The Top Unicorns Are Still Raising at 23x ARR

So there’s a curious thing anyone close in venture capital fundraising and rounds today.

Valuations for Hot VC Deals remain far higher than pre-March 2020 … even though growth for the overall public SaaS and Cloud companies has slowed to … all time lows.

The latest Bessemer data proves this out in a very helpful chart and summary.

For the best of the best in SaaS and Cloud, yes ARR multiples in VC rounds are down 31% from their 2021 peak. But … they are still double where they were in 2018-2019. And just as high as 2020.

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So while many in B2B2B are still struggling today — Salesforce has predicted growth will fall to single-digits — the U.S. economy overall remains very strong.

So it would make sense that SaaS companies that sell primarily to customers outside of tech, “B2B2C”, would be having their moment. Even if B2B2B folks that were on fire in 2021 are struggling now.

And indeed that’s the case. SaaS leaders that sell to SMBs selling to end consumers … are often doing pretty darn well today.

It’s not that complicated. You generally have one option: let everyone else you are already talking to … know you have a term sheet.

It’s great you have a term sheet, but if you push it too far, or stretch it out too long … that term sheet may go away.

You can ask for more time — once.  You can ask to extend an expiration date a bit.  Any VC that gives you a week to sign, will give you 10 days if you ask.

Generally, term sheets have either explicit expiration dates, e.g., “This Term Sheet Expires on Friday” or implicit ones, “Let me know if that all looks good.”

-> So :you usually have a week or so to get another offer.

If you don’t already have another investor pretty far down the process, it may be too late to get them there. Not always, but often. It’s too late to get another brand new investor that doesn’t know you all the way to term sheet in time.

So tell everyone that already knows you that you have an offer. See what happens. And if they don’t move quickly — assume you probably won’t get another in time. In time before the first one sort of disappears.

Finally, it is OK to ask for at least a little higher valuation. Even without another offer. The investor may so no. But if they offer $0.50 a share, no one is going to be insulted if you ask for $0.55. They may push back and say “$0.50 is as good as we can do.” And it may be worth just shaking hands and agreeing to $0.50 if it’s fair (goodwill goes a long way). But you won’t break any glass asking for a tiny bit higher valuation.

From startup to $500M, Spencer Burke, SVP of Growth at Braze, shares how Braze scaled a growth and customer success team.

We’re in a platform shift, just as in 1988 with the rise of computing in corporate environments.

Most traditional VCs will prefer 2 “Common” seats after the Series A. That typically would be the Founder-CEO and one other founder. Three would be atypical.

Nothing is impossible and if having all 3 of you stay on the board is truly very important, you can stick to your guns there. At least for a while, until you raise a material amount of outside capital. But as a default, prepare to shrink it 2. It’s better for everyone in the end. The third can still attend all board meetings as an observer. And realistically, the third founder often doesn’t … really need to be on the board. Being an observer is plenty. Being included is enough.

Do you need to do this before your first VC round? Not really, as long as you’ve agreed which of you besides the founder CEO will stay on the board. That way when the Series A VCs ask about it, you’ve already got the answer.

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