WorkTech – EXCLUSIVE: Acadian Ventures Founder Jason Corsello Launches the Future of Work 100 and Discusses Work Tech VC Market Conditions
EXCLUSIVE: Acadian Ventures Founder Jason Corsello Launches the Future of Work 100 and Discusses Work Tech VC Market Conditions
2023-05-24Jason and WorkTech Founder George LaRocque discuss what went into creating the list, how the startups and scaleups listed are ranked, as well as current market conditions for VC in the Work Tech category, including current views on the capitalization in the market, startup valuations, and trends impacting the market.
But now is a time and I think we’re going to see probably over the next four to six quarters of this big reset happening, particularly on the late stage venture markets or the late stage companies that have raised 200, 300 million.
Acadian Ventures Founder and General Partner Jason Corsello discusses their inaugural Future of Work 100, a ranking of the leading startup companies that are building enduring businesses that make work better, fairer, more meaningful, and ultimately more productive.
Jason and WorkTech Founder George LaRocque discuss what went into creating the list, how the startups and scaleups listed are ranked, as well as current market conditions for VC in the Work Tech category, including current views on the capitalization in the market, startup valuations, and trends impacting the market.
A full transcript of the interview can be found below.
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Enjoy the discussion!
Full Interview Transript:
Transcripts are automated and not edited.
George LaRocque: Hey, everyone. Welcome back to work, tech. It’s George Laroque, and I’ve got something really interesting to share with all of you today. My friend Jason Corselo, the founder of Acadian Ventures, put some really interesting data out into the market, and he’s here to tell us all about it. Jason, welcome.
Jason Corsello: Hey, George. Thanks, Robbie. Good to see you.
George LaRocque: Yeah, well, I don’t want to steal your thunder. I’ll let you tell everyone what you’ve released and what it’s all about.
Jason Corsello: Yeah, it’s a little bit about the Canadian ventures. So we’re an early stage venture capital firm focused specifically on what everyone likes to call the future of work. It’s a segment that both you and I have been involved in for a very long time. We’ve been tracking this market for a long time, as you have as well. But we look at it from very much an early stage investor lens, and we try to get data from all over the place and try to interpret data as we make investment decisions. So today I’m excited to share what we’re calling the future of Work 100. It’s been a bit of a passion project for me. I’ve been working on it literally for years in terms of compiling the data, analyzing the data, and we’ve reached a point where we want to put it out into the wild and see what people say. But it’s essentially a list of what we believe are the top venture backed future of work companies. And these are companies that have been where investors have backed them. Some of them are very large multibillion dollar companies. Some are smaller than that. But we’ve tried to create a fairly unique ranking. It’s not just based off of valuation. There’s some other metrics in that of what those top companies are. Maybe it will create some debate, discussion, but it’s something that we wanted to share to really try to educate the market of what’s happening, provide some context of where we think the market is going, and try to dig into a little bit of some unique snippets of what we think is happening in the market.
George LaRocque: Yeah, I really applaud you for doing this, and we’ll dig in a little more. But I think there are two types of data that’s prevalent about the market, and there’s sort of the general sort of B to B, B to C VC data, which, for whatever reason, they don’t do a good job categorizing this space. And it reflects a lot of the investors education is needed. And then you’ve got very reactionary, like what happened last month or what’s happening today. And I try to tell people, you’ve really got to have a wider lens than that. And this really is a nice wide lens on the market. So when I saw this, I really appreciated it. So there’s more than that list of 100, but you referenced the factors that go into the ranking, and it does start at one and go to 100. I noticed that it clearly wasn’t just about how much they raised or what the valuation was, because it was out of order. If that was the case, how did you rank or what were the factors?
Jason Corsello: Yeah, so I guess the first step is creating that curated list, which we track many of the companies that get funded. We’ve been tracking it for over ten years, right. So there’s really been thousands of companies that have been backed by investors, venture capital investors, over the last ten to even longer than that years. So first is capturing that list, and then we start to look at some core metrics of those companies. Some of it we compile ourselves because these companies are private companies. Oftentimes it’s hard to get data and it’s not always perfect. So what we’ve tried to do is accumulate this data over time and look at a couple of factors. One is valuation, right? Valuation is important. And just like anything, whether it’s real estate or something otherwise, valuation matters because someone has put a price on what they believe the value of this business is. So it certainly can be debatable, especially today. Valuations have certainly most observers in the market have gotten over inflated in the venture world over the last three or four years, but valuation has been a key component. But we also look at another core metric, and we looked at all kinds of different metrics, and the one we concluded on is revenue per employee. We think revenue per employee is a really important metric to be tracking because that essentially is an indicator to a company’s inefficiency, right. Just because you raise the most capital at a high valuation doesn’t actually mean you’re running the business efficiently. So what we did is we essentially created a calculation that looks at both valuation combined with the revenue per employee, and that’s essentially how the rankings work. So we’ve exhausted a lot of time and energy putting this together. Part of that is obviously looking at the number of employees, which sometimes can be generally available. Sometimes you have to go to the companies. Sometimes we actually had, as we were compiling the list, companies come back to us and said, hey, we’re not this, we’re that. But long of the shorts, your question is, we think revenue per employee is an important metric, and certainly there’s lots of unicorn lists out there. It still matters. But I think we’re starting to see the shift in market where efficiency is going to be a bit more important, especially in a more capital constrained environment that we’re seeing now, and we’ll probably see for a while, at least for the next couple of quarters.
