What Makes for a Successful Seed Round?

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This was initially published on the Seedchange Institute.

http://institute.seedchange.com/what-makes-for-a-successful-seed-round/


This week, news leaked that the widely discussed (and mocked) San Francisco startup Clinkle was on the verge of shutting down, as key employees began heading to the door and the company still had little to no product traction despite the massive $25 million seed round it raised in 2013.

When Charlie O’Donnell of Brooklyn Bridge Ventures asked Twitter to name the largest seed round that actually worked out, respondents struggled to find a good answer with some noting other companies (like Color, who raised over $40 million in its 2011 seed round) that went big and then went nowhere.

So, if raising an outsize amount of capital right off the bat — giving companies a head start on competitors, the ability to offer enticing compensation to top talent and the potential to double down on successful growth channels — isn’t the answer, what does make a successful seed round?

To start, Upfront Ventures GP, Mark Suster has said numerous times that when the hors d’oeuvres tray is passed, take two…but don’t take the whole tray. Put differently, companies should raise enough to fund the growth that will allow them to get to their next major milestone while also adding in a slight buffer, if possible. This remains instructive advice for people on both sides of the table, as discipline is key in refining the product and go to market strategies of a young company.

Another prolific VC blogger, Tomasz Tunguz of Redpoint, has discussed the interplay of angel money and VC money in a seed stage deal and looked at how it impacts follow on funding. After analyzing Crunchbase data, Tunguz noted that startups with at least one VC in their seed round raise Series A rounds 64% more often than do angel-backed startups.


That said, the difference between the amount raised in Series A rounds between the two groups (those that had VCs backing the seed rounds and that didn’t) was not statistically significant. While it may be a bit easier to raise a large seed round with a VC backer (primarily because of differences in fund sized between VCs and angels), it doesn’t make any meaningful difference in a company’s ability to raise a Series A and continue as a going concern on the path to acquisition or IPO.

As Tunguz puts it, this data goes to show that a great entrepreneur and a great company can come from anywhere.

Historically, angel investors have looked to VCs for signal with the line of thinking being that VCs are professional investors, with networks to surface the best companies and tested frameworks for evaluating deals. The reality, as detailed in the Kauffmann Foundation’s seminal 20 year retrospective of VC as an asset class, is that a majority of VC firms failed to exceed returns available from the public markets, after fees and carry were paid.

In spite of this, the resource intensive nature of conducting research and diligence on the number of investment opportunities necessary to build a strong portfolio of early stage companies was onerous for individuals and made it so that following VCs into deals remained the best option.

Today, this has changed, as platforms like SEEDCHANGE offer the opportunity to enlist a team of professionals to conduct the necessary research and diligence so that you as an investor can be more efficient in determining whether a certain company is right for your portfolio. This means less time spent collecting information and more time spent time evaluating the true merits of the deal — how can this team, their product and their strategy compete in the market?

The true makeup of a successful seed round doesn’t come down only to money raised or terms of the deal. Success in the early stages so often comes down to people — entrepreneurs and investors alike — making it integral that a funding round be composed of investors who truly understand the core businesses they are investing and are committed to remaining engaged with the portfolio company as it grows over time.

Uber & the Benefit of Building Social Capital

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Since hitting what was then reported to be a $330mm valuation in 2011, just two years after launching, everything has seemed “up and to the right” for Uber. Its valuation rose to $3.5b by 2013 then $17b in 2014. In the last 7 months or so, the ascent has continued, reaching what is now believed to be around $50b. For perspective, that makes Uber — again, a company that launched in 2009 — larger than 80% of the S&P 500.



This valuation, it has been assumed, has been earned on the back of an extremely lucrative business model that will only get more lucrative as it matures in many of the markets it is operating in. A recent Bloomberg report, which revealed smaller revenue numbers and higher operating losses for the company than most in the market assumed, makes this outcome seem like less of a foregone conclusion than had been expected. The leaked numbers don’t paint a perfect picture of Uber’s financial and operating positions since we do not know exactly which period the numbers correspond to but are instructive in that they show how difficult it will be for Uber to justify the mega valuation it has reached.

As a business, it is highly doubtful that Uber will fail to be a going concern any time soon. The end game for recent investors, who dumped huge amounts of capital at an overheated valuation into the company, is less clear. Losses in venture backed companies are not abnormal and are generally endorsed by investors pushing the company to grow. However, when taken in context with other recent news surrounding the company, the competitive landscape, and the markets they operate in, the financial numbers begin to paint a less than ideal picture of a company that everyone — from top-tier VC firms to massive asset managers — has been falling all over themselves to invest in.

