#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
Stages of fundraising
SeedProduct/ market fit
Series ARefine sales & marketing
Series BScale
#DPL15 | @stephpalmeri
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
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
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
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
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
● 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
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