Based on experience from fintech investor QED’s portfolio, Fintechjunkie walks through a number of actions and results startups have taken to lower losses or even get to profitability.
I think one of the key points is: “The cost structure of a startup changes when ambition is staged thoughtfully.”
This is why it’s possible for startups (and many large technology companies on the stock exchange) to e.g. layoff large parts of the company and invest less in marketing while still growing revenue (even if slower revenue growth than before).
He also writes “A startup with healthy unit economics growing at 50-75% is more attractive to most Investors than a startup with challenged unit economics growing at 100%+.”
I think the challenge for startups with less than $10 million in revenue growing 50-75% per year is that it needs to be profitable (or very close to) to be a good match for any type of investors. If not profitable venture capitalists see “it’s only growing 50%”, growth investors see “it’s still a pretty small company, let’s wait until it gets to $20 million” and most other investors see “it’s not profitable”.
I, and Alliance as a whole, strongly believe that a true founder-VC partnership is possible. And given that startups take 5+ years to build, it makes a lot of sense to think about fundraising more as relationship than a transaction. If you have the luxury to do so…
Most startups receives one term sheet in a successful fundraise. That doesn’t leave a lot of room to be too picky about the relationship, even if that would be preferable.
Waiting to sign a term sheet a couple of weeks in hope of finding a hopefully better investor isn’t appealing, as cash in the bank today instead of tomorrow is equivalent to a lot of relationship.
A 9 minute clip from a longer interview with Marc Andreessen on the Lex Fridman Podcast. What Marc says about founders and starting a company rings very true. It can be extremely rewarding being a founder of startup (even if it is often romanticized), but it also has real costs in terms of long workweeks, work-life imbalance, and loss of social relationships (or relationships put on pause).
Databricks has signed an agreement to acquire MosiacML for $1.3 billion. MosiacML lets companies train large language models on internal data at lower cost than e.g. OpenAI and build generative AI tools. It is noteworthy that MosaicML only has 62 employees. Not quite Instagram size at time of acquisition, but still not many employees.
Microsoft’s potential $69 billion acquisition of Activision Blizzard is a major event in the games industry. Some interesting things coming out of litigation after the US Federal Trade Commission has tried to block the transaction.
I think both sides are best understood if one tries to understand their business interests. Microsoft want a stronger position for its games business (as it is not winning currently) and Sony doesn’t want a stronger competitor. And they will find arguments to support their respective positions, which likely also goes for FTC who doesn’t want big tech to become even bigger.
“Your margin is my opportunity”, is a saying referred to Jeff Bezos. Uber CEO Dara Khosrowshahi expressedthesame feeling in his interview with Acquired.fm.
Dara said he would rather have a business with a 20 % take rate (the percentage a marketplace business keeps after paying sellers) instead of a 30 % take rate.
“I will answer somewhat seriously, which is high takers are dangerous. Our job as a company is to grow volume as much as we can, as fast as we can, and make our shareholders happy enough, minimizing the take rate, which is taking as much of that dollar and giving it to drivers and couriers. Last quarter, gross bookings grew 22% or so, which is really good. The money that drivers and couriers, including tips, made on the platform grew by 30% higher. At the same time, we’re able to expand our margins brief free cash flow positive.”
“I’d say I take the 20% take rate business. It’s more lasting. The growth can go on for much, much longer.”