Over the last couple of weeks, top Uber executives in France were arrested and UberPop (Europe’s version of UberX) was shut down in the country, something that had long been expected in the face of violent protest from the taxi industry and complaints about unethical business and employment practices. This comes on the heels of a (non-binding) ruling by the California Labor Commission that said an Uber driver should be classified as a W-2 employee instead of as an independent contractor. If changes are eventually made to the way on-demand workers are classified, Uber (and its domestic rivals) face higher costs and increased labor-related scrutiny.

Perhaps most worrisome for some later Uber investors is the way that the competitive landscape has developed around Uber in recent periods. One often invoked statistic is that investors are valuing Uber as if it is bigger than the world’s entire taxi market. This criticism neglects to acknowledge the fact that Uber’s ambitions are much larger than being simply a massive taxi company. With their goals of replacing car-ownership and their efforts to develop mapping and self-driving technology and branch into on-demand delivery, this is obvious. What the valuation does seem to indicate is that investors believe the worldwide market for Uber’s services is a winner take all one, with the expectation obviously being that it will be Uber standing alone when the dust settles.

As Stretechery’s Ben Thompson wrote in late 2014, the markets that Uber is competing in are transactional in nature, meaning that lower prices will be the key to winning them. In this scenario, Uber enters a market and can bleed competitors dry through higher spending, which builds upon itself by improving marketplace liquidity and allowing them to offer lower pickup and delivery times.

While the on-demand market still possesses the above characteristics, it is looking more and more like individual, regional markets may be winner take all, but the global market may not be for a few important reasons.

Protectionist governments and consumers, or the benefit of building social capital

Katherine Teh-White of global consultancy, Futureye, has been quoted many times in Uber-related articles for her thoughts on the “social license” companies need to operate, especially in new markets.

New businesses actually have to establish a social license to operate. This is the agreement by society or a community that an organization’s practices and products are acceptable and aligned with society’s values. If society begins to feel that an industry or company’s actions are no longer acceptable, then it can withdraw its agreement, demand new and costly dimensions, or simply ‘cancel’ the licence. And that’s basically what you’re seeing in Europe and other parts of the world with Uber.

Uber’s battles across the globe are often painted as Silicon Valley tech company vs. old world, anti-innovation governments and while to a certain extent this may be the case, it certainly doesn’t tell the entire story. For example, Uber drivers have faced stiff fines in many European cities, something that Uber the company has repeatedly picked up the tab for. This contempt for local laws, as onerous as Uber may find them to be, raises concerns of citizens as well. If Uber fails to comply with these rules, as Bloomberg’s Leonid Bershidsky, where does it stop? What other laws and regulations, possibly around workers right, will Uber choose to ignore.

Well-funded niche (and not so niche) competitors

United States based consumers, especially ones near major markets, are familiar with Lyft, the benevolent underdog who operates in about 65 cities in the United States. Lyft is well funded to the tune of about $1b and has proven to be a viable, if not overly threatening, antagonist in the Uber story. As touched on above, however, Uber’s ambitions are larger than simply being a taxi company, which means they are competing with a host of other well funded (less well funded, of course, than Uber itself) companies aiming to stake claim to sizable chunks of the on-demand economy before Uber has time to get around to the space.

In the same way that Uber and Lyft have been fighting an intense turf war in the United States, Kuaidi and Didi were battling it out for supremacy in China. That is, until they merged earlier this year, creating a combined company that now owns almost the entirety of the Chinese market and will make it difficult for Uber to gain any significant foot hold.

Again, on a regional basis, the market for ridesharing and other on demand businesses that Uber would like to branch into seems to be winner take all in nature and if Uber can’t deliver the same level of liquidity as its competitors in these areas, it stands little chance.

Other competitors like Singapore’s GrabTaxi and Ola, which operates in India, pose the same threat in other Asian cities. According to CBInsights, these three SoftBank-backed companies (including Didi Kuadi) have now raised more capital in total than Uber.


While Uber may be pulling further and further ahead in the U.S., it will need to grow rapidly in major emerging markets in order to justify investor expectations, something that seems unlikely to happen in light of this increased competition and the company’s inability (or disinterest) in building the social capital required to operate effectively in these new locations.

