In light of the Thanksgiving holiday here in the United States the topic of giving thanks in a startup is very apropos. Giving thanks is an important part of startup culture and should be incorporated into the standard rhythm. Here are some ways we give thanks by helping others and by enjoying each others’ company :
ExactTarget, one of the premier email marketing firms, just filed their S-1 for an IPO. Even as one of the largest SaaS companies in the world, ExactTarget has maintained an exceptional growth rate due in part of the execution of the management team, the continued overall market growth, and the power of the SaaS model. The wave of SaaS IPOs has truly arrived with Eloqua, Yelp, BazaarVoice, and more filing this year.
Here are some notes from the ExactTarget S-1 IPO filing:
Largest marketing SaaS salesforce with 285 reps (pg. 1)
4,600 clients (pg. 1)
No client represented more than 5% of revenue (pg. 2) – question: which client pays them more than $7M per year?
Pricing is based on volume of contracted utilization, level of functionality, number of interactive marketing channels, number of users and level of customer support (pg. 2)
1,100 employees (pg. 3)
$40 million annual R&D investment in 2011 (pg. 3)
500 resellers (pg. 4)
Corporate culture cited as one of five competitive strengths (pg. 4)
Revenues (pg. 7):
$72.3M (2008)
$95.4M (2009)
$134.2M (2010)
$148M (2011 first nine months – on pace for 55% growth rate)
Profits/Losses (pg. 7):
$3.6M (2008)
($2M) (2009)
($12.1M) (2010)
($29.2M) (2011 first nine months)
Accumulated deficit of $140M (pg. 9)
Two third-party data centers in Indianapolis and Las Vegas (pg. 13)
Significant portion of revenue is derived from clients in the retail and e-commerce, media and entertainment, travel and hospitality, financial services and insurance, technology, daily-deal and flash-sale industries (pg. 19) – amazing that daily deal sites are one of their named categories
Line of credit of $10M and long term debt of $7.5M (pg. 35)
Recurring subscription revenue by year (pg. 41):
$53.8M (2008)
$75.2M (2009)
$106.4M (2010)
$114.9M (2011 first nine months)
Recurring subscription revenue excludes revenue above the contracted amount as well as services (pg. 41)
Recently more clients have requested quarterly and monthly billing resulting in decreased deferred revenue (pg. 41)
Professional services are available for training, implementation, integration, deliverability, campaign services and strategic consulting (pg. 42)
Write off of $1.2M due to pulling their 2007 S-1 IPO filing (pg. 53)
43 consecutive quarters of revenue growth (pg. 72)
401 employees in sales and marketing (pg. 88) – since they have 285 sales reps, assume 30 in sales management, leaves approximately 85 people in marketing
Acquisitions (pg. F-17):
Keymail Marketing LTD. acquired for $1.6M
CoTweet acquired for $15.8M ($14.3M of which was goodwill, which is crazy high relative to purchase price)
mPath Global Pty Ltd. acquired for $2M
Frontier Technologia Ltda. acquired for $5.4M
The ExactTarget S-1 IPO filing was straightforward and didn’t have any surprises.
What else? What other thoughts did you have from the ExactTarget filing?
When meeting with an entrepreneur one of the questions I like to ask early in the conversation is “What outcome do you want from this meeting?” With so many different topics covered in a typical startup-oriented conversation, there’s a tendency to share useful information but not necessarily spend enough time on the most pressing items.
Here are some of the more common meeting outcome requests:
Feedback on the idea/concept
Introductions to investors, partners, and people that can potentially help
Resources like books and blogs to solve specific problems or better address potential opportunities
Analysis of a specific issue
The next time you’re in a meeting, be straightforward and ask the question “what outcome do you want from this meeting?” You’ll be able to spend more time on the key issues and get more value from the conversation.
What else? What other general questions do you commonly ask in a conversation?
An entrepreneur recently asked me for advice regarding the amount of equity to grant to a key hire. There’s a fair amount of information online with the following rough values for a Series A-stage company (the values can vary dramatically for a number of reasons):
CEO – 5%
C-level – 2%
VP – 1%
Director – .5%
Manager – .25%
Engineer/specialist – .1%
Percent ownership is only one piece of the equation, and is best viewed in the context of a number of factors like preferred stock preferences, strike price (assuming stock options), money raised, etc.
