Hey Reader,

Altitude Weekly Edition 002 is hot off the press from Cirrus Capital Partners 📰

Once weekly, we give you a bird's eye 🦅 view of the most interesting 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:

​LVMH’s Stellar Returns ​
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This image is insane.

→ LVMH reported a revenue of €86.2 billion, marking a 13% organic growth compared to 2022.

→ The company saw a profit of €22.8 billion, an 8% increase from the previous year.

→ Net profit also rose by 8% to €15.2 billion.

→ Notably, LVMH experienced double-digit organic revenue growth in Europe, Japan, and the rest of Asia despite facing a negative currency impact in the latter half of the year.

→ A dividend of €13 per share will be proposed, translating to a dividend yield of 1.9%.

LVMH’s strength is adaptability, showing strong performance across segments and global markets. After a momentous final quarter in 2023, investors and market watchers are eye-ing this in their ticker and waiting to learn about strategic initiatives, future direction, and sustained growth for this behemoth.

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​Financial Technology Partners: What To Watch For In 2024​

Bookmark this one. It’s not a light read, but trust that it’s worthwhile.

FinTech is going into a re-balancing act. 2023 had a lot of ups and downs and lofty valuations, but there’s still a strong presence and inflow of early-stage funding and successes from established players.

This slide deck details the number of M&A deals, IPOs, public companies taken private, and FinTech trends you should watch for.

Reimagining financial services won’t see a downward trend anytime soon.​
→ FinTech deal activity dropped by 70% last year—however, lower merger and acquisition volume explains much of this drop, as fewer $1 billion+ deals were announced.

→ FinTech closed 2023 out strong with $15 billion in private capital investing, a YoY increase of 30%.

→ 16 significant M&A transactions were over $1 billion. The most prominent? GTCR’s 18.5 million dollar acquisition of a majority stake in Worldpay and NASDAQ’s 11 billion dollar acquisition of Adenza.
→ Global digitization of B2B payments, next-gen wealth tech advisory solutions, investors favoring B2B over B2C, blending of FinTech and e-commerce—this scratches the surface of trends we will see in the next five years.

​Read the full report by FT partners.

​From unicorns to unicorpses: Why billion-dollar startups and even VC firms keep imploding​

This article is a subtle reminder: The startup landscape post-2022 is different. What is demanded of startups and VC firms is no longer enough—and there are a few reasons why:

→ Macroeconomic Forces: Interest rate hikes, market corrections, and geopolitical tensions have reshaped the investment climate, drying up the once-abundant capital.

→ Shift in Public Markets: The correction in public markets and the drying up of the IPO market have left many startups overvalued and struggling to raise funds

→ Venture Capital Slowdown: Rising interest rates have made traditional investments more attractive, reducing the flow of capital into venture funds and startups.

The current environment demands startups and VC firms to adapt by focusing on sustainability, profitability, and strategic growth. Companies that managed to stay disciplined during the boom years are better positioned to navigate the challenges ahead.

Atomic habits lead the way.

​Rule of 40 vs Rule of X​

Rule of 40 or Rule of X? It depends on who you ask. First, let’s first break down WTF either of these are:

→ The rule of 40: A simple formula popularized in 2015 by Brad Feld and Fred Wilson as a benchmark for balancing the growth and profitability of SaaS companies.

Formula: Annual Revenue Growth Rate (%) + Operating Profit (%) = 40+

(I couldn’t even explain why 40+ is an optimal result).

→ The Rule of X: Created by Byron Deeter and Sam Bondy at Bessemer Venture Partners, the Rule of X was intended to prioritize growth or operating profitability when generating a Cloud company’s Enterprise Value. Their premise was that revenue growth is valued 2x - 3x higher than the Free Cash Flow margin, arguing that growth has a compounding effect on value.

Formula: (Revenue Growth Rate x Multiplier) + Free Cash Flow Margin (%).

With a current multiplier of 2.3, the growth rate impacts enterprise value significantly more than the FCF margin.

→ The comparative analysis: The Rule of X offers a nuanced approach, considering the weighted impact of growth on value. The Bessemer Rule of X for publicly traded Cloud companies ranges significantly, indicating a broader evaluation of company performance.

Where concerns lie is application. Applying the Rule of X is primarily relevant for mid to late-stage companies with positive FCF Margin. Early-stage companies with negative FCF Margin may find the Rule of 40 more applicable. Also, the variability of the growth rate multiplier (M) and the challenge of standardizing SaaS metrics pose questions about the practical application of the Rule of X.

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​Truth is: Standardization in a landscape where metrics change? Difficult AF.

​Sam Altman plans to raise $7T​

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$7 trillion.

$7 trillion in funding.

Let that sink in.

Remember: Always aim high 😉

​Guide to headcount efficiency.​

Nearshoring, layoffs, and right-sizing are signs of ineffective management.

There, I said it. (So does OnlyCFO in this newsletter)

Wanna know what accounts for 70% of expenses for Cloud companies? Headcount efficiency. Too often, title inflation, overhiring, and offering unsustainable high salaries force large-scale layoffs.

The right people at the right time maximize revenue potential efficiently. For VC-backed companies, getting “T2D3” (triple, triple, double, double, double) growth is excellent for successful exit outcomes, but chasing this growth shouldn’t compromise unit economics or product/market fit (PMF).

Strategies for headcount efficiency:

→ Start budgeting from scratch to determine the necessary headcount based on current and future needs.

→ Leaders should acknowledge past hiring errors and make necessary adjustments.

→ Ensure efficiency in processes with the current headcount before expanding.

→ Avoid siloed department planning. Share information across departments for optimal decision-making.

→ Update hiring plans based on actual growth and leading indicators, not just aspirations.

→ Balance cost savings with the need for quality talent and plan international hiring carefully to account for tax implications.

​The most important post I've written in a while​

Powerful dreaming is worth its weight in gold.

If there’s anything to take away from this entire newsletter, it’s this article. Seriously, read this article by Greg Isenberg over at Greg's Letter, pin it for later, and return to it when you don’t have direction.

If you’re going to dream, dream in detail.

Got a business goal? Physical fitness goal? Money goal? Describe what that even feels like.

“I want to make 2M by 2026.”

vs.

“I want to be able to provide for my entire family and give my partner the option of having to work.”

The former is tangible, but the latter describes the feeling and emotion behind it. Vision is a guiding star, informing actions and decisions. It is not a rigid, inflexible plan. The point of Vision is to enrich experiences, relationships, and purpose, providing aim instead of relying on strict metrics as a steerer, when metrics don’t lead to a fulfilled life.

​Why growth models fail ​

Growth models are super important.

But they're not being used properly. AKA to actually "grow".

→ Use growth models to make relative trade-off decisions rather than exact forecasts. Operating models are used for financial forecasting, but when you use growth models for precise revenue or user growth forecasting, this leads to inaccuracies and loss of confidence due to reliance on unpredictable assumptions.

→ Put models in spreadsheets. Without a spreadsheet, it’s challenging to manipulate inputs and understand their impact on outputs, leading to a superficial understanding of the business. So, create a model in a spreadsheet to explore the relationship between inputs and outputs thoroughly, enhancing understanding of the business dynamics.

→ Using one model leads to oversimplification and inaccurate outputs. Don’t do it. For complex businesses, like marketplaces, separate the model into components (e.g., supply and demand sides) to maintain accuracy and usefulness.

→ Assign model ownership to an unbiased observer with a strong analytical background, ideally from analytics or strategic finance, to ensure objectivity and comprehensiveness. Effective growth modeling requires a blend of business judgment and detailed operational knowledge, often not found in one person.

→ Stop promoting the model. Promote the insights it generates. Often, internal stakeholders are more interested in actionable insights that drive growth than the model itself. Focus on communicating specific, actionable recommendations derived from the model to capture attention and drive business decisions.

Growth models aren’t a panacea, but they ARE valuable tools for strategic decision-making when used appropriately. Businesses can leverage growth models to inform resource allocation and strategy by avoiding common pitfalls. The emphasis is on complementing, not replacing, other forms of business analysis and customer engagement to drive growth effectively.

​Reading income statements ​

Easily one of the sexiest topics ever: business finance. I hope you heard the sarcasm in that one.
Some leaders are ridiculously bad at interpreting these documents, costing them big time. Just like you had to eat your vegetables before you could indulge in treats, business finance is the metaphorical vegetable you must digest to grow a business effectively.

OnlyCFO does a fantastic job of breaking down the key components of an income statement. Definitely worth a read.

In a nutshell:

1. Revenue
2. Cost of Revenue (COGS)
3. Gross Margins
4. Operating expenses (OpEx)
   1. Includes Sales & Marketing (S&M)
   2. Research & Development (R&D)
   3. General & Administrative (G&A) expenses
5. Other Considerations
   1. Stock-Based Compensation (SBC)
   2. Sales Commissions
6. Other income expenses
   1. This covers interest, foreign exchange, and investment gains or losses, which can influence the bottom line but are not core to the business operations.
7. Income Tax Expense

A deep understanding of the income statement is non-negotiable for a business to succeed. Encourage company-wide grasp of financial basics. Maybe it's a business finance book for dummies or weekly lunch and learns, but whatever it is, it will enhance overall operational efficiency and decision-making quality.

​Asset-Based Loans: The Ultimate Guide for 2024​

WTF is an asset-based loan? I mean I wrote a whole guide but hey, I’ll give you a summary right now.

(But also, please read the blog, too, lol. Bookmark it. You’ll find it handy one day).

Asset-based lending gives SMBs a strategic financing option using company assets as collateral. This method grants liquidity and supports growth initiatives, allowing businesses to leverage accounts receivable, inventory, machinery, or real estate for funding.

→ Advantages:

Flexibility: Loan values are tailored to the collateral's worth.

Accessibility: Businesses with solid collateral but imperfect credit can secure funding.

Growth Support: Enables cash flow management and investment in expansion.

If you want to know what collateral options you have, what factors influence loan terms and interest rates, or how to obtain one…well then, you’d have to read the blog 😉

Alright, that’s it for this week! Here are 46 words of juicy, self-aggrandizing promotional copy to end the newsletter:

Cirrus Capital Partners is a sector-agnostic money matchmaker for Founders. We align your company with the most optimal credit structures from the beginning, so you can raise capital with more optionality, in less time, at the market's best rates and terms. Welcome to fundraising... elevated.
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Until our next flight,

Ryan Ridgway & your friends at Cirrus

​cirruscap.com

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