No one is having fun right now, and that’s okay
Gil Dibner

About a week ago, I had a call with an early-stage VC friend in Israel. We serve on a board together, but this was just a friendly call. “You know,” he said, “no one is having fun right now. Even my best companies are struggling. Sales are hard right now. Managing teams is hard right now. Layoffs and cutbacks are happening everywhere.”

A few days ago, I sat down in London with another (this time late-stage) VC friend — and the sentiment was the same. “Boards,” he said, “are really challenging right now. Even for companies with $100M or more in the bank. Burn rates are high, VCs are freaking out, and growth levels are not what we hoped for.”

And just yesterday, I found myself chatting with a founder and hearing the same message. His company is solid. His product is used and loved by customers. His team is lean, united, and effective. They would like to raise capital, but can get to breakeven if they need to. And yet, he sounded exhausted and — temporarily defeated. Fundraising is hard. Sales are hard. People are tired.

Let’s be honest: these market conditions are challenging, frustrating, exhausting, and demoralizing. Worse yet, we don’t know how long they will last and that’s even more demoralizing.

The obvious points to make here are that (1) these are the times that forge great businesses and great business leaders; (2) the past few years have been deceptively easy, (3) this is what you signed up for when you joined the startup eco-system, and (4) the bad times won’t last forever so there is good reason to be a long-term optimist, keep the faith, and keep working at it.

A less obvious point — but a very important one — is to remember that this period is extremely challenging for everyone no matter how outwardly successful, confident, and happy they appear. Every company I know — and probably every company on the planet — is making tough decisions right now that affect the lives of employees. Every CEO and every manager has probably just been through a round of layoffs and is staring down the barrel of more. Every sales pipeline is getting re-evaluated and every sales target is looking a bit too optimistic right now. No one is having any fun. No one is “killing it.” What this means is that your situation is probably better than you think it is — on a relative basis. You have your problems and your competitors have theirs. Maybe you wish you had more cash in the bank and are considering laying off 25% of your 20 person team to extend runway. Your scary competitor with $50M in the bank might be burning $3M a month and is trying desperately to figure out how to lay off 30% of their 100-person team. He might also be dealing with pretty challenging board dynamics, or other issues you might not be aware of.

The point I’m trying to make is that just as the rising tide lifted all boats previously, the storm we are weathering right now is battering everyone. The frustration and exhaustion you are feeling right now is common to everyone — and it is not necessarily a sign of something specific to you and your business.

Hang in there.

Gil

EVENTS

Feb 8 / Lessons Learned From Investing Early in Over a Dozen SaaS Unicorns Including Salesforce, SuccessFactors, Box, Gusto, SalesLoft, ServiceMax, Veeva, Bill.com, Doximity, Yammer and Zoom Among Others
Jason Green, Founder & General Partner, Emergence Capital

Feb 15 / The Evolution of Collibra’s Product Positioning & How They Created a Category
Stan Christiaens, Co-Founder & Chief Data Citizen, Collibra

FROM THE BLOG

It’s Never too Early to Build your Growth Model
What are the specific mechanisms by which one user turns into many, and an initial investment turns into revenue?

How to Think About Revenue Quality as an Early Stage Founder
What does “quality revenue” mean when you don’t have much revenue at all?

It’s Not All About Bottoms-up
Two recent trends indicate that we may finally be past the mistaken belief that bottoms-up is the only “fundable” business model in town.

Don’t be Fooled by the PLG Mullet
How to know if you should be building a PLG Now, PLG Later or PLG Never company.

EUROPE & ISRAEL FUNDING NEWS

Poland/Payment Services. Ramp raised $70M for its payment infrastructure to help companies connect crypto and traditional finance.
Israel/Communications. Teridion closed $25M for its multi-cloud wide area network (WAN) connectivity solution that helps communication providers connect their sites to cloud centers, applications and employees.
Spain/Legal. Red Points raised $20M for its brand protection and anti-piracy management software.
France/Industrial. Pelico raised $18.5M to help manufacturers monitor and boost their operational performance.
Israel/Security. Wib raised $16M for its API security software.
Norway/Climate. Enode closed $15M for its SaaS-based platform that connects energy assets with an API.
UK/Communications. Worldr closed $11M for its data secure team communication application.
Portugal/Security. Probely closed $8.8M for its application security testing solution that empowers Security and DevOps teams.
Germany/ML Tooling. Apheris AI closed $8.7M for its collaborative data ecosystems platform that enables data to accessed and used in a private and secure setting.
Portugal/Industrial. Mov.ai closed $8.2M for its Autonomous Mobile Robots (AMR) platform.