The World’s First Unicorn

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We’ll see your Macbooks and ping pong tables and raise you a bunch of blast furnaces!

In 2015, 78 New York Times articles have included the word “Unicorn”. That ties this year with 2014 for the word’s highest number of mentions and with investors and pundits surely clamoring to puff up or tear down a couple more companies before the holiday break, odds are good that we’ll see a few more mentions in the (web)pages of the “Gray Lady”.


1901, as evidenced in the chart above, was a far less enlightened time than we live in today. For starters, “Unicorn” made it to print a mere 5 times during the course of the year.

And while transatlantic experimental radio communications were made for the first time, we were years away from Radio on the Internet. Although Satori Kato filed a patent for the first soluble instant coffee, Blue Bottle wouldn’t open its doors until more than a century later. Additionally, Micro VCs and accelerators were few and far between…meaning businesses were forced to actually make money to stay in operation. (Add to that Stanford’s crushing 49–0 loss to Michigan in the first ever Rose Bowl right at the beginning of 1902 and it made for a tough time for Silicon Valley’s tech elite).

1901 was also the year that saw the birth of the world’s first Unicorn — long before Aileen Lee coined the term in 2013. Through a merger of 10 different steel and manufacturing companies, U.S. Steel Corporation became the world’s first billion dollar company with an authorized capitalization of $1.4B (just under $40B in today’s money).

The First Annual Report for the First Startup Unicorn

The names surrounding its origin remain recognizable to this day and adorn skyscrapers, foundations, and institutions across the globe. There was John Pierpont Morgan, who entered the steel industry a few years prior to the founding of U.S. Steel and is better known for the massive financial firm now bearing his name as well as his rescue of the U.S. economy during the Panic of 1907. There was also Andrew Carnegie who founded Carnegie Steel in 1873 and agreed to be bought out by Morgan and his partners for just south of $500MM in bonds and stock of the newly created U.S. Steel in order to retire to a life of philanthropy. Additionally, two Rockefellers, Marshall Field, and Charles M. Schwab (not to be confused with Charles R. Schwab) had key seats at the table during the formative years of the business.

Infographic created with Infogram



The Not So Lean Startup


Over $3.2B in salaries and wages in today’s money.

Like many of today’s billion dollar companies, U.S. Steel paid its rapidly growing base of employees more on average than a typical American worker.


We can only assume these wage discrepancies caused a massive influx of fair trade, organic coffee shops and dog yoga studios into the early 20th century Youngstown, Ohios and Gary, Indianas of the world.

It’s not being a hipster if computers haven’t been invented yet!

Predictable Revenue is easy when your Board of Directors runs the economy

Today, investors and pundits worry about companies with negative unit economics, high burn rates, and unsustainably high valuations. For U.S. Steel, the only concern may have been where to find a safe big enough to store all the cash it was throwing off each month.


In addition to its impressive top line numbers, the company was highly profitable and grew that profitability each month on a Same Month YoY basis.


By the way…you can create awesome charts like this inside of Visible

And while regulators may have had issues with the business, investors likely had trouble speaking a questioning word through the wide smiles they had on their faces as they walked to deposit $56,52,867 in dividends in the bank.

Over $1.5B in today’s money.

At the end of 1902, the company was left with a cash balance of over $50,000,000. Imagine all the passive-aggressive bus stop advertising they could buy today with that kind of money!

Over $1.3B in today’s money.

Although, if our reading of history is correct…there was very little passiveness in the personalities of J.P. Morgan and his partners.

Life Before AWS

Today’s companies are fortunate to live in the age of AWS and WeWork, where two or three people can build a product, find some users or revenue, and display enough traction to raise capital from investors. Launching a startup today is significantly less capital intensive than it was 20 or even 10 years ago. 115 years ago?

In its first full year of operation, U.S. Steel spent over $29MM on the maintenance and renewal of capital equipment alone…


…and was mining millions upon millions of tons of iron ore all across the world.


The inventory of hard assets in most early stage companies today consists of nothing more than a few MacBooks and a ping pong table. Guilty…



U.S. Steel Today

With a current market cap of just under $1.3 billion, the company is worth less (on a non-inflation adjusted basis, in fact) than it was over 100 years ago. It remains one of the largest integrated steel companies in the world (and the largest in the U.S.) but, of course, that that title means significantly less than it did in the days of Morgan and Carnegie.

