Cloud 100 – NYC !

As you may have seen,  Forbes published the Cloud 100 , here is their description: Forbes Cloud 100 recognizes the best and brightest of the cloud. Compiled with the help of partners Bessemer Venture Partners and Salesforce Ventures, the list tracks candidates by operating metrics such as revenue and funding, with the help of 25 of their public cloud CEO peers.

Out of the 100 companies, 13 are based in NYC, specifically in Manhattan, see images below.  One of the great things about the startup scene in NYC is the density of companies, these companies are all in walking distance, less that 4 miles separates the most northern company to the the southern company.  I highlighted the density aspect in a previous post when looking at the locations of Fortune 500 companies (spoiler alert, 42 are based in Manhattan).

Startups (& VCs) have realized the sales opportunity that NYC provides and we are going to see an acceleration of SaaS companies being built here.

 

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LPs and Diversity

A lot has already been said and written about what is happening in our tech community with regards to how Women Founders are being sexually harassed and/or assaulted.  Recently, several Men have lost their jobs (careers?) for their behavior and I suspect others will too.

In addition to vocalizing how this is an issue, what actions can we take to improve things? While Women are at the center of the recent discussions, I do want to expand the conversation and include minorities in our community, as they are being impacted due to racism.

One of the most important areas we need to work on is diversifying the GPs (General Partners) of early stage VC funds.   The reason I say early stage funds, is that they are usually the first to financially support a startup, at a time when the company has very little data/revenue, so the VC is making a big bet on the Founders(s).  As you can see below, 92% of senior investment professional (GPs) are Men.  78% of GPs are White. The image below was via an article written by Kim-Mai Cutler in 2015.

screen-shot-2015-10-05-at-11-38-20-pm

The fact that there is a lack of diversity in the senior GP ranks, isn’t news but it is worth to highlight this again, especially for LPs (Limited Partners) who are reading this post (hopefully they are).  White males are not more capable of running firms than other gender(s) or ethnicity.   I believe that LPs have the most power in changing the make up of how VC firms look.   We need LPs to think about diversity when they invest their capital in VC funds, so how can we help?

Specifically, we need to mentor new and diverse VC funds (aka Emerging Managers).   We need to help leverage our LP rolodex to get these firms access to capital.  We need to help provide high quality Founder referrals.  We need to get these professionals engaged in industry events/dinners that we organize.  We need to ask these firms, “how we can help”, as every firm has different needs.  I don’t want to assume that everyone is looking for help or needs help but it doesn’t hurt to ask them if they need help.

If you are a VC, are you willing to share some of your LP connections?  Are you willing to invite these firms into your syndicate?  Are you willing to invite them to your dinners and/or speaking events?

Given that I’m based in NYC, I want to take this time to highlight diverse emerging managers based here.   If you are LP and haven’t already spoken to these firms, it it worth exploring why that is and finding time to connect with them (assuming they want new LPs now or in the future).

  • 645 Ventures
  • AlphaPrime Ventures
  • BBG Ventures
  • Female Founders Fund
  • Flatiron Investors
  • Future/Perfect Ventures
  • Human Ventures
  • Lattice Ventures
  • New Age Ventures
  • Primary Ventures Partners
  • Rucker Park
  • Social Impact Capital
  • SoGal Ventures
  • Startup52
  • Techstars IoT
  • Third Kind Venture Capital
  • Trail Mix Ventures
  • WME Ventures
  • Work-Bench
  • XFactor Ventures

Please let me know if I missed any firm(s).  This list is comprised of firms who meet all of the following criteria:

  • HQ’d in NYC
  • raising Fund I/II and/or currently investing out of Fund I/II
  • General Partnership is comprised of at least one woman and/or minority.  This person has to have substantial carry (which to me, means they are one of the leaders of the firm)
  • Early stage investment focus (Seed/Series A)

The point of the post is not to throw LPs under the bus, but it is fair to say they could be doing more to change the diversity of VC firms.  That being said, every stake holder in this community (including me) has a role that they can play in making changes that improve the makeup of VCs (and Founders).  It is worth taking time to think through how you personally can be helpful, I’m still thinking through it and welcome any feedback/thoughts.

My commitment is to help the above mentioned firms.  I have helped a few of them already but need to do more.

 

 

Does being Founder lead to being the best VC?

I don’t believe that being a Founder of tech startup gives you a better chance of being the best VC.  I have never seen any data that confirms this, if you have it, please share that in the comments section.  On the contrary, if you look at some of the best VCs of all time, they were NOT Founders of tech startups.  The great thing about this industry is that regardless of your background, you can be a great VC Identifying who is going to be the best VC, when a VC is just starting, is extremely difficult, which is why the job of being a LP is so challenging.

Here is the tweet thread that got me thinking about this topic:

 

 

 

 

 

 

 

 

 

 

I do recognize that specific words are critically important for this debate.  Entrepreneur vs Founder is a material difference.  The original premise and original tweet was about “Founder” not Entrepreneur .  That being said, most of folks on the list provided below were neither an entrepreneur or founder, a few did work for tech startups though but that is different debate.

