While the markets had a strong week, with the NASDAQ and S&P both up 4-4.5%, SaaS didn’t fare as well with the WCLD cloud index down .51%.
The major cloud vendors — Amazon, Microsoft, and Google — all reported earnings this week and had solid numbers.
On the other hand, Shopify announced that they will be laying off 10% of their workforce.
Their stock plunged 6% this week as investors have taken the layoffs as an indication that they will be underachieving vs expectations.
The narrative that seems to be emerging for SaaS is that, despite some recessionary concerns, growth is solid for most across the industry. The area of weakness seems to be concentrated in the Covid high-flyers, as companies like Shopify, Docusign, and Teladoc are now trading below where they were as the pandemic begun in early 2020.
Podcast recommendations of the week:
We loved a recent podcast interview with HorizonVC portfolio CEO Sidharth Kakkar, CEO/founder of Subscript. Sidharth was interviewed by First Round Capital’s Brett Berson. (First Round Review)
The interview covered a wide range of topics relating to operating in a remote-native startup. Sidharth had way too many fascinating insights to list here. To pick one that I found particularly thought-provoking, Sidharth offered his view on the problem with micromanagement, using a metaphor of management as part of the company’s operating system:
any time you’re telling someone what to do, you’re not actually solving the bug, you’re doing really bad patching and taking on more tech debt…instead you have to think more about what are the system-level things to do differently so that misaligned decisions don’t happen
Highly recommend this for all founders and it’s an absolute must for those running remote companies.
Interesting read of the week:
It’s a brutal moment for late stage venture funding, but startups with high growth and capital efficiency still have options. Retool shows that it’s technically possible to raise an up-round.
Retool just raised 45m at a 3.2b valuation, up from their 1.8b valuation last December. I don’t have the inside information, but I wouldn’t be surprised if they are breakeven if not cash flow positive. They happen to be an SEO juggernaut, which I’ve noticed in SaaS tends to correlate with impressive capital efficiency.
In a blog post last December discussing their round titled “Raising less money at lower valuations,” CEO/Founder David Hsu acknowledged that they could have raised at a higher valuation. But they chose not to do so because “reaching peak valuations too early results in substantially less upside for employees.”
In a blog post announcing the most recent round, Hsu writes that “our fundraising strategy is optimized for our team, not for vanity metrics.”
Kudos to Reetool for their fundraising foresight.
Given market conditions late last year, they probably could have raised at a much higher valuation. Had they done so, they would likely not be able to raise the up-round today and continue on a path with such strong momentum.
I have to imagine their up-round is a boon for for employee morale and company recruiting. They seem well on their way to becoming one of the great software companies of their generation.