As the recession set in, many venture capital funds urged founders to cut their marketing spend. On the face of it, this is an effective way to extend the runway while saving costs.
Several months later, we’ve since learned that cutting marketing budgets doesn’t make early-stage startups any healthier, but it’s a great way for VCs to reduce burn rates across their portfolio.
As Rebecca Szkutak reported this week, SaaS startups that ignored this advice outperformed those that followed it.
If someone offers you free business advice, it’s probably to their benefit.
If someone gives you advice in business, it’s probably for their own benefit. That’s why I take investors at their word when they say that most founders can’t 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 avoidable market) in the middle.
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“When this slide comes out, most investors chuckle (or cry), writes Bill Reichert, partner and chief evangelist at Pegasus Tech Ventures.
Few investors will deposit money based on how many billions you think you’ll make in year eight. Instead, founders must demonstrate that they have a guiding plan and a good understanding of potential users.
“How many customers are you going to acquire this year? Next year? The year after?” asks Reichert. And just as important: “How much can you convert? How are you going to reach them?”
Don’t spend too much time calculating future earnings or reading Gartner studies for facts that sound authoritative. Instead, build a bottom-up model that focuses on the size of the opportunity, not the market.
“Show investors how you will build an ever-expanding cadre of satisfied customers,” advises Reichert. “Don’t suggest that your focus is on gaining market share in a large established market.”
Editorial Manager, TBEN+
How to turn user data into your next pitch deck
Investors may love listening to a founder’s well-rehearsed story, but sharing the right customer data “can definitely bolster a pitch deck,” says David Smith, VP of data and analytics at TheVentureCity.
“Investors need to understand that you are not blinded by easy wins that can go up in smoke in a matter of weeks, but that you are using hard data to build a sustainable business that will endure and prosper over time.”
SaaS startups that ignored VC advice to cut sales and marketing were better off this year
Many VCs advised founders to scale back their sales and marketing spend to keep the runway this year. And it turns out that many VCs have given the wrong advice.
According to data from Capchase, a fintech that provides non-dilutive capital to startups, “companies that did not cut back on sales and marketing were now in a better financial and growth position than companies that did when the market began to decline in 2022. reports Rebecca Szkutak.
Of the 500 companies surveyed, bootstrapped companies showed the strongest growth, said Miguel Fernandez, co-founder and CEO of Capchase.
“What we’ve seen in this case, and what’s most interesting, is that the best companies have actually reduced all other costs except sales and marketing.”
Dear Sophie: My co-founder is a green card applicant who just got fired. What now?
My co-founder and I both got fired from Big Tech last week and it’s the kick we needed to go all in with our startup.
We are first-time founders, but they require immigration sponsorship to maintain status with our startup.
Are we looking at an O-1A in the 60-day grace period? Thank you!
— Newbie in Newark
Pitch Deck Teardown: Satelliot’s $11.4 Million Series A Deck
Cell phone coverage is built to serve people. That’s why Satelliot 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 mobile 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 number 1 satellite operator”
- Market size
- Business model
- Traction: “MNOs engaged and tech integrations underway”
- Go-to-Market: “Early Adopters Program”
- Interstitial slide
- NGO program
How much tax will you owe if you sell your business?
Getting a startup off the ground is hard work, so asking founders to prepare for an acquisition might sound 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 should also be ready to sell one.
In an explanation for TC+, Peyton Carr, CEO of Keystone Global Partners, provides a framework for calculating tax on an exit and explains the differences between short-term capital gains and long-term capital gains.
“As a founder, you need to plan your personal tax situation to maximize the opportunities presented to you.”