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.


2015: NYC En Fuego

The start of 2015 has been amazing in NYC, when you look at the velocity of VC funding activity.  I haven’t done a full analysis, but this is likely the most active month EVER in terms of big VC rounds being announced.  The impressive thing is the diversity in terms of sub-sectors being represented (some people still think this is a adtech & content town only).  I understand that VC financings is not the end game, but money does help in growing your company and getting to an exit.  Here is a list of $10M+ VC rounds that were announced in January 2015 (used CBInsights to get the data).

  1. Business Insider – $25M
  2. Datadog – $31M
  3. Giphy – $17M
  4. Mashable – $17M
  5. Earnest – $17M
  6. Button – $12M
  7. Persado – $21M
  8. Work Market – $20M
  9. Stack Exchange – $40M
  10. Taykey – $15M
  11. ClassPass – $40M
  12. Schweiger – $12M
  13. IRX Therapeutics – $32M
  14. Boxed – $25M
  15. Whistle – $28M
  16. Defense Mobile – $20M
  17. MongoDB – $80M
  18. Noom – $15M
  19. Reonomy – $13M

Thoughts on OnDeck Capital IPO

New York City based OnDeck Capital filed for their IPO.

This is how they describe themselves “OnDeck powers the growth of small business through lending and technology innovation”.

I’m excited about this upcoming IPO for several reasons.  First, this is going to be a positive event for the NYC tech scene, including several NYC based VCs who invested early and many of the employees (216 based in NYC per LinkedIn). Secondly, I’ve been in the financial services sector for over 15 years and haven’t seen many financial related IPOs, so that is nice to see and it is a trend.  Lastly, since the market downturn of 2008, majority of banks have lost their appetite to lend to small business, so this is a much needed product, which is one of the main drivers of their growth.

Some highlights:

  • They have choose the NYSE and will be traded under the symbol ONDK
  • Company started in 2007
  • Major investors are RRE (15.4%), IVP (14.4%), Village Ventures (10.8%), SAP Ventures (10.1%), First Round Capital (6.5%), Google Ventures (6.3%), and Tiger (6%)
  • Top line revenue has grown over 2.5x over the last year.  $107.6M (2014) vs $42M (2013).  Both figures are for 9 months.
  • They are at a $143.4M annual revenue run rate
  • Net loss has shrunk in the last year, which is great news considering revenue has grown over 2.5x.  $14.4M (2014) vs $18.8M (2013).   Both figures are for 9 months.
  • While sales/marketing expense has gone up, it is going up at a slower rate of 1.6x compared to revenue which has grown at 2.5x:  $21.8M (2014) vs $13.6M (2013).  Both figures are for 9 months.
  • Loans originated: $788.3M (2014) vs $290.9M (2013).  Both figures are for 9 months.
  • They are originating more loans (both number and dollars) directly vs indirectly.  43% (2014) vs 19.4% (2012).  This is % of total dollar volume loans.
  • 15+ day delinquency ratio has gone down from 8.9% (2012) to 5.4% (2014).

Global Smartphone Market Share

IDC recently published a report on global smartphone market share.   A few highlights from my perspective.

  • Apple market share as a % has gone down from 12.9% to 12.0%.
  • Xiaomi has more than doubled their market share
  • The majority of the devices are running Android, so it puts into perspective how large an opportunity Android is for developers that are thinking about a global audience


Tech Education in NYC

If you have been following the activity in NYC, you have a sense of the grassroots movement of fixing the problem of the lack of tech talent in the city but also globally.

The NYC community continues to impress me on how it has taken challenges head on and does its best to address them.  Similar to other active startup communities, there is a lack of quality engineering talent in NYC.

The following NYC based organizations are DOING something to fix this problem, many of them are focused globally, not just NYC.

General Assembly – a global network of campuses for technology, business and design.

Girls Who Code – a new organization working to educate, inspire and equip 13- to 17-year-old girls with the skills and resources to pursue opportunities in technology and engineering.

Codecademy – the easiest way to learn to code. It’s interactive, fun, and you can do it with your friends.

Flatiron School – school for passionate people who want to love what they do.  Students learn how to build awesome things with code.

SkillShare – a community marketplace for classes

Turing Fellows – matches top computer science students with outstanding summer internships at leading NYC Startups

hackNY – aims to federate the next generation of hackers for the New York innovation economy

Cornell / Technion Campus – educate the next generation of leaders who will advance technology, generate cutting-edge research that addresses critical issues

Academy For Software Education – a high school that provides innovative software engineering and computer science skills and knowledge

Enstitute – 2 year apprenticeship program for people who want to get into the startup sector

Startup Institue – an eight week program to train and place professionals in the startup sector

I genuinely believe that within the next five years, NYC can leapfrog both the Bay Area and Boston when it comes to having the best software engineers.

Instagram vs Indeed

I had a brief twitter chat with two active people in the NYC tech ecosystem, but wanted to further clarify my perspective in a blog post.

