Notorious: Common Mistakes Founders Make

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Common Mistakes Founders Make

Legendary repeat founder Jyoti Bansal (AppDynamics - $3.7B acquisition by Cisco, Harness, Traceable) recently shared mistakes he made as an early stage founder:

These are valuable lessons for early-stage founders: don’t build too far out ahead of customer’s current needs, meet the customers where they are and focus on solving your customer’s problems, rather than selling the product you’ve built. There are other important lessons I would add to this list that I’ve lived or witnessed firsthand:

• Focus on finding PMF before determining how to sell your product (PLG, sales assist, outbound etc)

• Don’t scale up the team until you have PMF (sounds obvious, I know)

• Don’t be afraid to pivot if it’s not working after a few tries (I pivoted my startup too late)

• Obsess over clock speed - how quickly your startup learns, adapts and ships new product

Thanks for reading. By way of background, I am an early-stage investor at Wing and a former founder. Please reach out to me on X @zacharydewitt or at zach@wing.vc. Some of the early-stage PLG + AI companies that I have the privilege to work with and learn from are: AirOps, Copy.ai, Deepgram, Hireguide, Slang.ai, Tango and Tome.

Operating Benchmarks (from PLG Startups):

I will continue to update these metrics and add new metrics. Let me know what metrics you want me to add (zach@wing.vc)

Organic Traffic (as % of all website traffic):

• Great: 70%

• Good: 50%

Conversion rate (website → free user):

• Great: 10%

• Good: 5%

Activation rate (free user → activated user):

• Great: 50%

• Good: 30%

Paid conversion rate (free user → paid user):

• Great: 10%

• Good: 5%

Enterprise conversion rate (free user → enterprise plan):

• Great: 4%

• Good: 2%

3-month user retention (% of all users still using product after 3 months):

• Great: 30%

• Good: 15%

Conversion from waitlist to free user:

• <1 month on waitlist: ~50%

• >3 months on waitlist: 20%

For more detail on acqusition rates by channel (Organic, SEM, Social etc), please refer to this prior NPLG.

Financial Benchmarks (from PLG Public Companies):

Financial data as of previous business day market close.

Best-in-Class Benchmarking:

15 Highest EV/ NTM Revenue Multiples:

15 Biggest Stock Gainers (1 month):

Complete Dataset (click to zoom):

Note: TTM = Trailing Twelve Months; NTM = Next Twelve Months. Rule of 40 = TTM Revenue Growth % + FCF Margin %. GM-Adjusted CAC Payback = Change in Quarterly Revenue / (Gross Margin % * Prior Quarter Sales & Marketing Expense) * 12. Recent IPOs will have temporary “N/A”s as Wall Street Research has to wait to initiate converge.

Recent PLG + AI Financings:

Seed:

• Bagel Network, an open source platform intended for humans and autonomous AI agents to collectively build, trade, and license machine learning datasets, has raised 3.1M. The round was led by CoinFund, with participation from Protocol Labs, Borderless Capital, Maven11 Capital, Breed VC and Graph Paper Capital.

• Inngest, a startup that makes it easier for developers to build and manage serverless backends, has raised $6.1M at a $26.1M valuation. The round was led by Andreessen Horowitz, with participation from GGV, Afore Capital and Vercel.

• Nile, a serverless Postgres built for modern SaaS applications, has raised $11.6M. The round was led by Benchmark, with participation from SV Angel.

• p0, a company using large language models to help developers catch serious issues in code before it is shipped, has raised $6.5M. Lightspeed Venture Partners led the round, with participation from Alchemy Ventures.

• RagaAI, an AI comprehensive testing platform intended to help enterprises mitigate AI risks and make their models secure and reliable, has raised $4.7M at a $12.7M valuation. The round was led by Pi Ventures, with participation from TenOneTen Ventures, Olima Ventures, Anorak Ventures, Arkana Ventures, Mana Ventures and Exfinity Venture Partners.

• Reken, a cybersecurity platform intended for building a new category of AI products to protect against generative AI threats, has raised $10M. The round was led by Greycroft and FPV Ventures, with participation from Firebolt Ventures, Fika Ventures, Omega Venture Partners, Homebrew and JAZZ Venture Partners.

• Twin, an artificial intelligence-powered text-to-action system designed to complete tasks across applications from start to finish, has raised $3M. The round was funded by Motier Ventures, Betaworks and Factorial.

Series A:

• Qdrant, the company behind the eponymous open source vector database, has raised $28M. The round was led by Spark Capital, with participation from Unusual Ventures and 42cap.

• Sema4.ai, a startup that makes AI tools for businesses, has raised $30.5M at a $155.5M valuation. Mayfield, Benchmark and Canvas Ventures funded the round.

• Sierra, an enterprise AI company co-founded by OpenAI chair Bret Taylor, has raised $85M at a $1B valuation. The investment was led by Sequoia Capital.

• Spellbook,  an automation and online collaboration platform designed for law firms, has raised $20M. The round was led by Inovia Capital, with participation from Thomson Reuters Ventures, The Legal Tech Fund, Good News Ventures, Concrete Ventures, Bling Capital, N49P, Path Ventures and Moxxie Ventures.

Series B:

• Clerk, a startup creating a suite of embeddable UIs, APIs and admin dashboards that app developers can use to authenticate and manage users, has raised $30M. The round was led by CRV, with participation from Stripe, Andreessen Horowitz and Madrona.

• Codeium, a startup that combines AI and coding, has raised $65M at a $500M valuation. The round was led by Kleiner Perkins, with Greenoaks and General Catalyst also participating.

• DataSnipper, a Dutch automation platform for accountants and auditors, has raised a $100M at a $1B valuation. The round was led by Index Ventures.

• Kittl, an online tool made to provide graphic supplies for artistic design for graphic designers, has raised $36M. The round was led by IVP, with participation from Left Lane Capital.

Series D:

• Kore.ai, a startup building conversational AI for enterprises, has raised $150M at a $800M valuation. The round was led by FTV Capital, Nvidia, Vistara Growth, Sweetwater PE, NextEquity, Nicola and Beedie.