Author Archives: Shai Goldman

Best Startups in NYC ?

There is always a debate as to which startups are the best ones in NYC.

Looking at Glassdoor can be one resource to utilize to make an argument as to which ones are the best.  How employees feel about a company, can be a good indicator as to how a company might perform.

I took at look at which NYC HQ’d VC backed startups had the highest rankings.  In order to be considered for this list, the startup had to have at least 25 reviews, which I feel is a good enough sample size.

So, here are the top 5:

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Market Cooling of 2016

VC rounds and dollars are down approximately 1/3 vs the same time frame as last year (2015).

I utilized CB Insights to pull some data.

I wanted to see what has happened the last few months, post the public market correction that took place in February 2016.

First thing I wanted to look at was all VC rounds in the US between March 15th and May 15th of this year.

The query provided: 523 rounds of equity financing, totaling $7.12B.

Now, I wanted to compare to same time frame of last year.

The query provided: 778 rounds of equity financing, totaling $11.6B.

So, rounds are down 32.8% and funding amount is down 38.6%.

I wanted to drill down and just look at Seed and Series A rounds, again, only in the US, on those same dates, March 15th to May 15th of this year (2016).

The query provided 293 rounds of equity financing, totaling $1.46B.

Again, wanted to compare it to the same time frame of last year.

The query provided 465 rounds of equity financing, totaling $2.09B.

So, Seed/A rounds are down 37% rounds and funding amount is down 30%.

This cooling off period is actually a great thing.  The funding environment was too frothy the last few years and there was a lack of discipline on both the CEO and VC fronts.  Companies are now focusing on getting a handle of their burn and spending their money in a slight more conservative rate.

While things have cooled, the good news for Founders is that there is still A LOT of money available to them.  The majority of VCs have new/newer funds raised.

Tech Activism

As you may of heard, there was a proposition in Austin that had an impact on ride sharing, specifically on tech companies/startups Uber and Lyft.  See this article if you are not familiar with the situation or want a refresher.

A lot of people in the tech community are upset about this decision, as they feel Austin is being anti-tech/startup.

The part that is disappointing is that people are being very vocal about this proposition AFTER the vote has already taken place.  One thing I have witnessed in living in the Bay Area and NYC, is that the startup community, broadly speaking, aren’t very involved in local politics.

If you look at the results of the proposition, it shows you that a very small percentage of the population ultimately made the decision.

Austin has a population of almost 900K people and as you can see below, 10K people were the difference in opposing the measure that has impacted Uber/Lyft.  The article that I reference above indicated that only 17% of REGISTERED voters participated in this specific proposition.

We, being the collective tech community, need to do a much better job of not only making our voices heard but connecting with those in non-tech community to influence their decisions.  Sending out tweets isn’t enough, their needs to be people in the street communicating the message directly to local citizens and also calling/mailing/emailing the local/state/federal politicians.

I’m using this specific Austin situation as a recent example, so this isn’t meant to only call them out.  Similar situations have happened in other cities.

 

Voting Results:

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Austin Population:

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Slack’s Valuation

As you may of heard, Slack just raised a $200M round of financing at a $3.8B valuation.

Per the first image below, they have 800K paying users.

If you look further down at the second image, you can see how much they charge paying users, between $6.67 per month or $15 per month.

Assuming all their 800K paying users are at the lower tier of $6.67 per month, they are at $64M in annual recurring revenue ($6.67 x 12 months x 800K).  If they were a public company at this revenue, they would be trading at a 60x revenue multiple ($3.8B/$64M).

If their 800K paying users were at the high tier of $15 per month, they are at $144M in annual recurring revenue and 26x revenue multiple ($3.8B/$144M).

Realistically, their users are paying somewhere in the middle of $6.67 and $15, so splitting the difference of 60x and 26x multiple, they would need to trade at a 42x multiple.

Taking a look at the Bessemer Cloud Index, you can see that the largest multiple of public saas companies is Workday, trading at a 10x revenue multiple.  So assuming the best case scenario, Slack is getting paying users at the upper tier of $15/month, the 26x revenue multiple is much bigger than Workday’s.  That being said and a major implication to their current valuation, they are growing at a much faster pace than Workday or any other company in the Cloud Index.

