Hey Reader,

Altitude Weekly Edition 004 is hot off the press from Cirrus Capital Partners 📰

Once weekly, we give you a bird's eye 🦅 view of the most exciting news and insights around...

• Successful Companies and Founding Teams
• VC, PE, M&A, and Credit Transactions
• Growth Metrics, Benchmarks, Charts & Data
• New and Emergent Technologies
• Productivity Hacks

Created for founders, bootstrappers, VCs, angel investors, marketers, technologists, executives, and operators—everywhere.

Let’s get into it:

​The Founders Guide to Leveraging AI​

In Lenny's Newsletter, 8 startup founders give their take on AI.

While it's a tool of great power (you see where I am going with this), it also comes with great responsibilities.

In general, they agreed:

→ You HAVE to integrate AI at some point to stay competitive.

→ AI as a skill will be highly sought after for this next wave of job applicants. Give it a few more years; it will be a necessity.

→ AI challenges traditional business models, particularly seat-based software, prompting leaders to reconsider pricing and packaging strategies to align with the new AI-driven market dynamics.

→ Contrary to concerns, AI can augment human productivity instead of replacing humans outright.

→ Beyond natural language processing, computer vision and sensing will affect industries like defense and security.

There are still things to consider...

→ If there are teams or jobs where creativity, productivity, and personalization are cornerstones—think carefully about replacing humans with AI instead of simply augmenting human jobs.

→ Remember that much of this is still catching up with the legal system. Implement AI responsibly to avoid risks like data privacy and intellectual property. Develop guidelines.

​Klarna says its AI assistant does the work of 700 people after it laid off 700 people​

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I love the first line of this article: Klarna is bullish on bots.

Ya think?

When 2.3 million conversations were managed with customer satisfaction levels equal to human agents, Klarna saw an opportunity for efficiency by cutting 700 full-time agents. They clarify that AI's job equivalence is not directly related to the layoffs but rather illustrates the long-term impact of AI technology on workforce requirements (isn't that just a nicer way of saying AI took your job?).

Klarna anticipates this technology will boost its profits by $40 million in 2024.

Do you think customer service jobs will be cut en masse, or are there nuances? We're curious to hear your thoughts on this one.

​How much are Nvidia’s rivals investing in startups? We investigated.

Nvidia's startup investments jumped 280% year-over-year from 2022 to 2023, participating in around 46 deals. This aggressive investment strategy is part of their broader effort to deepen its roots in AI. And it's working.

How do their rivals stack up?

→ Intel, through Intel Capital, leads in terms of the volume of startup investments, deploying over $350 million across various investments in 2023. But: AI startups constitute a relatively small portion of Intel's venture portfolio, despite the strategic importance of AI to the chip industry.

→ Arm, while not as active as Intel in startup investments, has made several direct investments and others through Deeptech Labs, a VC fund and accelerator it co-launched. Their investments in 2023 mark a significant increase from the previous year, signaling a growing interest in supporting startups, potentially including those in the AI sector.

→ Through AMD Ventures, AMD has been more conservative in its investment approach, with a few deals in the past years. They plan to ramp up investment activity, mainly targeting AI platforms, generative model companies, and AI infrastructure offerings.

Nvidia's dominant position in the AI chip market is supported by its extensive investment in startups—so competitors have significant ground to cover to challenge its market leadership.

​Thrasio files Chapter 11​

The King of e-commerce has filed for bankruptcy.

Thrasio's CEO, Greg Greeley, once emphasized the company's progress in "transforming the business and its intention to strengthen its financial position for future success."

But as of last year, it showed signs of potential bankruptcy, accompanied by layoffs and market withdrawals as part of its restructuring efforts.

This is a microcosm of a broader issue within the e-commerce aggregation industry and the late-stage startup ecosystem, which only worsened after a downturn in fundraising. (That and managing a diverse portfolio of e-commerce businesses is complicated). Thrasio was optimistic and got significant funding, but their model was ambitious—operational difficulties, changing consumer preferences, and economic pressures led to their current financial predicament.

This situation is a cautionary tale for other companies in the e-commerce aggregation space. Rapid expansion doesn't come without risk, and sustainable financial management is vital.

​How to Read Balance Sheets​

Speaking of managing money...

Be a baller in the streets but ruthless in the balance sheets.

(I don't recommend ostentatious displays of wealth; I just had to add this zinger in the newsletter).

Income statements capture most of the attention for their direct impact on valuations, but the balance sheet is equally crucial for understanding a company's financial health and strategic positioning. Master the balance sheet. Seriously. Operators and investors can gain deeper insights into a company's assets, liabilities, and equity, enabling better decision-making and risk management.

OnlyCFO outlines the basics:

→ Assets: What the company owns. Assets are classified into current assets (expected to be converted to cash within a year) and non-current assets (long-term investments, property, and intangible assets like goodwill).

→ Liabilities: What the company owes, liabilities are divided into current liabilities (obligations due within a year) and non-current liabilities (long-term debts and obligations).

→ Equity: Reflecting the value attributable to stockholders, including common stock, additional paid-in capital, and retained earnings or accumulated deficit.

The Balance Sheet Equation: Assets must always equal liabilities plus equity; a fundamental accounting principle that ensures the balance sheet "balances." The income statement, detailing a company's financial performance over a period, feeds into the balance sheet through the retained earnings section, linking the two documents.

A good balance sheet = Strategic advantage + risk management for a company.

Startup hiring cut in half

In 2023, founders were significantly more cautious about new hires.

The tech industry has experienced a contraction, with a record number of layoffs contributing to a net decrease in the workforce within Carta startups. The tech sector's employment landscape is volatile, especially with investors influencing decisions to reduce headcount to cut down payroll costs. The events of 2023 and early 2024 may indicate a lasting shift in the startup ecosystem, moving away from the rapid expansion of previous years to a more measured and sustainable growth model. This could affect how startups approach scaling, investment, and workforce management in the future.

