📊 Issue #5: Q422 Wrap & Iconiq's 5 Key Metrics
Back again with a slight change up from our usual programming. The acquire section of this issue is dedicated to a reflection and some analysis of Q4.
Let’s dive in…
🎯 ACQUIRE — Q422 Wrap (OKRs; Activities & Productivity; Average Week)
⚙️ OPERATE — An excellent take on key performance metrics and over / under performance as a firm grows / matures, courtesy of Iconiq
🧐 MUSINGS - “Escape competition through authenticity”
🎯 ACQUIRE
// Q422 Wrap
Objectives & Key Results
Data Systems - Score: 4/4
Reflection / Diagnosis: Feeling really good here, though this is certainly v1. In the future, we will apply a more sophisticated algo to further incorporate our target attributes in the screening process to continue limiting time spent on deals outside of our sweet spot.
Origination / Deal Flow - Score: 3/4
Reflection / Diagnosis: We maintained 3x deals at LOI for ~50% of the quarter and are actively closing our first acquisition. Needless to saw, thrilled with these results. The valuation and LOI process are pretty well playbook’d at this point, though there is definitely room for improvement when it comes to referral partners. This quarter, we will focus on systematizing a deal referral process, where we forward along the deals that are above / below our sweet spot to the respective players, in hopes this drums up reciprocal referrals and goodwill in general.
Content - Score: 3/4
Reflection / Diagnosis: This is issue #5 of the newsletter so that piece is rolling right along. I’ve sourced an excellent production partner on the podcast front, though we won’t stand that up until the middle of this quarter, at the earliest. We were probably a little eager to get both content channels rolling simultaneously and should have planned to sequence them instead, or stand up the newsletter and reassess content strategy / needs from there.
Activities & Productivity
Patterns / Comments:
Out of the gate I had a deal under LOI so most time was spent on diligence and fundraising. Unfortunately, that deal broke down, though I had to maintain momentum with investors under the premise I was making an acquisition in the next ~6mths and any acquisition would fall within the target return profile. In essence, I was raising like Micro SaaS was an asset class unto itself and an investor friendly way to access private equity (vs traditional barriers to participation: $X00k minimum check, 10yr time horizons, etc.). At the same time, I had to establish initial operating infrastructure with my team, mainly related to origination systems and diligence processes. Once my ‘OG investor base’ and initial operating rhythms were in place, you see the networking and diligence activities scale up.
As we move in to the last month of the quarter, we had a deal in the later stages of diligence, which required investor-facing time to provide updates on the target business and specific returns, etc., in addition to a stretch of deep / final diligence. Unfortunately, cumulative / time boxed productivity shows a decline towards the end of the quarter. Time boxing / tagging focused work requires forward looking planning and a mostly proactive state. As the target deal drew closer to the finish line, I had to be far more reactive - mainly related to debt financing asks, turns on legal docs, etc. Put simply, I was running around like a mad man half of each week executing time sensitive activities, to then come back to then pick up a back log of prioritized activities that might / might not have been on the calendar. I hope to instill more rigor around calendar management this quarter to better reflect activities and time intensity on a given week so we have clear base rates to measure improvement against in subsequent quarters.
Average Week
Patterns / Comments:
After some time in a new role / environment, I’ve always preached stepping back and laying out a ‘perfect average week’. Context switching is the brain / performance killer so, if you can, group activities or apply a theme to structured blocks of time (aka sprints) to maximize productivity and time in flow. There are a LOT of work streams going on right now (from fundraising / investors and keeping one eye on deal flow to connecting with sellers and diligence’ing deals), and some work streams have a range of contexts themselves (e.g switching between diligence of Company A and B, which are in totally separate industries).
As noted above, I can do a better job time time boxing activities to capture true time intensity, but the above feels like an accurate reflection of the ratios across various activities. Further, this is well inline with what I identified as my priorities / intended allocation of time so I’m generally pleased with this average week last quarter.
In Q123, we should see portfolio ops and SV team time sky rocket as we close our first acquisition and GET BUSY.
⚙️ OPERATE
RESOURCE:
APPLICATION(S): Though the context is different (growth stage / venture investing vs micro), this is an excellent look at measuring key metrics as a business matures to understand over / under performance.
As Micro acquirers, the ‘Enterprise Five’ are helpful metrics to fixate on during diligence, namely YoY ARR growth and Net $ Retention. I wouldn’t go too deep on measures of profitability or growth efficiency, as those will change under your ownership
Following on the above, as Micro Operators, rule of 40, Net Magic Number and ARR per FTE are all very solid metrics to keep an eye on over time as you step in and operate the business.
🧐 Musings
“Escape competition through authenticity” - Naval Ravikant
I find myself sharing this quote on at least a weekly basis. Recently, ‘authenticity’ (closing the gap between who you are and what you do) has been a profound guide post for me in navigating big decisions.
It’s true, you are far and away the most likely to become the best version of you (as opposed to someone else becoming the best version of you). It follows then that authenticity helps us realize our full potential, though unfortunately, we are conditioned to emphasize other factors in our decision making (money, status, power, etc.).
My hope for everyone in 2023 is to follow your gut in all matters of life and be as authentic as you can be. I have a sense we’ll end up happier and more fulfilled than a paycheck or anything else material could provide.