How We Spend Money at Mattermark: What Goes Into Our Burn Rate?

Founders reading this post, before you go spend more money than you are already spending please note key context here is that not only do we make significant revenue for our stage, we have an annual growth rate that exceeds 100% YoY. Without these attributes to your business, spending money in this way could be dangerous or deadly. We strongly urge you to consult your investors, advisors, and cofounders about these decisions.


 

Mattermark is not a profitable company, we are a venture-backed company that runs at a loss like the majority of early stage startups. We are very transparent about how we are running the company, making decisions, and sharing our journey of the past two years, from $0 of revenue to more than $200K in monthly recurring revenue. When I started sharing financial information about the company I wasn’t sure what would happen. Some people were critical, but ultimately it has led to more sharing and we’ve learned so much by being a part of the conversation.

We’ve shared a high level overview of our revenues, expenses, growth rates, and burn rate several times now but this isn’t enough. Founders write in asking what specifically we spend money on, to help them sanity check their own expenses. While the tech press tease startups for expensive office chairs and video games, and chastise them for not having good enough healthcare or proper parental leave, the reality is that most of these writers have no idea what it takes to run a company. Enough of these unhelpful scolds, it’s time for something a bit more useful.


In June, our burn rate was $420K.

In June we collected $293K of bookings revenue and spent $713K.

Another way to express this is to say we covered 41% of our June expenses with cash collected, and money raised from investors covered the other 59%.

Let’s make it more real. Where does the money go each month?

$525K for 43 headcount. This includes salaries, payroll tax, full coverage of medical/dental premiums, bonuses, commissions, PTO, and severance expenses.

$45K for 11,000 RSF of office space in San Francisco

$30K for COGS (servers, data licensing, payment processing etc.)

$25K in marketing expenses (marketing experiments)

$25K for stuff to “get work done” like office supplies & SaaS software tools (laptops, CRM software, marketing automation software, telecom, food/drinks)

$25K for outside services (recruiter fees, HR training, payroll, and accounting)

$14K for travel (sales calls, board meetings, our Seattle office)

$14K for legal (we pay this once a year, but accrue monies for the annual bill)

$10K for facilities (garbage, water, electricity, janitorial, etc.)


A couple things that I thought I’d highlight:

Salaries: We get compensation comps from our investors, sister portfolio companies, and widely available survey data. This has been one of the biggest value-adds of working with Andreessen Horowitz, and also a big benefit of the YC network and Foundry Group family of companies.

Computers: We get everyone a new laptop, and Apple has an excellent business leasing program. Many investors also have discount programs.

Chairs: We have been buying the same awesome $80 IKEA chairs for 2 years.

Snacks: We spend ~$100/month per employee on snacks, coffee, and order in catered lunch once a week for our “lunch and learn” series of talks.

Perks: We spend ~$600/month per employee on full coverage of medical/dental premiums (and 50% for dependents). I am also very proud of our 12 weeks of paid family leave for men and women, early exercise on stock options for all employees, and 4 weeks of vacation. (Oh hey, we’re hiring!)

 

Looking for more information on operating expenses of startups? Check out this awesomely transparent overview from the team at Buffer.

Is your startup openly sharing your financials, operating expenses or other information that can help founders make better decisions? Tweet to us @Mattermark and we’ll update this post with a link to more resources.

© Mattermark 2015. Sources: Mattermark Research, Crunchbase, AngelList.

Series A Round Sizes Continue to Climb in 2015 Led by Redpoint, RRE, and Sequoia Capital

This post is part of our Startup Funding Benchmarking Series exploring the allocation, concentration, and macro trends in the financing of high growth startups.


Last week, we reported on the continued rise of Series A round sizes (and therefore valuations, assuming ownership percentage requirements are remaining steady for the majority of deals). The median Series A round size in the U.S. is $6 million, and most recently in July came in at $7 million.

When I looked at the most active Series A investors of 2015 I found something surprising: the median deal sizes for 24 of the top 25 most active Series A investors in 2015 were even higher. Some by just a little bit like Foundry Group (disclosure: a Mattermark investor) at $6.05 million median Series A, and some a lot like Redpoint at $16 million and RRE Ventures at a median Series A round size of $15 million.

Top 25 Most Active* Series A Investors, by Median Series A Round Size in 2015

2015mostactiveA

Editor’s Note: The table above shows the median Series A round size that these investors participated in, not the check sizes they wrote. It would not be crazy to assume that the higher the Series A round size, the higher the valuation of that round due to fairly standardized VC ownership requirements (unless it was co-lead).


 

It may be that lettered Series __ round names are becoming less meaningful. Indeed, investors I reached out to confirmed that several of their announced A rounds “really looked more like a B”. Perhaps, similar to Mattermark’s own funding history, these companies had already raised enough seed funding on convertible notes prior to the round to make significant progress (another interesting analysis I’d like to do).

Whatever the case, Series A rounds sizes continue to climb this year, and we will continue to report on this trend.

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Looking for resources to help you research startups and venture capital? Sign up for a free trial of Mattermark Professional to access the underlying data for these graphs, as well as in-depth profiles of more than one million high growth companies.

© Mattermark 2015. Sources: Mattermark Research, Crunchbase, AngelList.

Series B Round Sizes Jumped 50% from 2013 to 2014, Up 84% Since 2008

This post is part of our Startup Funding Benchmarking Series exploring the allocation, concentration, and macro trends in the financing of high growth startups.


While Series A round sizes are up significantly since 2008, readers followed up with me after yesterday’s post to suggest I look into Series B rounds which they expected would show an even larger jump in size for the same period.

