A simple take on AI, MBAs going back to finance and some Q1 valuation data
Perspectives and Quick Takes From Bigfoot and Our Community of B2B Software Operators and Investors
Thanks for joining me for another Bigfoot Bi-Weekly Roundup.
In this edition I cover:
A tweet from a VC along with my thoughts on zooming out from AI
Pendulum Swing: Finance Taking Talent from Tech
Q1 Valuations Report From SSM Partners
If you enjoy what you read, I’d appreciate you sharing with your network!
Zooming out from AI
I ran across this (long) tweet from Micah Rosenbloom at Founder Collective talking about the hotness of AI and how to look/invest beyond it (specifically referencing a recent investment in a carwash SaaS/marketplace business). I found his statement below to be the most valuable one for Founders to see.
It may be ok for VCs to over index to AI as an investment theme. But, when it comes to operators, over indexing is always a more dangerous game. I’m an advocate for staying “antennas up” and finding tangible ways to execute on new technologies rather than making moonshots bets that depend upon them.
When talking with operators, I’m particularly interested in how they’re harnessing AI (LLMs or other) to:
Unlock the data they already have at their disposal
Provide better UX to get it to your customers
I find it encouraging when see companies in our portfolio integrating AI (LLM) into their existing product(s) to achieve both of these outcomes.
Beyond that, I want to understand what kind of market pressures and opportunities they’re experiencing. For example, we have heard from some companies that they are starting to experience some market pressure from new “AI-first” entrants who may be better funded than them. We also hear that customers are very interested in AI, but don’t really know where to go with it. This customer confusion can lead to:
Internal product development confusion for companies without a solid grasp on their roadmap
Churn susceptibility as prospects/customers chase a shiny new offering from a new market entrant touting AI.
As is always the case, operators (and investors) must strive to cut through the noise and confusion (there’s a lot of both currently) rather than blindly and reactively charging down a path that may lead them astray. Zoom out and take the long view.
Pendulum Swing: Finance Taking Talent from Tech
Here’s a recent post from LinkedIn’s Human Capital newsletter that most of us will probably find confirmatory rather than surprising. MBAs are increasingly pursuing finance jobs rather than tech jobs. 34% of Harvard Business School graduates in 2022 went into finance, up from 28% three years earlier. The same trend for Wharton and Booth grads.
Here’s a quote from a recent MBA grad the LinkedIn editor spoke with:
“If you would have asked me in September 2022 what was open, I would have said tech and finance,” Spitalnick told LinkedIn News. “By November, layoffs were hitting blue-chip technology companies, and I said there was slim to no chance most of us were going to tech roles. Pretty much across the board, the message was, ‘Check in in January,’ then it became ‘Check in in March,’ and then it was, ‘Check in in June.’ In the end, the blue-chip tech firms were just not hiring.”
The tech/financial services job markets for new MBAs or business undergrads is still not great with both types of employers having laid off waives of employees over the past 12 months. According to data from LinkedIn's Economic Graph, the finance job market is less bad - while the number of tech job postings in the U.S. slumped by 56% over the past year, the number of new finance roles declined by a significantly smaller amount, 33%.
Nonetheless, these folks need gainful employment, so rather than chasing the shine of tech they’re taking the more traditional financial services path, at least until they decide in 2 years they want to join a startup “worth” a bazillion dollars.
On Q1 Valuations (& More) from SSM Partners
Thanks to Chris McGanity who must have spent a lot of time putting together this solid report covering public market valuations and operating metrics, SaaS private market M&A trends and economic indicators.
Here’s a soundbite Chris gave me:
“I think the main takeaway for us is that there remains uncertainty about the economy and interest rates moving into the future, but that valuation levels have reverted back to their historical trends. Strong performance continues to be rewarded, but high burn rates and complicated cap tables are making it difficult for companies to close the bid ask spread in the venture space.”
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