Here is a list of folks who meet all of the following parameters:

  1. They were not tech Founders before they started leading venture rounds
  2. They started leading venture rounds (Seed/A/B) post 2005
  3. They have substantial realized gains (not looking at TVPI), meaning they distributed meaningful money to their LPs (DPI)

If you know VCs that meet ALL of these parameters, please let me know in the comment section and will add them.  In no particular order:

Rebecca Lynn – Canvas

http://www.canvas.vc/team-member/rebecca-lynn/

 

Ian Sigalow – Greycroft

https://www.greycroft.com/people/ian-sigalow/

 

Kirsten Green – Forerunner

https://forerunnerventures.com/team/kirsten-green/

 

Chetan Puttagunta – Benchmark

https://www.linkedin.com/in/chetanputtagunta/

 

Shana Fisher – Third Kind

https://www.crunchbase.com/person/shana-fisher#section-overview

 

Mamoon Hamid – Kleiner Perkins

https://www.kleinerperkins.com/people/mamoon-hamid

 

Tony Florence – NEA

https://www.linkedin.com/in/toflorence/

 

Mike Volpi – Index

https://www.indexventures.com/team/mike-volpi

 

Roger Ehrenberg – IA Ventures

https://www.crunchbase.com/person/roger-ehrenberg

 

Matt Cohler – Benchmark

https://www.linkedin.com/in/mattcohler/

 

Aydn Senkut – Felicis Ventures

https://www.felicis.com/team/aydin/

 

Hans Tung – GGV Capital

https://www.ggvc.com/team/hans-tung

 

Active Early Stage Investors in NY based companies (Jan ’17 to Aug ’18)

In preparation for an event that we run on a regular basis, called Fundraising Workshop, wanted to provide an update on some of the most active early stage VCs (Venture Capital) who are investing in NY based startups.

A few items before providing you the information.

  • The data was pulled via CB Insights
  • The investors do not need to be based in NY but have to be investing in NY based companies
  • The date range was Jan 1 2017 to August 13 2018
  • It only includes venture capital firms and excludes accelerators, angels, corporates, etc.
  • CB Insights doesn’t provide data on who is leading the rounds, so the assumption with these firms listed, is that they participated in the round and not necessarily lead, a critical distinction when fundraising.  If you are fundraising, you need to do more homework to figure out is actually leading rounds.

The data is below.

Most active VCs who participate in sub $2M rounds, see below.  Many of the seed and pre-seed rounds are sub $2M in size, so if you are looking for firms who are active at this size, this is a good target.  Now, the data around pre-seed and seed is challenging since many of these rounds are not announced , which makes it is difficult for CB Insights to capture.  So this list is not comprehensive but I think it provides a lot of signal on the right firms to reach out to.

sub $2M rounds

Most active Seed VCs, see below.  In this query and unlike above, I didn’t put parameters on the size of the seed round.

Seed

Most active Series A VCs, see below.  Again, no parameters on the size of the round.  As I mentioned in beginning of the post, I am unable to query who is “leading” these particular round.  So some of these firms could be leading and other could be participating in them.

Series A

Slack $7B valuation

As you may of heard, Slack is supposedly raising a $400M equity round at  a$7B valuation.

I wrote a blog post about Slack’s last announced valuation in 2016, when it was $3.8B.  The tldr was that if Slack was a public company, it would be trading a 42x revenue run rate.  In that blog post, I referenced the Bessemer Cloud Index, which provides perspective on what enterprise saas public companies are being traded at.  The median revenue rate for these companies is 8.5x, but those public companies are growing at a much slower pace, so it was expected that Slack would earn a large multiple.  That being said, I thought 42x was a bit rich.

In the article mentioned in the first sentence, the had a chart: Slack has indicated they have 3M+ paid users, see below.

slack-growth-2018-stacked (1)

Per Slack pricing page,  they charge between $6.67 and $15 per paying user per month.

So, based on 3M paying users, they are between $240M  ($6.67/user/month x 12 months x 3M paid users) in annualized revenue run rate and $540M revenue run rate.  If you split the difference, lets assume they are a $390M annualized revenue run rate.

If you take the valuation of $7B and divide it by $390M, they would be trading at 18x annualized revenue run rate.

I think 18x is a fair valuation given their grow rate, although Slack paid user growth is slowing, which is expected as the company gets larger.  The closest public saas comparison I would find is Shopify, which is trading at 17x annualized revenue run rate.

THE END.

 

Top NYC growth startups?

Are these the top growth startups in NYC?  I don’t know, but lets take a look at some PUBLICLY available data from LinkedIn, Glassdoor and CB Insights.  If you want a TLDR, scroll to the bottom.

As many of you are aware, they are so many listicles circulating online about the top companies, they are rarely data driven and read like who is the most popular, not who is best or fast growing.  They typically are about driving pages views.   Wanted to take a look at PUBLIC data to see if I could derive some signal from the noise.

