The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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Doug Pepper: Crypto Is an Unreal Bubble Unlike SaaS Which Will Survive
“I don't think that this is going away or that this is some inner, this is not crypto, which is going through an internet like bubble for 99 and 2000, because it's not real. These businesses are all absolutely fundamentally real and needed. There's just a bit o…”
AI-Native Burn Multiples Fall to 0.4x at $100M ARR
“At a hundred million ARR, the burn multiple falls to 0.4 X for AI native companies versus 1.6 for classic SAS companies. They're four times more efficient in adding ARR.”
Revenue Growth Overtook Efficiency as the Top Valuation Driver in Q2 2023
“What you can see through kind of most of 22 last year was that efficiency went to the top. That's how companies were valued. And of course, now look at the very last point on the far right. Q two, 20, 23, it's flipped again and on top revenue growth.”
Product Marketing Backgrounds Correlate Best With Head of Marketing Success
“And what we found is both from a commonality standpoint as well as a correlation with tenure and success, it's product marketing.”
Doug Pepper: ICONIQ Seeks Near-Tripling Growth for Sub-$10M ARR Startups
“Below 10, we're still looking for companies that are, they're maybe not tripling, but close. And the old saying is the reason that Neeraj came up with triple, triple, double, double is if you're not tripling at single digits, it's awfully hard to believe that …”
Pepper: Venture investing activity will be dramatically higher by late 2023
“I think the public, I think it's a great time to buy a lot of these names in the public markets. That's not investment advice, but given that, I think we're going to be in a much better place next year. And then in terms of our activity levels, I think dramati…”
Pepper: Nearly 100% of 2021 Startups Cannot Raise at Prior Valuations
“I mean, I think if you're saying at the same price as that 20, 21 valuation, I think it's close to a hundred percent.”
Pepper: Growth VCs can no longer underwrite to $10B outcomes
“And I think it's going to fundamentally change how people think about entry points because no longer can you assume, you know, ten billion to generate a venture return in most cases.”
Pepper: SaaS Multiples Will Settle Higher Than May 2022 Levels Within 24 Months
“I happen to be one of the bulls and I'm not calling the bottom. That's not our job to pick the bottom, but my guess is that we do settle out at multiples higher than today over the next. 24 months. And we get back to that being normal as opposed to normal bein…”
Top AI B2B Companies Achieve 1.6 Magic Number and 6-Month Payback
“Remember, you know, a magic number better than one means you're making your money back on sales and marketing in less than a year. And look at the ones that are rocketing at a hundred million in ARR or rather above one, they're at 1.6, they're going profitable…”
SaaS Net Bookings Attainment Dropped From 95% Pre-2020 to 83% in 2023
“And to put these numbers in perspective, pre twenty-twenty, we typically saw these fall in the 95 to a hundred percent range, so really just speaks to the meaningful impact that we've seen. Again, 83% in the first half of this year may feel like renewed optimi…”
SaaS Companies Average Two to Three Sales Leaders Before Going Public
“In general, we find that most companies have somewhere between two and three sales leaders between founding and actually going public”
Predictable Growth and NDR Rank as Top SaaS Valuation Drivers
“We looked at all the publicly traded SaaS companies and did a regression analysis of what are the key drivers of your valuation and your valuation multiple. And this is actually the answer in order. Revenue growth, probably not surprisingly, but not just growt…”
Sales Leaders Need Past Quota Experience of 25x Your Current ARR
“55% of those hires not only were successful, they made it all the way past a hundred million ARR. If you hire somebody who had less than 25 times your current ARR in terms of their quota responsibility, 44% didn't even make it out of the early stage. They didn…”
Successful SaaS Startups Consistently Hit a Growth Plateau Around $15M ARR
“We looked at all the data of our companies over a decade. Even the successful ones hit this thing that we call the growth plateau. Around fifteen million ARR, you can see in the data, and again, these are the successful companies that made it through. They hit…”
Doug Pepper: Median SaaS Growth Rate Fell From 83% to 48%
“The median growth rate was about 83% last year across a very wide range of companies that we track. This year, that's degrading all the way to 48%.”
Doug Pepper: Median SaaS Plan Attainment Fell From 99% to 69%
“Q one, the medium was 99% hit their plan. I've never Q two, yeah, 87%, Q three, median, 69%.”
Pepper: Only 5% to 10% of Iconiq Portfolio Beat Raised 2022 Targets
“Roughly my guess is less than 10, maybe five have raised their plan for this year and are beating that raise plan.”