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Looking at the graph, we observe that the average Series B round size peaked in late October 2014 at $31.1 million, where 28 of the past 90 Series B round sizes were recorded at $20 million or greater. The median round size, which generally lags the average but may be a more meaningful measure of long-term shift to higher round sizes, reached a local maximum of $19.7 million in late April 2015 and is approaching that peak again last week with a $19.4 million median round size for the past 90 days.

Over the entire period, the median round size for a Series B has increased by $8.4 million (84%), from $10 million in early 2008 to $18.4 million at the end of July 2015.

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We can see that the trend for increased Series B round sizes is a more recent development, with most of the growth happening from 2013 onward. This could be a waterfall effect from companies who previously raised their A rounds at higher valuations, and then went on to overcome that valuation hurdle and take even larger sums of money. It could also be due to greater competition among firms for companies showing legitimate traction.

What do you think is causing the increase in Series B round sizes? Tweet to us @Mattermark with you thoughts.


Methodology Note: In Graph 1 we present “90 Event Moving Average” and “90 Event Moving Median” measurements, which takes the average or median respectively of the past 90 funding events announced in chronological order. You may be familiar with measures such as a 90 *day* moving average, and we would like readers to note this difference. This was done for ease of analysis, and we believe it presents a meaningful set of information to inform against this trend.


Looking for resources to help you research startups and venture capital? Sign up for a free trial of Mattermark Professional to access the underlying data for these graphs, as well as in-depth profiles of more than one million high growth companies.

© Mattermark 2015. Sources: Mattermark Research, Crunchbase, AngelList.

Series A Round Sizes Increased 68% Since 2008, On Trend With Economic Recovery & Bull Market

This post is part of our Startup Funding Benchmarking Series exploring the allocation, concentration, and macro trends in the financing of high growth startups.


Yesterday we published an analysis of year-over-year comparison of median VC funding round sizes by stage, revealing what many investors already know: round sizes are up significantly since July 2014, corresponding with an increase in private company valuations. We observed a “barbell effect” where late stage and Series A deal sizes have seen the most movement, and today’s analysis digs into Series A deal sizes from the beginning of 2008 to present.

image (28)

Looking at the graph, we observe that the average round size is always significantly higher than the median. The average peaked in mid June of 2015, where 33 of the past 90 Series A round sizes were recorded at $10 million or greater. Over the entire period, the median round size for a Series A has increased by $2.8 million, from $4.2 million in early 2008 to $7 million at the end of July 2015.

This 68% increase since 2008 has not occurred steadily, and may simply lag broader market conditions such as the ongoing impact of The Great Recession in late 2009 and 2010.

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2011 ended the year with median round sizes up just 1% from their 2008 level, in concert with a broader economic recovery, and 2012 continued on this positive momentum with the single largest jump in round sizes of the past 8 years.

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Source: Yahoo Finance

Savvy readers know that demonstrating a relationship between two trends does not prove that one series of events caused the other, so while we observe an increase in prices in tandem with an increase in broader economic growth it is important to consider other factors. Are the hurdles for raising a Series A round higher than they were in 2008? How has the volume of deal activity, and competition for those deals across a larger number of early stage funds, effected pricing? What other signals might we use to understand this trend? Stay tuned to our Startup Funding Benchmarking Series as we continue to explore these questions through data.


Methodology Note: In Graph 1 we present “90 Event Moving Average” and “90 Event Moving Median” measurements, which takes the average or median respectively of the past 90 funding events announced in chronological order. You may be familiar with measures such as a 90 *day* moving average, and we would like readers to note this difference. This was done for ease of analysis, and we believe it presents a meaningful set of information to inform against this trend.


Looking for resources to help you research startups and venture capital? Sign up for a free trial of Mattermark Professional to access the underlying data for these graphs, as well as in-depth profiles of more than one million high growth companies.

© Mattermark 2015. Sources: Mattermark Research, Crunchbase, AngelList.

Median Startup Funding Round Sizes Up 39% YoY, Lead By Late Stage & Series A Deals

This post is part of our Startup Funding Benchmarking Series exploring the allocation, concentration, and macro trends in the financing of high growth startups.


July saw a 39% overall increase in median round sizes compared to July of 2014. The largest increase occurred in late stage rounds, which were up 77% year-over-year.

Series A, B, and C rounds saw increases of 46%, 25% and 9% respectively.

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Mega rounds in the late stage category in July 2015 included $2 billion to Didi Taxi (Coatue Management, Tencent Holdings, Alibaba, Hillhouse Capital Group), $300 million to DraftKings ($300M USD from Kraft Group, The Walt Disney Company, Fox Investments), and $275 million to FanDuel (Comcast Ventures, Time Warner Investments, KKR, Google Capital).


July Round Medians Significantly Outpaced Year-to-Date Trend, Suggesting Valuations Are Still on the Rise

July median round sizes significantly surpassed the 2015 year-to-date trend of an overall 15% increase to median round sizes. While Series C and late stage rounds appear to have stabilized a bit more year-over-year, Series A and B rounds both continue to climb (+33% and +25% respectively).

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There has been a great deal of discussion about a “private market bubble” and we believe round sizes are often a useful indicator of higher valuations, as investors hold strong to their ownership requirements and compete for deals by offering bigger checks for the same amount of dilution, with a higher hurdle the company must meet before taking their next financing.

This is a developing trend, and we will continue to report as it progresses.

Looking for resources to help you research startups and venture capital? Sign up for a free trial of Mattermark Professional to access the underlying data for these graphs, as well as in-depth profiles of more than one million high growth companies.

© Mattermark 2015. Sources: Mattermark Research, Crunchbase, AngelList.

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