If you look at the valuation of companies in the Cloud Index, fourth image below, only 9 companies have a higher valuation than Slack’s $3.8B.

Given Slack’s revenue and growth rate, they could IPO today, but the big question is what their market capitalization could be.

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$FB vs $TWTR vs Snapchat

When these companies were at a similar life stage, (ie going from ~$100M to ~$300M in revenue) they had very different private market valuations.

Snapchat = $16B
Facebook = $10B
Twitter = $8B

The question for me is whether one is over-valued or were the other two under-valued?

Here are some tweets below with links to the data.

 

2016, an opportunity for VCs

2016 is off to a very rocky start.  I don’t know if we are headed into the recession but the private market will be impacted with what is currently happening in Chinese stock markets, oil prices and US stock markets.

I expect 2016 to be similar to 2009 in terms of how the private market (venture world) will be impacted.  I suspect that many VCs are going to pull back this year, mainly to focus on existing portfolio companies in order to get them another round of equity/debt financing (aka oxygen) and/or help them get to an acquisition (or soft landing).

That being said, some VCs are going to be opportunistic and make MORE investments in 2016 vs 2015.  In down markets, VCs can get more ownership in companies since valuations drop due to supply/demand dynamics.  Many VCs will tell you that in order to generate 3x+ fund returns, entry valuation price / ownership % is critical.

I utilized CB Insights to research which VCs increased their Seed/Series A investment pace in 2009 vs 2008.  The top six firms that increased their pace were Founders Fund, First Round Capital, True Ventures, Accel Partners , Venrock and Bessemer (listed by most # of early stage deals in 2009).

It will be interesting to revisit 2016 and do a similar query to see which VCs increased their pace in 2016 vs 2015.

 

 

Maple

Maple is a vertically integrated food startup in NYC.  They launched in early/mid 2015 and recently expanded their coverage area to midtown , which is where my office is.

I really liked their packaging and quality of the food (the most important part).

The only issue I had was their delivery time, they had indicated 35 minutes but actually took 55 minutes.

I’ve tried the UberEats service multiple times but didn’t like the packaging of the food but their delivery times were typically less than 10 minutes, so super fast if you are in a time crunch.  It is a bit of a apples and oranges comparison as Maple makes the food and UberEats is just delivering (for now).

This is a massive market which is evolving quickly.  Looking forward to trying other services out, including Sprig, which hasn’t launched in NYC yet.


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5 years in NYC

I can’t believe it was five years ago that we moved to NYC!  (I don’t call it Silicon Alley or Big Apple)

Since moving here with my Wife (Kanya) and two dogs, we added two amazing children, Sophie is now four years old and Caleb is 18 months old. (Yes, I’m still reppin’ my Bay Area sports teams…this pic is from the Bronx Zoo)2015-09-27 17.36.42 copy

The startup scene has evolved dramatically.

An important KPI for an emerging startup community is the # of VC backed companies, ultimately you need to have exits though (but that is a function of time).

The # of VC backed companies that raised money in 2011 = 97

The # of VC backed companies that raised money in 2015 = 416… the is over a 4x increase!!!

On the exit front, there were zero $100M+ exits in 2011 and in 2015, there were three (Etsy IPO + Business Insider and Sunrise acquisitions).  In addition, there a lot of well established companies that are IPO ready and/or on the IPO track.

On the VC front, there were a handful of well established NYC HQ’d firms in 2011, Insight, Bessemer, Firstmark, RRE, USV, First Round, Greycroft, etc. Now there are 100+ firms who are actively writing checks,  and notably, there has been a massive amount of seed focused funds established in the past few years.

The SVB office, which was growing to 10 people when I moved here, is almost 50 people now.

We are still in early days for this startup community.   Over the next five years, we are going to get closer to the Bay Area in terms of investments and acquisitions (although I don’t expect NYC to be at the same scale, nor does it have to be a goal to be considered a success).

