We've Seen Innovation in Bits, But Not Enough in Atoms

MFN Clause: In a most favored nation (MFN) clause, if subsequent convertible securities are issued to future investors at better terms (e.g., a lower valuation cap), the better terms will automatically apply to the investor’s SAFE. This clause falls away on conversion of the SAFE into company stock.

When Arthur Patterson and Jim Swartz co-founded Accel, a core principle of their approach to investing was a thesis-based method called a “Prepared Mind”. Referencing the Louis Pasteur quote “chance only favours the prepared mind”, this method remains integral to how we approach, learn about and invest in new opportunities today. Prepared Minds involve our team honing in on specific categories and industries, being proactive, talking to our network, researching the trends shaping tomorrow’s world, finding the category leader - and then moving fast (for the right reasons!).

“Art when really understood is a province of every human being. It is simply a question of doing things, anything well. It is not an outside extra thing. When the artist is alive in any person, whatever his kind of work may be, he becomes an inventive, searching, daring, self-expressing creature. He becomes interesting to other people. He disturbs, upsets, enlightens and he opens ways for better understanding. When those who are not artists are trying to close the book, he opens it. He shows there are still more pages possible.” I think that’s so telling for everything that you all are about to do, all the challenges you’re about to face. You’re going to be the ones that open the book.

“The world would stagnate without him and the world would be beautiful with him, for he is interesting to himself and he is interesting to others. He does not have to be a painter or a sculptor to be an artist. He can work in any medium. He simply has to find the gain in the work itself, not outside of it.” One of the biggest lessons that I’ve learned throughout my career is how important the work is, how important not just the end product is, but the actual craft, doing the work, inventing within the work

“The work of the art student is no light matter. Few have the courage and stamina to see it through. You have to make up your mind to be alone in many ways. We like sympathy as humans and we like to be in company. It is easier than going it alone, but alone one gets acquainted with himself, grows up and on, not stopping with the crowd. A cost to do this, if you succeed somewhat, you may have to pay for it as well as enjoy it for the rest of your life.” That’s something if you do something meaningful, you are going to have to pay for it in all the work, but at the same time, you will also be able to enjoy it for the rest of your life

“We are not here to do what has already been done.” Everyone in this room feels that we are not here to do what has already been done. “Know what the old masters did, know how they composed their pictures, but do not fall into the conventions they established. These conventions were right for them and they are wonderful. They made their language, you make yours. They can help you, all the past can help you.” I think in Silicon Valley and especially in technology, it’s so easy to fall in the footsteps of others, to do what they do because you think it’s the right way because you think they’ve had the success and you can copy that success, you have to find your own path, you have to find your own footsteps. “An art student must be a master from the beginning that is he must be the master of such as he has by being now master of such as he has, there’s promise that he will be a master in the future.”

I believe the great artists of the future will use fewer words, copy fewer things. Essays will be shorter in words and longer in meaning

it’s nice to be important but it’s more important to be nice

By Working Together with others you can make the most positive contribution to the most people

The idea of an integrated life is that you decide what’s really important to you, and be honest with yourself, and also you’re looking at your calendar near and longer term, and are you paying attention to the things that you really believe are important in your life to serve?

the lesson learned out of that, that I’ve learned over the years, and you have too, is you think about it, you look at it from every possible angle, and at the end of the day you decide, but the most important thing is that when you say it and you start to act on it, you really need to think about how you feel about it.

we only receive, or we only really want feedback when we feel safe, and we only offer real feedback when we feel safe

if you look up the definition of authenticity, three circles again, it’s the alignment of who you are and what you do between your beliefs, values, and behaviors.

when you dig into the nuances of what the most important thing is, it’s usually not the current tactic, but it’s actually the overall strategy. And the North Star is the thing that you need to protect

I actually think, even concepts like roadmaps and generally, plans are actually overrated. The best possible roadmap is have a very clear guide view of what matters to your merchant, have a super strong model of your own capabilities as a company. And then we run the function of deciding what is the very best thing you can work on. Every moment, you have teams ready to pick the next task instead of everyone of doggedly working off a thing that, of course, gets interrupted by reality.

In every company, there’s a founding story. Everyone gets this clear sense that, hey, the reason why we have this job, the reason why we’re on this mission, the reason why we’re doing this thing is because at some point someone took the first step, wrote the first line of code. That story is imbued in the company

A DPO is similar to an initial public offering (IPO) in that securities, such as stock or debt, are sold to investors. But unlike an IPO, a company uses a DPO to raise capital directly and without a "firm underwriting" from an investment banking firm or broker-dealer. A DPO may have a sponsoring FINRA broker, but the broker does not guarantee full subscription of the offering. In a DPO, the broker merely assures compliance with all applicable securities laws and assists with organizing the offering. Following compliance with federal and state securities laws, a company can sell its shares directly to anyone, even non-accredited investors, including customers, employees, suppliers, distributors, family, friends, and others.

