Will this brand hit a growth ceiling soon? Is current growth based on strong brand/product fundamentals? A VC friend evaluating digital first brands raising Series A/B wanted to look at marketing metrics beyond LTV/CAC to answer these questions 10 metrics that can help 1. Total Media Spends Media Spends as a % of net revenue is a very hard metric without any assumptions and difficult to manipulate Plot Monthly Data for total Media spends across platforms ( Amazon, FB, Google etc) as a percentage of total Net E-commerce Revenue( Marketplaces, D2C etc) If this remains constant/reduces as the brand scales, it is a positive 2. Advertising driven Sales At early stages, brands rely on pure performance marketing to drive sales But this reliance should come down as the brand scales Plot Monthly Data for percentage of Sales on e-commerce platforms directly driven by Ecom Ads, and percentage of sales on D2C directly driven by paid media If both remain constant/reduces as the brand scales, it is a positive 3. Organic Visits and Brand Searches For consumer brands, it is important to reduce their reliance on performance marketing by working on organic acquisition channels and improving brand awareness Tracking Organic Visits and brand search volumes are good ways to understand this Plot Monthly data for Percentage of Visits in Website which are Organic, and plot monthly brand search volumes on Amazon and Google If both metrics keep increasing, it is a positive 4. Amazon Reviews and Ratings At scale, Amazon Reviews and Ratings are very difficult to game and gives a very true picture of quality and customer experience Rather than overall ratings and reviews, plot the monthly data of ratings Often early adopters are more considerate and rate innovative products highly. But if the monthly ratings remain consistently high with growing scale, it means the products are really good 5. Conversion Rates Conversion rates trends tell a lot about product-price-market-fit, and about the future scope of growth Look at monthly trends on conversion rates. With scale, conversion rates should go up on both Amazon and D2C A lowering conversion rate often means the in-market audience/core affinity TG is getting exhausted It is a big red flag if it happens as, it often indicates that future growth by paid media is going to be difficult and expensive 6. Repeats Repeat purchases are often the difference between the life and death for CPG brands with AOV on the lower side Look at monthly data on M1 and M3 repeats depending on the consumption cycle If these numbers keep on improving/keeps constant even when the brand moves and scales beyond its early adopters and core affinity TG, it is a big positive as it indicates product market fit at a bigger scale 7. Discount Driven Sales Every brand has Gross Margins calculated basis certain pricing. Discounts on top of the MOP are quite common as a lot of e-commerce is deal driven But the metric of Total discounted sales volume /Total sales volume gives a good idea of the brand’s reliance on discounts to drive sales This number should remain constant/come down as the brand scales 8. Price Increase Absorption History This is another thing that tells the brand’s pricing power. Plot the weekly conversion rate data post every price increase If the conversion rates get back to old levels within few weeks of a price increases, it highlights excellent brand and product strength which will translate to pricing power and better margins in future 9. Share of Spends/Market Share Plot the digital media spends for all the players in the category. From this, plot the Share of Spends for the brand. Since we would have an approximate idea of the brand’s market share, plot the ratio of Share of Spends/Market Share A ratio of SOS/SOM less than 1 is ideal. If the number is lower than 1, it means the brand can spend more money to capture more customers If high, then the brand will need to look at other problems to fix like conversion rates etc 10. Total Awareness/Market Share The previous 9 metrics can be easily pulled out from public tools and different Amazon/Google/Analytics reports accessible to the brand But this metric will require an online brand track Commission an online brand track to plot the awareness metrics for the core TG defined for all players in the category From that, calculate the Total Awareness/Market Share metric for each brand For Eg in a hypothetical scenario, lets say that the market leader of the category has total awareness of 80% and Market share of 20% So, the Total Awareness/Market Share Ratio is 4 which becomes a benchmark For the brand in question, if this number is lower or similar to the benchmark( say total awareness of 15% and market share of 5%), it means there is an opportunity to increase market share easily by increasing brand awareness by increasing spends on media But if it its other way around( say total awareness of 50% and market share of 5%), future growth will not be straightforward and brand will hit a ceiling soon Put together, these 10 metrics gives a good idea of the brand’s – Product Price Market Fit – Digitally Influenced TG Market Size – Customer Love – Pricing Power – Scope of Future Growth by Increasing Brand Awareness – Marketing Execution Effectiveness These metrics should be useful not just for VCs, but also for founders to track their fundamentals and to ensure they won’t be hitting a growth ceiling without seeing it coming Follow @arindam___paul

