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Startup Digest Reading List: Gross Margins, Startup Equity, Rolling Funds, Telehealth

Welcome to this week's edition of the Startup Digest Reading List featuring stories I found interesti
Issue #123  •  September 21  •  View online  •  Suggest a link
Startup Reading List
Startup Reading List
A weekly curated newsletter on startups and technology.
Welcome to this week’s edition of the Startup Digest Reading List featuring stories I found interesting on startups, technology, and venture capital.
I’m glad we can finally see blue skies again in the SF Bay area ☁️. Hope everyone had an awesome weekend! 
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Written by Chris McCann, General Partner @ Race Capital, former Greylock Partners. More about me.
Feel free to share this newsletter with others, sign up here: https://startups.startupdigest.com/
Why Gross Margins Matter
In the early stage startup world there is so much emphasis on annual/monthly recurring revenue, engagement (daily/monthly active users), churn, etc. - it is sometimes hard to remember one of the most important long term metrics - Gross Margins. 
Villi Iltchev from Two Sigma Ventures shares his thoughts on why gross margins matter. TLDR:

  • Gross margins are sticky 
  • Gross margins are highly correlated to revenue growth 
  • Gross margins allow companies to invest more in R&D, sales, and marketing-all of which will help a company become the dominant player in a market.
From the perspective of the most recent high growth companies who recently went public, the average gross margin of these companies were ~78%.
Guide to Silicon Valley Startup Equity
Startup equity is sometimes a confusing topic to understand, especially for new employees as they are evaluating different opportunities. 
Jamie Wong, who joined Figma when it was less than 20 people and is now $2B+ valuation company, gives some real practical tips on things to know about early stage equity
If you’re in this situation, you need to read the whole post but the main topics to understand are: 83(b) elections, early exercise programs, and post-termination exercise windows.
Thoughts on Rolling VC Funds
Rolling funds, as we covered a few times are a new venture capital structure where general partners can advertise publicly, create evergreen funds, and LP’s can subscribe continuously. 
Samir Kaji from First Republic and one of the leading voices in the venture fund ecosystem, shared his thoughts on this new fund structure. TLDR: 

  • Innovation in the VC fund model is rare
  • Most likely it will be a alternative path for individual new managers
  • Rolling funds align most closely with managers with large personal brands (given that you can publicly fundraise with them)
  • LP’s will most likely churn at higher rates
  • While it’s too early to predict the impact of rolling funds, he does not believe this will displace traditional venture formations.
Prediction vs Reality: Telehealth
Back in March at the start of the lockdowns, everyone was predicting that telehealth was going to eclipse in-person doctor visits and this trend would persist. Some early data by Epic Health Research Network (the EHR system that powers 54% of all the medical records in the US) came out showing what actually happened:

  • In April 2020, telehealth visits comprised of 69% total healthcare visits. This was an incredible 300x increase in telehealth visits. 
  • Since then telehealth visits have dropped off to make up 21% of total healthcare visits. 
  • While this is a big drop off, telehealth visits before the pandemic were less than 0.01%
In short, while off its highs, the pandemic did seem to push the current healthcare system to a new reality and will most likely develop towards a different future because of it.
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This Startup Digest Reading List goes out to a wide membership base of founders, technologists, investors, and operators. Feel free to share with others, sign up here: https://startups.startupdigest.com/
Techstars Startup Digest Startup Reading List is curated by:
Chris McCann Chris McCann - General Partner @ Race Capital, former Greylock Partners
chris@startupdigest.com
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