When the downturn began, many VCs urged founders to slash their marketing spending. On its face, that’s an effective way to extend runway while cutting costs.
Several months later, we’ve since learned that cutting marketing budgets doesn’t make early-stage startups healthier, but it is a great way for VCs to reduce burn rates across their entire portfolio.
As Rebecca Szkutak reported this week, SaaS startups that ignored this advice outperformed the ones that followed it.
If someone offers you free business advice, it’s probably for their own benefit.
In business, if someone’s offering you advice, it’s probably for their own benefit. Which is why I take investors at their word when they say most founders cannot properly assess their total addressable market (TAM).
Most founders submit a slide with three concentric circles: TAM on the outside, SAM (serviceable addressable market) in the middle and SOM (serviceable obtainable market) in the center.
Full bluehillco+ articles are only available to members.
Use discount code TCPLUSROUNDUP to save 20% off a one- or two-year subscription.
“When this slide appears, most investors chuckle (or weep),” writes Bill Reichert, partner and chief evangelist at Pegasus Tech Ventures.
Few investors will wire funds based on how many billions you think you’ll make in year eight. Instead, founders must demonstrate that they have a directional plan and a keen understanding of prospective users.
“How many customers will you acquire this year? Next year? The year after?” asks Reichert. And just as importantly, “How many can you convert? How will you reach them?”
Don’t spend too much time calculating future revenue or reading Gartner studies for factoids that sound authoritative. Instead, build a bottom-up model that focuses on the size of the opportunity, not the market.
“Show investors how you are going to build an ever-expanding cadre of delighted customers,” Reichert advises. “Don’t suggest that your focus is on acquiring market share in a large established market.”
Have a great weekend,
Editorial Manager, bluehillco+
How to turn user data into your next pitch deck
Investors might enjoy listening to a founder’s well-rehearsed story, but sharing the right customer data “can definitively power up a pitch deck,” says David Smith, VP of data and analytics at TheVentureCity.
“Investors need to see that you’re not being blindsided by easy wins that can go up in smoke within weeks, but are using hard data to build a sustainable company that will endure, and thrive, with time.”
SaaS startups that ignored VC advice to cut sales and marketing were better off this year
Many VCs advised founders to dial back their sales and marketing outlays to preserve runway this year. And, as it turns out, many VCs have been giving the wrong advice.
According to data from Capchase, a fintech that offers startups non-dilutive capital, “companies that didn’t cut spending on sales and marketing were in a better financial and growth position now than those that did when the market started to dip in 2022,” reports Rebecca Szkutak.
Of the 500 companies surveyed, bootstrapped firms showed the strongest growth, said Miguel Fernandez, Capchase’s co-founder and CEO.
“What we have seen in this case, and what is most interesting, is that the best companies have actually cut every other cost except sales and marketing.”
Dear Sophie: My co-founder’s a green card applicant who just got laid off. Now what?
My co-founder and I were both laid off from Big Tech last week and it’s the kick we needed to go all-in on our startup.
We’re first-time founders, but they need immigration sponsorship to maintain status with our startup.
Do we look at an O-1A in the 60-day grace period? Thanks!
— Newbie in Newark
Pitch Deck Teardown: Sateliot’s $11.4M Series A deck
Cell phone coverage is built to serve people, which is why Sateliot is launching nanosatellites to provide IoT connectivity for ocean buoys and autonomous drones.
The company shared its €10 million Series A deck with TC+, which includes all 18 slides:
- Problem: “90% of the world has no cellular coverage”
- Solution: “To connect all NB-IOT devices from space under 5G standard”
- Value proposition: “Near real-time connectivity”
- Product: “Standard protocol”
- Why us: “Sateliot is the #1 satellite operator”
- Market size
- Business model
- Traction: “MNOs engaged and technical integrations ongoing”
- Go-to-Market: “Early adopters program”
- Interstitial slide
- NGO program
How much tax will you owe when you sell your company?
Getting a startup off the ground is hard work, so asking founders to prepare for an acquisition may sound just as silly as telling them to practice their Academy Award speech in the bathroom mirror.
Still: If you’re ready to launch a startup, you must also be prepared to sell one.
In an explainer for TC+, Peyton Carr, managing director of Keystone Global Partners, offers a framework for calculating taxation upon an exit and lays out the differences between short-term capital gains and long-term capital gains rates.
“As a founder, you’ll need to plan for your personal tax situation to optimize the opportunity set that is presented to you.”