SaaStr Fan Fav: The Latest 2023 Napkin Reveal with Christoph Janz

Editor's Notes

1. A few words about Point Nine. early-stage VC focus on SaaS at the seed stage invested in startups from more than 25 countries, so we‘re very geo-agnostic
2. In case you haven’t heard about us yet, …
3. The topic I’d like to talk about is … Given the massive downturn that started about 1.5y ago, this is a question many founders are nervous about. I don’t have all the answers, but hopefully a few.
4. Quick background: In 2016, I tried to answer this question, did some research, and put the results onto the proverbial “back of a napkin”. The rest is history. ;-)
5. ICYMI, we ended up producing an actual, physical napkin, and we‘ve repeat the research every year. What I’d like to do is walk you through the key results from this year’s survey and give you a preview of the 2023 napkin. I’ll run through valuations and round sizes quickly b/c you can read about this online. Carta has a great dataset which they’ve published. What’s probably more interesting are some of the more qualitative answers and some of the implications for founders that are fundraising in 2023. This year, before we did the survey, I expected …
6. … that the napkin might look like this, but it turns out the actual results are a bit more nuanced. ;-)
7. Let’s first take a quick look at the overall investment activity. You’ve probably seen some of these charts – investment acvitiy is down a LOT, but…
8. Now let‘s look at the data on round sizes and valuations, starting with pre-seed. The blue bars represent … the green line … and the yellow line…. You can see that there‘s a wide range, but most pre-seed round sizes were around $1-1.5M at very roughly $5-10M pre.
9. Looking at Seed, you can see that most Seed rounds were very roughly $4-5M at $10-20M pre.
10. We also asked investors about how much ARR the company had when they raised. This isn‘t releveant for Pre-Seed because pre-seed is usually pre-revenue. What you can see for Seed is that ca. half of the companies didn‘t have revenue. And the other half had a a few hundred thousand dollars ARR up to about $1.5M.
11. Moving on to Series A, most rounds were around $5-15M, which is a big range of course, so mabye not that helpful, and most valuations were around $20-60M, again with a huge variance.
12. Looking at ARR at Series A, most companies were at $1-5M ARR, which is a bit more than what we saw in previous years. The majority was growing more than 2x, but almost half of them were growing less than 2x, which is interesting as it could point to a slight reduction in what investors expect. The take-away from this is probably that Series As happened a bit later than they used to in terms of ARR level, but growth might have been a bit lower.
13. Looking at Series B, we don‘t have a lot of data points here but again also included the data from Carta. Most Series B rounds were $10-40M at around $80-200M. Again, a big range.
14. Looking at ARR at Series B, most companies had $6-12M of ARR. Interestingly, more than half of them were growing at less than 2x. Similar to what we saw for Series A: companies tend to raise a bit later, have more ARR, and grow a bit less fast than before the downturn.
15. We’ve also asked investors the following question: Which of these factors are more important to you in 2023, which ones less important, and which ones equally important? Here, the picture is very clear: Almost all investors care much more about capital efficiency and valuation than they used to, and half of them said that a convincing AI strategy is more important in 2023.
16. With that, here’s how I think we’re goint to update the napkin for this year.