Analyzing Fundraising Trends and Ecosystem Dynamics

In this episode, Joseph Floyd from Emergence Capital joins CJ to dive into the venture capital firm’s latest benchmarking report, offering insights into the enterprise software space. Compiled from over 650 responses from Emergence Capital’s portfolio and additional seed firms, the report covers a range of companies from pre-seed to pre-IPO. Joe discusses key trends in AI adoption, highlighting the contrast between companies incorporating AI and those actually generating revenue from it. The conversation also touches on efficiency metrics like net dollar retention rates, and whether the rule of 40 still holds relevance. Joe sheds light on the struggles faced by companies in the "messy middle," grappling with slower growth and burning cash. Other topics include the lengthening time between early-stage funding rounds, the shift in fundraising dynamics, and why some founders are rethinking their need for venture capital altogether. Tune in for a comprehensive look at the current state of enterprise software and the challenges ahead.

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FOLLOW US ON X:

@cjgustafson222 (CJ)

@thejoefloyd (Joseph Floyd)

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TIMESTAMPS:(00:00) Preview and Intro(02:36) Sponsor - NetSuite | Maxio(04:55) Benchmarking Report Background(05:56) Incorporating AI Versus Making Money Off It(09:23) Investing in R&D for AI and How This Affects P&L(11:12) The Real Speed of the Evolution of AI(13:46) The Lasting Power of the Current AI Leaders(15:29) Sponsor - Leapfin | Planful | Mercury(18:53) Growth Versus Profitability and the Rule of 40(20:42) Why the Days of 150% NDR Are Gone(22:53) Why Mid-Stage Companies Are Hardest Hit(24:24) Subscription Based Versus Usage-Based GDR(25:42) Hybrid Pricing Models and AI(27:08) Gross Dollar Retention Rates Versus Net Dollar Retention Rates(27:50) Why Mid-Market Buyers Are Pulling Back(30:37) Impacts on $5 Million - $20 Million ARR Companies(35:04) The Growth Slowdown in $50 Million - $250 Million ARR Companies(37:43) Companies Quietly Shutting Down(40:12) The Effect on Employees(41:02) The Impact of Zombie Companies on the Economy(42:39) The LP-GP Relationship and Returning Capital(44:19) The Denominator Effect(45:27) Public Markets Versus Private Markets(46:26) Why Time Between Early-Stage Rounds Is Lengthening(47:29) Why Some Companies Shouldn’t Raise Venture(50:42) “The Secret Playbook” Refresh