I recently wrote about getting VCs excited about Marketplace start-ups. SaaS founders became envious!

Understanding how people wire tens of millions is the only Series A hack I recommend.

Few people understand the intellectual process behind investing.

VC is risk management.

Series A-focused VCs must cover two risks.

1. Market risk

You need a large market to cross a threshold beyond which you can build defensibilities. Series A VCs underwrite market risk.

They must see you have reached product-market fit (PMF) in a large total addressable market (TAM).

2. Execution risk

When evaluating your growth engine's blitzscaling ability, execution risk arises.

When investors remove operational uncertainty, they profit.

Series A VCs like businesses with derisked revenue streams. Don't raise unless you have a predictable model, pipeline, and growth.

Please beat these 3 metrics before Series A:

Achieve $1.5m ARR in 12-24 months (Market risk)

Above 100% Net Dollar Retention. (Market danger)

Lead Velocity Rate supporting $10m ARR in 2–4 years (Execution risk)

Hit the 3 and you'll raise $10M in 4 months. Discussing 2/3 may take 6–7 months.

If none, don't bother raising and focus on becoming a capital-efficient business (Topics for other posts).

Let's examine these 3 metrics for the brave ones.

1. Lead Velocity Rate supporting €$10m ARR in 2 to 4 years

Last because it's the least discussed. LVR is the most reliable data when evaluating a growth engine, in my opinion.

SaaS allows you to see the future.

Monthly Sales and Sales Pipelines, two predictive KPIs, have poor data quality. Both are lagging indicators, and minor changes can cause huge modeling differences.

Analysts and Associates will trash your forecasts if they're based only on Monthly Sales and Sales Pipeline.

LVR, defined as month-over-month growth in qualified leads, is rock-solid. There's no lag. You can See The Future if you use Qualified Leads and a consistent formula and process to qualify them.

With this metric in your hand, scaling your company turns into an execution play on which VCs are able to perform calculations risk.

2. Above-100% Net Dollar Retention.

Net Dollar Retention is a better-known SaaS health metric than LVR.

Net Dollar Retention measures a SaaS company's ability to retain and upsell customers. Ask what $1 of net new customer spend will be worth in years n+1, n+2, etc.

Depending on the business model, SaaS businesses can increase their share of customers' wallets by increasing users, selling them more products in SaaS-enabled marketplaces, other add-ons, and renewing them at higher price tiers.

If a SaaS company's annualized Net Dollar Retention is less than 75%, there's a problem with the business.

Slack's ARR chart (below) shows how powerful Net Retention is. Layer chart shows how existing customer revenue grows. Slack's S1 shows 171% Net Dollar Retention for 2017–2019.

Slack S-1

3. $1.5m ARR in the last 12-24 months.

According to Point 9, $0.5m-4m in ARR is needed to raise a $5–12m Series A round.

Target at least what you raised in Pre-Seed/Seed. If you've raised $1.5m since launch, don't raise before $1.5m ARR.

Capital efficiency has returned since Covid19. After raising $2m since inception, it's harder to raise $1m in ARR.

P9's 2016-2021 SaaS Funding Napkin

In summary, less than 1% of companies VCs meet get funded. These metrics can help you win.

If there’s demand for it, I’ll do one on direct-to-consumer.

Cheers!

I've worked in a People role at seven early-stage firms for over 15 years (I enjoy chasing a dream!). Few of the seven achieved profitability, including unicorn status or acquisition.

Did early-stage startups share anything? Was there a difference between winners and losers? YES.

I support founders and entrepreneurs building financially sustainable enterprises with a compelling cause. This isn't something everyone would do. A company's success demands more than guts. Founders drive startup success.

Six Qualities of Successful Startups

Successful startup founders either innately grasped the correlation between strong team engagement and a well-executed business model, or they knew how to ask and listen to others (executive coaches, other company leaders, the team itself) to learn about it.

Successful startups:

1. Co-founders agreed and got along personally.

Multi-founder startups are common. When co-founders agree on strategic decisions and are buddies, there's less friction and politics at work.

As a co-founder, ask your team if you're aligned. They'll explain.

I've seen C-level leaders harbor personal resentments over disagreements. A co-departure founder's caused volatile leadership and work disruptions that the team struggled to manage during and after.

2. Team stayed.

Successful startups have low turnover. Nobody is leaving. There may be a termination for performance, but other team members will have observed the issues and agreed with the decision.

You don't want organizational turnover of 30%+, with leaders citing performance issues but the team not believing them. This breeds suspicion.

Something is wrong if many employees leave voluntarily or involuntarily. You may hear about lack of empowerment, support, or toxic leadership in exit interviews and from the existing team. Intellectual capital loss and resource instability harm success.