Efficient growth is what matters: Accept that growth rate will decrease with the efficiency and payback constraints. Everyone has been buying some of their growth with inefficient spend. By extending runway, you buy yourself time to build from a stronger foundation. Ravi Gupta, Partner Sequoia Capital. Many private companies are seeing the market and wondering what it means. Here are some thoughts on how to navigate this. Anything useful is based on the experiences of my teammates at Sequoia and the incredible founders who have survived/thrived in all markets: 1/ This is a correction: The MS unprofitable tech index is down ~65% since Dec 21. That is a big drop but it brought multiples to historical averages. No one knows where markets will go but current multiples are much closer to durable reality than what we saw the past two years. 2/ Your valuation is not what you thought it was: This market change may not be your fault, but it is your problem. If you raised in 2021, your company might be worth something like ⅓ of your last valuation. 3/ Embrace reality: If you believe the above point does not apply to you, I would encourage you to compare the implied revenue multiple of your proposed valuation to Snowflake’s, who has $1.4bn of revenue, 102% YoY growth and 27% FCF margins. 4/ You need more runway than you think: Many companies think they have enough runway. They don’t. It takes a long time to triple valuation (if you are targeting a flat round) in a rational market. It might take 4+ years to do this. If that’s true, you need 5+ years of cash. 5/ Free Cash Flow is the destination: Ultimately, investors are underwriting your ability to durably produce free cash flow. In order to believe that, they need to see durable growth and improving profitability. 6/ People will look at certain metrics to judge whether your growth is durable: If you’re a SaaS company, three metrics that matter: NNARR / S&M, NNARR / Burn, and Net Dollar Retention. Excellent is 2, 2, and 150%. Good is 1, 1, and 120%. 7/ Metrics that matter for transaction based businesses: Unit economics (positive / improving), 12-month user retention (stable / improving in new cohorts), transactions/user for the retained user (smiling cohorts). Payback periods of <12 months will also help. 8/ Your P&L will show if you’re improving profitability: If you’re losing money, you want EBITDA as a % of revenue to be improving every year. 9/ Efficient growth is what matters: Accept that growth rate will decrease with the efficiency and payback constraints. Everyone has been buying some of their growth with inefficient spend. By extending runway, you buy yourself time to build from a stronger foundation. 10/ Invest in Product: Product improvements are your way out of this. Focus on i) increasing organic growth (or make it easier to sell without heavy S&M), and ii) increasing user and dollar retention. Unlock spend when you have the right efficiency and payback metrics. 11/ This is a crucible moment: My friend sent me a note at one of Instacart’s crucible moments. It ended with “You have a chance to become anti-fragile. How lucky you are.” I would echo his sentiments here. This is a painful time. It is also an amazing opportunity. Go get it. Follow @GuptaRK22

What is the future of Ethereum? Last week, Vitalik Buterin co-published a paper predicting Ethereum’s future. I read the 37-page paper and interviewed its co-authors so you didn’t have to. [🧵 THREAD] The future according to @VitalikButerin revolves around soulbound tokens (SBTs). SBTs are NFTs that can’t be transferred after they are received. Once you receive an SBT, you hold it in a Soul wallet forever. I interviewed paper co-author @glenweyl. He predicts that SBTs will be available for early uses by the end of 2022. He also said, “I suspect the 2024 up cycle will focus on them.” But, wait – what’s the point of NFTs that can never be transferred? Here’s 3 use cases. Use case 1: Universities could give SBT degrees to their graduates. If universities gave NFT degrees now, graduates could sell them to anyone online. But if a graduates receives an SBT degree, he would not be able to transfer or sell it. Use case 2: A company is trying to hire people who went to Conference X. Because Conference X gave out SBT badges to its attendees, no one can buy a badge on an open market. The company could then filter candidates for verified attendees of Conference X. Use case 3: A DAO wants to build a community of environmentalists. The DAO can airdrop SBTs to attendees of