Capital Chronicles #4

Hello there! Welcome to Capital Chronicles, saving you hours every week with ~2-3 minute summarised insights from the best venture builders, investors and capital allocators out there. This week: understanding user activation with OpenView, David Sacks’ advice on deciding between VC and PE, and mapping out the path to becoming a ‘centaur’ (not a unicorn) with Bessemer Venture Partners.

As subscriber #TBD, each web link below takes you to:

• A link to the original article (read time: varies)

• Summary / insights / implications per article (read time: 2-3 minutes)

Now, read on for the latest…

🛠️ On venture building…

Understanding user activation, with Sam Richard. Exploring the elusive yet crucial concept of user activation in product management.

• Why you should read it: Despite being the most crucial metric for predicting user retention and business growth, user activation remains the hardest to define and measure effectively. OpenView offer a robust framework for developing an activation metric with the right balance of simplicity and signal that a product team can get behind.

🧭 On venture investing…

VC vs. PE: What’s the Right Framework?, with David Sacks and the Craft Ventures team. Delving into the critical differences between Venture Capital (VC) and Private Equity (PE) investment frameworks and their implications for startup founders.

• Why you should watch it: Despite the allure of capital inefficient, high-growth strategies, Sacks argues that many startups should pivot to a private equity mindset focused on profitability to avoid the pitfalls of dilutive cram down rounds. This is an incredibly important counter-narrative both for investors and entrepreneurs. If a company does not have venture scale metrics, a successful outcome can still be achieved for everyone involved if the right capital allocation decisions are made in a timely manner.

📖 Learning resource…

From Startup to Centaur: The Founder’s Roadmap to $100 Million ARR, by Bessemer Venture Partner. A comprehensive guide for entrepreneurs aiming to scale their startups to achieve $100 million in annual recurring revenue (ARR).

• Why you should read it: while achieving a ‘unicorn’ $1b valuation is all the rage in the startup and venture capital ecosystem, BVP prefer to hunt for ‘centaurs’, companies that achieve $100 million in ARR. This guide outlines a pathway to that future. Unsurprisingly, priorities are less about chasing high valuations and more about mastering operational fundamentals and customer-centric growth strategies.

📊 Market insight…

Analysing the latest public software trends, by the Meritech Capital team. The "Meritech Software Pulse" provides a detailed analysis of the public software market, using Meritech Capital’s Benchmarking tool to track and analyze the sector.

• Why you should read it: the rigour of Meritech’s quarterly report is phenomenal, providing a comprehensive and insightful view of the current market. I find it a great resource for: (1) Benchmarks and for understanding the potential valuation ranges and drivers; (2) A snapshot and comparison of company performance relative to software peers and the market as a whole; (3) Data-driven analysis on the trends and opportunities in the software sector, highlighting best-in-class and the most undervalued companies today.

🎲Lucky dip essential reads…

• Board operating plans: less data, more context wins

• Unintentional success through channel partnerships

• Magic number: A diagnostic tool that diagnoses nothing

Before you go…

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Have a great week!

Josh