SaaS investor insights

News, insights and updates from the team at Bloom Equity Partners

Founders & Friends, Happy Friday!

We are back at it again with another Weekly Bloom. This week we’ll be sharing some great investor insights as well industry updates, favourite tweets from the week and much much more. Let’s get into it 🔥

Default Investible v.s. Default Uninvestable

You are probably very familiar with the famous article from Paul Graham ‘Default Alive or Default Dead’… well a few weeks back David Sacks (GP @ craft ventures) released a tweet thread on the topic. He highlighted how during these turbulent times founders should change their frameworks from default dead & default alive to default investable & default uninvestable. Here’s a quick summary of his thoughts:

• Being default alive is almost impossible for early-stage startups as that means being cash flow positive. On the other hand, being default investible means that a startup’s metrics are good enough to raise capital in the current environment, which is much more attainable for early-stage companies.

• He noted some “default investible” benchmark metrics for SaaS startups:

  

• If as a startup you aren’t currently investible, Sacks advises that you must give yourself adequate time to fix your metrics, and cannot wait until the end of your runway to try and fundraise.

• He ends by mentioning that late-stage startups are the one exception for embracing the “default alive” standard;

  Eg, $100M ARR growing 50% YoY. This is now completely uninvestable by growth-stage VCs. These companies would be better off realigning to PE model. Become cashflow positive, then grow.

TLDR: These are wise words of wisdom from an experienced founder, operator and investor. Founders… take note.

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What We’re Reading and Listening To…

📚 Union Square Ventures: The Thinkers

📚 Why I Am Obsessed With Pricing Power

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News from the Industry: deals, deals, and more deals 💰

Blackstone has raised an initial $3B for its second growth fund as tech stocks continue to plunge

Siemens to buy U.S. software company Brightly in $1.58 bln deal

Zendesk Goes Private In $10.2B Deal Months After Turning Down Larger Offer

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Favorites from the Ecosystem

Investors👇…..

Jay Vasantharajah @jayvasdigital

Berkshire Hathaway acquired See's Candies for $25m in 1972, and since then has generated over $2bn in earnings (80x the original investment). This is despite the confectionary industry growth barely keeping up with inflation. One of the key reasons: pricing power.

Orlando Bravo @OrlandoBravoTB

Some say, “you can't cut your way to success.” That’s true, but what's also true is that “you can't spend your way to greatness.” When looking to turn your business profitable, stay away from generalizations, and engage in a creative and practical operational exercise.

Founders👇…..

GREG ISENBERG @gregisenberg

My guide to startups: I've lost millions, hired hundreds, raised millions and sold companies before the age of 30 Read this to become better:

Peter Zhou @PeterLZhou

1/9: The Rutter team finalized company values today: Grow Humbly, Give More Than You Take, and Do More with Less. A 🧵

Operators👇….

Sieva Kozinsky @SievaKozinsky

I met a guy with a scaffolding business that cashflows $6.5M per year. I dug into the business to learn more. Here’s what I learned:

Noah Desai Weiss @noah_weiss

“Hybrid” SaaS has taken off. Companies like Atlassian, Shopify, and Zoom have built SMB-focused product lines without sales people. At Slack, we’ve scaled our “self-service” biz to hundreds of thousands of customers and hundreds of millions in ARR. 🧵 8 hard-earned lessons:

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End Note 🔚

As always, if you're enjoying The Weekly Bloom, we'd love it if you shared it with a friend or two. We try to make it one of the best emails you get each week, and I hope you're enjoying it.

And should you come across anything interesting this week, send it our way! We love finding new things to read through members of this newsletter.

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About Bloom Equity Partners

Bloom Equity Partners is a lower mid-market software-focused private equity firm, leveraging deep operational and commercial experience to create enduring market value for the benefit of our investors, founders, and their companies.