Instead of percent ownership, I prefer approaching it in the same manner as Fred Wilson. Here’s a quote from his post titled “Employee Equity: How Much?”
The key thing is to communicate the equity grant in dollar values, not in percentage of the company. Startups should be able to dramatically increase the value of their equity over the four years a stock grant vests. We expect our companies to be able to increase in value three to five times over a four year period. So a grant with a value of $125k could be worth $400k to $600k over the time period it vests. And of course, there is always the possiblilty of a breakout that increases 10x over that time. Talking about grants in dollar values emphasizes that equity aligns interests around increasing the value of the company and makes it tangible to the employees.
So, the next time you’re discussing equity with an employee, explain all the parameters but focus the conversation around dollar values and expected outcomes.
What else? What are your thoughts on determining equity grants for startup employees?
Early last week I was talking to an entrepreneur about startup valuations and how for the Series A round it really depends on the amount being raised. The idea is that VCs want to own roughly 1/3 of the business, so if you raise $3 million, your pre-money valuation will be $6 million. If you raise $4 million, your pre-money valuation will be $8 million. Some VCs want 40% of the equity so the pre-money valuation, assuming the same amount raised, will be slightly lower. The valuation is based on the amount being invested and the desired amount of ownership by the investor.
Now, once the startup starts generating revenues the valuation dynamic changes to more traditional metrics. Here are four quick factors in startup valuations:
Profits/earnings – the amount of money the startup makes, typically before factors like taxes, interest, depreciation, and ammortization
Growth rate – the faster revenues and profits are growing, the more valuable
Recurring revenue – the greater the percentage of revenue that’s recurring, the more valuable
Gross margins – the greater the gross margins, the more valuable
So, a company that is extremely profitable, growing fast, 100% recurring revenue, and high gross margins will be the most valuable, everything else being equal.
What else? What are some other factors in startup valuations?
Last week I was talking to a successful entrepreneur and he was updating me on great progress with his new venture. After talking for a bit about how my company is hiring a number of people and how hard it is to find the right people, he mentioned something that made me pause: he had a number of people from his previous business he couldn’t wait to hire as soon as his new business could afford them. With his non-solicitation agreement term limit about to expire, there was no negative recourse to bringing previous employees into his new venture.
A significant benefit for successful serial entrepreneurs is recruiting previous colleagues to a new venture.
This seems obvious in retrospect but hadn’t become apparent until I’d been in a situation where the amount of time and effort it took to find the right people was much more substantial than desired. Recruiting is hard work and to have a pool of trusted, known-quantity previous team members is a real benefit for serial entrepreneurs.
What else? In what other ways is recruiting previous colleagues a benefit for serial entrepreneurs?
At every conference I attend there’s at least one presentation with slides that contain dozens of words. Inevitably, the presenter mumbles something to the audience like “you probably can’t read this” and continues right on. Whenever this happens I cringe and immediately think of Guy Kawasaki’s 10/20/30 rule of PowerPoint. Well, after this most recent conference, and seeing another slide with unbearably small words cluttering the screen, I came up with another rule:
All words on a presenter-led slide need to fit in a single tweet.
Now, there is a major qualifier included in there: presentation slides delivered live before a group should follow this rule whereas slides that are designed to be handouts should have much more information. If a presenter is taking the audience through his or her slide deck, each slide should have no more than 140 characters, just like a tweet. There’s elegance in brevity. Audience members should focus on the presenter, not read the extensive text on the slide.
What else? What do you think of the presentation slide fit-words-in-a-tweet rule?
Yelp! Inc. just filed their form S-1 to go public, likely by mid-2012 if the IPO market stays open. Yelp is the #1 business reviews platform for consumers to talk about what they like, and don’t like, in a public setting. Since launching in September 2004, they’ve amassed over 22 million reviews.