George LaRocque: Yeah, I couldn’t agree more. But I’m curious to stick on valuations for a moment. I get asked about valuations every time I talk to a founder, any investor, and the question is always, what are you seeing? What’s happening? And I’m curious I’ll put that on your plate. How has that landscape changed? What are you seeing when it comes to valuations?
Jason Corsello: Yeah, so I’ll give you one headline, which we publish on Futurework 100 com, which is, of the top 100 companies that we looked at, the median valuation or or Arr multiple annual recurring Revenue multiple is around 20 X. That’s a last twelve months. LTM is the acronym last twelve months multiple, which is 20 X. So many would tell you, and I’m in this camp, that that is probably much overvalued in today’s market. Right. Because for a lot of these companies so, of this list, there are 64 companies that are valued over a billion dollars. So typically what you find is for those companies, there is oftentimes a public market comp. You can look at ADP or workday or Zip recruiter, or go down your list of the nearly 50 publicly traded companies. Right. So there’s a comp that the public markets have set for those companies, and it’s on average, probably somewhere between five and eight X in the public markets today. Right. On this list, in the venture box markets, it’s 20 X. So that would tell you the markets are overvalued, have been overvalued, will continue to be overvalued for a period of time. So the next thing is then what happens next? And we can talk about that, but I think we’ve certainly seen a lot of capital come into venture, come into this market as well. It’s no exception. So this is essentially a byproduct of the free money over the last four or five years that we’ve seen. These are cycles that happen. And so I think we’re going to see a natural cycle of compression of these multiples. It’s inevitable. I think the bigger question is what happens to a lot of these companies that were overvalued overfunded and are out at this inflection point.
George LaRocque: Yeah. And timing, right. When did they raise what was their burn rate for how long were their investors? Yes, right. But that sort of range, or the range, is that five to eight range? That’s the ballpark, I think, these days, from what I’m seeing, if you’re at the top of that range, or you can do a little better than that, it seems like that’s where the conversations are happening. And when I say that I’m not providing any inside baseball here. This is with founders who are thinking about and based on their foray into the market. That seems to be the ballpark.
Jason Corsello: Yeah. I guess one caveat to the George is typically what you see with private venture backed companies, they’re growing faster than their public market comps, public market peers. Right. So that would command maybe a little bit of a premium on that revenue multiple, but certainly shouldn’t be three X or four X. Right. And so this is where we’re going to see that compression and more closely tied to the public marks. But it’s never perfect right. But now is a time and I think we’re going to see probably over the next four to six quarters of this big reset happening, particularly on the late stage venture markets or the late stage companies that have raised 200, 300 million. The average company on this list has raised 200 million. For the billion dollar plus companies, they’ve raised over nearly 350,000,000 on average. So they’ve raised a lot of capital and so a lot’s going to change in the next couple of quarters.
George LaRocque: Yeah, there were some other really interesting headlines or insights that you shared in this, whether it’s looking at where the companies are located or where the capital is coming from, it’s a global market. And I forget what she used as a headline, but it’s silicon Valley is not the center of the universe or something like that any longer, or it’s starting to shift. Can you talk a little bit about what surprised you there?
Jason Corsello: The end of Silicon Valley dominance, I guess.
George LaRocque: There it is.
