Speculation, bubbles, yes, they have always been around. I entered the VC world in the late 90s. Now we are in the unicorns era. Or were we?
I did my 537th startup cap. table a few days ago (see below). I had hesitated a little as I was not sure a company selling mattresses, even online, could be classified in my list of tech companies. But with VCs like NEA, IVP, Norwest on board and leading banks such as Goldman Sachs and Morgan Stanley as underwriters, it had all the needed pedigree. Or at least it looked like it.
Then I read Casper’s IPO is officially a disaster on CNN and Here’s why Casper’s disappointing IPO could spell disaster for other unicorns on Business Insider Nordic
What happened? Well the initial IPO price on the table below should have been $18, then it was fixed at $12 for the first day of trading and this morning CSPR is at $10.26. The unicorn is now a $400M company. And you may want to have a look at the price of the B, C and D preferred rounds on the table below. Yes disasters happen from time to time.
As a quick remined my latest list to be updated when I will have reached 550 tables.
I had a few days ago a conversation about why I thought titles such as CEO or CTO were not such a good idea in start-ups. I thought this was a close debate and apparently not. So let me try to elaborate.
A good quote – I just found trying to structure my thinking – is “CEO means in a startup Chief Everything Officer”! CTO means someone who does not want to interact with customers while Business Development means the opposite. But you would not use VP of Sales in a small team…
In the book Startup Nation, there is something similar: “The multitasking mentality produces an environment in which job titles — and the compartmentalization that goes along with them — don’t mean much.”
Steve Blank explains titles are for established companies with knwon business models and known processes: Companies Have Titles to Execute a Known Business Model. […] Therefore the job title “Sales” in an existing company is all about execution around a series of “knowns.” [For example] Did he have a repeatable and scalable business model? Did he have a well understood group of customers? […] Startups Need Different Titles to Search For an Unknown Business Model. You didn’t need a VP of Sales, you needed something very different. Searching around a series of unknowns. You needed a VP of Customer Development
I am not sure I am allowed to do the following but here is a long extract from Bussgang: “Job titles make sense for mature companies, not for start-ups. […] At business school, I learned all about titles and hierarchies and the importance of organizational structure. When I joined my first start-up after graduation, e-commerce leader Open Market, I found the operating philosophy of the founder jarring: He declared no one would have titles in the first few years. If you needed a title for external reasons, our founder told us, we should feel free to make one up. But we would avoid using labels internally. In other words, there would be no “vice-president” or “director” or other such hierarchical denominations.
Why? Because a start-up is so fluid, roles changes, responsibilities evolve and reporting structures move around fluidly. Titles represent friction, pure and simple, and the one thing you want to reduce in a start-up is friction. By avoiding titles, you avoid early employees getting fixated on their role, who they report to, and what their scope of responsibility is – all things that rapidly change in a company’s first year or two.
So when I co-founded Upromise, I instituted a similar policy. We had an open office structure and functional teams, but a fluid organizational environment and rapid growth. One of our young team members changed jobs four times in her first year. Only after the first year, as we settled into a more stable organizational structure and I recruited senior executives who were more obviously going to serve as my direct reports on the executive team did I begin to give out titles (CTO, CMO, CFO, etc.). But you can establish role and process clarity without having to depend on titles.
Here is Steve Blank visual summary of all this:
In his four steps to the epiphany, he adds a quick check list about this: Goal of phase O-b: Set up the Customer Development Team. Agree on Customer Development team methodology and goals.
Author: Whoever is acting as CEO
Approval: Entire Founding Team/Board
Time/Effort: 1/2-l day meeting of entire founding team
A- Review the organizational differences between Product and Customer Development – Traditional titles versus functional ones.
1. No VP of Sales
2. No VP of Marketing
3. No VP of Business Development
B-Identify the four key functional roles for the first four phases of a startup
1. Who is the Business Visionary
2. Who is the Business Execution
3. Who is the Technical Visionary
4. Who is the Technical Execution
C-Review the goals of each of the roles for each of the four Customer Development phases
D-Enumerate 3 to 5 Core Values of the Founding Team
1. Not a mission statement
2. Not about profit or products
3. Core ideology is about what the company believes in
Phase O-b Exit Criteria: Buy-in of the team and board for functional job descriptions, right people in those jobs, core values
Here is an updated version of my equity tables from startups which filed to go public at some point. There are about 525 individual companies as well as just below statistical synthesis relatively to fields, geography and periods of time about VC amounts, time to IPO, levels of sales and income at IPO (as well as PS and PE ratios), age of founders, number of founders, ownership in companies by catagories. I think ths may be of interest for some of you…
Following my traditional analysis of startups through their IPO filings documents (you can check my 2017 analysis on 400+ documents here or the tag #equity on this blog), here is an updated analysis with 500+ start-ups.
You can have a look at the full 500 cap. tables on scribd or look at a shorter synthesis which follows.I hope this is self-explanatory enough.