It's typical for many startups to grow fast in the early stage, with the ARR growth by 144% on average. As the company matures, the growth rate slows down and falls into the 15% to 45% year-to-year growth range.

Research10 has gone far into making tangible those aspects of company culture that are shared by high-performing organisations. Often these companies operate in small, cross-functional teams with end-to-end ownership, highly autonomous in their daily operations, but also highly aligned to shared and understood business goals. The generative type of organisational culture as outlined by Westrum11 provides a broad but actionable description of the types of corporate culture we should be striving for.

High performing organisations are obsessively disciplined about their metrics, usually choosing a specific one – a ‘North Star Metric’12 – to track overall business performance. Teams then break this metric down to its smallest components in detailed KPI trees13

So, specific knowledge is found much more by pursuing your innate talents, your genuine curiosity, and your passion. It’s not by going to school for whatever is the hottest job, it’s not for going into whatever field investors say is the hottest.

It's not surprising that after being trained for their whole lives to play such games, young founders' first impulse on starting a startup is to try to figure out the tricks for winning at this new game. Since fundraising appears to be the measure of success for startups (another classic noob mistake), they always want to know what the tricks are for convincing investors. We tell them the best way to convince investors is to make a startup that's actually doing well, meaning growing fast, and then simply tell investors so. Then they want to know what the tricks are for growing fast. And we have to tell them the best way to do that is simply to make something people want.

A non-governmental organization (NGO) or non-governmental organisation (see spelling differences) is an organization that generally is formed independent from government.[2][3][4][5][6] They are typically nonprofit entities, and many of them are active in humanitarianism or the social sciences; they can also include clubs and associations that provide services to their members and others. Surveys indicate that NGOs have a high degree of public trust, which can make them a useful proxy for the concerns of society and stakeholders.[7] However, NGOs can also be lobby groups for corporations, such as the World Economic Forum.

This transaction transferred 100% of Loudcloud's revenue to EDS while the company was publicly traded on NASDAQ. Beginning with EDS as its first enterprise software customer, Horowitz grew Opsware to hundreds of enterprise customers, over $100 million in annual revenue, and 550 employees. In July 2007, Horowitz sold Opsware to Hewlett-Packard for $1.6 billion in cash

Financial modeling is the task of building an abstract representation (a model) of a real world financial situation.[1] This is a mathematical model designed to represent (a simplified version of) the performance of a financial asset or portfolio of a business, project, or any other investment. Typically, then, financial modeling is understood to mean an exercise in either asset pricing or corporate finance, of a quantitative nature. It is about translating a set of hypotheses about the behavior of markets or agents into numerical predictions.[2] At the same time, "financial modeling" is a general term that means different things to different users; the reference usually relates either to accounting and corporate finance applications or to quantitative finance applications. While there has been some debate in the industry as to the nature of financial modeling—whether it is a tradecraft, such as welding, or a science—the task of financial modeling has been gaining acceptance and rigor over the years

A financial model is simply a spreadsheet which is usually built in Microsoft Excel, that forecasts a business’s financial performance into the future. The forecast is typically based on the company’s historical performance and assumptions about the future, and requires preparing an income statement, balance sheet, cash flow statement, and supporting schedules (known as a 3-statement model).

BLUE OCEAN STRATEGY is the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand. It is about creating and capturing uncontested market space, thereby making the competition irrelevant.

RED OCEANS are all the industries in existence today – the known market space. In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known.

GAAP is the set of accounting rules set forth by the FASB that U.S. companies must follow when putting together financial statements. GAAP aims to improve the clarity, consistency, and comparability of the communication of financial information. GAAP may be contrasted with pro forma accounting, which is a non-GAAP financial reporting method. The ultimate goal of GAAP is to ensure a company's financial statements are complete, consistent, and comparable. GAAP is used mainly in the U.S., while most other jurisdictions use the IFRS standards. 0 seconds of 1 minute, 43 secondsVolume 75%

Derivatives are financial contracts, set between two or more parties, that derive their value from an underlying asset, group of assets, or benchmark. A derivative can trade on an exchange or over-the-counter. Prices for derivatives derive from fluctuations in the underlying asset. Derivatives are usually leveraged instruments, which increases their potential risks and rewards. Common derivatives include futures contracts, forwards, options, and swaps. 0 seconds of 1 minute, 8 secondsVolume 75%

A common mistake is to use bookings and revenue interchangeably, but they aren’t the same thing. Bookings is the value of a contract between the company and the customer. It reflects a contractual obligation on the part of the customer to pay the company. Revenue is recognized when the service is actually provided or ratably over the life of the subscription agreement. How and when revenue is recognized is governed by GAAP.

