Hey — It's Nico.
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Here's what I got today:
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Startup Ideas:
Brian Armstrong shares 10 ideas people should build in crypto (Link).
Anhad Sanwal shares 50 of his startup ideas (Link).
Growth:
Greg Isenberg shares a new way to think about product vs. distribution: Symbiotic Growth (Link).
"Build first, market it later" mindset kills your business (Link).
10 storytelling frameworks to use with your teams and marketing (Link).
M&A:
Justin Mares shares how he bought a SaaS for $0 in cash (Link).
How agencies can use AI to obtain SaaS valuations (Link).
News:
Y Combinator removes an Indian startup from batch due to ‘irregularities’ (Link).
Butternut Box, a dog food subscription startup, raises £280M (Link).
Amazon business acquirer Benitago files for bankruptcy after raising $380M (Link).
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I’ve talked plenty of times in the past about bootstrapping.
Working on Failory has put me in front of dozens of stories of failed startups that, had they not raised VC money, would have stayed in business, operating in a leaner and profitable way.
Many founders have come to realize that a steady reliance on venture capital is unhealthy, if not risky, for their startups.
And in the words of Terrence Rohan, an SF-based investor, these founders are choosing to raise less and build more.
There’s a clear trend in the venture industry: VCs are offering startups more money.
The chart above shows that startups today have 5x more VC capital than their counterparts in 2013.
Every single type of round has also increased in size. While an average Seed round in 2014 was $800k, nowadays, it’s $3.7M.
The reason for this? VCs increasing their fund sizes.
Terrence argues that VC funds tend to grow over time because GPs get paid more management fees, which are irrespective of performance and only based on fund size.
The thing is that there’s no clear reason why startups would need more money.
A startup’s main cost is salaries. These have increased over the years, but definitely not by 5x.
And there’s no evidence that more money makes a startup perform better.
The alternative to going the VC path is not necessarily bootstrapping but raising smaller, disciplined amounts of capital or delaying raises if the company is profitable and growing.
This way, without sacrificing the growth and value brought by VC funds, your startup will have:
The “raise less, build more” approach empowers founders to be builders again.
This week, the email marketing automation platform Klaviyo released its S-1 filing, a document presented before a company goes public showing the complete picture of the business.
Klaviyo is an excellent case of the “raise less, build more” framework shared above. Even though they have raised ~$455M, they have only burned ~$15M of that.
What’s crazier is that the two co-founders still own 51.2% of the business (incredibly high stake for a company about to go public).
Tanay Jaipuria has published a short breakdown of Klaviyo’s S-1, sharing some interesting insights about the product and growth of the company.
Klaviyo helps retail and eCommerce businesses to generate revenue through email and SMS.
Klaviyo’s main difference is that it integrates data collection with the sending of emails: it tracks customer behaviors, allowing businesses to create personalized campaigns.
In this regard, they have built intelligence into the product: they support predictive analytics, allowing businesses to anticipate things like the churn risk of their customers.
It started with email campaigns and then became multi-channel, expanding to SMS and push notifications.
Klaviyo has 130k customers, with an average customer value of $5k/year. Over the last 12 months, they generated $585M in revenue.
Klaviyo is an example of product-led growth executed well. Their product offers a fast time-to-value and clearly attributed value.
Most of their growth comes from inbound channels, such as WoM, agency partnerships, and platform integrations.
Among these platform integrations, the most important one is with Shopify. 77.5% of Klaviyo’s ARR comes from customers on Shopify. Not only that, but Shopify also has an 11.2% stake in Klaviyo.
I’ve always believed that startup launch platforms, like Product Hunt and BetaList, can drive users to your website but no customers.
People on these platforms are there for self-promotion or just for curiosity. It’s hard to convert them into paying users.
That’s why I prefer launching products in niche communities where my target audience hangs out online. I’ve tried Slack, Reddit, and Facebook Groups, but never Discord.
Alexander Chen has published a post in Indie Hackers sharing how he got his first 30 users to his heavy-lifting app by launching it in Discord communities.
Alexander argues that platforms like Reddit or Hacker News are for “posting and forgetting.”
They are forums with little two-sided interaction. If your post does well, you may have some comments to reply to; otherwise, your post will get lost in the feed.
Discord, instead, is a chat system. You can interact with your target audience, ask them questions, help them get onboarded to the app, etc.
It’s a very fast-paced environment, ideal for a product launch.
💡 Struggling to validate your startup idea? I've created a course on how to use pre-sales to validate it.
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💰 Struggling to raise funding? I've curated lists of 2,100 accelerators and incubators and 1,000 VC firms.
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📞 Looking for consultancy with your startup? Book a one-hour-long call with me.
That's all of this week.
Cheers,
Nico
