This won’t be a long post, but I loved this excerpt:

Today, software is no longer simply used as a set of applications to increase employee productivity (such as email and expense reporting). Instead, software is directly orchestrating customer experiences and operations that run the business. It is not just that companies are using more software — in a very real sense, they are actually becoming software.

There are some thing you read that just get you excited because they strike the perfect balance of tangible and visionary, obvious and non-obvious. You feel like you’re discovering this inevitable evolution in the world that’s only in inning 1 or 2. Credit to whoever wrote that in the S-1 — it’s some compelling messaging.

My colleague Mike (who has been around the block once or twice) will often remind our team of the 80/20 rule: most companies would prefer to pay for 80% of the functionality at 20% of the cost. Sure, some will pay 100/100 functionality/cost, but that’s the exception.

We get this sage counsel often when we are talking about competition from Google, AWS, Microsoft, etc. — name your large tech company with a big existing customer base. Worry being they’ll build a “fine” product and package it with existing offerings at 0–20% of the cost at which your company is trying…

If you just look at MongoDB’s high level metrics, you may miss an impressive transformation. 40% revenue growth, burning -32% on the EBITDA line — 0.36x GM-adjusted magic number, 8% rule of 40— any investor would say “ok growth, fine / not great sales efficiency”. Dig a level deeper and you see two things:

  • On an operating cash flow basis, MongoDB is only burning 7% of revenue, so rule of 40 looks more like 33%, not 8%. (This is primarily due to non-cash adjustments associated with stock-based comp and deferred revenue, which most investors are comfortable backing out.)
  • And the…

In the vast majority of cases, investors will look for three primary items, so it’s helpful to have these available off the shelf:

1. Historical & Projected P&L

This is what I’d consider “table stakes”:

Key highlights:

  • ARR Bridge (the first 5 lines) — investors want to see how much of the ARR is driven by new logo bookings vs upsell, and how churn and downsell look; these metrics are then summarized in the gross and net retention lines below the bridge
  • Gross Margin — simple in concept, but one tip: if you have an implementations team or pro services team, it’s worth breaking that…

The basis for pretty much any new business is one of these claims:

  • [X] is not being done well. I am starting a company to do it better.
  • [X] should exist. I am starting a company to offer it.

There is a dangerous underlying assumption in these statements that is the source of countless business failures. To see why, just read the following:

There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to…

It’s funny that people talk about “serverless” as a new trend. Isn’t every SaaS application like Zendesk/Salesforce or platform like Twilio/Zapier also “serverless” from the perspective of a consumer of that application? And that’s really what’s driven the democratization of access to modern software. No longer did anyone need to hire an IT group, set up servers, install and maintain software, etc. You just sign up and start using it. You never think about the idea of a server, even though that’s what running it behind the scenes. And because you’re not making a big investment up front, there’s a…

I love this 2 min 30 second video. For those who haven’t seen “Bridge of Spies”, it’s a story of a Russian spy, Rudolf Abel, who was arrested in 1957 by the FBI on conspiracy charges— James Donovan (Tom Hanks) is the only lawyer who will represent him. Needless to say, the prospects for a captured Russian spy are not great…

Even though I’ve watched this 25+ times, I struggle to live by the “would it help” idea. If I’m waiting for the outcome of anything (will a deal come through, will this person take the offer, etc.), some…

Probably because they have nothing better to do, in May 2014 FASB decided to introduce ASC 606, which changed the rules around revenue recognition. Most notably for software investors, it meant that software sold on-premise could no longer be recognized linearly over the length of the contract. For example, let’s say you signed a 3 year deal with a customer worth $1M/year. With ASC 605, the previous standard, you’d just book $1M/year in revenue, but with ASC 606, you now book 80% of the value of the contract up front ($2.4M in this case), and then recognize 20% of the…

Expert network calls I think are looked at like legal performance-enhancing drugs for investors — every investor uses them, they’re incredibly helpful (if done correctly), and nobody likes saying they use them.

What’s impressive is that entrepreneurs seem to rarely use this resource, but before we address that:

A Primer

  • Expert networks are provided by a bunch of different companies, but the ones I’ve seen people use are GLG, AlphaSights, Guidepoint, and Tegus.
  • To access experts on an expert network, you sign a contract for typically a minimum of 25 calls (priced at $800–1200 a piece), so ballpark $25k.
  • Once you have…

  1. Focus

Every day in venture you can run in 15 different directions — there’s always a new trend, a new space, new deals, new people to meet. But what’s most valuable is your ability to pick an area of focus and have the conviction in it to go deep. You need to be able to say “no” to all the distractions. Some days it will be hard — you see your friends doing deals and you will think you chose the wrong area, but you need to stay committed. In a business with long feedback loops, you can’t change course…

Andrew Camel

Investing at Brighton Park

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