Sequoia Only Lost 2% on FTX; Plus the Top News and Content of the Week

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Hey SaaStr Community,

FTX.

A crazy loss.

But as crazy as it sounds, a tiny one, compared to the huge wins in the exact same VC fund.

Back in November 2012, folks all over Twitter were making fun of Sequoia for investing $20m+ in an iOS app that never launched and failed.

But they missed the point of how the game was played. The same week, Sequoia also sold Meraki to Cisco and made $240,000,000 on that deal.

You can lose $20,000,000 if you make $240,000,000 the same week.

And so we see it again, 10 years later. After Sequoia has a string of 10x funds. Yes, FTX is going to zero. And yes, it looks like fraud was involved. It’s not OK. But, in the end, Sequoia is already up $7.5 Billion in the same fund it lost $150m on in FTX. Losses like this are part of Going Big.

GOING BIG IN VENTURE CAPITAL

Gartner: SaaS Spend In the Enterprise Will Grow 17% to $195 Billion in 2023

Gartner has its latest report out, talking to hundreds of CIOs, and it breaks down projected SaaS spending in the enterprise in 2023.

The summary:

Gartner predicts SaaS spend in the enterprise will rise to $195 Billion in 2023, up 17% from $167 Billion in 2022.

MORE HERE

This edition of the SaaStr weekly is sponsored in part by Demandwell

5 Interesting Learnings from Five9 at $800,000,000 in ARR

So if you are in the support space, or CRM, or just generally sell into mixed enterprise-mid market, Five9 is a good one to follow.

The company has been around for decades in the call center and contact center space, but after rebuilding around a web-native platform, saw a rebirth.

Today it’s at $800,000,000 in ARR growing a healthy 29%, and a strong 18.5% EBITDA.

But with a lot of telephony and comms bills to pay, gross margins are relatively low at 52%, which is out of fashion at the moment, so Five9 trades at a $3.3 Billion, or about 4x ARR. It should be higher, but these are the times we are in. Growth is down a bit, but not dramatically from the 33% annual growth at $550m in ARR.

THE 5 LEARNINGS

OpenView: Unicorn Production is Down 80%. And Falling.

Unicorn “production” has now fallen 80%-85% in Q3, and probably has further to fall.

At the peak of 2021, 40 Unicorns were being minted every month. It really was like that.

Now we’re down to 8 — and falling.

Yes, you might be one of the 8. I hope you are. Just share the chart above with any of your cofounders or teammates who don’t quite have a sense of how things have shifted lately.

UNICORN PRODUCTION IS DOWN

We’re All Paying the Price Now for Overhiring, Lowering the Bar, and General Startup Inflation

So our economy is going through some unpredictable transitions, with Cloud and SaaS companies powering through with still-strong growth and unemployment remaining at near record lows, while inflation, interest rates and more batter us at the same time.

And we’re seeing a lot of layoffs in tech, Meta and Stripe being the latest.

Perhaps the only direct and frank I’ve seen is from Stripe: “We Just Plain Overhired”.

But even there, the issues are more nuanced.

WE'RE ALL PAYING THE PRICE

This edition of the SaaStr weekly is sponsored in part by BlueSnap

One Thing That Never Works: Hiring a Bunch of Agencies Instead of a VP of Marketing

So when a startup finally is able to raise a few million dollars, they’re ready to do some marketing.

But sometimes, even oftentimes, they want to start with an “agency or two” instead of hiring a real VP of Marketing.

These agencies are everywhere.

Look, some of what an agency can do is nice, and some of it is worthless, but none of it is what you really need in the early days.

You need leads. You need sign-ups. You need customers.

YOU NEED REAL LEADS

The Different Flavors of Risk Early Stage VCs Take

One experience that confuses a lot of founders is when it really starts to take off — and they still get “No”s from VCs.

But then, once they get to say $1m+ ARR, growing 15%, 16, 20% a month — why isn’t every VC they meet offering a term sheet?

The answer usually is pretty simple — Early Stage VCs take different types of risks.

Later, once you pass $20m ARR ++ — if your growth is strong, everyone probably wants to invest. The main issue is price. But at any stage before that, it turns out, different VCs specialize in the types of risks they like to take … and the types they don’t.

Let me make a list, of at least 10 Risks Different SaaS VCs Do and Do Not Like To Take. And the key is, it really varies from VC to VC. And in the Boom Times of 2021 and such, VCs took a lot more risk across the board. But now they are back to picking the types of risk they like to take.

THE RISKS

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How Focusing on Delivering Customer Value Generates Business Value with Gusto Co-Founder Josh Reeves

Many entrepreneurs seek to create something new, but not everyone has the drive to create new and valuable solutions for today’s problems. Every successful company, established or on the rise, shares this feature: they provide value to their customers.

The real value of any company depends not on its share price but on the value it provides to its users. Gusto CEO and co-founder Josh Reeves has seen firsthand how this value is built.

WATCH NOW

Hot Jobs Hiring Now

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