Not All Startups Are Created Equal

This is my way of staying connected - a simple monthly email.

Hi Friends and welcome to my monthly newsletter!

In this issue: I share my learnings from doing the podcast, give a hot-take on the VC market, and give my best criteria for evaluating a startup for success.If you enjoy my newsletter, it'd make my week if you would forward it to a friend!If we haven't met yet, welcome! Shoot me message, would love to connect.

JuneCouple's dinner @ HopstixVisited the in-laws Portland and work remotelyWine night @ Murphy's w/ friendsMy niece's 3rd birthday party (HBD Sophie)Hosted friends for drinks after the RIFWatched Top Gun 2 w/ Patrick (it's awesome!)Led a strategy call for someone looking to start a SaaS companyCouple's dinner @ La GrottaSpent the weekend in the mountainsAttended Noah's 1st birthdayCo-hosted a Father's Day BBQLunch @ future brother-in-law's houseFriends dinner @ Tum Pok Pok3 podcast interviews

The Best Explanation of the Tech Layoffs

I've been fielding a lot of questions around what's driving the layoffs in the tech space after my former employer conducted a RIF impacting 25% of the company. A friend sent this blog post to me and it's the most succinct explanation I've read.

Here are the big bullet points: (copy/pasted)

• Rising interest rates. The value of a software business is the net present value of its future cash flows. If interest rates rise, the discount rate used in the DCF (discounted cash flow analysis) increases, creating a lower present value. Interest rates on the 10-year treasury are inversely correlated with SaaS valuations. Raising rates is one of the last tools the Fed has to fight inflation.

• End of the “COVID sugar-high”. SaaS multiples initially crashed during the onset of COVID but came roaring back even as forward estimates came down. There was significant (and valid) exuberance around high-growth SaaS stocks and the potential for a step-function pull-forward of IT budgets and revenue for these companies as every company – regardless of industry – needed more software to serve their end-users and customers. Every earnings announcement tended to drive SaaS stocks further upward and there was nothing that could seemingly stop them. That “sugar high” seems to be ending even as IT budgets are stronger now than they were in 2020.

• Inflation and macro-economic risks. Inflation is at the highest point in 40 years and in order to combat rising inflation, interest rates must be raised (hurting valuations in point 1). Moreover, given there is a reasonable risk of a recession, valuations have come down as there has been a flight away from perceived riskier assets i.e. high-growth SaaS companies.

• Russia / Ukraine war and other geopolitical risks.

https://www.meritechcapital.com/blog/2022-saas-crash

While the tech layoffs are terrible for those impacted, it's also difficult for the middle managers who have to deliver the bad news. Worst day of my career was when I laid off 13 people in 2hrs. I'm glad I didn't have to do it twice.

What I've Learned After 8 Podcast Interviews

• People are hungry to share their story and build their personal brand

• More people watch than comment or subscribe

• It gets easier to have a 50 minute conversation the more you do it

• The power of an audience or community cannot be understated

• Everyone should consider themselves as a media brand - start posting!

• Inspiration takes all sorts of forms

• I appreciate hearing 'good job'

• The views might not be in the millions but it's encouraging to see 200 people have seen a video (or parts of it)

• I enjoy helping others tell their story

• I'll think of more!

Not All Startups Are Created Equal

Not all startups are created equal. Not every 22 y/o is Zuck. If you’re considering joining a startup, here’s how to evaluate it before joining.

But first, the benefits of joining a winning startup:

• accelerated career growth

• speed to maturity

• deep learning in an interesting industry that can be parlayed into an industry role

• work with young, hungry likeminded (read: future winners) people

The leadership team. Like I said, they’re not all Zuckerbergs. Look to work for a leadership team that has seen success before. Either worked a successful company or, ideally, start a successful company and this is their second act.

2a. The market. This is a two-part equation. Will the market grow to support a big company or is it super niche? It might start small but ask where is the expansion opportunity. Avoid a 1 product company or a potential feature of another platform. Bad for your personal growth.

2b. The budget. Does your target customer have budget for software? You can hope the founders have this validated but recommend you reach out to your network or better yet sales friends to get some insight.

3. The clients. Who are you selling to? Clients will get mad and upset regardless but best to understand do you like working with these type of people. Selling software to law firms? Ask yourself if you like talking to lawyers.

There are plenty of other factors like bootstrapped vs VC funded, pay, insurance, yada yada but the big three for success are above.

Can you think of other factors

Running Stats from the Past Month

June Running Stats: 18.6

Annual Total Mileage: 55.82 miles

Got an Apple Watch and sync'd it to Strava: https://www.strava.com/athletes/104612868Add me!

The End

2022 is about all connections for me. I'd love to grab coffee/chai or jump on a quick call. Shoot me a text and we can schedule something. 404-731-7814.

Go big!- Nik Fuller

In Search Of

Anyone interested in being interviewed for a video podcast? I want to talk to my friends and share all the cool things they are up to.

https://calendly.com/nikf/nikfuller-com-podcast-interview?month=2022-07