📕 Jumping on VC Treadmill; Q2 2021 Private SaaS Company Multiples; How to Steal talent from Big Tech
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🏃♂️ People often refer to raising venture capital as “jumping on the VC treadmill” because once you get on it, it’s very hard to get off. Astronomical growth targets require founders to spend all of the funds they raise quickly, putting them in an all out sprint to gain traction so they can raise their next round. David Sacks’ recent post on venture backed SaaS Org Charts gives a flavor of just how fast these companies need to scale their teams to have a shot at hitting those growth goals, explaining that Series A startups typically have at least 1m in ARR with roughly 40-50 employees, while Series B companies are looking to have at least 5m in ARR and 100-125 employees. That massive jump in headcount puts businesses in a scary position, because if they don’t raise that next round, there are significant cuts required to reach profitability, and ultimately, survive.
📈 Public SaaS company multiples continued to roar in Q2 2021 (at the lower end you are seeing 4-5x revenue multiples for ~10% annual growers, which feels beyond generous!), but the question we are all wondering is what impact that has on the private sector. SaaS Capital’s data shows that while there has been an uptick in private company multiples, the premiums are being mostly seen in growth stage businesses who are up ~50%+ year over year. Our thought: buyers are likely looking for more growth from small startups than the bigger players because they just don’t have the scale (and stability) of public entities, which presents more risk.
🏆 For pre-revenue startups, your initial outbound strategy is used to get product feedback rather than actually close deals – you have to make sure potential customers are actually picking up what you're putting down before executing on your initial thesis. Liam Mulcah (Director of Sales @ Unusual Ventures) has an unconventional way of segmenting potential customers, breaking them down into 3 buckets (startups, challengers, and champions) which can help you understand what they are prioritizing at their current stage, and hopefully enable you to better sell to them. He includes an example of a 14 day, 7 touchpoint outreach sequence which some of their companies have used for both LinkedIn and Email, as well as a sales outreach calculator so you can play with levers to see what sort of metrics you need to hit your goals.
🧛 When trying to hire top talent, it’s very unlikely that you are going to be able to out-pay the likes of Facebook, Amazon, Google etc.. But that doesn’t mean you can’t steal some all stars from the jaws of FAANG, it just means that you need to be more creative on how you present the opportunity to work at your startup. The area which big tech companies will never be able to compete with more agile startups is impact – rather being a cog in a massive machine, they can be on the ground floor of building a team where their footprint will be seen. Of course, that pitch will fall short on those who are looking for a more stable option and big company perks. But, if done right, it should at least make them think twice...