And while it may be long in the tooth, the stock chart below shows that the company still appears to have a taste for the boom and bust lifestyle of the early 20th century — which, frankly, seems to be the lifestyle many of today’s emerging unicorns favor as well.


And because there is never a bad time for a Godfather clip, we are compelled to mention that the company played a crucial role in the 20th century rise of America’s industrial might (for better and worse) and became a name that every outsider — from the Corleone family to a number of smaller, more nimble competitors — strived to outdo.

…and one day, you will be too 😉

This was initially published on the Visible Blog, where we post weekly on topics like startup metrics, fundraising, and hiring.

For companies — large and small — each day is spent telling your story over and over again to all of the people who matter to your business. Each week, we curate the best thoughts on telling your story from around the business world here. You can subscribe by clicking here.

Looking to invest in the next Uber? Better find them early.

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Traditionally, investors have had 2 options for investing in high growth tech companies:

  1. Live in a city with a vibrant early stage technology ecosystem, know the right people, and get access to companies as they emerge. This setup has been available only to a select few.
  2. Purchase shares when the company goes public.

Expansion and growth stage deals (like the funding round Uber recently raised) have long been out of reach for most investors. Recently, online platforms have opened up opportunities for more investors at the seed stage, expansion and growth stage opportunities remain out of reach for all but the largest institutional funds; and tech IPOs are infrequent.

To explore these trends, let’s first take a look at what is occurring in the late stage private markets. While these deals are largely inaccessible to individuals, they are having a major impact on developments both up (IPOs) and down (seed stage) the venture stack.

1. There are more than 75 venture backed private companies valued at over $1b

While some of these companies will likely fail to live up to expectations (and valuations), many of them fit the profile of what an IPO company would have looked like a decade ago — growing revenue, profitable unit economics, and large market opportunities. A desire to maintain founder control and build without having to please Wall Street or comply complex regulatory and accounting requirements has led many of these companies to push off going public. This means less access to high growth deals in the tech deals in the public market.

2. Growth stage rounds are being populated more and more by corporate investors

The amount of corporate venture investment is on pace to hit multi-year highs and a significant portion of that capital is being invested in late stage companies. These investors — standalone corporate funds or those investing off the corporate balance sheet — seem to have more of a focus on planting seeds for lucrative business development relationships than on generating returns, making them less sensitive to valuations.

3. Traditional public market investors (asset managers like BlackRock and TD Ameritrade) have started investing in late stage private deals

This trend has emerged in response to the first trend, as like corporate VCs, these massive asset managers have been less sensitive to entry price, meaning that once these companies finally do hit the public markets they will be fighting to justify massive valuations and the opportunities for investors to participate in meaningful growth will have vanished.

So what do these trends tell us about investing in the private markets? Two things 1) the majority of value creation is happening at the early stage and 2) later stage deals — whether in private or public companies — do not offer investors risk adjusted returns that match a thoughtfully diversified portfolio of early stage companies.

Look at returns for early investors in Uber to see why this is true. When the company hit a valuation of $17b in late 2014, it was reported that investors in the company’s first round had seen their money grow 2,000x. That’s more than a home run, better than a grand slam. The company’s most recent round valued the company at almost $51b — a nearly 6000x return for early investors. It would take a valuation of $306 trillion for late stage investors to match that return (and then early Uber investors would have a 36,000,000x –that’s 36 million — return, so early stage wins big again).

Finding the next Uber, even for thoughtful investors with reliable access to early stage investing opportunities, is tough. But as the Cambridge Associates LLC U.S. Venture Capital Index, a comprehensive survey of the performance of the U.S. venture market, shows, early stage investments still provide higher expected returns than other asset classes.


Source: NVCA

Across most time periods, especially the long term, early stage investments outperform other private stages as well as public market indices like the S&P 500. Value creation in the economy at large has been (and likely will continue to be) driven by smart founders with a vision, talented teams executing on that vision, and investors who fund the vision early.

Looking for more insight on getting started with early stage investing? Take a look at the presentation below.


Originally published at institute.seedchange.com on September 4, 2015.

The 5 Distrosnacks we’ve used to grow Visible

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Each afternoon, the 500Startups Distribution team sends out an incredibly engaging GIF-of-the day email that we read religiously here at Visible…partially because we, like most humans, can never get enough great GIFs but also because each mail features a quick and easily implementable growth tip on topics like A/B testing, content marketing and messaging.