Another lens that I thought about was, if I was going to join a startup, how would I choose which startup to join?  It is a very difficult process to narrow down the list.   As an example, on AngelList, there are ~2,900 startups in NYC, of which ~700 have posted a full time job on that site in the past seven days.

One of the public data sources is Glassdoor.   If you aren’t familiar with this service, it is essentially Yelp for employees.  Before you get up in arms, I realize that some disgruntled employees will post negative items on there but I think if there are enough inputs, it can provide some signal on the health of the company.  Not only can you provide input on the company but on the CEO as well.  For this exercise, in order to qualify, you had to have at least 20 reviews, which I thought was a large enough sample size that if there were some disgruntled employees with an ax to grind, it could be balanced by happy current/past employees but I do realize this can be gamed.  Regardless, there is some signal that you can derive from this service.  In addition, the startup needed a ranking of at least 4.6 or greater (max number is 5, larger the number, the better).  See example below.  As a side note, Glassdoor was recently acquired for $1.2B, congrats!

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The other data source was LinkedIn.  If you are in the tech community, LinkedIn gets trashed a lot, primarily by engineers/developers, who get a lot of unsolicited emails from recruiters,  but I can see how that can be annoying.  I don’t think LinkedIn has figured how to deeplink yet, you will see my tweets ranting about this 🙂 .  That being said, if you are in a sales or relationship driven role, this service is invaluable.  If you pay for their subscription, you get access to two data points that I used for their exercise,  number of employees and growth rate.  See below as an example for a NYC startup, Lemonade.

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Number of employees is an important data point, as it CAN provide some signal on potential top line revenue.  If you are a startup that has a clear revenue model, I assume that every employee generates at least $100K in revenue, which takes into consideration their salary, benefits and overhead (office space, taxes, electricity, etc).  So in this example, I would assume that Lemonade is generating ~$9M ($100K x 91 employees) in top line revenue.   I don’t know if this is accurate in this particular case but that would be my assumption.   For companies who don’t have a clear revenue model, I would obviously assume no revenue.  Feel free to disagree with me on this, comments are open and would like your feedback on this.

The other data point that is important is growth rate.  For this exercise, I took a look at the 1 year growth rate, in the example above, it is 69%.   In order to qualify for this exercise, I took a look at companies that are growing at least 20% in the past year.

Lastly, utilizing ChubbyBrain Insights (aka CB Insights), I took a look at a how much VC funding the company has raised.  Two data points that you can generate some signal, total funding amount and last round of financing.  If I were to join a startup, knowing when they raised their last round is critical, as it provides some signal on how much cash they have remaining.  How much total funding can provide some signal as well, especially if have ownership in the company is important to you.  Generally speaking, the more the company has raised, the less ownership they will provide to a new employee.  So if ownership is important, you might want to take a look at this data point.  For this particular exercise, I didn’t require the company be VC backed or that it has raised a new round of financing but I did provide info on that for you on Airtable (PS, I love their service)

So without further ado, here are the companies that qualified based on the all the criteria provided above (PS, if I missed you by accident, please lmk and I will update the post).

In alphabetical order:

  • Augury
  • BounceX
  • Button
  • CB Insights
  • Compass
  • Convene
  • Dataiku
  • Elite SEM
  • Fundera
  • Greenhouse
  • InVision
  • Justworks
  • Kustomer
  • Lemonade
  • SeatGeek
  • Updater

Special thanks to Bella Rubin for helping with gathering data for this post.

PS, another signal that was derived from this exercise, is looking at which VC firms were the most prevalent in backing these companies in the early days (Seed & A rounds only).  See the Airtable referenced above for a link to that information.  There were five firms (all NYC based) that showed up on two occasions: Lerer Hippeau, First Round Capital, Thrive Capital, FirstMark Capital and Box Group.  The signal strength is a bit low as 2 out of 15 is not substantial but still wanted to highlight it.

PSS, this comment from the CEO of CB Insights is a worth highlighting.  Looking at capital efficiency is good lens when taking all the data points into consideration.

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Top 10 Startups in NYC , Q1 2017 edition

“who are the best startups in NYC?”….I get this question a lot.

It is very hard to quantify an answer, usually is based on some anecdotes but rarely is it a data driven answer.  One way to quantify this is by utilizing information via Glassdoor  If a company is highly ranked on Glassdoor, it should indicate that the employees overall are happy campers.  If you have happy employees, there is a strong likelihood that customers are happy, which usually means $$$.   I have not researched whether or not, there is a strong correlation between happy employees and company success, but intuitively I think it makes sense, if you disagree, please let me know.

In any case, here are my top 10 startups in NYC, would love to get your thoughts.

In no particular order:

  • Seatgeek
  • Apprenda
  • CB Insights
  • Boxed
  • Datadog
  • Hightower (now VTS)
  • InVision
  • Kemp
  • Justworks
  • BounceExchange

These companies met ALL of the parameters below, again the data is from Glassdoor:

  • HQ’d in NYC
  • At least 20 reviews provided by current/previous employees
  • At least a score of 4.7 (out of 5)

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