Partner at Altimeter Capital // Investing predominantly in software businesses from Series B through IPO. Dad to 3 beautiful little girls. No investment advice
7 added to My Authors
Mar 22 • 20 tweets • 3 min read
There's broadly two opinions out there on inflation:
1) Inflation is "transient-ish" and will wane the back half of this year and be back to 2% target early next year
2) De-globalization will drive sustained high inflation over the coming 3-5+ years
What do I think?
As a growth investor it's imperative to have a point of view. Inflation impacts rates, and rates impact software multiples. Ive largely been on the transient-ish side, but it's important to see the other point of view
And by transient-ish I mean inflation lasting ~12 more months
Mar 21 • 8 tweets • 2 min read
Post GFC Venture Capital as an industry has massively "over earned." The data below shows pooled IRRs by vintage from Hamilton Lane. And this performance is despite the fact that private multiples have historically always been higher than public multiples
As a venture capitalist we take bets that companies will be worth more in the future, despite a "premium" multiple paid in the early days.
So yes, many private companies are "worth less" right after an investment if you applied a public multiple. But this phenomenon isn't new
Mar 7 • 14 tweets • 3 min read
What should a public software company growing 100%+ at $250M+ ARR be worth (multiple)? There are very few companies to hit this. Im excluding companies that hit that growth only bc of covid. I believe that list includes Snowflake, SentinelOne, Zoom, Crowdstrike, Shopify, Workday
Expanding to 80%+ and I get a few more co's like Datadog, Monday, Elastic, UiPath, ZoomInfo, ServiceNow, Okta, Zendesk (not an exhaustive list but representative).
The big question - theres high growth software and then there's hypergrowth. What multiple should hypergrowth get?
Feb 22 • 24 tweets • 4 min read
Reflecting on digital transformations vs pull forward for cloud software over the long weekend - I think we've largely seen 3 different ways cloud software was affected by Covid:
1) Fake TAM creation 2) One time pull forward 3) Durable pull forward
I don't think any business was truly unaffected. Therefore, it's important to have a perspective on which bucket each company falls into when predicting what future growth will look like. This applies to both public and private businesses
Jan 13 • 4 tweets • 2 min read
Bifurcation of software multiples as seen on a scatter plot (multiple vs growth). Historically all software has traded within red circle. Now a separate group has broken out. Is it warranted? After Q4 earnings, I believe we'll see more separation of contenders from pretenders
Here's the scatter plot without the circles
Jan 12 • 8 tweets • 2 min read
Some takeaways from Morgan Stanley's Q4 CIO survey
- Software has the highest growth expectations in IT
- Strong demand in software persisting (not simply pull forward in 2021)
- Cloud computing remains CIO's top priorities
- Security software most defensible
More graphs below
"Survey data suggests 25% of application workloads are running in the public cloud today, up from 23%... in 2Q21. The multi-year trend in the migration of applications to the cloud remains intact, with CIOs expecting 44% of workloads to reside in public cloud by 2024"
Oct 26, 2021 • 10 tweets • 2 min read
Trend in cloud software: Growth Durability 📈📈
Historically, many people have overestimated how quickly software companies would decelerate growth. below chart shows rough Datadog quarterly growth expectations at IPO (orange) and actual (blue)
Datadog has grown much faster (by a wide margin) than they were expected to at IPO
The biggest effect of this? Compounding $$ growth
At IPO (Sept '19) Datadog was projected to do ~$610M of revenue in 2021. Current projections? $1.3B!
In just 2 years expectations have doubled🤯
Aug 26, 2021 • 13 tweets • 3 min read
Some confusion after hours in Snowflake. For some extra commentary on the Snowflake RPO figure (lots of talk about it this quarter), I'd point people to the pre-earnings research note Karl Keirstead at UBS published a few days ago. Screenshot below: $SNOW
To try and explain this further - RPO measures the aggregate total unrecognized contract value from all customers. Let's say a company had one customer that signed a $100k one year deal. After 6 months, the RPO would be $50k. this represents the remainder of the deal, or 6 months
Aug 19, 2021 • 9 tweets • 2 min read
Asana and Monday are two fascinating businesses. I remember looking at private rounds many years ago and thinking "this is a commodity space, there won't be any big outcomes with a long tail of small / medium outcomes."
Both are ~$15B companies today. Software markets are huge!
