Capital Chronicles #14

Hello there! Welcome to Capital Chronicles, saving you hours every week with ~2-3 minute summarised insights from the best venture builders, investors and capital allocators out there. This week: capital allocation frameworks by TDM Growth Partners, a Terminator 2-inspired funding announcement by Kleiner Perkins, Bessemer Venture Partners release a finance fundamentals course, and performance benchmarks based on 600+ B2B software companies.

As subscriber #TBD, each web link below takes you to:

• A link to the original article (read time: varies)

• Summary / insights / implications per article (read time: 2-3 minutes)

Now, read on for the latest…

🛠️ On venture building…

Capital Allocation Frameworks for Long-term Shareholder Value Creation, from TDM Growth Partners. The article emphasises the importance of capital allocation frameworks for businesses, arguing effective capital deployment is critical to the success of a company.

• Why you should read it: While it may seem obvious, effective capital allocation is crucial throughout a company's lifecycle—from its early cash-burning stages to when it's generating substantial free cash flow at scale. In fact, for startups, it's arguably even more critical due to the more acute trade-offs they face. The TDM team provides readers with a comprehensive framework for approaching capital allocation, along with inspiring examples of how successful software companies tackle this vital topic.

🧭 On venture investing…

Kleiner Perkins announcing their latest set of funds: KP21 ($825M) for early-stage companies and KP Select III ($1.2B) for high-inflection investments. KP aims to support companies leveraging AI across enterprise software, consumer tech, healthcare, fintech, and hardtech sectors.

• Why you should read it: KP released their funding deck online alongside the announcement. Beyond the epic Terminator 2 theme, the deck offers a rare glimpse into how one of Silicon Valley's most established venture capital firms positions itself in the market. It showcases KP's unique value proposition to founders and they share their perspective on AI applications across various sectors. Notably absent, however, was any disclosure of fund performance metrics!

📖 Learning resource…

Finance fundamentals for software companies, by Bessemer Venture Partners. A comprehensive guide for building a finance function covering key topics such as budgeting, forecasting, hiring, driving growth, pricing and benchmark metrics for operating performance.

• Why you should read it: a very simple and accessible nuts-and-bolts how-to guide for building a software company's finance function. Rather than covering everything in minute detail, the course focuses on the essentials for leaders while providing readers the opportunity to explore topics specifically relevant to them. This includes those adjacent to the target audience who might be supporting entrepreneurs or looking for benchmarks for financial and operating performance and/or fundraising.

📊 Market insight…

Emergence Capital releasing their Beyond Benchmarks 2024 report. Based on data from over 600 B2B software companies, the report covers GenAI enterprise trends, the current fundraising environment and company performance metrics.

• Why you should read it: curious about how companies are leveraging AI? Interested in the latest venture activity trends? Want to know benchmark metrics by ARR range? It's all covered in detail. Jason Lemkin (SaaStr) also offers insightful commentary on the report. His key takeaway: if the top quartile companies in the $5M-$20M range are only growing at 58%, and 100% growth is the benchmark for raising venture capital, then only a subset of the top quartile can realistically secure funding in the current climate!

🎲Lucky dip essential reads…

• Opening new markets: efficient growth in 2024 and beyond

• How to calculate CAC Payback Period (the right way)

• Sequoia’s $600b question for AI

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Have a great week!

Josh