WORTH READING

ENTERPRISE/TECH NEWS

Crypto collapse, crypto contagion. The second largest crypto exchange in the world, FTX, collapsed over the weekend. FTXs trading arm Alameda Research has also wound down. By late Friday November 11, FTX, Alameda Research, and all associated entities filed for bankruptcy and Sam Bankman-Fried stepped down as CEO. Soon after, FTX claimed it was hacked and hundreds of millions worth of remaining customer funds (those that hadn’t been handed over to Alameda Research to invest!) were siphoned out of FTXs wallets. Phew. Let’s just say there’s a lot going on here and this blurb will be out of date by the time you read it. Timeline from CoinDesk here. Fantastic explainer from Byrne Hobart here, and deep dive from the New York Times here.

Layoffs continue. New survey shows that one in three Israeli startups has laid off employees in 2022. There has been a massive wave of layoffs in the US as well, across both startups and bigger, more established tech companies. While there have been layoffs in Europe, they haven’t been nearly as widespread, yet. You can find a running list, compiled by Sifted, here.

Space junk. Could cleaning up space junk be a big business? Space junk is a growing problem. U.S. officials expect the number of satellites to increase almost tenfold to 58,000 by 2030. Big aerospace companies aren’t interested in solving this problem, so startups are stepping in: “Months after its inception in 2018, Switzerland’s ClearSpace signed a €86.2 million ($86.3 million) contract with the European Space Agency, or ESA, to eliminate remains of a Vega rocket by 2025. ClearSpace will use a robot to get hold of the debris and burn it in the atmosphere. Then there is Tokyo-based Astroscale, which has raised $300 million in venture capital since its inception nine years ago. This September, the U.K. Space Agency awarded £4 million, equivalent to $4.6 million, to both companies to remove defunct British satellites by 2026.”

HOW TO STARTUP

How to PLG. Fantastic rundown from Ben Williams, VP Product at Snyk, on how to build a PLG motion from the ground up. Props to Lenny Rachitsky for getting Ben to share a bunch of tactical templates, like the experiment plan template they use at Snyk.

Planning to plan. Super useful, super tactical piece from our friend Shomik Ghosh over at Boldstart on annual planning. Shomik invited CJ Gustafson, CFO PartsTech and former FP&A lead at Snyk (second Snyk shout out!), to share his insights on running a planning process. CJ covers why planning is important at a high-level, but also shares tactical advice on expense tracking and the like. Worth a quick read.

Entering the era of CAC and NDR. OpenView released their 2022 SaaS benchmarks report last week. The survey data is from July to August 2022, but it’s still worth a quick review. All in all, there’s not a lot of great news. As we’ve discussed previously in this newsletter, the public markets have hammered SaaS businesses. Multiples have compressed and the value of growth has plummeted (meaning the metrics that matter have changed as well). And if you sell into software businesses, expect sales to be challenging as well, as all companies, regardless of runway, are slashing burn. But there are some useful benchmarks and actionable advice on improving CAC payback and NDR, two metrics which can provide durable growth during a downturn like the one we’re facing now.

HOW TO VENTURE

How low can we go? The Information got their hands on some internal documents from Tiger Global, and they show the impact of the public market implosion on their “index the startup market” strategy over the past few years. From the article: “The $6.7 billion fund Tiger launched in March 2021 had a 13% annualized internal rate of return, net of fees, as of the end of June 2022, down from a 69% net IRR as of the end of September 2021.Tiger’s $3.75 billion fund that launched in January 2020, just prior to the boom, had a 22% annualized rate of return as of June 2022, down from a 92% rate as of September 2021.”

The power law reigns. Meghan Reynolds at Altimeter Capital shares new power law data from a top venture insider: “As of Q2, for Fund Vintages 2008–2019, they had exposure to 8,350 companies. 2,700 were realized. Of those exited companies, 5% of the companies (150) drove 70% of the value.”

PORTFOLIO NEWS

Forter was selected in the Cloud 100 companies, an annual list of the world’s top private cloud companies. Forter Co-founder & CEO Michael Reitblat discusses the company’s origin and his more than 25 years of combating fraud.

Snyk was selected in the Cloud 100 companies, an annual list of the world’s top private cloud companies. Snyk CEO Peter McKay explains how their unique offering enables developers to work securely throughout the software development lifecycle.

Reco’s Tal Shapira wrote an article on ‘Why Business Context Justification Enables Safer Collaboration’.

Aquant collaborates with Oracle to optimize how field service organizations operate and deliver service.