Investors more highly value companies where the majority of total revenue comes from product revenue (vs. from services). Why? Services revenue is non-recurring, has much lower margins, and is less scalable. Product revenue is the what you generate from the sale of the software or product itself. ARR (annual recurring revenue) is a measure of revenue components that are recurring in nature. It should exclude one-time (non-recurring) fees and professional service fees. ARR per customer: Is this flat or growing? If you are upselling or cross-selling your customers, then it should be growing, which is a positive indicator for a healthy business. MRR (monthly recurring revenue): Often, people will multiply one month’s all-in bookings by 12 to get to ARR. Common mistakes with this method include: (1) counting non-recurring fees such as hardware, setup, installation, professional services/ consulting agreements; (2) counting bookings (see #1).

While top-line bookings growth is super important, investors want to understand how profitable that revenue stream is. Gross profit provides that measure. What’s included in gross profit may vary by company, but in general all costs associated with the manufacturing, delivery, and support of a product/service should be included.

TCV (total contract value) is the total value of the contract, and can be shorter or longer in duration. Make sure TCV also includes the value from one-time charges, professional service fees, and recurring charges.    ACV (annual contract value), on the other hand, measures the value of the contract over a 12-month period. Questions to ask about ACV:   What is the size? Are you getting a few hundred dollars per month from your customers, or are you able to close large deals? Of course, this depends on the market you are targeting (SMB vs. mid-market vs. enterprise). Is it growing (and especially not shrinking)? If it’s growing, it means customers are paying you more on average for your product over time. That implies either your product is fundamentally doing more (adding features and capabilities) to warrant that increase, or is delivering so much value customers (improved functionality over alternatives) that they are willing to pay more for it.

Lifetime value is the present value of the future net profit from the customer over the duration of the relationship. It helps determine the long-term value of the customer and how much net value you generate per customer after accounting for customer acquisition costs (CAC). A common mistake is to estimate the LTV as a present value of revenue or even gross margin of the customer instead of calculating it as net profit of the customer over the life of the relationship.

GMV (gross merchandise volume) is the total sales dollar volume of merchandise transacting through the marketplace in a specific period. It’s the real top line, what the consumer side of the marketplace is spending. It is a useful measure of the size of the marketplace and can be useful as a “current run rate” measure based on annualizing the most recent month or quarter. Revenue is the portion of GMV that the marketplace “takes”. Revenue consists of the various fees that the marketplace gets for providing its services; most typically these are transaction fees based on GMV successfully transacted on the marketplace, but can also include ad revenue, sponsorships, etc. These fees are usually a fraction of GMV.

A good proxy to measure the growth — and ultimately the health — of a SaaS company is to look at billings, which is calculated by taking the revenue in one quarter and adding the change in deferred revenue from the prior quarter to the current quarter. If a SaaS company is growing its bookings (whether through new business or upsells/renewals to existing customers), billings will increase.

Customer acquisition cost or CAC should be the full cost of acquiring users, stated on a per user basis. Unfortunately, CAC metrics come in all shapes and sizes. One common problem with CAC metrics is failing to include all the costs incurred in user acquisition such as referral fees, credits, or discounts. Another common problem is to calculate CAC as a “blended” cost (including users acquired organically) rather than isolating users acquired through “paid” marketing. While blended CAC [total acquisition cost / total new customers acquired across all channels] isn’t wrong, it doesn’t inform how well your paid campaigns are working and whether they’re profitable.

Burn rate is the rate at which cash is decreasing. Especially in early stage startups, it’s important to know and monitor burn rate as companies fail when they are running out of cash and don’t have enough time left to raise funds or reduce expenses

Blitzscaling became the name of the game. This method of “high-impact entrepreneurship” involves growing as big as possible as fast as possible to squash out the competition. With low overheads and a get-big-fast strategy, digital start-ups began hitting billion-dollar valuations long before it made sense to cash in. And, in 2013, investor Aileen Lee christened these ever more common billion-dollar companies: unicorns. Like any designer animal, the unicorn comes with troubling genetic tendencies. Aggressive growth does indeed stunt the competition – warping the market and the culture as ideas and opportunities crumble in the unicorn’s wake. The “reality distortion field” through which the unicorn convinces investors of their vision is prone to fade, revealing insurmountable obstacles. And for the unicorn itself, growing so big so fast is a strain that causes many to collapse.