When the downturn began, many VCs urged founders to cut their marketing spend. On the face of it, this is an efficient way to extend the runway while keeping costs down.
A few months later, we learned that cutting marketing budgets doesn’t make early-stage startups healthier, but it’s a great way for VCs to reduce burn rates across their entire portfolio.
As Rebecca Shkutak reported this week, SaaS startups that ignored this advice outperformed those that followed it.
If someone offers you free business advice, it’s probably for their own benefit.
In business, if someone offers you advice, 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 estimate their total addressable market (TAM).
Most founders present a slide with three concentric circles: TAM on the outside, SAM (serviceable addressable market) in the middle, and SOM (serviceable reachable market) in the center.
Full TechCrunch+ articles are available to members only
Use a discount code TCP PLUS ROUNDUP to save 20% on a one- or two-year subscription
“When this slide came up, most investors laughed (or cried),” wrote Bill Reichert, partner and chief evangelist at Pegasus Tech Ventures.
Few investors will transfer funds based on how many billions you think you’ll make in year eight. Instead, founders must prove that they have targeted plan and clear understanding of future users.
“How many customers will you acquire this year? Next year? Next year?” asks Reichert. And just as important, “How many can you convert? How are you going to get to 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 intend to build an ever-growing staff of satisfied customers,” advises Reichert. “Don’t assume that your focus is on gaining market share in a large established market.”
Have a nice weekend,
Editorial Manager, TechCrunch+
How to turn user data into your next presentation
Investors may enjoy hearing the founder’s well-rehearsed story, but sharing the right customer data “can ultimately boost performance,” says David Smith, vice president of data and analytics at TheVentureCity.
“Investors need to see that you are not blinded by easy profits that can disappear in weeks, but are using hard data to build a sustainable company that will endure and thrive over time.”
SaaS startups that ignored VC advice to cut back on sales and marketing fared better this year
Many VCs have advised founders to cut their sales and marketing spend to stay on track this year. And as it turns out, many VCs have been giving the wrong advice.
According to data from Capchase, a fintech company that offers startups non-dilutive capital, “companies that did not cut sales and marketing spend were in a better financial and growth position now than those that had did when the market started to decline in 2022,” reports Rebecca Shkutak.
Of the 500 companies surveyed, startups are showing the strongest growth, said Miguel Fernandez, co-founder and CEO of Capchase.
“What we saw in this case, and what’s most interesting, is that the best companies actually reduced all other costs except sales and marketing.”
Dear Sophie: My co-founder is a green card applicant who was just laid off. Now what?
My co-founder and I got laid off from Big Tech last week and this is the kick we needed to go all-in on our startup.
We are first time founders but they need immigration sponsorship to maintain their status with our startup.
Do we consider the O-1A in the 60 day grace period? Thanks!
“New to Newark.”
Pitch Deck Teardown: Sateliot’s $11.4M Series A Deck
Cell phone coverage is built to serve humans, which is why Sateliot 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:
- Cover up
- Problem: “90% of the world has no cellular coverage”
- A team
- Solution: “To connect all NB-IOT devices from space on 5G standard”
- Value Proposition: “Near Real-Time Connectivity”
- Product: “Standard Protocol”
- Why us: “Sateliot is the #1 satellite operator”
- Market size
- Business model
- Traction: “MNOs Engaged and Technical Integrations Continue”
- Go-to-Market: “Early Adopter Program”
- Interstitial slide
- NGO program
How much tax will you owe when you sell your company?
Launching a startup is hard work, so asking founders to prepare for an acquisition might sound as silly as telling them to practice their Oscar speech in the bathroom mirror.
Still: If you’re ready to launch a startup, you need to be ready to sell it, too.
In a commentary on TC+, Peyton Carr, managing director of Keystone Global Partners, offers a framework for calculating exit taxation and outlines the differences between short-term capital gains and long-term capital gains.
“As a founder, you will need to plan your personal tax situation to optimize the set of options available to you.”