Note: You can subscribe to the newsletter here

Over time, we have implemented a few of the best lessons as we work to grow Visible.

Since I’m not nearly as creative as the 500Startups team when it comes to finding relevant GIFs, I simply leveraged Slack’s new /Giphy feature to make do.


1. More Landing Pages, More Visitors


The Distrosnack

Companies with 15+ landing pages get 55% more signups than those with 10 or fewer.

Customize landing pages:

  • By channel
  • By campaign
  • By user segment / persona

The Implementation

Over the past 6 months, we have increased our number of landing pages by 105% and with that have seen improvements in our inbound performance as well as higher conversion rates on those pages vs. on our home page as a result of being able to target pages to specific audiences and make the content on the page hyper-relevant.

The increase in landing pages has been a factor in improving our Hubspot Marketing Score, which they define as:

“ A holistic measure of a site’s online presence as measured by HubSpot’s Marketing Grader on a scale of 0–100.”

Our Hubspot Marketing Score over time.

While we haven’t put up Tesla-level scores quite yet, we are getting there.


2. The Growth Toolkit

Wouldn’t that chart look better on Visible?

The Distrosnack

Here is the 500Startup Growth Toolkit:

  • Segment (aggregate / integrate all your analytics)
  • Intercom (event-based email and in-app messaging)
  • Buzzsumo (research the best keywords and phrases for inbound/content marketing)
  • ToutApp (send tracked 1-to-1 emails)
  • UserTesting (qualitative UX testing with real users)
  • SimilarWeb (traffic source comparison aka spy on competitors)
  • Import.io (data harvesting)
  • Unbounce and Instapage (two words: SMOKE TESTS)

The Implementation

We have used almost every one of the tools above at one point or another and have settled on a toolkit that we’ve found fits our team and workflows the best.

Here is the growth toolkit that we currently employ at Visible:

  • Heap Analytics (funnel and event tracking)
  • Intercom (event-based email and in-app messaging)
  • Buzzsumo (research the best keywords and phrases for inbound/content marketing)
  • Outreach (run targeted drip “smarketing” campaigns)
  • Hubspot (landing pages, social publishing and monitoring, keyword research, email newsletter…you name it!)
  • Kimono Labs & Import.io (data harvesting)
  • Instapage (landing pages, A/B testing)
  • Formstack (forms)
  • Zapier (the pipes that let all of our tools talk to one another so that we can gain better insight into our actions)

3. Leverage the Thank You Page

Zac Efron: One of the few remaining celebrities without a startup.

The Distrosnack

Don’t think of your Thank You page as a throw-away just because the user completed your desired action:

  • Confirm registration details
  • Invite friends
  • Get the mobile app

The Implementation

We recently released our first book, titled “The Ultimate Guide to Startup Data Distribution” and with that, put together a landing page where people could download the book in exchange for an email. Pretty standard.

Heeding the advice from this Distrosnack, we also built a thank you page to help keep people who had just converted in our “universe,” directing them to a page where they could sign up for Visible.

The result? 25% of people who downloaded the book ended up signing up for Visible. While we don’t have a ton of comps to go off of, this seems like a pretty great conversion rate and helped contribute, in part, to the biggest week we’ve ever had at Visible


4. Worship Information Hierarchy


The Distrosnack

Look at the ratio of things that you can be do on a landing page vs the number of things that you should be doing. As attention ratio goes down, your conversion rate goes up. Exception: multiple links with the same goal.

Worship information hierarchy. What do people want? Put that first, draw attention to it, remove everything that’s not important.

The Implementation

As noted, we’ve used a few different tools to build what we feel (and the stats back up) are effective landing pages with effective, targeted messaging and fewer distractions. Here are a couple recent landing pages we’ve built that have done an effective job of minimizing the number of actions a viewer can take in order to drive conversions.

http://info.visible.vc/startup-data-distribution
http://info.visible.vc/startup-data-distribution

5. Marketing Multiplier


The Distrosnack

Marketing is a massive force multiplier that gives you leverage in hiring, fundraising and sales. It’s not just about lead gen. It’s about positioning your company in a way that’s relevant and exciting to your stakeholders. Everything is easier with great marketing. “We don’t do marketing” is not something to be proud of.

