Keynote by Stephanie Palmeri, Principal at SoftTech VC, at Data Point Live, San Francisco, 10/1/2015

1. #datapointlive
How Best in Class Companies Are
Using Data to Win Investor
Confidence (at Any Growth Stage)
Stephanie Palmeri,
Principal, SoftTech VC

2. #DPL15 | @stephpalmeri
Bio
● Leads deals in next-generation commerce &
marketplaces, mobile, edtech, consumer health,
and SaaS startups
● Before moving to Silicon Valley from NYC in 2011,
spent a decade working at the intersection of
marketing and technology for startups and seed
funds/incubators (like Lot18 & NYC Seed) and
large corporations (Accenture, Estee Lauder, SAP
AG)

3. #DPL15 | @stephpalmeri
SoftTech VC
● 3 investors
● 4 Funds (I, II, III, IV)
● $85 M current fund, $155M under management
● 170+ startups funded
● $2.25 B in follow-ons
● $2.5 B in M&A considerations
● $8.0 B in 1st IPO

4. #DPL15 | @stephpalmeri
Investment criteria
● 45-50 seed deals over 3 years
● $500K to $1M+ per initial investments
● Roughly 45-50 new investments per fund, plus reserves
for “follow-ons” in Series A and Series B
● Geos: SF/SV, NYC, SoCal, Toronto
● Target ownership: 7 to 10%
● Always syndicating with peer micro-VCs and angels

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Representative investments

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The Current State of Fundraising

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Stages of fundraising
Seed
Product/
market fit
Series A
Refine sales
& marketing
Series B
Scale

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The goals of a VC
●
Deliver profit to investors
●
Always on the lookout for outsized returns
●
80/20 Rule or ⅓ - ⅓ - ⅓

9. #DPL15 | @stephpalmeri
A typical year
Of about 2000 opportunities...
●
~20% result in a review/screening/meeting
●
~2.5% get through to due diligence
●
<1% (~0.75%) result in an investment

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SoftTech VC’s “Three Asses” Rule

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The Old World (2013)
Raise
$1M
Raise
Series A
$1M ARR in 12
months
6 months to raise
your series A
18 month runway

12. #DPL15 | @stephpalmeri
Increased
availability of
seed capital
More $$
going
after each
deal
companies
raise more
$$, round
sizes
increase
surplus of
capital means
more
companies
enter the
market
more
investors
and dollars
to support
increased
deals
The New World

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The current environment
●
Flywheel is moving
rapidly
●
A $1M round is 50% less
than the round your
biggest competitor raises
6 months later
●
The bar for a Series A
rises

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Seed is the new A

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A rounds are also getting bigger

16. #DPL15 | @stephpalmeri
What this means for you
●
You have more competitors, and they can hire more
people
○ move faster on product
○ spend more on sales & market efforts
●
You have more competition for investor attention
○ more companies looking for funding
○ more pressure on investor time
●
The bar for Series A gets raised
○ It’s no longer $1M ARR, it’s now $2-3M ARR

17. #DPL15 | @stephpalmeri
The New World: 2015
Raise
$1M
Raise
Series A
$1M ARR in 12
months
6 months to raise
your series A
18 month runway
Raise
$2M
Raise
Series A
$2-3M ARR in 12-18
months
6 months to raise
your series A
18-24 month runway

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Your options
●
Raise a bridge
●
Cobble together a round of investors you
might be less likely to take in “good times”
●
Sell early

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How the Smartest Founders are
Navigating This Landscape

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When data matters
UnicornsStrongBottom 1/3 Middle 1/3
$ $$$$

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When data matters
UnicornsStrongBottom 1/3
Data may help you
improve your company’s
performance but will not
help raise $$
Middle 1/3
$ $$$$

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When data matters
UnicornsStrongBottom 1/3 Middle 1/3
How you leverage data
may move your
company here or here
$ $$$$

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When data matters
UnicornsStrong
Effective use of
data will help you
get the deal done
Bottom 1/3 Middle 1/3
$ $$$$

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When data matters
UnicornsStrong
Data will
help you
maximize
valuation
Bottom 1/3 Middle 1/3
$ $$$$

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Things that matter
●
Predictability
●
Momentum/ Positive Trendlines
●
Healthy Cohorts
●
Negative Churn (for SaaS) / Retention
●
Expansion
●
Repeat transactions
●
Positive LTV (lifetime spend - CAC)

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What are the smartest founders doing?
Using data to show a clear path to growth.
Give investors confidence about their $$$ Series A Funding

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SaaS tools companies are using to
make better decisions with data

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Using Data to Speak the VC
Language

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Company 1: using cohort analysis to
demonstrate path to growth
●
Early-stage SaaS company
●
Shifting from SMB to
Corporate market
●
Leverage cohort data to
demonstrate greater ARPU
plus long-term (non-
transactional) value
Acquisition
Retention/
Engagement

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Company 2: funnel report card
●
EdTech company
●
Build a funnel report card to
review:
○ Acquisition
○ Activation
○ Retention
○ Virality
●
Identify critical actions & timing
●
Drive key product and
marketing initiatives
Retention/
Engagement
Activation

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Company 3: identifying your unique
metrics
●
P2P Marketplace
●
Strong social component
●
Insights:
○ Listers Need Love
○ Buyer/Seller is Power
○ Network Effects!!!
Social
User
Lister
Seller
Buyer/
Seller
Buyer
Buyer/
Lister
Retention/
Engagement
Activation

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What these founders have in common
They’re using data to tell a compelling
story about a clear and sustainable
path to growth, informing product and
marketing decisions along the way.

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How you can do this
Acquisition Activation
Retention/
Engagement

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● CAC: Blended & Paid
○ $$ spent across your
channels
● LTV to CAC ratios
● Funnel-specific metrics:
○ Installs -> Account -> Active
○ Free Trial -> Paid
Acquisition

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● Identify key
behaviors/milestones
● # Active users (define!)
● MoM growth/CMGR
● Cohort analysis
● Network effects
Activation

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● MAU/WAU/DAU
● Social: likes, shares, etc.
● Usage frequency and duration
● Growth in ARPU
● Repeat purchasing
● Expansion
● Sell-Thru/Inventory Turn
● Churn ($, Customers, Net $)
Retention/
Engagement

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5 Tips for Using Data to Show the
Path to Growth

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1. Guide the conversation
Size of your business:
○ GMV
○ Revenue
○ Bookings
Growth of your business:
○ MoM growth/ CMGR
○ Cohort dynamics
○ Network effects

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2. Help them focus
Organize the data, conversation, etc. to help
investors focus on what matters most
●
Use standard industry terminology
●
Be clear on your definitions

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3. Give them access
●
Real-time dashboards
●
Create an investor-
appropriate view
●
Prevent surprises!

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4. Avoid restatements, get answers
●
Know the major inputs to your “polished” metrics
●
Prefer “I’ll get back to you” to a guess
●
Misstating metrics hurts credibility
●
Be nimble in your ability to pull & discuss data

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5. Remember metrics aren’t static
●
Good metrics aren’t just about raising money
●
Metrics are for founders, executives, and
investors
○ To understand what’s working and what isn’t
○ To adjust operations accordingly
○ To use for board meetings, investor updates,
management meetings, and pitches

43. #DPL15 | @stephpalmeri
Thank You!