Notorious: Define Culture First

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Define Culture First

I love asking repeat founders what they plan to do differently this time around based on hard lessons learned from the prior startup. One of the more unique and thoughtful answers I heard from a founder whom I admire is to: deliberately define culture before you start hiring.

In the founder’s first startup, they hired quickly to fill the gaps needed to grow. Fast forward two years and the culture was a hodgepodge of different values. Some employees were team players, others weren’t. Some were customer obsessed, others weren’t. Some were mission driven, other’s weren’t. It became very difficult to row in the same direction when the team wasn’t on the same page.

This time around, the repeat founder is doing a lot of work to define the culture early on before starting to hire. As part of the interview and hiring process, the founder is evaluating candidates on cultural fit. Another repeat founder I spoke with recently said something similar in that the main thing he would do differently is establish a “continuous learning” culture that is obsessed with getting to the truth as fast as possible. When launching a new startup, business unit or team - repeat founders recommend being deliberate before hiring to define the values and culture of the team.

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):

• Freemium (Self Serve):

  • Great: 7%

  • Good: 4%

• Freemium (Sales Assist):

  • Great: 12%

  • Good: 6%

• Free Trial:

  • Great: 15%

  • Good: 8%

• Reverse Trial:

  • Great: 15%

  • Good: 8%

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 Notorious episode.

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:

• Danswer, an answer bot designed to build custom AI assistants for each team with technical prompts, has raised an undisclosed amount by First Round Capital.

• Higgsfield AI, an AI-powered video creation and editing platform designed for more tailored, personalized applications, has raised $8M. The round was led by Menlo Ventures, with participation from Charge Ventures, Bitkraft Ventures, K5 Tokyo Black, AI Capital Partners and DVC.

• Quadratic, a real-time spreadsheet designed for data accessibility from various sources, has raised $5.6M. The round was led by GV, with participation from Catapult Ventures, Everywhere Ventures and Betaworks.

Series A:

• Datavolo, a dataflow infrastructure designed to provide access to all of the data including the unstructured files, has raised $37M. The round was led by General Catalyst, with participation from Citi Ventures, MVP Ventures and Human Capital.

• PowerML, an enterprise LLM platform for finetuning, has raised $24.8M at a $124.8M valuation. The round was funded by First Round Capital and Rsquared.

• Read AI, a meeting analytics platform intended to automate the scheduling, email, and messages to centralize and simplify their knowledge sources, has raised $21M at a $120M valuation. The round was led by Goodwater Capital, with participation from Madrona Venture Group.

Series B:

• Coalesce.io, an SF-based provider of data management software, has raised $50M. Industry Ventures and Emergence Capital co-led the round, and were joined by 11.2 Capital, DNX Ventures, GreatPoint Ventures, Hyperlink Ventures, Next Legacy Partners, Snowflake Ventures, and Telstra Ventures.

Series D:

• Homebase, a software startup that helps companies with payroll, shift scheduling, timesheets, hiring and onboarding, communication and HR compliance, has raised $60M. L Catterton Growth led the round, with Emerson Collective, Notable Capital, Bain Capital Ventures, Khosla Ventures, Cowboy Ventures and PLUS Capital joining.

Series E:

• Aerospike, a Mountain View, CA-based NoSQL database, has raised $100M. Sumeru Equity Partners led the round, and was joined by Alsop Louie Partners.