Pepper: Growth VCs Mistakenly Assumed Every Startup Could Become a Decacorn
“The big mistake that the growth stage investors made over the last couple of years pivoting off of what you just said was not that we thought everything could be a unicorn. It's that we thought everything could be a Decacorn. I think that this environment is p…”
Pepper: Well-capitalized market leaders should accelerate in downturns, not cut burn
“There's going to be some that are market leaders that are performing really well, that have three years of capital that you say, let's hit the gas and separate from competitors. There might be others that are having a tougher time that don't have two years of …”
Pepper: SaaS Valuations Will Fall in 2-4 Quarters as Founders Need Capital
“I think it's going to take two, three, four quarters. For those companies that raised in early or mid 20, 21 to need to come back and there will come a time where they need capital and the pendulum will swing from, you know, purely power on the part of founder…”
Most SaaS Startups Hire Their First AE Before a Head of Sales
“Most companies will hire their first AE before a head of sales.”
Scale-Up Sales Leaders Need Quota Experience 14x Your Current ARR
“You're looking for a sales leader that has at least 14 times of your ARR in quota-carrying background.”
Scaling Companies Prioritize Geography and Size Over Industry Segmentation
“The maturity of segmentation really kicks in during this phase, with most companies prioritizing geography and size. As companies continue to scale, that's where we start to see segments like industry come into play”
Pepper: 2022 SaaS sell-off reflects valuation excess, not business performance
“And I think what that tells you is that the performance of the companies is often disconnected from the valuations. And so what we're seeing today is not a judgment on the performance Of the companies or their quality or the opportunity ahead. It's simply a re…”
Pepper: VC fund deployment cycles will normalize back to 2-3 years
“In the last two or three fund cycles, we were investing each of those funds in one year. I think we're going to see fund cycles normalize back to a two or three year fund cycle.”
Pepper: Regretting Every Sale Signals Venture Market Peak
“And I think the moment you feel that way, that you regret every sale and believe that you should just hold everything forever is maybe a good signal that we're nearing the top.”
Pepper: 2022 valuations will look like great entry points within 3-5 years
“Our bet is that over the long-term three to five plus years, we're going to look back at today and see very good entry points for certain companies.”
ICONIQ Models Exit Revenue Multiples Compressing From 30x to 10x
“We're investing today at a 30 times multiple of revenue, and we're assuming in five years from now when we exit, that we're going to exit at a 10 times multiple. So we always factored this compression into our models, even before this happened.”
Sales Leaders Present at IPO Average Three Years of Prior Tenure
“On average, we find the sales leader that is there at time of IPO has been there for more or less three years prior to that, just to have the time to build out the maturity and sophistication in that revenue repeatability.”
54% of Tech Companies Hire Their CMO Within Two Years of IPO
“And you can see from the data, 30% are hiring their CMO a year, less than a year from going public. You know, a total of 54% two years to IPO. And then on the dollar side, 46% are hired after a hundred million ARR.”
Over 50% of Pre-IPO Revenue Comes From Upsells and Cross-Sells
“The first is thinking about the split between existing customer base and new customers, and what you see here is by the time companies are ready to IPO, over 50% of their revenue is generated by existing customers through either upsell or cross-sell.”
International Customers Make Up 30% of Tech Company Revenue at IPO
“If all of those are the case, then, of course, it makes sense to start expanding internationally, and again, at the time of IPO, We typically see about 30% of revenue made up from non-North America customers.”
Sales Managers Oversee 5-7 Reps at $20M-$50M ARR, 7-10 Near IPO
“You could see in the 20 to fifty million dollar range, the data that we have is that typically a manager can manage five to seven individual contributors. Of course, as a company gets closer to IPO, they can scale that to seven to 10.”
Software Companies Average Three Distinct Products at the Time of IPO
“Cross-sell obviously requires a more diverse product suite, and what you can see along the bottom here is, on average, companies at the IPO stage have three products.”
Matthew: 1Password bootstrapped 15 years before raising a $600M round
“Iconic and Excel invested in one password, which had been bootstrapped for 15 years before they ended up. Before they ended up raising capital, you know, they raised a six hundred million dollar round over the last couple of years.”
Jacobson: Some ICONIQ Companies Raised Capital Every Six Months in 2020-2021
“In twenty-twenty and twenty-twenty-one, it was, you know, extremely active and the market was vibrant and, you know, there were companies in our portfolio that were raising capital, you know, every six months in some cases and the world was awash with capital.”