What did you need to raise money in 2022?
The concept of the “SaaS Napkin” has been around for, well, probably as long as SaaS.
The gist is to summarize the themes that defined tech funding rounds during a given calendar year, all on one page. Some themes stay the same - like demonstrating a solid financial profile when you are on the pre-IPO track - while other details change from year to year - like the average valuation for of a Series A.
If you’ve tuned into TechCrunch or kept up with all the unfortunate layoffs in big tech over the last six months, 2022 was the come down after the big party; the sobering flight home after a long weekend in Vegas…
Or was it?
Even with this significant drop-off, 2022 is already the second-highest investment year on record. In addition, we expect total investment to hit the $200 billion mark for the second year in a row and the fifth successive year of more than $100 billion in VC funding.
I was… not expecting that. I guess the fall is all relative to the heights we soared over the past two years, emphasizing the absurdity of cash burning companies raising on forward 18 month ARR figures, and printing 50x and 75x NTM Revenue multiples.
My boy Icarus, no longer a Vice President at Sequoia
Venture rounds flew too close to the sun in 2020 and 2021, and they readjusted their cruising altitude in 2022. This caused a lot of turbulence, with revisions to target operating plans and people searching for new jobs.
But there were still a lot of flights.
Here’s a summary of the key themes when it came to raising venture funding in 2022.
Seed
Primary Theme
Founder - Market Fit
Secondary Themes
Earned secret
Attractive, underserved market
Uniquely qualified to solve
Traction
$0 - $500K in revenue
Users and Usage > Revenue
Path to capture market
Funding
$5M - $20M valuation
$1M to $5M raised
Uses
Iterate with users
Hire a few people
Initial product development
Series A
Primary Theme
Early traction
Secondary Themes
Early customers LOVE product
Ability to iterate and ship fast
Early signs of PMF
Traction
$500K to $2M in revenue
+200% - 300% y/y growth
+5 to 30 customers
Funding
$25M - $75M valuation
$5M to $20M raised
Uses
Hammer initial Sales channel
Hire initial Sales reps
Hire more R&D
Series B
Primary Theme
Clear Product Market Fit
Secondary Themes
Ability to recruit "A" players
Increasing usage / expansion
Early evidence of repeat GTM
Traction
$2M to $15M in revenue
+175% y/y growth
Burn multiple trending < 2
Funding
$50M- $200M valuation
$10M to $30M raised
Uses
Scale GTM
Hire VP level leaders
Series C
Primary Theme
Repeatable sales motion
Secondary Themes
Efficient unit econ on each sale
Improving Revenue per Head
Multi product potential
Traction
+$15M to $50M in revenue
+150% y/y growth
+125% Net Dollar Retention
Funding
$100M - $1B valuation
$15M to $50M raised
Uses
Establish multiple GTM channels
Scale org, G&A, systems
Build a full platform to sell
Series D onward…
Primary Theme
Strong financial profile
Secondary Themes
Multi product execution
Line of sight to more TAM
Revenue predictability
Traction
+$50M in revenue
+115% y/y growth
Compare to public benchmark
Funding
$500M - +$1B valuation
$50M to $200M raised
Uses
Chart a path to profitability
Fill any senior talent gaps
Time to clean up before IPO
Thank you
Thanks to Shomik Ghosh and Andre Retterath for their inputs into this year’s SaaS napkin. Check out their work below:
Quote I’ve Been Pondering
A big shot is just another shot.
People make a huge deal out of clutch shots. thing is, it’s just one shot. If you make a thousand shots a day, it’s just one of a thousands. Once you’re hitting that many, what’s one more?
-Kobe Bryant
