and go from there.
  • Target the Most Important Metrics
    While there are dozens of metrics that should be tracked weekly, it’s best that a bonus plan align with 1-3 metrics that are both easy to understand and the most important in the business. For example with SaaS, growth rate is a huge driver of valuation and is a common bonus metric.
  • Counterbalance the Metrics
    Ideally, one or more of the bonus metrics have a counterbalance metric so that the combined results are best for the business. As an example, if growth rate is the first metric, the second metric would be cash burn such that the executives are aligned to grow as fast as possible while burning an appropriate amount of cash. Faster growth might be possible with more cash burn, but the executives would be incentivized to get the mix just right for their bonuses, and this would align with the board expectations.
  • Tied to Base Salary
    Bonuses are usually connected to the salary as a percentage of base compensation. For example, a bonus that is 30-40% of base salary is most common so that executives have the majority of their short-term compensation paid out regularly and once a year they get their bonus (typically paid out after the fiscal year is closed out).

So, as an example, an executive bonus plan would be 40% of base salary and weighted with 70% for growth rate and 30% for cash burn and paid out annually. The percentages and metrics vary from business to business but the general ideas stay the same: keep it simple, target the most important metrics, counterbalance the metrics, and tie it to the base salary.

Startup Equity Expectations: New Car, New House, New Life

Outside of the largest startup regions, the role of stock options/equity compensation is often unappreciated. Salary always gets the most attention, for obvious reasons, followed by benefits, and lastly equity.

Why doesn’t equity and “upside” get the same amount of interest? Simple: without local stories and lore of “regular” people getting wealthy from stock options, they don’t occupy any mindshare. Unfortunately, it’s a foreign concept and doesn’t fit the typical model of being paid in a way where you can promptly spend it. Plus, add in the fact that being short-term focused is a normal quality, waiting years or decades for a potential payoff doesn’t get many people excited.

How do you set team member expectations about the potential value of equity? Start by equating it to more commonly appreciated financial markers and then provide specific details. Let’s look at some example expectations.

New Car

Ah, the unusually satisfying smell of a new car — a sign of success and accomplishment for many people. When startup equity has the potential payout to a buy a new car, set the ballpark expectations. If the startup does well, this is the type of value you can expect from the stock.

New House

Still the American dream for millions of people, the goal of home ownership is a major aspiration. While it often requires a much greater level of startup success, there’s a chance that this equity will turn into enough cash to buy a new house, debt free. Set the appropriate expectation and what level of exit valuation is necessary for this possibility.

New Life

Financial freedom (FIRE!). The rarest, of course, is the outsized-outcome that creates enough wealth for a new life, however that’s defined by the individual. Usually, this happens when a startup sells or goes public for billions of dollars. While possible, set expectations accordingly.


Yes, most startups fail and most entrepreneurs don’t make any money after they raise venture capital. But, it’s a game of power laws and the winners can exceed the wildest dreams. Set expectations with team members around the potential value of their equity and connect it to common financial markers like new car, new house, and new life.

Atlanta Startups on the 2021 Inc. 5000

Every year I enjoy reading about the newest Inc. 5000 fastest growing companies in the United States. The Inc. 5000 is a great vantage point into a variety of different industries, not just tech startups. Future entrepreneurs would do well to study it and look for trends, both across industries and geographies.

Here are the Atlanta startups on the 2021 Inc. 5000:

  • No. 30: Greenlight – Kids’ Debit Card
  • No. 42: Stord – Digital Warehouse and Distribution Network
  • No. 52: Radix Health – Scheduling Solutions for Medical Practices
  • No. 91: Benevate – Employer Assisted Housing Solution
  • No. 92: RateForce – Compare Auto Insurance Quotes
  • No. 132: OneTrust – Operationalize Privacy, Security & Data Governance
  • No. 203: Roadie – On-The-Way Delivery Platform
  • No. 266: LeaseQuery – Lease Accounting Software
  • No. 278: RoadSync – Logistics Payment Software
  • No. 357: Bitcoin Depot – Crypto ATMs
  • No. 371: DC BLOX – Data Centers
  • No. 518: inBrain – Market Research Made Easy
  • No. 595: Accushield – Sign-In and Health Screening Kiosk
  • No. 618: IRONSCALES – Email Security Platform
  • No. 673: – Vacation Rental Protection
  • No. 1,036: CoreView – Office 365 Management Platform
  • No. 1,048: FullStory – Digital Experience Management
  • No. 1,125: Florence Healthcare – Software Solutions that Advance Clinical Research
  • No. 1,150: SingleOps – Business Management Software for the Green Industry
  • No. 1,155: Wick – Multi-Mode Survey Platform
  • No. 1,210: SalesLoft – Sales Acceleration & Customer Engagement Platform
  • No. 1,397: Payrix – Embedded Payments for Vertical Software Platforms
  • No. 1,444: FormFree – Automated Asset Verification for Mortgages
  • No. 1,446: MacStadium – Mac Servers and Cloud Solutions
  • No. 1,457: 1Q – Customer Engagement Platform
  • No. 1,584: Terminus – Account Based Marketing Platform
  • No. 1,637: Cooleaf – Employee Engagement & Experience Management
  • No. 1,654: CreateMyCookbook – Make a Recipe Book
  • No. 1,727: SaaSOptics – Automate Subscription Management
  • No. 1,744: LendingPoint – Personal Loans
  • No. 1,783: BeyondTrust – Privileged Access Management
  • No. 1,878: DefenseStorm – CybertSecurity, CyberCompliance and CyberFraund for Banking
  • No. 1,992: Field Pros Direct – On-Demand Adjusters Network
  • No. 2,075: GROUNDFLOOR – Real Estate Debt Investment Marketplace
  • No. 2,114: AODocs – Document Management and Business Process Management
  • No. 2,234: Itential – Network Automation, Configuration, and Compliance
  • No. 2,342: CallRail – Call Tracking & Marketing Analytics Software
  • No. 2,402: Spiralyze – Predictive A/B Testing
  • No. 2,548: Intellum – Customer Education Software
  • No. 2,552: N2N Services – API Integration Platform
  • No. 2,701: Mobilewalla – Consumer Intelligence Platform
  • No. 2,846: Azalea Health – Health IT Platform
  • No. 2,903: Deposco – Warehouse and Order Management Systems
  • No. 2,994: SimplePart – E-commerce Programs for Automotive
  • No. 3,101: Springbot – Email Marketing and Paid Advertising Platform
  • No. 3,145: WorthPoint – Antiques, Art, and Collectibles
  • No. 3,164: – Telecom, MSP & IoT Billing Platform
  • No. 3,329: MessageGears – Enterprise Customer Marketing Platform
  • No. 3,497: DecisionLink – Customer Value Management
  • No. 3,539: Tripwire Interactive – Video Games
  • No. 3,602: EMS Technology / Operative IQ – Operations Management for First Response
  • No. 3,897: Vyne – Connecting Disconnected Data
  • No. 4,030: Vital4 – AI-Driven Data Solutions for Risk Screening
  • No. 4,300: AchieveIt – Integrated Plan Management Solution
  • No. 4,914: ClickDimensions – Marketing Automation Software

Congrats to the 50+ startups on the list and here’s to their continued growth.

Not All Angel Investors Are Motivated by Money

When talking to entrepreneurs that are out raising an angel round, I encourage them to figure out the true motivations of potential angel investors. At first glance, it’s easy to think that they’re motivated by the most common thing: money. While this is often the case, there’s often more nuance and variety to unpack. And, even on the money side, there are different expectations. Let’s see some examples.

Tourists in Town

First-time angel investors that write a few checks while times are good, and leave just as fast as they came, are the most common. This type is looking for a quick win and has a short time horizon and not enough deal volume resulting in poor outcomes. Be careful with the tourists.

Lottery Ticket

Several years ago I was talking to a potential first-time angel investor and I asked him his investing goals. He said he’d like to invest 1-3% of his savings into startups with the potential to have an income stream that would replace his existing income. Doing some basic math, he was interested in a lottery ticket-like outcome. Not impossible, but highly improbable. Make sure proper expectations are set when there are lofty goals.

Stay in the Game

After selling a startup and sailing off into the sunset, it’s easy to get antsy and bored. One of the best ways to stay in the game without any responsibility is angel investing. The investor enjoys providing guidance and mentorship. The entrepreneur likes the cash and advice. Win win.

Want a Job

Back in the Pardot days I was referred to a potential angel investor. I gave my pitch and made the ask: will you invest? This potential angel said he was interested, and that any money he’d invest would be done so under the condition that he’s hired as a consultant and paid the amount he’d invested. Pass.

Pay it Forward

I know an ultra successful angel that invests simply to pay it forward to the next generation of entrepreneurs. He invests exclusively based on email: no pitches, no phone calls, no Zoom meetings, no reference checks, nothing. A few emails back and forth and it’s a go/no-go.


Not all angel investors are motivated by money. Work to find out the true motivations of potential investors and you might be surprised by what you learn. All money is green but it isn’t all equal.

Startup Success Begets Greater Startup Success

In startupland there’s always been talk of startup success begetting more startup success. The idea is that successful startups expose hundreds, if not thousands, of employees to what it’s like in a startup. Then, after a big exit, a number of newly wealthy employees become the next generation of angel investors and entrepreneurs. Ideally, the cycle repeats itself and each subsequent generation is more successful than the last.

While it sounds nice and makes logical sense, the time horizons are often incredibly long with 7-10 years for the first success. Assuming another 7-10 years for the next round of successes, this process can take decades to play out. Building a substantial startup community requires a long time horizon.