Uber’s S-1 has just been released. I jumped on the opportunity to analyze the shareholding of the startup, a thing I had tried to do in 2017 (with much less information – check here). Here are the figures that I found (subject to errors related to my possible too much eagerness…)
Uber cap. table – from the SEC S-1 published on April 12, 2019
The age of founders of start-ups is a recurrent topic on this blog. You can just check it through hashtag #age. I have just updated my cap. table database with now 500 “famous-enough” companies for which I have compiled a lot of data. You can check here the most recent update with 450+ companies in mid 2018 – Some thoughts about European Tech. IPOs or a synthesis dated 2017 with 400 companies Equity in Startups.
I just looked at the age of 850 founders from these 500 companies. I think it is interesting. I hope you will agree… I am not even sure I need to comment much. Average age is 37 overall, 45 in biotech, 37 in hardware (electronics, telecom and computers, energy) and 32 in software/internet.
Lyft is the first Unicorn which published its S-1 document, i.e. its IPO filing. Is this good news or bad news? Lyft is impressive, two founders who were 22 and 23 when they co-founded their start-up 12 years ago have reached more than $2B in sales with a little less than 5’000 employees in 2018. This is the good part. The less good piece is it took the company more than $5B in equity investment and the reason is simple: Lyft has lost $900M in 2018, and more than $600M in both 2017 and 2016. This is more than $2B cumulative loss. I assume losses were pretty high in the previous years too. YOu can have a look at the cap. table I built from the S-1:
I read recently an article by Tim O’Reilly: The fundamental problem with Silicon Valley’s favorite growth strategy. O’Reilly has doubts about Reid Hoffman and Chris Yeh’s claiming that Blitzscaling would be the secret of success for today’s technology businesses. “Imagine, for a moment, a world in which Uber and Lyft hadn’t been able to raise billions of dollars in a winner-takes-all race to dominate the online ride-hailing market. How might that market have developed differently?” I have the same doubts about this crazy strategy but who am I to say?…
Sensirion finally announces its IPO. The spin-off from ETH Zurich was founded in 1998 and many were expecting such an event from a very succesful but quite discrete company. Sensirion has disclosed some numbers and I had followed the development of the company thanks to some data from the Zurich register of commerce. So as usual here is my guess of the capitalization table. And I look forward to compare it with the data from the IPO prospectus when it will be published…
Felix Mayer and Moritz Lechner, co-founders of Sensirion
Again this is guessing only. As you might see, the early funding rounds are unknown to me. I am not sure about how many shares the founders, main investor and employees have adn I am not sure either at which price the company will be priced. I based my numbers on about twice the company sales in 2017… The company claims Knoch has 55% of the company, the founders 14% and employees 8.5%. It does not look to far…
The Sensirion IPO prospectus is not public and is confidential so I cannot publish more than I have here. I can only write I was not too far from the truth despite some discrepancy…
A few days after Dropbox filing for an IPO, here is Spotify. Their F-1 can be found here. The data from the filing document is not exhaustive enough for me, many pas financing rounds are not described but the Luxembourg register of commerce helps too.
Spotify founders Martin Lorentzon and Daniel Ek
Just like for Dropbox, this is a filing only, so the price per share is tentative and the valuation is not fixed yet. The price per share could probably go from €20 to €100…
I should not like “Don’t f**k it up”. Just because I am not a big fan of “how to” books in high-tech entrepreneurship. There is another reason why I should not like, i.e. the subtitle: “How Founders and Their Successors Can Avoid the Clichés That Inhibit Growth”. Usually I think foudners should not have successors. But I did not hate les Trachtman’s book at all. The reason is Les gives good advice to founders, the main one being “Trust and Empower”.
Let me give you examples:
I know that every founder believes his company is special, exceedingly complex, and unique. I can assure you that the challenges confronting you are just not that different. Ninety-five percent of your problems are shared by other founders, which is good news because it means your problems are solvable. They’ve been seen and handled many times before—all that is required is the smarts and the courage to address them. [Page 2]
“Employees who are taught to mistrust their own instincts are not very likely to trust their colleagues’ instincts, either.” Fear of failure can easily poison a company culture. Team-building efforts are useless when everyone’s first imperative is CYA — cover your ass. [Page 12]
The process of building a team is not that different from raising a healthy, self-sufficient child. […] You want them to learn from their mistakes and the
resulting painful consequences. [Pages 15-16]
Micromanaging can often be an excuse for not developing and committing to mid-range and long-range goals. It can also serve as an excuse, changing your mind about what’s most important from one day to the next. A lot of founders run small companies that way, and they never scale those companies because it’s impossible to run a larger company on the basis of what the founder is feeling that particular day. [Page 20]
and his advice to foudners is to give more and moe importance to strategy by [Pages 31-33]: 1. Track your time.
2. Decide what not to work on, and stick to it.
3. Plan for the unexpected.
4. Write down your goals and revisit them quarterly.