Both have executed extremely well and this shouldn't be understated. What's been incredibly impressive is the growth in the enterprise segments. Both define enterprise as customers with >$50k ACV. Asana grew that segment 92%. Monday grew it 226%. Way more than just a SMB business
Aug 17, 2021 • 5 tweets • 1 min read
The acceleration across cloud software companies so far in Q2 has been very impressive. As of now, most companies with a June quarter end have reported Q2. Most accelerated. Graph below shows (Q2 YoY growth - Q1 YoY growth). Positive numbers represent acceleration (faster growth)
I removed 3 companies - Shopify, Olo and BigCommerce. All were major Covid beneficiaries. Q1 this year lapped a 2020 Q1 that did not see much Covid benefit, while Q2 lapped a 2020 Q2 which did see a Covid benefit. So the YoY compare between Q2'21 to Q2'21 isn't as relevant
Apr 12, 2021 • 5 tweets • 2 min read
Some great slides from the Crowdstrike investor briefing last week. A few call outs on what makes them such a great business, that others should aspire to:
1. TAM Expansion: The best businesses increase the size of the pie, not just their piece 2. Product Expansion Velocity: At IPO (in 2019) Crowdstrike had 10 modules. They now have 19. Amazing product development velocity
Mar 10, 2021 • 4 tweets • 3 min read
I always enjoy reading Bessemer's annual State of the Cloud report. One of my favorite slides below. The takeaway? Leading cloud companies don't decelerate growth nearly as quickly as they're expected to. Why? Cloud markets are almost always much bigger than anticipated
Analysts constantly underestimate leading cloud companies ability to sustain higher growth rates for longer periods of time
Jan 19, 2021 • 25 tweets • 6 min read
A trend I'm excited for this year: DataOps & the Analytical Engineer
~10 years ago DevOps was born. The role of system admins and developers merged. Infrastructure became self-serve
Today the role of data engineers and business analysts are merging. Data is becoming self-serve
Data infrastructure is becoming so powerful that the tools today allow non-technical folks to carry out the once complicated / custom code/ huge backlog jobs of data engineers.
Before getting into what this means, let's first discuss how we got here
Dec 10, 2020 • 14 tweets • 3 min read
My biggest takeaway from Q3 cloud earnings? We REALLY saw cloud businesses ACCELEERATE. Since Covid began we heard anecdotal data of "digital transformations accelerating." But the data was never there. It is now. Data below shows the absolute change in rev growth % from Q3 to Q2
For further clarification - the graph shows the delta between Q3 YoY growth rate and Q2 YoY growth rate (I tried to normalize for acquisitions where I could, sure I missed some). As an example - Zoom grew 367% in Q3 and 355% in Q2, so the delta, 12%, is graphed.
Oct 1, 2020 • 5 tweets • 2 min read
Great report from Morgan Stanley today on the Identity Access Management market.
They claim an increasingly cloud-based and distributed workforce shifts security control towards Identity & Access Management, driving a considerably larger >$30B TAM vs. industry estimates 👇
IAM is the top CSO priority:
Sep 30, 2020 • 4 tweets • 1 min read
Some cool new Twilio products announced today at their Signal conference. As engagement channels shift from physical to digital Twilio has gotten a boost. 500% growth in Twilio Video usage, and total messages 2x first half of this year. More announcements below $TWLO
1) Twilio Frontline: a mobile application that allows field workers to seamlessly and securely engage directly with customers from their personal devices
2) Twilio Video Web RTC Go: a free toolkit that eliminates the complexity of building on top of WebRTC for video messaging
Sep 24, 2020 • 15 tweets • 3 min read
A few weeks ago I shared a graphic looking at the change in YoY growth rates for SaaS businesses from Q2 to Q1. I thought another interesting analysis would be looking at the change in net new ARR added from Q2 to Q1. The data below shows the % change:
To calculate net new ARR in a given quarter I first take the quarterly subscription revenue (where disclosed) and multiply it by 4 to get an implied ARR metric. I do the same thing for the quarter prior. The difference between the 2 is the implied net new ARR added in a quarter
Sep 23, 2020 • 7 tweets • 2 min read
Zuora's annual subscription economy report it out! Some takeaways:
1. Subscription companies continue to outperform their product-based peers by wide margins, growing revenues approximately 6X faster than S&P 500 companies (17.8% versus 3.1%) 2. Subscriber growth took a big dip in Q1 as the pandemic started, but rebounded in a big way in Q2
Sep 19, 2020 • 4 tweets • 2 min read
Looking at the share price reaction for SaaS businesses the day after reporting Q2 earnings makes it appear like most stocks fell (the median stock fell 2.5%). However if you look at how the share price after earnings compared to 2 weeks prior it paints a different picture! Data:
This is particularly true for businesses with July Q ends who saw big run ups in share price in the couple days leading up to earnings, then big drops right after. Fastly (June Q end) was the epitome of this. Down 19% the day after earnings, but up 17% compared to 2 weeks prior!
Sep 17, 2020 • 8 tweets • 2 min read
Unity IPO will be a very interesting one to track - they're breaking from the traditional pricing mechanism. Typically investment banks take companies on a roadshow, collect and manage orders / allocations from large institutional funds, and then ultimately help set price
The Unity team is maintaining full control of pricing / allocations. They will collect bids from funds that have a price and a preferred # of shares. Based on all of these bids, the Unity team will then come up with a price.
Sep 10, 2020 • 7 tweets • 2 min read
Digital Transformation Reality Check: Not all SaaS companies have benefited from Covid! In fact, I'd argue only 3 (Zoom, Shopify, Fastly) have truly benefited. With Q2 earnings mostly under wraps, we can look at the absolute change in growth rates from Q2 - Q1
Note that I had to break the axis for Zoom
To make it clear what the data is showing: Im simply subtracting Q1 YoY growth from Q2 YoY growth. Zoom grew 355% in Q2 and 169% in Q1 so the difference (355-169) is graphed.
I've tried to normalize for acquisitions as much as I could