environmental conferences and graduates of environmental programs. @vitalikbuterin calls this a “souldrop”. Vitalik and his team call this world a “Decentralized Society”. I believe this is the future of web3 and the broader online world. With scammers and fakers galore, having real on-chain credentials is key. What is the future of Ethereum? Last week, Vitalik Buterin co-published a paper predicting Ethereum’s future. I read the 37-page paper and interviewed its co-authors so you didn’t have to. [🧵 THREAD] The future according to @VitalikButerin revolves around soulbound tokens (SBTs). SBTs are NFTs that can’t be transferred after they are received. Once you receive an SBT, you hold it in a Soul wallet forever. I interviewed paper co-author @glenweyl. He predicts that SBTs will be available for early uses by the end of 2022. He also said, “I suspect the 2024 up cycle will focus on them.” But, wait – what’s the point of NFTs that can never be transferred? Here’s 3 use cases. Use case 1: Universities could give SBT degrees to their graduates. If universities gave NFT degrees now, graduates could sell them to anyone online. But if a graduates receives an SBT degree, he would not be able to transfer or sell it. Use case 2: A company is trying to hire people who went to Conference X. Because Conference X gave out SBT badges to its attendees, no one can buy a badge on an open market. The company could then filter candidates for verified attendees of Conference X. Use case 3: A DAO wants to build a community of environmentalists. The DAO can airdrop SBTs to attendees of environmental conferences and graduates of environmental programs. @vitalikbuterin calls this a “souldrop”. Vitalik and his team call this world a “Decentralized Society”. I believe this is the future of web3 and the broader online world. With scammers and fakers galore, having real on-chain credentials is key. Follow @iamjasonlevin

Zerodha founder Nithin goes UnPluggd. How large is the Indian market for B2C tech businesses in terms of users who can generate revenue? Maybe 15 crores max! Here’s why, with Fintech as a reference, since some data is available. I guess it is important to know this, so we can all be rationally optimistic. 1/11 I get puzzled whenever someone says India has 140cr people & only 9cr demat accounts (6% of the population), & this can grow to 40 crores (25% as in developed nations) over the next few years. Almost everyone building an investing app seems to be sold or selling this idea 2/11 Firstly, India has 9 crore demats, but they aren’t unique. The unique count is ~6 crore. But active demats with holdings above Rs 10k is less than 3 crore. This is in line with the ~3.4 crore unique MF investors—despite the MF Sahi hai and other campaigns. 3/11 So ~3cr or 2% of Indians out of 140cr invest. Large opportunity? Not yet & not the right way to look. ITR filings for FY 20/21 by income. ~4.8cr < ₹5lks ~90lks ₹5 to ₹10lks ~43lks > ₹10lks If people have to invest or spend more, they need to earn at least ₹2.5lks/yr? 4/11 If there are say 5cr more who earn ₹2.5lks+ but don’t file ITR, max Indians who make >2.5lks are just 10cr? Beyond 10cr, income starts dropping below ₹ 1lk. They can’t really invest or have discretionary spending. Now, 3cr out of 10cr is 30%, which isn’t bad at all? 5/11 The other question for fintechs focusing on investments is how large can the audience that hasn’t already invested be? Remember, we’ve had a bull market, mega ads, freebies, WFH, IPOs, low interest rates, & social media frenzy? If this hasn’t got people in, what else can? 6/11 There are maybe ~20cr on UPI & user growth seems to be plateauing. But among UPI users, the majority (90%) of transactions are again from <10cr Indians. This seems similar to the assumptions of potential users who can invest or spend based on ITR and capital markets data. 7/11 Assuming I am wrong by 50%, that total number at max is maybe 15 crores? Growing this number is the real problem to solve for all of us. Yes, there is incremental wealth created, but that is only within maybe the top 2 crore Indians, easy to miss the fact from our bubbles. 8/11 To solve this, the focus should be to do whatever it takes to enable entrepreneurs to build resilient businesses at home. So that they create wealth, share it with employees, shareholders, & invest it back in the economy. From Infy to Tatas to tech startups to lakhs of MSMEs 9/11 Not every business is VC’able or can be valued at $10mil, $100mil, or $1bil. Sustainability is more important than valuation. Misjudging the market size and opportunity, then setting wrong expectations and chasing valuations are probably the biggest reason why startups fail 10/11 It is crazy how everyone starting a business today wants to be called a startup, and talk is mostly about overselling market size & valuations, but not about sustainability. I hope this gets corrected in this global reset. We need resilient businesses for India to do well. 11/11 Follow @Nithin0dha