Novice Investor #16 - Pipeline Analysis, Founder Networking Event and Effective Scaling
Happy Platinum Jubilee Weekend all. I hope everyone has nice plans for the extended weekend.
I kicked off the summer with a week of kite surfing and sunbathing in Egypt which is something I will hopefully be repeating again soon. There is nothing like a bit of sunshine to increase your energy and motivation levels. I am feeling proud of finally being able to actually kite surf. Last time, I spent three days being thrashed around the water with limited surfing time.
At Kennet, summertime networking and events are taking shape. We are hosting a Summer Founders Drinks Event on Thursday, 30th June. If you are in London and fancy catching up with the Kennet team and portfolio over a beer, please do let me know.
I will also be in Barcelona next week for SaaStr. Similarly, if you are in the city or know any interesting people I should meet there, HMU.
Pipeline Analysis
Back in March, Dave Kellogg joined the newsletter for a very insightful guest appearance where we covered all things pipeline. I took some of the learnings to create a repeatable pipeline analysis method.
The analysis is useful to accurately assess the health of a company’s pipeline as part of due diligence, but it should also uncover some insights that could be helpful to the sales team leadership during the life of an investment.
It covers how to assess the sales cycle, the cadence of pipeline creation and the most important question for any board, investor or CEO, will the company hit their numbers next month/quarter. Using the fake data in the above analysis, the answer was no!
Productivity Tech - Kindle > Books
Hardware counts for productivity too. I have been using a kindle for as long as I can remember. It was only recently when I temporarily misplaced it, that I realised just how infinitely better it is than real books. With in-real-life books, there is no way to look up word meanings or highlight words or phrases, and physically navigating a thick book is a bit of a nuisance.
Plus, prior to my trip to Egypt, instead of doing lengthy research, walking to a bookstore or waiting for a delivery of expensive books and literally carrying them to Egypt, I logged into Amazon, which recommended five great covers I instantly had access to at a fraction of the price (c. £5 per cover).
Unless you are ego-building a grandiose bookshelf at home, go get a £50 Kindle.
Books
The Voltage Effect - John List
For any investor, CEO or product manager, this is a very useful read. The Voltage Effect discusses the reason why some ideas scale so well and why others fail miserably. The Author, John List, is a Professor of Economics at the University of Chicago and was previously the Economist at Uber and Lyft. He does an amazing job taking his background in research to apply disciplined scientific method experiments to scaling business ideas and government policies.
The overarching message of the book is to do rigorous experiments on appropriate samples to gather data on whether a product or policy can truly scale. He discusses five key factors that are necessary for any idea to successfully scale and also goes through four key elements to successful scaling.
Here are the most impactful learnings I took from the book:
Data, data, data. Experiment rolling out features across small samples before a full rollout.
Have a central team/person to assess the data i.e., not the product manager whose career progression hinges on feature releases.
When investing capital, always look at the marginal dollar return instead of a long period average. Taking averages over long periods masks how good or bad a particular channel is performing i.e., Facebook ads might have returned a CPL of $2 for the past twelve months. However, a company may have saturated that channel and for the past week, the CPL is up to $10. In this case, the lengthy average hides poor performance and the marketing team should invest more in different channels like Google ads.
Culture is key as a company scales. Independent, meritocracies may function well with small numbers, but as an enterprise scales, the need for collaboration and the opportunity cost of not collaborating grows exponentially.
Kennet Partner’s Investment Target
Kennet Partners is a Growth Equity investor with over 20 years of experience partnering with European and US SaaS companies. If you know any companies which fit our criteria, please reach out.
Investment size: $8m - $30m
Maturity: Over $3m in ARR
Growth: > 30%
Type: Bootstrapped and capital-efficient B2B SaaS businesses
Geography: Europe & US
Disclaimer: None of the content in the Newsletter should be taken as financial advice.