Jason Corsello: Yeah. I mean, Silicon Valley is still very important in terms of a foundation for venture backed companies, but we’ve seen a big shift in a couple of things. One is companies can be started anywhere in the world. So I think of the list, there’s nearly 15 countries represented. I think it’s more than that. I don’t have to at my fingertips, it’s certainly on the website, but all geographies are represented, countries like Chile are represented, countries like Singapore, so there’s a wide diversity in terms of companies in their headquarters. So companies can be started anywhere in the world. We’ve known that over the last couple of years. But I think this list represents that secondarily, and I think we’re going to put out more data on this. Is there’s a real big gap or disparity between the companies that are funded, that are based in Silicon Valley and everywhere else? And I guess the key highlights are one is most companies in Silicon Valley raise a lot more capital at much higher valuations, and actually their revenue was lower than their peers outside of Silicon Valley. So it’s a really interesting dichotomy of the list. And I’ll give you one kind of last interesting highlight, is for the companies in Silicon Valley, their current error multiple is about 25 times. So that’s higher than the 20 times average. If you look at the companies outside of Silicon Valley, it’s about twelve times, or in Europe, I should say, it’s about 1212 and a half times. So European companies on an Arr multiple are basically half of that multiple as their Silicon Valley peers. So to me, I think that what that suggests, it’s something that we’ve been watching and we’ve been investing ourselves, is looking at companies outside of core Silicon Valley because we think you can build better companies more efficiently. They have to raise less capital so you’re less diluted as an investor and you can build very strong healthy companies.
George LaRocque: Yeah, I find that when I’m talking to investors, for all the reasons you just stated, any investor outside of Silicon Valley, when they’re looking for deal flow, they want to stay away from Silicon Valley, and it has a lot to do with the metrics you just shared. At the same time, the investors outside of Silicon Valley in the US as well as globally, are really targeted by I guess it makes sense culturally. But do you find that the startups outside of Silicon Valley have a hard time going to Silicon Valley, raising earlier money? I see that a little, and it’s almost like people like to raise and invest sort of where they are, if you will. Is that just happenstance, or do you see that as well?
Jason Corsello: No, definitely. I mean, we’ve even seen it within our own portfolio, as many of them want to go to Silicon Valley. It’s like a badge of honor. You’ve got a Silicon Valley DC that’s invested in your company, and there’s something to be said for that right there’s. Fantastic. This isn’t by any means a way to bash investors in Silicon Valley. Some of the world’s best investors sit in Silicon Valley, and that’s not going to change for a long time. I just think we’re seeing a leveling of the playing field. Right. Whereas you can raise capital anywhere in the world. Right. There’s great funds in Europe today. There’s great funds in Southeast Asia. There’s great funds in Latin America. So it’s not just you make the trek to Silicon Valley to raise capital. Capital really has become very dispersed and that you can raise anywhere in the world. I mean, we’ve co invested with funds in Africa, we’ve co invested with funds in Singapore, we’ve co invested with funds in Latin America. So I think over the next ten years, the way I think that we’re going to see a continuance of this, that it’s no longer going to be you have to depend on capital out of the Valley to fund your business. There’s great funds that are emerging everywhere in the world.
George LaRocque: Yeah, well, you used The World Is Flat as the intro to talk about that, this section, and I think 100%, the Silicon Valley is still the place where we all look to see what’s happening from a trend perspective, whether it’s tech or investment. But the World Is Flat has impacted our market when it comes to talent, when it comes to skills, availability, all of the macro trends that are driving our market on the buyer side and on the tech side impact Silicon Valley, too, whether it’s investors or talent, any type of talent. I always say what we said in the 90s is finally coming to bear in a way that we all really feel it every day. So you you made you called out a few trends like that as well. And I think I like the way you put it. Managing talent has become an existential crisis for every company. And I noticed some disbursement of the funds across this 100. HR and recruiting were the top categories. But were there any trends that really within those bigger categories that stood out for you that you’re focused on right now?
Jason Corsello: Yeah, it’s a really good question. I’d say nothing that we’ve been able to diagnose just yet. Right. So as you know, HR, payroll and recruiting have been long the most invested or investable areas. I think if you look at the top ten on the list, a lot of them have focused on productivity and collaboration. So companies like Muro and Airtable and Notion, and that’s been an emerging trend over the last seven or eight years of companies like that emerging that are just making us more efficient and more productive. So that’s probably been probably the most interesting trend in terms of categories of investment over the last five plus years that didn’t really it existed, but it’s become much easier to use those tools than ever before. I’d say kind of one last area that we’ve been exploring as as investors is emerging markets. I think there’s just a really interesting opportunity in emerging markets. It doesn’t necessarily suggest it in the future of 100 list or any of the rankings. But if I was going to throw my crystal ball out, I’d say we’re going to see a lot of companies emerge on the list in the next ten years. Assuming we continue to put this list together in ten years of companies that are in Nigeria or Nairobi and Kenya or in places that haven’t necessarily been on venture capital list more recently. So I’m excited about that. One of the top investors, or the top investors in our category has been Y Combinator. And Y Combinator invests everywhere in the world these days. We’ve invested in companies that were Y Combinator, companies that are located in emerging markets. So that’s one area I’m super excited about and we’ve been investing ourselves in.