Thankfully, we’re seeing it play out right in front of us in Atlanta. Just last week FullStory announced a $103M raise at a $1.8 billion valuation. FullStory’s founder/CEO is Scott Voigt who ran marketing for Silverpop before Silverpop was acquired by IBM for ~$300M.

The week before Flock Safety announced a $150M raise at a valuation over $1 billion. Flock Safety’s founder/CEO is Garrett Langley who worked at Experience before it was acquired by Cox Enterprises for more than $200M.

Being part of a winning team and seeing success first-hand makes it more attainable and doable.

Startup success begets greater startup success, just look at Atlanta.

Early Innovation Stack at Pardot

Recently I read Jim McKelvey‘s excellent The Innovation Stack: Building an Unbeatable Business One Crazy Idea at a Time. In the world of business books, Jim is especially unusual with his quirky, fun writing style complete with eclectic analogies on every page. The big idea is that startup success isn’t one breakthrough idea — e.g. using a credit card reader plugged into the headphone jack of an iPhone at Square — but rather the aggregation of a number of ideas that coalesce over time.

Wildly successful startups stack one innovation on another, without consciously thinking of it as innovation, all in an effort to make the customer happy. Only once success is achieved, it’s possible to look back and see the different innovations that emerged. Here’s what he cites as the innovation stack for the company Square (market cap $100+ billion) that he co-founded:

  • Simplicity
  • Free Sign-Up
  • Cheap Hardware
  • No Contracts
  • No Live Support
  • Beautiful Software
  • Beautiful Hardware
  • Fast Settlement
  • Net Settlement
  • Low Price
  • No Advertising
  • Online Sign-Up
  • New Fraud Modeling
  • Balance Sheet Accountability

These are easy to see now, but back in 2009 this was anathema to the credit card processing industry. The provide the best customer experience possible, innovation was required across multiple dimensions.

Now, let’s apply this thought exercise to the early days of Pardot (company founding through the first five years):

  • All-in-One Marketing Platform
    By incorporating the most important marketing modules like email, landing pages, forms, automations, and integrations into a unified platform, marketers were able to run higher performing campaigns
  • Customer Care Culture
    With our culture of people who were positive, self-starting, and supportive and a focus on being the best place to work and the best place to be a customer, our bootstrapped company was able to out-compete heavily funded competitors from the coasts
  • Tech Stack
    Building an app from scratch in 2007 using PHP on Symfony with a MySQL backend enabled our engineering team to deliver customer requests faster and iterate quicker than the incumbents
  • Product Pricing and Packaging
    Everything was built around a price point that was the maximum amount we could charge a marketing manager without having to sign off from finance (~$1,000/month) while delivering the most bang for the buck
  • No Contracts
    Without contracts, we had to earn the business of our customers everyday. This forced us to work harder and ensure we were delivering value. Every competitor had annual contracts.

Innovation stack is a way to reflect on the elements of the business that enabled success. At Pardot, it was part people, technology, business model, and more that allowed us to win. Thanks to Jim for writing an excellent book that captures this idea that innovation is necessary across all disciplines in a business.

Triple T: Team, TAM, and Timing

One of the more popular questions I get is, “What do you look for in a startup?” Startupland is part art and part science, so I’m always looking for frameworks and ideas to increase the chance of success. One of my favorite frameworks for what to look for in a startup is the Triple T: Team, TAM, and Timing.


Everything starts with the entrepreneurs. Where did the idea come from? Why work on it? What’s worked well so far? What hasn’t worked well? What’s next? There’s a story or arc to the entrepreneurial journey. Part of it is listening for examples of uncommon grit and perseverance that will prove beneficial as challenge and obstacles continually present themselves. Part of it is feeling the emotion in the pitch and assessing how that will translate to recruiting team members, finding investors, and signing up customers.


After team, the next area to assess is the Total Addressable Market (TAM). TAM is a way of asking the question: if all goes well, how big can this startup get? The best startup ideas are ones where the TAM is small today, but fast growing, such that in 7-10 years it’ll be a huge market. Of course, predicting the future is terribly difficult. On average, entrepreneurs I talk with don’t spend enough time thinking through TAM and pursue ideas that appear too small in the long run. TAM should be small today and massive tomorrow.


We’ve all heard someone say, “I had that idea years ago.” Being too early is no different than being too late. Much like Goldilocks choosing the bed that was just right, timing needs to be just right. Ideal timing is starting a few years ahead of peak market adoption such that there’s a strong foundation, great team, quality customers, and an excellent story. Then, when the market really takes off, all the pieces are already in place. For timing, be a little early, but not too early.

The next time you’re thinking through a startup idea, or talking to an entrepreneur, use the Triple T framework and assess the team, TAM, and timing.