The Implementation

We are all about staying relevant to our stakeholders — and helping others do the same — here at Visible and we have used content marketing as a way to give customers, investors, partners (and anyone who may become one of those three things) insight into how we run the business, think about the market, and build our product.

In addition to the post you are currently reading, here are a few examples:

http://info.visible.vc/startup-data-distribution
http://info.visible.vc/startup-data-distribution
http://info.visible.vc/startup-data-distribution
http://info.visible.vc/startup-data-distribution


If your company is using any other Distrosnacks to grow your business, I’d love to hear what they are and how you’ve implemented them! Shoot me an email at brett at visible.vc.

These 6 Quotes from Warren Buffett’s Annual Letters Will Help Your Startup Beat the Bubble

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In volatile economic times, investors often look to Warren Buffett for a read on how they should be weathering the storm. And although he famously doesn’t invest in startups, the wisdom compiled over 50 years of his annual letters can help founders and executives make smarter decisions about the future of their businesses when market conditions aren’t working in their favor.

If #VCTwitter is to be believed, the wheels are in motion for a major correction in the private tech market and companies should start gearing up for a vastly changed funding environment.

Image via @StartupDrugz

However, a pull back in the market doesn’t signal the end of days for every company trying to go from growth to scaling to eventual IPO. Sure, some companies, regardless of stage, will fail to meet VC expectations while others, no matter what market cycle we are in, will outperform. This infographic, from a Mattermark + Battery Ventures webinar, displays this perfectly.


In the same way that the Oracle of Omaha has found lucrative investments at every possible point in the business cycle, great companies form and will continue to form in every economic period.

We went back through 50 years of Buffett’s shareholder letters to pull out 6 of the best lessons you can use today to build a business robust enough to flourish whether things are on the way up or the way down for your competition and the rest of the market.


Own your company’s story around the good, bad, and the ugly of your past, present, and future.

“When you do receive a communication from us, it will come from the fellow you are paying to run the business. Your Chairman has a firm belief that owners are entitled to hear directly from the CEO as to what is going on and how he evaluates the business, currently and prospectively.” — 1979 Berkshire Hathaway Annual Letter

When competition increases, telling your company’s story becomes more important. Acquiring customers, raising money, hiring. A compelling story helps give you the edge over the competition in these areas.

Buffett has perfected the art of telling Berkshire Hathaway’s story in a way that makes it more attractive to not only its current stakeholders but also to others who may come into the fold in the future — companies they are looking to acquire, other investors in the market, the media, etc.

So what does a good startup story look like? Here are a couple things to keep in mind:

  • Combine numbers and narrative to provide the right level of context. While readers are interested in how much a given metric may have changed, it is more important to fill them in on why it changed and what they can expect in forthcoming periods.
  • Make specific asks of your investors and stakeholders. Removing as much friction as possible makes it more likely that your investors will be willing to make that intro you need to a key hire, customer or VC.
  • Keep is consistent. For Buffett, that means once per year. For an early stage company undergoing changes at a much faster rate, monthly is often the way to go.

Want to take it a step further? Here are some great templates that you can start using today to craft your own mini-Buffet missives once a month (quick plug: any of these templates can be used inside of Visible)


For your metrics, paint the bullseye first, then shoot the arrow.

“Yardsticks seldom are discarded while yielding favorable readings. But when results deteriorate, most managers favor disposition of the yardstick rather than disposition of the manager. To managers faced with such deterioration, a more flexible measurement system often suggests itself: just shoot the arrow of business performance into a blank canvas and then carefully draw the bullseye around the implanted arrow. We generally believe in pre-set, long-lived and small bullseyes.” — 1982 Berkshire Hathaway Annual Letter

Most emerging SaaS companies are on the search for predictability. How can we get to the point where X amount of money invested in a certain growth channel yields Y new paying customers with an LTV of Z. It is a complex equation that takes a long time to begin understanding and an even longer time to perfect.

Without a well-defined set of metrics and a budget (different than projections or a forecast) to hold yourself to over a period of time, you are constantly restarting the process of understanding what your path to business model predictability looks like.


Tails are not legs (like GMV isn’t Revenue)

Managers thinking about accounting issues should never forget one of Abraham Lincoln’s favorite riddles: “How many legs does a dog have if you call his tail a leg?” The answer: “Four, because calling a tail a leg does not make it a leg.” — 1992 Berkshire Hathaway Annual Letter

As YCombinator’s Sam Altman recently noted, many founders make costly mistakes when representing their financial and growth metrics to investors and other stakeholders. Often, this is done out of ignorance. Sometimes, the misrepresentation is deliberate. Both are inexcusable.