George LaRocque: Yeah, there’s a lot there to get excited about. I think the adoption is going to pull those markets right along. And of course, they’ll ultimately do business outside of their region as well. But it just represents not just a new market to bring these products out, but in some ways, the more established markets like, you know, the US. Or or Europe are on older platforms and, you know, bought into. There’s a there’s a change and a transformation taking place. Whereas these companies are capitalizing on newer technology and usability in the SMB in those emerging markets that we just really started to see, in my opinion, post 2010. So I think it’s going to happen really fast as those markets adopt and start to see the value from the tech.
Jason Corsello: And they’re huge markets. I mean, many of these markets are three times, four times, even five times the size of the US. Right. So the big concern I have in the US market right now is there’s just a saturation of products, right? There’s literally hundreds of employee engagement solutions, whereas in some of these markets outside of the US. There are a lot of greenfield opportunities that are much larger than the US. Market that we all know about, but we don’t know the sizes of some of these other markets, which are just massive, right, that haven’t had access to technology, that haven’t had the ability to buy technology, because it’s either. Been too expensive or it just hasn’t existed. Because there’s a lot of local requirements for that product, for that HR product or that payroll product. Again, it doesn’t necessarily showcase in the list today, but it’s something that I think we’re going to see change over time. And one of the things I’m excited about doing over the next couple of months is start to dissect some of the data that we have in the list and start to share what’s happening in certain segments of the market outside of the US. In certain categories. Because I think when you start to dig in the data some pretty interesting trends that aren’t necessarily apparent when you just look at the surface level.
George LaRocque: Yeah, well, I think there’s a lot of consistency to what we put out quarterly. We look at where the money’s going, we look at the categories subcategories, but we also look over the last seven years and look at that, how it was dispersed. And as I was scrolling through this, I was just nodding like, yeah, this is all very our data aligns with this. Of course, to your point, this is a list of the top 100. So many of them are later stage than what we’re seeing quarter to quarter, but still the trends are what they are from a category and regional perspective. Anything else you’d like to leave everyone with as far as where to find this or how you’d like them to perceive it?
Jason Corsello: Yeah, I guess a couple of last things to leave you. So first of all, the list can be found at FutureOfWork 100. Com. And it certainly love appreciate folks feedback to the list. I think we’ll probably go through some iterations over time as we start to dissect those, one of my limited partners, investors in our fund, said, is this list going to be the same in twelve months or 24 months? And I was joking and I said, well, maybe the future will work 50 next year because I think this list is going to change quite a bit. As we talked about, the key highlight I think that people are going to see is there’s just been a massive over, I shouldn’t say overfunding, but a massive funding. And as we talked about from the beginning, a lot of these companies have raised a lot of capital at pretty high valuations and a lot is still going to happen in the next twelve to 18 months. Either companies need to grow into those valuations or they’re going to have to raise more capital because they’re still burning a lot of capital. So I guess the NetNet is there’s going to be a lot of movement in this list over the next twelve to 24 months and I’m excited to watch it evolve because it’s not always who raises the most money wins. I’ve seen a lot of companies that have bootstrapped. I was at one of them cornerstone on demand. That didn’t raise a lot of capital. I Think over the span of Cornerstone. Before we went public, we raised less than $50 million, which is unheard of in today’s market. So there’s a lot of companies that I think are going to show up on the list that didn’t. And I think what hopefully this list will also do is that it will highlight the companies need to build a lot more efficient than what we have over the last five years. It’s not just about how much you can raise and telling your friends you raise from great investors. It’s about really building long, sustainable, enduring companies. And that’s what I’m excited about. As investors, we’re going to build really good companies. It’s not just going to be about a race to who can raise the most capital and try to grow as fast as possible.
George LaRocque: Yeah, well, that’s what we like about acadian. Jason. You’ve been in this market? It’s more than a trend for you. There’s a lot of goodwill that you bring to the market. Things like this list as a great example. I know how much time it takes to vet this data, compile this data and put it out there. So kudos to you and everything you’re doing. And thanks for coming and helping. Tell the world about it here at work.
Jason Corsello: Tech cool. Thanks for your continued support, George. I appreciate it and love what you guys keep doing. Great.
George LaRocque: Thanks a lot, and thanks, everybody, for watching or listening. And until next time.
Jason Corsello: Our channel.