Here are a few notes from the S-1 IPO filing:
#1 free listed travel app on the Apple App Store (pg 1)
61 million unique monthly visitors (pg 2)
19,000 active local business accounts paying for their premium service (pg 2)
$58.4 million in net revenue for the first nine months of 2011 with a net loss of $7.6 million (pg 2)
Shopping and restaurants represent 46% of the reviews (pg 3)
Growth strategy: growth in existing markets, expand to new geographic markets, platform expansion, and enhance monetization (pg 5)
43 Yelp markets in the U.S. and 22 Yelp markets internationally (pg 6)
Revenues (pg 10)
$12.14M (2008)
$25.81M (2009)
$47.73M (2010)
$58.38M (first nine months of 2011)
Losses (pg 10)
$6.23M (2008)
$2.33M (2009)
$9.51M (2010)
$7.41M (first nine months of 2011)
Accumulated deficit of approximately $32.1 million (pg 15)
CEO recently testified before the U.S. Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition related to Google (pg 19)
Currently a defendant in seven patent infringement suits (pg 22)
In the process of settling a suit that alleges violation of labor laws for up to $1.3M (pg 22)
Advertising contracts are typically 3, 6, or 12 months (pg 24)
Going to spend approximately $15 million internationally in 2012 (pg 53)
Strengths: passionate community, leading brand in local, powerful network effect, proven market development strategy, local-focused sales force, proprietary technology, and attractive business model (pg 80)
As of September 30, 2011, Yelp had 852 full-time employees globally (pg 89)
CEO 2010 salary was $210,000 (pg 102)
COO 2010 salary was $235,000 (pg 102)
Venture capitalists own 74.9% of the company (pg 118)
The CEO/co-founder owns 11.1% of the company (pg 118)
The Yelp S-1 was straightforward and didn’t provide any suprises.
What else? What are your thoughts on the Yelp S-1 IPO filing?
At today’s Pardot User Conference Elevate 2011, Scott Voigt did a great job talking about a number of topics, one of which was marketing measurement. One example that he presented, and I thought was especially valuable, was that of the waterfall model, also known as a cohort or vintage model. The idea is simple but has several parts:
Time is a challenge for marketing data as it is hard to attribute marketing-contributed value in an exact manner
One of marketing’s most important KPIs is the number of opportunities created from marketing-generated leads
Marketing-generated leads often don’t turn into opportunities immediately so it’s important to look at time series analytics
A waterfall model takes the number of leads generated in a specific month, then tracks the number of opportunities generated from those leads in that month as well as subsequent months on a monthly basis
Here’s an example waterfall/cohort model for tracking marketing-generated leads that turn into pipeline opportunities:
Jan
Feb
Mar
Apr
Leads
50
52
49
55
Opportunities
Jan
2
Feb
3
2
Mar
2
2
1
Apr
1
3
3
3
In the table above, note how leads generated in one month turn into opportunities over the course of time. Without this type of analysis it’s difficult to understand marketing’s on going effectiveness.
Scott did a great job with his presentation and I enjoyed hearing his theories on marketing.
What else? What are your thoughts on the waterfall method for marketing measurement?
At today’s Pardot User Conference the marketing agency Brainrider gave a great presentation titled Developing Customer-Centric Content. The big takeaway for me was that too many sites organize content based on how marketers think about types of resources (e.g. PDFs, Case Studies, etc) as opposed to how the potential customers think about what they want. Have you ever gone to a site and generically said that you want a PDF? I didn’t think so.
Here are notes from their presentation:
Things to define:
Driven by objectives
Customer-focused
Demonstrating subject matter expertise
Supporting your programs
Measuring performance
Checklist for better content:
Be customer-focused
Start with light content
Make it findable
Measure what works
What business are you in?
Target
Needs and pain
Value proposition
Content categories
Start with light content:
Leverage “as is” content
Repurpose existing content
Use light formats
Curate and share 3rd party content
Leverage as-is content:
Existing brochures
Resource center
Slideshare
LinkedIn
Repurpose existing content:
1-page download
Checklist
Resource post
Blog post
Make it findable:
Use keywords in your title
Describe why it’s worth reading
Use images and graphics for key concepts
Headers and lists to be scannable
Include more information links at the bottom
Measure what works:
Track content by category in Google Analytics by segments
Pageviews, Avg. time on site, Pages per visit, Gated downloads
Brainrider argued their case well that marketers need to develop customer-centric content and provided great examples.
What else? What are your thoughts on customer-centric content?
David Cummings on Startups 