When building out a framework for how to track key performance metrics around your business, one of the first places to start is to set clear definitions for what everything means. Too often, early stage companies play fast and loose with metric definitions in an effort portray their growth in a more flattering light.

An undisciplined approach to defining the key performance indicators in your business represents a lack of respect for, as Marc Andreessen puts it “the fact that you are deploying other people’s capital” and can cause a breakdown in the relationship with your stakeholders.



Before chasing the new and shiny, double down on what is working

“Before looking at new investments, we consider adding to old ones. If a business is attractive enough to buy once, it may well pay to repeat the process.” — 1994 Berkshire Hathaway Annual Letter

On the surface, the cycles for everything in the startup world— funding, product, news —seem to be accelerating rapidly. While a deeper dive makes it clear that a lot of this information is just noise, it doesn’t stop teams and companies from getting distracted.

When a company hits an inevitable rough patch, any new idea seems like a good idea, leading to wasted time and money chasing product or distribution ideas that fall well outside of your core competency and what should be your core focus.

As YCombinator’s Paul Graham puts it, “nothing kills startups like distractions.


Don’t be ‘Cinderella at the ball’

“The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities æ that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future æ will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.” — 2000 Berkshire Hathaway Annual Letter

Each quarter, we survey top VCs and angels from around the world in an effort to understand where the early stage market is heading. In our Q2 survey, the word on everyone’s mind was ‘discipline’. Specifically, a concern over the lack of discipline many investors saw in the market on both sides of the table.

Some investors expressed concern about a lack of discipline from fellow investors jumping hastily into companies at inflated valuations while many claimed to see increasing burn rates across the industry, partially driven by entrepreneurs thinking that their next round will come as easily as their last.

Hyde Park Angels, one of the top angel groups in the United States and our partner for the survey put together a helpful list of ways your company can navigate the impending (according to some) shakeup in the early stage market. The highlights:

  • Take a fine toothed comb to your financials
  • Understand the logic behind your numbers
  • Be honest with yourself (and your team) about your company’s progress
  • Cultivate strong relationships with your investors
  • Know how to sell your strengths

You can check out the full post here >>


Widen your moat

“Every day, in countless ways, the competitive position of each of our businesses grows either weaker or stronger. If we are delighting customers, eliminating unnecessary costs and improving our products and services, we gain strength. But if we treat customers with indifference or tolerate bloat, our businesses will wither. On a daily basis, the effects of our actions are imperceptible; cumulatively, though, their consequences are enormous.” — 2005 Berkshire Hathaway Annual Letter

“Delighting customers” and “winning on product” are two phrases that any startup buzzword purveyor worth their salt is very familiar with. The third part of Buffett’s quote, “eliminating unnecessary costs” is one that is just now coming into vogue with the handwringing over burn rates and bubbles.

Startup cliches aside, the impact of nailing all three of Buffett’s requirements on a daily basis is huge for a fledgling company. One customer conversation can ignite growth into a new market, one feature can help your product leapfrog your biggest competitor, and one spending misstep can lead to a pattern of frivolous cash management.


About Visible

Visible gives you the power to tell the story around your key performance data. Visualize your most important metrics, organize capitalization and keep all of your stakeholders engaged all from a single platform.

You can sign up for a free trial here.

How to tell your company’s story.

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Every company has a story to tell. What is yours?

By: Brett Bivens


For companies — large and small — each day is spent telling your story over and over again to all of your key stakeholders. Hiring, selling, raising capital…the storytelling doesn’t stop, it simply changes contexts.

As a company grows, more and more stakeholders — investors, employees, advisors, partners — enter the fray. Stakeholders who need to be inspired to see the same future that you do and who need to be informed in order to play their respective roles most effectively.

Today, Visible is featured on Product Hunt to announce the new version of our platform which focuses on helping companies tell their stories more effectively by giving them one place for all of their key performance and ownership data.

Just under two years ago, we launched our 1.0 product on Product Hunt and conducted one of the first AMAs on the site. In that initial AMA, our CEO Mike Preuss noted the following:

“Our goal is to make it as easy as possible to get key data to the right people. With the rise of transparency, early stage investment, syndicates, equity crowdfunding, and more we are very excited for the future.”