I am excited about several local initiatives that are going to propel the startup community.  One is Cornell Technion campus that is being built on Roosevelt Island.  It should be up and running at the end of next year, the goal is create a Stanford/MIT equivalent in NYC.  The second being CSNYC , whose “mission is to ensure that all of New York City’s 1.1 million public school students have access to a high-quality computer science education that puts them on pathway to college and career success”.  Lastly, we have many private organizations that are teaching people how to code, which will support the growing tech community.  Some of the programs include General Assembly, Flatiron School, Startup Institute, Codecademy, Coalition for Queens, etc.

 

I’m grateful to be part of this growing community, the future is bright!

Summer Internship 2016

Update on 1/29/2016:  I am currently reviewing the submitted emails and will respond by Feb 15th if we want to move forward with an interview.

 

We (SVB) are seeking an amazing intern for the Summer of 2016.

The past interns that I’ve hired have gone to do some interesting things in the startup/venture community:

  • Kevin Carter, who subsequently joined SV Angel as an Associate and is now a Partner
  • Chaz Flexman, who subsequently joined SVB full-time, then worked for A16Z and now is VP of Strategic Relationship at PCH International
  • Thomas Knowles, who subsequently joined the SVB venture arm and is now a Partner at Gratitude Railroad (a VC fund in Utah)
  • Dimitris Kouvaros who subsequently and recently became a Director at Newark Venture Partners (a new VC fund / Accelerator)

Here are the characteristics that she or he must possess:

  • PASSION for the startup community
  • Articulate (both in writing and presenting)
  • Takes initiative
  • Hard worker
  • Have an opinion (let me know which sector(s) you are excited about)

If this sounds like you and can clearly demonstrate the above characteristics, please send me an email at sgoldman at svb.com.  In the subject line, use: 2016 Internship.

A few key points to highlight:

  • This is a paid position (~$15 / hour)
  • Ideally, the candidate is currently a Freshman, Sophomore or Junior
  • Start date would be around June, flexible depending on your class schedule
  • Could be either full-time or part-time
  • Position is based in NYC
  • Ideally, the candidate lives in NYC, in case we would like to extend the internship beyond the summer
  • You get to work directly with me 🙂
  • All the work you will be doing is squarely focused on data/metrics regarding the startup/vc community.  A lot of ad hoc projects around venture funding/activity, sector analysis, portfolio reviews, assisting with blog posts, working with CRM, etc.
  • I will review applicants emails in January and will make a final hiring decision by the end of February

 

About SVB:

In short, we are the leading global commercial bank for entrepreneurs and investors.  A more detailed overview is provided below.

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Start Small

A little more background on my recent tweets, see below.

I recently had a conversation with a VC who is in the process of raising his 1st fund.  My suggestion was to start small, acknowledging that management fees would likely be minimal or close to nothing.  The benefit of starting small is that the fundraising process will likely be slightly shorter and slightly easier (although it is never SHORT or EASY).  Institutional LPs want to see how you can manage a fund, so that faster you get started and show a track record, the faster you can have a chance of raising from those big LPs.  Many funds have shown the ability to start small and then raise significantly larger funds in a handful of years.

I also threw out the idea of…hold you breath…not charging any management fees on the first fund (i.e. no salary) but with a pre-negotiated amount of draw to cover non-salary costs.  I know this is shocker for some, but several managers have done this.  The trick obviously is how do you pay your bills with no salary?  Some had savings that carried them over for a few years, some had a significant other that helped them cover their living costs and some did consulting on the side.  Hard to pull off, but can make the fundraising process even faster if you are looking to optimize for speed.

Related, here is a post by a Charlie O’Donnell of Brooklyn Bridge Ventures, who raised an inaugural $8.3M fund and outlines the economics of his fund  http://www.thisisgoingtobebig.com/blog/2014/5/12/the-economics-of-a-small-vc-fund.html

Also a post by Notation Capital, which raised a sub $10M inaugural fund and how they capped their fees https://medium.com/@NotationCapital/a-million-dollars-in-fees-762009db0cc8#.uh0xauv93