3. Team momentum.

A successful startup's team is excited about its progress. Consistently achieving goals and having trackable performance metrics. Some describe this period of productivity as magical, with great talents joining the team and the right people in the right places. Increasing momentum.

I've also seen short-sighted decisions where only some departments, like sales and engineering, had goals. Lack of a unified goals system created silos and miscommunication. Some employees felt apathetic because they didn't know how they contributed to team goals.

4. Employees advanced in their careers.

Even if you haven't created career pathing or professional development programs, early-stage employees will grow and move into next-level roles. If you hire more experienced talent and leaders, expect them to mentor existing team members. Growing companies need good performers.

New talent shouldn't replace and discard existing talent. This creates animosity and makes existing employees feel unappreciated for their early contributions to the company.

5. The company lived its values.

Culture and identity are built on lived values. A company's values affect hiring, performance management, rewards, and other processes. Identify, practice, and believe in company values. Starting with team values instead of management or consultants helps achieve this. When a company's words and actions match, it builds trust.

When company values are beautifully displayed on a wall but few employees understand them, the opposite is true. If an employee can't name the company values, they're useless.

6. Communication was clear.

When necessary information is shared with the team, they feel included, trusted, and like owners. Transparency means employees have the needed information to do their jobs. Disclosure builds trust. The founders answer employees' questions honestly.

Information accessibility decreases office politics. Without transparency, even basic information is guarded and many decisions are made in secret. I've seen founders who don't share financial, board meeting, or compensation and equity information. The founders' lack of trust in the team wasn't surprising, so it was reciprocated.

The Choices

Finally. All six of the above traits (leadership alignment, minimal turnover, momentum, professional advancement, values, and transparency) were high in the profitable startups I've worked at, including unicorn status or acquisition.

I've seen these as the most common and constant signals of startup success or failure.

These characteristics are the product of founders' choices. These decisions lead to increased team engagement and business execution.

Here's something to consider for startup employees and want-to-bes. 90% of startups fail, despite the allure of building something new and gaining ownership. With the emotional and time investment in startup formation, look for startups with these traits to reduce your risk.

Both you and the startup will thrive in these workplaces.

Choose.

DNA makes us distinct.

We act alike. Most people follow the same road, ignoring differences. We remain quiet about our uniqueness for fear of exclusion (family, social background, religion). We live a more or less imposed life.

Off the beaten path, we stand out from the others. We obey without realizing we're sewing a shroud. We're told to do as everyone else and spend 40 years dreaming of a golden retirement and regretting not living.

“One of the greatest regrets in life is being what others would want you to be, rather than being yourself.” - Shannon L. Alder

Others dare. Again, few are creative; most follow the example of those who establish a business for the sake of entrepreneurship. To live.

They pick a potential market and model their MVP on an existing solution. Most mimic others, alter a few things, appear to be original, and end up with bland products, adding to an already crowded market.

SaaS, PaaS, etc. followed suit. It's reduced pricing, profitability, and product lifespan.

As competitors become more aggressive, their profitability diminishes, making life horrible for them and their employees. They fail to innovate, cut costs, and close their company.

Few of them look happy and fulfilled.

How did they do it?

The answer is unsettlingly simple.

They are themselves.

• They start their company, propelled at first by a passion or maybe a calling.

• Then, at their own pace, they create it with the intention of resolving a dilemma.

• They assess what others are doing and consider how they might improve it.

• In contrast to them, they respond to it in their own way by adding a unique personal touch. Therefore, it is obvious.

Originals, like their DNA, can't be copied. Or if they are, they're poorly printed. Originals are unmatched. Artist-like. True collectors only buy Picasso paintings by the master, not forgeries, no matter how good.

Imaginative people are constantly ahead. Copycats fall behind unless they innovate. They watch their competition continuously. Their solution or product isn't sexy. They hope to cash in on their copied product by flooding the market.

They're mostly pirates. They're short-sighted, unlike creators.

Creators see further ahead and have no rivals. They use copiers to confirm a necessity. To maintain their individuality, creators avoid copying others. They find copying boring. It's boring. They oppose plagiarism.

It's thrilling and inspiring.

It will also make them more able to withstand their opponents' tension. Not to mention roadblocks. For creators, impediments are games.

Others fear it. They race against the clock and fear threats that could interrupt their momentum since they lack inventiveness and their product has a short life cycle.

Creators have time on their side. They're dedicated. Clearly. Passionate booksellers will have their own bookstore. Their passion shows in their book choices. Only the ones they love.

The copier wants to display as many as possible, including mediocre authors, and will cut costs. All this to dominate the market. They're digging their own grave.

The bookseller is just one example. I could give you tons of them.

Closing remarks

Entrepreneurs might follow others or be themselves. They risk exhaustion trying to predict what their followers will do.

