Inc - 2021 Was Crazy Because Growth Was Crazy

We look back on the go-go days of the second half of 2020 and 2021 like it was a time of fools and silliness. Of 1,000 unicorns we didn’t need, of products that in end no one quite really had to have.

Fair enough.

But if you’re trying to figure out what’s really going on in 2024, let’s take a calm look back at how the top leaders were growing even just in 2022, when the markets were crashing but growth was still epic.

We’re close!! SaaStr Europa 2024 is June 4-5 in London and it will be full of VCs!

Just a sampling of who’s already coming:

• 20VC
• Accel Partners
• AccelerAsia
• Activum SG Ventures
• AGC Partners
• Albion VC
• Altair Capital
• Atomico
• B Capital
• Backbone Ventures
• Beacon Capital
• Begin Capital
• Beringea
• BlackRock
• Bpifrance Large Venture
• Caixa Capital
• Carbide Ventures
• Cipio Partners
• Columbia Lake Partners
• Creandum
• Credit Mutuel Innovation
• Dawn Capital
• Earlybird Venture Capital
• Expedition Growth Capital
• Felix Capital
• Fiedler Capital
• Five Elms Capital
• Flashpoint VC
• Fortino Capital
• Founderpath
• GP Bullhound

A lot of you reading SaaStr are probably more B2B SaaS oriented and may not be paying attention to the consumer market, but it’s already massive and is continuing to grow quickly.

In this week’s Workshop Wednesday, RevenueCat CEO Jacob Eiting and Growth Advocate David Barnard share their annual State of Subscription Apps report with us.

At SaaStr’s inaugural AI Day, the Senior Director of Product Management at Panoptica by Cisco, its incubation team, Alex Jauch, talks about how GenAI is powering app security, how Cisco is using it, and how you can use GenAI to protect other businesses.

So with public SaaS companies continuing to grow, but revenue multiples often at relative lows, it can make sense in some cases to “go private”, invest in more growth for a few years, and try to IPO again down the road.  Qualtrics did it, nCino just did it, and the latest is Squarespace. They are going private at an almost $7 Billion valuation.

Now that may sound like a lot, and it is a lot, but less so a multiple of revenue and ARR. Squarespace is at ~$1.1B in ARR, growing almost 20% with strong margins — and even with a 30% premium to take it public, it’s still been acquired for about 6x ARR.

Squarespace hasn’t done everything right, but it’s a pretty darn good one. One I’d hoped would be worth more than 6x ARR.

This edition of the SaaStr Daily is sponsored in part by Sage

Join 2,000+ peer SaaS finance leaders, such as Jeff Epstein from Bessemer Venture Partners and The SaaS CFO, for this exclusive virtual event on June 5, 2024.

This full-day summit has three different tracks (CFO, Controller, and RevOps) to help you build the processes and teams within fast growth SaaS, AI, and high-tech companies needed to drive efficient growth.

Want to partner with SaaStr? Click here to Sponsor our events, podcasts, newsletters and more.

Generally, this is the last, best chance to fix things.

Founder equity splits are a tough thing. What seems fair on Day 0 may seem less fair on Day 720. The one that seemed the weaker of the 2 may end up the stronger. A lot can change.

But the thing is, startups are Positive Sum gains. Even owning 10% of something worth $1b+ is nuts.

So if things are fair, they tend not to come a boil here.

And if things are totally broken, one co-founder quits. Or leaves. Or stops working very hard. Etc.

Here, things are probably close to broken.

I’d try to fix it — if you want to keep her / him. And I’d do it with an additional fair equity grant that vests over 5+ years.

I did it. It worked.

It’s not common with typical Silicon Valley investors.  But outside of that?  It’s a little old school, but it’s not that uncommon.

And run from a milestone-based “second check”. Because really, it’s just a one-way option for the investor.

If you had just one investor, then in a perfect world, this investor would get to dole out chunks of the initial investment and see how it goes.

The problem is twofold:

• First. there’s a tragedy of the commons. It doesn’t work with a syndicate.  Will the others do it as well?
• Second, and much more importantly, these deals are almost always structured in practice really as options for the VC.  They can choose to invest if milestones are met, but don’t have to.  All this does is give you a false sense of confidence more money is coming.  And often blocking other investors from coming in.

We’ll evolved. It’s fine to do 2 seed rounds now. Doing multiple rounds of SAFEs does this informally all the time now.

Avoid “tranches” if you possibly can. I almost never see the investor fund the second tranche. And it just creates a lot of headaches.

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