In general, things that startups may want to consider are...

→ Cost management: Founders and executives should prioritize the efficient use of resources, focusing on managing payroll expenses to navigate economic uncertainties.

→ Investor relations: Maintaining open communication with investors and heeding their advice on operational adjustments is crucial for navigating downturns.

→ Workforce planning: Adopting flexible workforce strategies, including contingent workforce models, can help startups remain agile and adjust to fluctuating demand for talent.

→ Employee retention: In a market where employees are more hesitant to change jobs, enhancing retention efforts and focusing on employee engagement is a competitive advantage.

→ Scenario planning: Preparing for multiple future scenarios, including further contractions or a return to growth, will enable startups to respond swiftly to changes in the hiring landscape.

Long-term sustainability > Short-term expansion

Kurt Wagner @KurtWagner8 New: When Elon Musk took over Twitter he fired CEO Parag Agrawal, CFO Ned Segal, top lawyer Vijaya Gadde and GC Sean Edgett immediately “for cause,” which meant withholding their golden parachutes. Now they’re suing him for $128 million https://www.bloomberg.com/news/articles/2024-03-04/ex-twitter-executives-sue-musk-for-128-million-in-severance-pay bloomberg.com Ex-Twitter Executives Sue Elon Musk for $128 ... Four ex-Twitter executives, including former Chief Executive Officer Parag Agraw... 12:45 PM • Mar 4, 2024 26 Retweets 84 Likes Read 9 replies

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Uh oh.

Immediate thoughts:

→ "For cause" firing is to be used cautiously; this kind of termination decision has consequences, particularly regarding contractual obligations like golden parachutes.

→ Watch ya mouth! Things that you say can and will affect legal disputes and public perception. Elon Musk isn't exactly one to edit what he says, and his public statements about withholding severance to recoup part of the acquisition cost could come back to bite him. But again, we shall see.

Take this as a lesson if you're ever involved in an acquisition. Have clear, enforceable contracts, do legal and financial due diligence, look at existing executive agreements and potential liabilities, and thoughtfully manage post-acquisition transitions.

And maybe be careful what you say on social media. (Yes, even if you own it).

​The Racecar Growth Framework: A Simplified Guide for Founders and Investors​

Vroom vroom.

This is the most chewable guide I could find on GTM strategy for startups. There are some fantastic visuals in this one, so definitely bookmark it.

1. The Growth Engine:

• This is the core of sustainable long-term growth for startups. Rinse and repeat.
• Self-sustaining loops drive growth by reinvesting outputs (like revenue) into more growth (like ads).
• Common engines include SEO, Paid Ads, Sales, and Virality.

2. Kickstarts:

• Tactics to acquire the first 1,000 users are often unscalable but crucial for initial growth.
• Methods range from sharing with friends, cold outreach (emails, DMs, calls), pitching in relevant communities (online and offline), leveraging influencers, creating viral content, physical placements (flyers, booths), and being first on a new platform.
• Particularly in B2B, focus on networking, pitching in relevant gatherings, and press coverage.

3. Turbo Boosts:

• One-off events that temporarily accelerate growth but don't have lasting effects.
• Unlike kickstarts, which are more initial-stage tactics, it can be used at any growth stage.

​Maximizing Profits: Financing Tips for the Food & Beverage Industry​

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You need a specialized finance strategy if you're in the food and beverage industry.

Perishables, seasonality, rising costs, and government agency regulations uniquely affect food and beverage. We wrote a looooong guide highlighting key investment strategies for growth, including leveraging technology, optimizing supply chains, and focusing on sustainability and branding to stand out in a competitive market. We also discuss specialized financing options like D2C lending platforms for quick access to funds and asset finance for acquiring or upgrading equipment without high upfront costs. These options offer flexibility and can be crucial for scaling operations. When starting, flexibility, access speed, and the cost of capital are vital factors in deciding how you finance.

We're here to help.

​SaaS Performance Metrics Framework​

I'm glad someone on the internet geeks out on SaaS performance metrics like we do.

Most B2B SaaS founders want to create value for all stakeholders, but what metrics to pay attention to varies greatly for each company. In this article, Ray Rike does an excellent job of focusing on the core pillars of what creates economic value for founders, investors, and employees.

The 5 primary pillars of enterprise value for a SaaS company:

1. Capital Efficiency metrics like Growth Rate, ARR per FTE, and ARR to Capital Raised help assess how well a company uses its financial resources to generate revenue growth.
2. Operating Efficiency is measured by metrics such as the Rule of 40, which combines growth rate and operating profit margin, and Departmental Expense to Revenue Ratios, highlighting the importance of balancing growth with profitability.
3. Customer Acquisition Efficacy focuses on metrics like the New CAC Ratio and CAC Payback Period, indicating the cost and efficiency of acquiring new customers.
4. Customer Retention Efficacy emphasizes the importance of keeping existing customers through metrics like Gross Revenue Retention Rate and Customer Retention Cost Ratio, underscoring the value of customer loyalty and the cost-effectiveness of retention strategies.
5. Customer Expansion Efficacy includes metrics such as Net Revenue Retention Rate and Expansion ARR as a percentage of Total New ARR, showcasing the significance of growing revenue from existing customers through upsells and cross-sells.

Each pillar touches on different aspects of the SaaS business, from how effectively capital is used to grow revenue to how efficiently a company operates, acquires, retains, and expands its customer base. Focus on these, and you'll be golden.

Until our next flight,

Ryan Ridgway & your friends at Cirrus

​cirruscap.com

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