It's true.

Life offers choices.

Being oneself or doing as others do, with the possibility of regretting not expressing our uniqueness and not having lived.

“Be yourself; everyone else is already taken”. Oscar Wilde

The choice is yours.

I’m a permaculture farmer. I want to create food-producing ecosystems. My hope is a world with easy access to a cuisine that nourishes consumers, supports producers, and leaves the Earth joyously habitable.

Permaculturists, natural farmers, plantsmen, and foodies share this ambition. I believe this group of green thumbs, stock-folk, and food champions is falling to tribalism, forgetting that rescuing the globe requires saving all of its inhabitants, even those who adore cheap burgers and Coke. We're digging foxholes and turning folks who disagree with us or don't understand into monsters.

Take Dr. Daphne Miller's comments at the end of her Slow Money Journal interview:

“Americans are going to fall into two camps when all is said and done: People who buy cheap goods, regardless of quality, versus people who are willing and able to pay for things that are made with integrity. We are seeing the limits of the “buying cheap crap” approach.”

This is one of the most judgmental things I've read outside the Bible. Consequences:

• People who purchase inexpensive things (food) are ignorant buffoons who prefer to choose fair trade coffee over fuel as long as the price is correct.

• It all depends on your WILL to buy quality or cheaply. Both those who are WILLING and those who ARE NOT exist. And able, too.

• People who are unwilling and unable are purchasing garbage. You're giving your kids bad food. Both the Earth and you are being destroyed by your actions. Your camp is the wrong one. You’re garbage! Disgrace to you.

Dr. Miller didn't say it, but words are worthless until interpreted. This interpretation depends on the interpreter's economic, racial, political, religious, family, and personal history. Complementary language insults another. Imagine how that Brown/Harvard M.D.'s comment sounds to a low-income household with no savings.

Dr. Miller's comment reflects the echo chamber into which nearly all clean food advocates speak. It asks easy questions and accepts non-solutions like raising food prices and eating less meat. People like me have cultivated an insular world unencumbered by challenges beyond the margins. We may disagree about technical details in rotationally-grazing livestock, but we short circuit when asked how our system could supply half the global beef demand. Most people have never seriously considered this question. We're so loved and affirmed that challenging ourselves doesn't seem necessary. Were generals insisting we don't need to study the terrain because God is on our side?

“Yes, the $8/lb ground beef is produced the way it should be. Yes, it’s good for my body. Yes it’s good for the Earth. But it’s eight freaking dollars, and my kid needs braces and protein. Bye Felicia, we’re going to McDonald’s.”

-Bobby Q. Homemaker

Funny clean foodies. People don't pay enough for food; they should value it more. Turn the concept of buying food with integrity into a wedge and drive it into the heart of America, dividing the willing and unwilling.

We go apeshit if you call our products high-end.

I've heard all sorts of gaslighting to defend a $10/lb pork chop as accessible (things I’ve definitely said in the past):

• At Whole Foods, it costs more.

• The steak at the supermarket is overly affordable.

• Pay me immediately or the doctor gets paid later.

I spoke with Timbercreek Market and Local Food Hub in front of 60 people. We were asked about local food availability.

They came to me last, after my co-panelists gave the same responses I would have given two years before.

I grumbled, "Our food is inaccessible." Nope. It's beyond the wallets of nearly everyone, and it's the biggest problem with sustainable food systems. We're criminally unserious about being leaders in sustainability until we propose solutions beyond economic relativism, wishful thinking, and insisting that vulnerable, distracted people do all the heavy lifting of finding a way to afford our food. And until we talk about solutions, all this preserve the world? False.

The room fell silent as if I'd revealed a terrible secret. Long, thunderous applause followed my other remarks. But I’m probably not getting invited back to any VNRLI events.

I make pricey cuisine. It’s high-end. I have customers who really have to stretch to get it, and they let me know it. They're forgoing other creature comforts to help me make a living and keep the Earth of my grandmothers alive, and they're doing it as an act of love. They believe in us and our work.

I remember it when I'm up to my shoulders in frigid water, when my vehicle stinks of four types of shit, when I come home covered in blood and mud, when I'm hauling water in 100-degree heat, when I'm herding pigs in a rainstorm and dodging lightning bolts to close the chickens. I'm reminded I'm not alone. Their enthusiasm is worth more than money; it helps me make a life and a living. I won't label that gift less than it is to make my meal seem more accessible.

Not everyone can sacrifice.

Let's not pretend we want to go back to peasant fare, despite our nostalgia. Industrial food has leveled what rich and poor eat. How food is cooked will be the largest difference between what you and a billionaire eat. Rich and poor have access to chicken, pork, and beef. You might be shocked how recently that wasn't the case. This abundance, particularly of animal protein, has helped vulnerable individuals.

