General Business

With the markets down significantly, financings (at least at the later stages) slowing down, and inflation and interest rates on the rise, perhaps now is a good time to talk about your burn rate. Hopefully, you took advantage of the robust financing markets of the past few years to put some money on your balance sheet. Perhaps you raised at what historically have been very attractive valuations (we certainly have companies in our portfolio that have raised well, well above the historical averages). With that as the backdrop, it’s probably a good time to remind you that the amount of money you have in the bank doesn’t have to dictate your burn rate. Your underlying business metrics should. Dividing the…

A few quick market observations from dicussions I’ve had with portfolio companies over the past few weeks. All relate to just how a white hot economy has some downside effects on certain types of businesses. Certainly some early warning signs – curious if others out there are seeing the same. My take-away is that in many sectors of the economy companies quite literally don’t need more customers. They can’t handle the additional load because they can’t hire fast enough and their supply chains are stretched thin. We’ve seen this in digital advertising for sure (and not just in travel and other segments that might be reacting to the Delta variant). Interestingly we’ve also seen a couple of companies – especially…

Uncharted is about to launch applications for their new Economic Inequality Initiative to support teams working on radical ideas to address economic inequality. I have a long history with the Unreasonable Institute (renamed Uncharted in 2017) and the work they’ve been doing around empowering entrepreneurs from many different backgrounds who are working across the globe on some of our world’s most important problems. Since 2010, they have helped an amazing set of entrepreneurs raise over $250 million, created impact in 96 countries, and benefited 37 million lives around the world. Amazing! Seeing extreme economic inequality as one of the biggest threats to America in the next 30 years, they’re launching their most ambitious program ever. I hope you can help…

Net Dollar Retention (NDR) and Net Revenue Retention (NRR) are both important measurements in any business but many companies conflate the two or (more frequently) only report on one. Both are key metrics but for different reasons. Equally important is separating out NRR for your largest customers versus the rest of your customers since often the behavior of large customers is markedly different than average customers. Their effect on a business and can be hidden in aggregate data and a sense of their impact is lost. NDR and NRR are as defined as follows: NDR measures the average percentage change in revenue over the first 12 months of a customer. NRR measures the percentage of revenue retained from all customers…

The democratization of capital may be messy at times, but it’s much better than the alternative. And it’s long over-due. Robinhood’s actions to restrict trading in GameStop stock, as well as several other issuers, was completely the wrong response to an increasingly active capital class. It’s time to give up this old notion that small investors somehow need to be saved from themselves (as they claimed was the reason they halted trading in GME and other issues *). For years, capital investment has been the sole purview of the wealthy in the United States and elsewhere. We’ve long had a series of laws that restricted people’s abilities to invest in private stocks and at that same time, given fee structures…

I had a bunch of interesting comments on my recent post about company options programs – many very constructive. One of the things a number of people have asked was what I think is the right approach to performance-based options grants. I realized I referenced this in my original post but didn’t cover it in any detail. Performance grants are important and provide an opportunity to describe a nuance that I didn’t do a very good job of outlining in my original article. For performance grants, I believe the right methodology is for the board and the management team to decide on a pool of options that is available in any given year for merit-based grants. I think it’s important…

This last weekend, I took the weekend off along with a half-day on Thursday and a full day on Friday. I called it a mini-vacation and it was fantastic. I turned off email and (for the most part) social media and enjoyed some digital free time. Like many of you, I’ve been running hard the past few months. Long days, working weekends, etc. Spring break was skipped and we’re running headlong into summer. At some point we all need to take a moment, ideally a few, and recharge. A week off right now felt like a step too far, so I decided to start with a smaller step. It was a good reminder both of how needed it was as…

Almost universally our best companies are constantly experimenting. This takes different forms in different parts of their businesses but the common theme is that every process, every page on your website, every communication to a customer is an opportunity to test and optimize. Sometimes this is chipping away at a mountain (small improvements that add up over time). Other times we see large jumps in efficiency (I had a company recently change some text on a landing page and see a 10% improvement in sign-ups to a white paper). The improvements are important – businesses become efficient over long periods of time and these efficiencies compound each other to create significantly better operational outcomes (and business outcomes). And even small…