Venture Capital | Alessandro Perilli

What founders owe to startup investors

peris — Fri, 26 Jan 2024 13:13:20 +0000

Pitch the way VCs think

peris — Mon, 20 Nov 2023 18:17:16 +0000

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State of Venture Capital in Q2 2022

peris — Sun, 31 Jul 2022 18:39:45 +0000

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Angel, Early-Stage VC, and Late-Stage VC deals size 2011-2021

peris — Thu, 10 Feb 2022 17:29:53 +0000

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Some VC firms are better than others at identifying $10B startups before they are worth that much

peris — Sun, 28 Nov 2021 10:27:28 +0000

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From angel investor to solo venture capitalist

peris — Thu, 25 Nov 2021 18:23:25 +0000

Some angel investors, who invest their own money without a team or firm, are spreading their wings and evolving into solo venture capitalists, who invest external funds. They can move fast—there are no other partners to convince before doing a deal. Elad Gil, a prominent solo vc, made around 20 investments in the first half ... Read more

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Average venture capital deal value 2006-2021

peris — Thu, 25 Nov 2021 18:05:42 +0000

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Global venture capital activity 2002-2021

peris — Thu, 25 Nov 2021 17:53:06 +0000

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How many startups are out there?

peris — Sun, 14 Nov 2021 21:32:51 +0000

The FTC report says that there were 86 US exits to GAFAM for over $50m from 2010 to 2019. According to the NVCA, there were 2,100 US VC exits for over $50m in that period. Selling to those five companies was 4% of decent-sized exits.

(People sometimes suggest that entrepreneurs start companies and VCs fund them in the hope that they will be bought by Google. This data should make it clear why VCs think this is hilarious.)

The same point applies to the total data set. GAFAM bought 400 US companies from 2010 to 2019 for over $1m, of which 86 were over $50m and 314 were between $1m and $50m. In the same period, the NVCA reports 3,600 US VC exits where a value was disclosed (and 9,600 total).

This prompts a broader observation: I’m not always sure how many people understand just how many startups are being created now. From 2010 to 2019, YCombinator alone backed 1,561 US companies (353 have died and 253 were acquired, while 955 remain independent). In the total US market, the NVCA reported 32,000 companies raising their first funding. This, really, is the context for those 400 US GAFAM acquisitions.

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How the meaning of Annual Recurring Revenue (ARR) has changed over time

peris — Thu, 04 Nov 2021 20:22:21 +0000

I was taught that ARR is the value of the currently paying, deployed, and contracted customers, annualized. In other words, the ARR is a guaranteed annuity. The guarantee implies predictability, which investors prize and value at high multiples.

Over time, the definition of ARR has slackened. First, SaaS companies modified it to include customers who weren’t contractually obligated to pay, but did pay the same amount regularly.

Next, infrastructure companies, which charge by use (by CPU hour used, API called, or GB stored), and amassed customer bases’ with spending habits that vary by the month, adopted ARR. They argue that though customers’ usage wasn’t predictable on a small scale, over a large enough customer base, customer behavior is similarly predictable to contracted spend.

Then, consumer subscription businesses began pitching using ARR. After all, there’s not much difference between an SMB paying monthly and a consumer paying monthly. However, there is a meaningful difference in net-dollar retention because most consumer companies have negative NDR, and most SaaS companies benefit from positive NDR (accounts that expand over time). But let’s set that aside.

And then, marketplaces shifted from GMV to annualizing net transactional revenue and calling it ARR. Tom-ay-to / tom-ah-to.

To come full circle, there’s a newer ARR metric for SaaS companies called cARR, which is contracted ARR, or the annualized value of the contracts signed but not deployed. That number is typically larger and provides a bigger number to multiply, hence a higher valuation.

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