Industrial food causes environmental damage, chronic disease, and distribution inequities. Clean food promotes non-industrial, artisan farming. This creates a higher-quality, more expensive product than the competition; we respond with aggressive marketing and the "people need to value food more" shtick geared at consumers who can spend the extra money.

The guy who is NOT able is rendered invisible by clean food's elitist marketing, which is bizarre given a.) clean food insists it's trying to save the world, yet b.) MOST PEOPLE IN THE WORLD ARE THAT GUY. No one can help him except feel-good charities. That's crazy.

Also wrong: a foodie telling a kid he can't eat a 99-cent fast food hamburger because it lacks integrity. Telling him how easy it is to save his ducketts and maybe have a grass-fed house burger at the end of the month as a reward, but in the meantime get your protein from canned beans you can't bake because you don't have a stove and, even if you did, your mom works two jobs and moonlights as an Uber driver so she doesn't have time to heat that shitup anyway.

A wealthy person's attitude toward the poor is indecent. It's 18th-century Versailles.

Human rights include access to nutritious food without social or environmental costs. As a food-forest-loving permaculture farmer, I no longer balk at the concept of cultured beef and hydroponics. My food is out of reach for many people, but access to decent food shouldn't be. Cultures and hydroponics could scale to meet the clean food affordability gap without externalities. If technology can deliver great, affordable beef without environmental negative effects, I can't reject it because it's new, unusual, or might endanger my business.

Why is your farm needed if cultured beef and hydroponics can feed the world? Permaculture food forests with trees, perennial plants, and animals are crucial to economically successful environmental protection. No matter how advanced technology gets, we still need clean air, water, soil, greenspace, and food.

Clean Food cultivated in/on live soil, minimally processed, and eaten close to harvest is part of the answer, not THE solution. Clean food advocates must recognize the conflicts at the intersection of environmental, social, and economic sustainability, the disproportionate effects of those conflicts on the poor and lower-middle classes, and the immorality and impracticality of insisting vulnerable people address those conflicts on their own and judging them if they don't.

Our clients, relatives, friends, and communities need an honest assessment of our role in a sustainable future. If we're serious about preserving the world, we owe honesty to non-customers. We owe our goal and sanity to honesty. Future health and happiness of the world left to the average person's pocketbook and long-term moral considerations is a dismal proposition with few parallels.

Let's make soil and grow food. Let the lab folks do their thing. We're all interdependent.

Wishing for Lasting Companies, Not Penny Stocks or Goodwill Write-Downs

Get me a NASCAR-style company-logoed cremation urn (notice to the executor of my will, theres gonna be a lot of weird requests). I believe in working on projects that would be on your tombstone. As the Homebrew logo is tattooed on my shoulder, expanding the portfolio to my posthumous commemoration is easy. But this isn't an IRR victory lap; it's a hope that the firms we worked for would last beyond my lifetime.

Venture investors too often take credit or distance themselves from startups based on circumstances. Successful companies tell stories of crucial introductions, strategy conversations, and other value. Defeats Even whether our term involves Board service or systematic ethical violations, I'm just a little investment, so there's not much I can do. Since I'm guilty, I'm tossing stones from within the glass home (although we try to own our decisions through the lifecycle).

Post-exit company trajectories are usually unconfounded. Off the cap table, no longer a shareholder (or a diminishing one as you sell off/distribute), eventually leaving the Board. You can cheer for the squad or forget about it, but you've freed the corporation and it's back to portfolio work.

As I look at the downward track of most SPACs and other tarnished IPOs from the last few years, I wonder how I would feel if those were my legacy. Is my job done? Yes. When investing in a business, the odds are against it surviving, let alone thriving and being able to find sunlight. SPAC sponsors, institutional buyers, retail investments. Free trade in an open market is their right. Risking and losing capital is the system working! But

We were lead or co-lead investors in our first three funds, but as additional VCs joined the company, we were pushed down the cap table. Voting your shares rarely matters; supporting the firm when they need it does. Being valuable, consistent, and helping the company improve builds trust with the founders.

I hope every startup we sponsor becomes a successful public company before, during, and after we benefit. My perspective of American capitalism. Well, a stock ticker has a lot of garbage, and I support all types of regulation simplification (in addition to being a person investor in the Long-Term Stock Exchange). Yet being owned by a large group of investors and making actual gains for them is great. Likewise does seeing someone you met when they were just starting out become a public company CEO without losing their voice, leadership, or beliefs.

I'm just thinking about what we can do from the start to realize value from our investments and build companies with bright futures. Maybe seed venture financing shouldn't impact those outcomes, but I'm not comfortable giving up that obligation.