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This is largely good advice, but… I find that in 2021 the capital environment has become so much easier compared to even 5 years ago, some of this advice feels

This is largely good advice, but… I find that in 2021 the capital environment has become so much easier compared to even 5 years ago, some of this advice feels a little out of date. Yes investors want a company that can scale 1000x, but these days I’m hearing a lot of VC interest in companies whose ceilings are probably in the $50-250M range, and who are offering pretty good terms. You don’t need a unicorn exit for that, you “only” need to make a product that works with a degree of traction, and then get acquired by a bigger player. As long as you don’t raise too much that can still make for a nice outcome for all involved. It’s really astounding how much money is chasing so little return right now.

code_biologist 5y ago
There's a huge unstated detail there: to access that non-unicorn capital you need to be recurring revenue SaaS. The older focus on unicorn outcomes allowed for more creative revenue models and higher risks. Companies that don't have revenue really figured out but have an ultra compelling product can get unicorn-targeted funding. The VC interest in these smaller companies is predicated on the revenue and valuation multiple predictability that comes alongside recurring revenue SaaS. Much lower risk for an investor. The margin structure of these types of companies is a nice bonus. If you're a founder trying to get access to this reduced-target capital you need to have 10%+ monthly recurring revenue growth, gross margins above 70%, and ideally a clear acquirer. Not affiliated with this group, but this article explains in more detail: https://leadedge.com/why-we-like-saas-businesses/ https://leadedge.com/why-we-like-saas-businesses/
- bsder 5y ago
  > There's a huge unstated detail there: to access that non-unicorn capital you need to be recurring revenue SaaS. Agreed. I know almost a dozen actually cashflow-positive companies that want to take some investment in order to expand and can't get anyone to call them back. The reason why there seems to be a "shortage of good companies" is because the VCs are all chasing the exact same very narrow niche formula.
  - skmurphy 5y ago
    They should contact firms like Lighter Capital who make Revenue-Based Financing loans.

code_biologist 5y ago

There's a huge unstated detail there: to access that non-unicorn capital you need to be recurring revenue SaaS. The older focus on unicorn outcomes allowed for more creative revenue models and higher risks. Companies that don't have revenue really figured out but have an ultra compelling product can get unicorn-targeted funding. The VC interest in these smaller companies is predicated on the revenue and valuation multiple predictability that comes alongside recurring revenue SaaS. Much lower risk for an investor. The margin structure of these types of companies is a nice bonus. If you're a founder trying to get access to this reduced-target capital you need to have 10%+ monthly recurring revenue growth, gross margins above 70%, and ideally a clear acquirer. Not affiliated with this group, but this article explains in more detail: https://leadedge.com/why-we-like-saas-businesses/ https://leadedge.com/why-we-like-saas-businesses/

bsder 5y ago
> There's a huge unstated detail there: to access that non-unicorn capital you need to be recurring revenue SaaS. Agreed. I know almost a dozen actually cashflow-positive companies that want to take some investment in order to expand and can't get anyone to call them back. The reason why there seems to be a "shortage of good companies" is because the VCs are all chasing the exact same very narrow niche formula.
- skmurphy 5y ago
  They should contact firms like Lighter Capital who make Revenue-Based Financing loans.