Despite the ongoing correction in the public markets, mass layoffs in the tech sector and high inflation, U.S. Treasury Secretary Janet Yellen says we’re not yet in a recession.
At the same time, it’s taking a lot longer to secure startup funding than it did just a few months ago, which means many companies are burning cash faster than they can raise it.
For SaaS startups, laying off staff and going fully remote isn’t enough: to add more time to the countdown clock, founders must calculate their burn multiple (net burn/net new ARR), says Alex Zekoff, CEO and co-founder of Thoughtful Automation:
The gold standard is a burn multiple of one — for every dollar you burn, you add a net new dollar in subscription revenue. At less than zero, you are in a cash-flow-positive position, which is really hard to do. But say that you are burning $2 million in a quarter, and you are only adding $500,000 of net new ARR. You are at a 4x burn multiple, and you probably need to start thinking about how to reduce that.
Thanks very much for reading, and have a great weekend.
Fundraising chats still start off with small talk, but startup teams are under more pressure than ever to make the best possible use of these rare opportunities.
Blair Silverberg, CEO and co-founder of Hum Capital, says entrepreneurs need to resist the urge to become defensive in these sessions.
“In fact, the more a founder can push the questions back to the investor in a way that gives a better understanding of their business and investment strategy, the easier the rest of the conversation will be.”
When Andy Warhol appropriated images of Campbell’s soup cans in 1962, he was lucky: For a host of reasons, the company decided not to sue him for infringing its trademark.
One wonders how the situation would have played out 60 years later if Warhol had minted a series of NFTs with the iconic labels.
In her latest TC+ post, CORPlaw founder Kristen Corpion examined “the most interesting and important IP legal issues that are currently impacting the creation, transfer and use of NFTs,” including trademark infringement, the first sale doctrine, and why Seth Green ended up paying a $100,000 premium to buy back his stolen Bored Ape.
OpenPhone successfully raised a $14 million Series A in November 2020, but when co-founder and CEO Mahyar Raissi realized they needed another round a year later, “it was becoming obvious that the market was turning.”
In classic TC+ “how to” style, Raissi, a former software engineer, explains the process his team used to accelerate their Series B, the tactics they used to manage investors and how the strategy led to a $40 million round.
“To ensure a timely process, you must be armed with a complete and bulletproof case for investing in your company. You need to spend a couple of weeks preparing your data and the story behind it before you start talking to VCs,” Raissi advises.
“There is no time to test the waters and get early feedback. Do all of that before you start the countdown.”
If your company raises a $200 million Series E, it’s fair to debate whether you can still call it a startup.
Still, convincing investors to part with enough money to produce your own sequel to “The Gray Man” is an impressive feat, which is why we were eager to review the deck that helped Alto Pharmacy close such a large round.
What are fintech investors willing to bet on in this climate?
To get a sense of how their viewpoints and strategy have changed in recent months, Mary Ann Azevedo asked eight active investors about the advice they’re offering portfolio companies, how they expect the next few quarters to unfold and their pitch preferences: