#datapointlive

How Best in Class Companies Are Using Data to Win Investor Confidence (at Any Growth Stage)

Stephanie Palmeri, Principal, SoftTech VC

#DPL15 | @stephpalmeri

Bio

● Leads deals in next-generation commerce & marketplaces, mobile, edtech, consumer health, and SaaS startups

● Before moving to Silicon Valley from NYC in 2011, spent a decade working at the intersection of marketing and technology for startups and seed funds/incubators (like Lot18 & NYC Seed) and large corporations (Accenture, Estee Lauder, SAP AG)

#DPL15 | @stephpalmeri

SoftTech VC

● 3 investors● 4 Funds (I, II, III, IV)● $85 M current fund, $155M under management ● 170+ startups funded● $2.25 B in follow-ons● $2.5 B in M&A considerations ● $8.0 B in 1st IPO

#DPL15 | @stephpalmeri

Investment criteria

● 45-50 seed deals over 3 years● $500K to $1M+ per initial investments● Roughly 45-50 new investments per fund, plus reserves

for “follow-ons” in Series A and Series B● Geos: SF/SV, NYC, SoCal, Toronto● Target ownership: 7 to 10%● Always syndicating with peer micro-VCs and angels

#DPL15 | @stephpalmeri

Representative investments

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The Current State of Fundraising

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Stages of fundraising

SeedProduct/ market fit

Series ARefine sales & marketing

Series BScale

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The goals of a VC

● Deliver profit to investors● Always on the lookout for outsized returns● 80/20 Rule or ⅓ - ⅓ - ⅓

#DPL15 | @stephpalmeri

A typical year

Of about 2000 opportunities...● ~20% result in a review/screening/meeting● ~2.5% get through to due diligence● <1% (~0.75%) result in an investment

#DPL15 | @stephpalmeri

SoftTech VC’s “Three Asses” Rule

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The Old World (2013)

Raise

$1MRaise

Series A

$1M ARR in 12 months

6 months to raise your series A

18 month runway

#DPL15 | @stephpalmeri

Increased availability of seed capital

More $$ going after each deal

companies raise more $$, round sizes increase

surplus of capital means more companies enter the market

more investors and dollars to support increased deals

The New World

#DPL15 | @stephpalmeri

The current environment● Flywheel is moving

rapidly● A $1M round is 50% less

than the round your biggest competitor raises 6 months later

● The bar for a Series A rises

#DPL15 | @stephpalmeri

Seed is the new A

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A rounds are also getting bigger

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What this means for you● You have more competitors, and they can hire more

people○ move faster on product○ spend more on sales & market efforts

● You have more competition for investor attention○ more companies looking for funding○ more pressure on investor time

● The bar for Series A gets raised○ It’s no longer $1M ARR, it’s now $2-3M ARR

#DPL15 | @stephpalmeri

The New World: 2015Raise

$1MRaise

Series A

$1M ARR in 12 months

6 months to raise your series A

18 month runway

Raise

$2MRaise

Series A

$2-3M ARR in 12-18 months

6 months to raise your series A

18-24 month runway

#DPL15 | @stephpalmeri

Your options

● Raise a bridge● Cobble together a round of investors you

might be less likely to take in “good times”● Sell early

#DPL15 | @stephpalmeri

How the Smartest Founders are Navigating This Landscape

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When data matters

UnicornsStrongBottom 1/3 Middle 1/3

$ $$$$

#DPL15 | @stephpalmeri

When data matters

UnicornsStrongBottom 1/3

Data may help you improve your company’s performance but will not help raise $$

Middle 1/3

$ $$$$

#DPL15 | @stephpalmeri

When data matters

UnicornsStrongBottom 1/3 Middle 1/3

How you leverage data may move your company here or here

$ $$$$

#DPL15 | @stephpalmeri

When data matters

UnicornsStrong

Effective use of data will help you get the deal done

Bottom 1/3 Middle 1/3

$ $$$$

#DPL15 | @stephpalmeri

When data matters

UnicornsStrong

Data will help you maximize valuation

Bottom 1/3 Middle 1/3

$ $$$$

#DPL15 | @stephpalmeri

Things that matter

● Predictability● Momentum/ Positive Trendlines● Healthy Cohorts● Negative Churn (for SaaS) / Retention● Expansion● Repeat transactions● Positive LTV (lifetime spend - CAC)

#DPL15 | @stephpalmeri

What are the smartest founders doing?

Using data to show a clear path to growth.Give investors confidence about their $$$ Series A Funding

#DPL15 | @stephpalmeri

SaaS tools companies are using to make better decisions with data

#DPL15 | @stephpalmeri

Using Data to Speak the VC Language

#DPL15 | @stephpalmeri

Company 1: using cohort analysis to demonstrate path to growth

● Early-stage SaaS company● Shifting from SMB to

Corporate market● Leverage cohort data to

demonstrate greater ARPU plus long-term (non-transactional) value

AcquisitionRetention/

Engagement

#DPL15 | @stephpalmeri

Company 2: funnel report card● EdTech company● Build a funnel report card to

review:○ Acquisition○ Activation○ Retention○ Virality

● Identify critical actions & timing● Drive key product and

marketing initiatives

Retention/ Engagement

Activation

#DPL15 | @stephpalmeri

Company 3: identifying your uniquemetrics

● P2P Marketplace ● Strong social component● Insights:

○ Listers Need Love○ Buyer/Seller is Power○ Network Effects!!!

Social User

ListerSeller

Buyer/Seller

BuyerBuyer/Lister

Retention/ Engagement

Activation

#DPL15 | @stephpalmeri

What these founders have in common

They’re using data to tell a compelling story about a clear and sustainable

path to growth, informing product and marketing decisions along the way.

#DPL15 | @stephpalmeri

How you can do this

Acquisition ActivationRetention/

Engagement

#DPL15 | @stephpalmeri

● CAC: Blended & Paid○ $$ spent across your

channels● LTV to CAC ratios● Funnel-specific metrics:

○ Installs -> Account -> Active○ Free Trial -> Paid

Acquisition

#DPL15 | @stephpalmeri

● Identify key behaviors/milestones

● # Active users (define!)● MoM growth/CMGR● Cohort analysis● Network effects

Activation

#DPL15 | @stephpalmeri

● MAU/WAU/DAU● Social: likes, shares, etc.● Usage frequency and duration● Growth in ARPU● Repeat purchasing ● Expansion● Sell-Thru/Inventory Turn● Churn ($, Customers, Net $)

Retention/ Engagement

#DPL15 | @stephpalmeri

5 Tips for Using Data to Show the Path to Growth

#DPL15 | @stephpalmeri

1. Guide the conversation

Size of your business:○ GMV○ Revenue○ Bookings

Growth of your business: ○ MoM growth/ CMGR○ Cohort dynamics○ Network effects

#DPL15 | @stephpalmeri

2. Help them focus

Organize the data, conversation, etc. to help investors focus on what matters most

● Use standard industry terminology ● Be clear on your definitions

#DPL15 | @stephpalmeri

3. Give them access

● Real-time dashboards● Create an investor-

appropriate view● Prevent surprises!

#DPL15 | @stephpalmeri

4. Avoid restatements, get answers

● Know the major inputs to your “polished” metrics● Prefer “I’ll get back to you” to a guess● Misstating metrics hurts credibility● Be nimble in your ability to pull & discuss data

#DPL15 | @stephpalmeri

5. Remember metrics aren’t static

● Good metrics aren’t just about raising money● Metrics are for founders, executives, and

investors ○ To understand what’s working and what isn’t○ To adjust operations accordingly○ To use for board meetings, investor updates,

management meetings, and pitches

#DPL15 | @stephpalmeri

Thank You!