As a prelude, this post is not a reflection as to which company is better or which specific community is better but an example of how two separate exits can have a distinct impact on their respective tech communities.

Both Instagram and Indeed ($1.1B) were amazing exits for the Founders and early investors. That being said, the Indeed exit is much better for a tech ecosystem than the Instagram exit. Here are a few reasons why.

  1. Instagram had a total of 13 employees at the time of the exit. Per LinkedIn, Indeed has 553 employees. Indeed has created a lot more jobs.
  2. Indeed will continue to operate, grow their business and hire more people. Instagram was essentially a defensive acquisition by Facebook. I’m sure the Instagram team will continue to improve the product but I wonder how much larger the team is going to be and if they are going to be run somewhat independent than other teams at Facebook.
  3. Instagram was a no-revenue based startup with the focus on growing users and figuring out a monetization later. Indeed was built with the mind set of generating revenue in their early days and according to their investor, USV, Indeed didn’t need VC funding to grow their business. The Instagram exit propagates the idea that you can just build an application without a revenue model and become successful. Many entrepreneurs are trying to replicate an Instagram but sadly 99% will fail.
  4. Per Crunchbase, Instagram raised $57.5M, Indeed raised $5M. The Indeed acquisition provides a great example of how you can scale your business without raising a lot of money. The mindset of minimizing how much you raise is positive. VC funding is critical for many startups but raising too much money can have very negative consequences and I don’t want to see other entrepreneurs have the idea that raising a lot of money is some sort of badge of honor.
  5. To my earlier point, Indeed has a lot more employees, as a result, a lot of experienced employees will have the ability and money to start their own companies. My guess is that Indeed employees will create more startups than the Instagram employees.

As a last point that is not as relevant to which is better exit for a tech community, Indeed took nearly eight years to build, scale and sale their company.  Instagram was built,  scaled and sold in two years.  Startup Founders need to understand that building a valuable company takes a lot of time, like an Indeed and not an Instagram.

[View the story “Instagram vs Indeed” on Storify]

Yahoo’s Next Steps

If you follow the tech news, you heard that Marissa Mayer just became CEO of Yahoo!

The big question is what happens next, which products/services become a priority and what direction does Mayer take Yahoo.

We need to understand how Yahoo describes their business currently, here are a few quotes from their 10-K, Yahoo is a “premier digital media company” and “Yahoo! Properties currently fall into three categories: Communications and Communities; Search and Marketplaces”


Their revenue is generated from three areas: Display, Search and Other.  Display generates $2.1B or 43% of revenue.  Search generates $1.8B in revenue or 37% of revenue.  Other generates $970M in revenue or 20% of revenue. If you look at the revenue trends of these areas, search revenue is decreasing, other is decreasing but display is roughly consistent the last few years.  It is not a surprise that search revenue is decreasing, they have been losing marketshare for many years, Yahoo is in third place when it come to search engine traffic, behind Google and Microsoft.

A few thoughts and suggestions as to what happens next for Yahoo:

  1. There are 14,100 Full Time employees at Yahoo (per their 10-K).  That is a lot of employees and provides a great opportunity for Yahoo to reassess and identify their star players.  There will be some additional lay-offs
  2. They have $2.2B in cash and short-term investments.  Similar to what Facebook, Google and Twitter are doing, they can make some acqui-hires or small acquisitions ($100M or less), mainly to bring on new product people with specific skill sets
  3. Hire 20+ highly competent/skilled developers to engage the startup communities in areas such as Bay Area, LA, Seattle, Boulder, Austin, Boston, NYC, Durham, Tel-Aviv, London, Berlin, Shanghai etc.  These would be developer outreach professionals, helping spread the word about some of Yahoo’s APIs (current and future) and scouring the communities to identify developer talent
  4. Bring on a handful of professionals to engage the investor community, specifically to identify emerging startups that could be partnership opportunities and/or acquisition targets.  These people would work with accelerators such as Y Combinator, Techstars, 500 Startups, etc. and early stage funds such at SV Angel, Lerer Ventures, 500 Startups, First Round Capital, True Ventures, etc.
  5. Ad-tech is an evolving sector and there are always some new technologies being developed, there is an opportunity to make a few acquisitions in this space, especially since display is their main revenue stream
  6. They need to make a big push on mobile, they don’t seem to have any strategy in this area, this includes viewing content, communication and ecommerce
  7. ecommerce is big opportunity and they should become a player in this area.  There continues to be a trend of content and ecommerce being done in unison.  Yahoo can integrate ecommerce to existing content
  8. They have some interesting things on high-end content (video) and would like to see them focus more in this area.  I like what YouTube is doing with its premium channels, could see Yahoo doing something similar
  9. Become specialized in a few verticals within search where they can become the number one player
  10. Flickr is a property that needs some immediate attention.  Either enhance this area and focus on people profiles (such as Facebook) or sell it off it is not part of their core offering
  11. They need to figure out what they do with Alibaba.  There has been some bad blood between both companies but Mayer might be able to fix that relationship