Today, Syndicates has continued to roll ahead, equity crowdfunding is becoming a bigger and bigger force and the call for transparency in the early stage community has become louder, especially in light of the Zitrual situation and amidst concerns of companies burning capital irresponsibly.

So how can companies today — specifically early stage startups — leverage all of the data being created within their organizations and distribute that data most effectively to everyone that matters?

1. Accept the Responsibility

As Marc Andreessen noted in a recent sitdown with Dan Primack, deploying capital on behalf of others comes with a responsibility and requires discipline on the part of founders and executives. Employing others to help build your vision carries the same weight.


When you accept the responsibility to begin empowering people in your company with the right information, it leads to better communication between teams, more introductions from investors to potential customers or employees and an overall culture of transparency that endows a feeling of ownership that stretches beyond what shows up on a cap table.


2. Understand Stakeholder Personas

When bringing a product to market, customer personas play a major role in
things like pricing, messaging and feature set. When distributing key
information about the performance of your business, stakeholder personas
help inform which subset of metrics you present as well as when and how
you present them.

Investors, according to High Alpha CFO Blake Koriath, are often interested
in the highest level metrics, enough information to quickly understand
general trends in the business and also understand where they can have the
most impact. Overall Gross Margin, MRR Added and LTV are examples of
metrics SaaS investors may be interested in seeing.

Executive team members fall next in line and need to understand how the success of their team is contributing to the overall direction of the business. Finally, team members are likely interested in the “atomic units” of those higher-level metrics. That is to say, how are their individual contributions bubbling up to impact the metrics that determine success for their teams?

The Stakeholder Persona Matrix

3. Build a Data Distribution System

Data Distribution is a term that we recently coined here at Visible to define the systems and processes a company has for getting the right information to the right people at the right time.

Find the Right Framework for Your Company

The way that a company tracks and analyzes the key performance indicators around its product development and distribution as well as its customers and employees is key in determining whether its data distribution system will be effective and yield long term positive results. It doesn’t matter how often a management team communicates with team members, investors and any other stakeholders if the communication isn’t actionable and relevant to what drives the success of the business.

Blake Koriath, mentioned above, likes to start wide when working with companies, focusing first on business model and company stage, then digging into exactly who will be viewing specific metrics and when.


Hone in on Your Most Valuable Metric

To use a line from David Skok (the Godfather of SaaS metrics), “good
metrics should be actionable, and drive successful behavior.” To accomplish
this, you first need to determine the end definition of “success” for your company. Since the mix of factors leading up to this point (Business Model + Stage + Audience), as well as the overall goals of every company, are different, there is no one size fits all approach to selecting your MVM.

At Visible, the metric most tied to our “success”, our MVM, is the number of companies we have actively using the platform on a monthly basis. The progress that we make on this metric helps us understand the performance of each one of our teams and can help us identify parts of the business bottlenecking our growth.

First of all, it gives us a good idea of how many people are coming in to the top of the funnel through different inbound and outbound channels then lets us know if our product is effective at “activating” those companies. Then, if a company is coming back to Visible each month to track and distribute their performance data, they are more likely to be inviting their investors, advisors and team members. As more companies in an investor’s portfolio begin sharing updates and metrics, the investor is more likely to become a paying customer. Similarly, team adoption within an organization grows as companies invite more employees.

Up and to the right…hopefully.

In addition, since so many of the companies on Visible are what would be considered early or growth stage businesses, their continued expansion will bring new stakeholders into the fray, adding to the number of people who rely on us for the organization of their most crucial business data.

Steal the Right Set of Metrics for Your Company

While your MVM is intended to give you and your stakeholders a holistic
look at your company it cannot exist in a vacuum. Each week, month and
quarter, your MVM will trend differently and having a strong set of
supporting metrics can tell you why, as well as how you can continue the
trajectory or make the necessary adjustments to get back on track. Every
supporting metric in your business should:


If these three criteria are met, you ensure that you aren’t spending time
tracking and disseminating superfluous information about your company,
saving your stakeholders time in trying to cut through to what’s important and helping everyone in your organization focus their efforts properly.


This post is excerpted from our first book, The Ultimate Guide to Startup Data Distribution. You can download the book for free and learn more about how other top companies are building and operating high-impact data distribution systems to keep everyone that matters engaged in the their business.

Download The Ultimate Guide to Startup Data Distribution >>>>

Check out how nice it looks! You should download it!