The earnings season is always approaching us, as many software companies shift their internal calendar by a month to avoid closing their financial books in December, giving them all of January to wrap up the fourth quarter.
Introduction
This article explores startups, markets, and money. You can read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.
What does this mean for you and me?
This week will bring us a lot of financial data from software companies, and that excites me!
As someone who spends most of their time thinking about and discussing private market companies, I look forward to reading the results from public tech companies, as they must disclose financials four times a year, providing us with an excellent window into what’s really happening.
This type of data helps TechCrunch+ understand the cryptocurrency market, the initial public offering window, big tech, and this week, what’s happening with software companies.
Companies reporting their third quarter this week and what we can learn from them
Monday: Zscaler
Tuesday: Twilio
Wednesday: CrowdStrike
Thursday: Snowflake
Friday: Unity Software
Introduction
Throughout the eight years I spent in venture capital, I’ve always noticed the challenge the sector faces regarding technical jargon. Venture capital is a sector characterized by big words, from technical abbreviations to buzzword descriptions. This often means we need to be clearer with founders, and it falls on us to use as little technical jargon as possible.
The problem
Traditional venture capital firms are viewed as exclusive and closed off, unlike the “founder-friendly” approach that all institutional heads strive to achieve. While diversity and inclusion have become more focused in the ecosystem over recent years, the language we use still poses a barrier for founders to enter.
We are all guilty of using tech language, often casually rather than deliberately. But I believe it’s one of the major obstacles to making our industry more accessible. While misuse of technical terms may keep some people outside the industry, it also impacts within venture capital firms. Relying on technical jargon also signals a lack of understanding and communication skills among institutional heads. High-performing investment teams should reduce the use of technical jargon and express what they mean to focus on the essence of the founder and company’s strengths and weaknesses.
The solution
It is in the public interest to learn to speak clearly. The ability to communicate clearly and succinctly is a vital skill in any industry, but it is a skill that founders will struggle to develop if they have not been led by example.
Effective technical jargon
Not all technical jargon is bad. When used, ensure it is for the right reasons. It can be effective. But at its worst, it can be a means to keep outsiders out and perpetuate the elite reputation of the venture capital industry.
Lazy technical jargon
I see two types of technical jargon in the industry – effective technical jargon and lazy technical jargon. “Effective technical jargon” conveys common, critical concepts that eliminate stubborn repetition. These are typically abbreviations, such as using NDR instead of “net dollar retention.” While these terms are effective in conveying ideas, they place the burden of decoding on the listener.
An example of technical jargon
For example, an obscure yet entirely fundamental metric is “ARR.” ARR can have two definitions, and rarely does anyone clarify which one they are referring to:
- ARR – Annual Recurring Revenue: Total contract value / Number of years. This usage is the most accurate and original for ARR.
- ARR
- Annual operating rate: recurring monthly revenue multiplied by 12. This metric should only be relied upon when the company has a declining net retention.
- ARR – annual recurring revenue: this is an attempt to use technical jargon to make something that is not ARR sound like ARR.
ChartMogul provided a useful interpretation of ARR in all its forms, which I direct founders to. However, communicating the original intent is more important than translating these terms. When a founder transcends these terms and clearly shows how they define “ARR,” it demonstrates that they have a fundamental understanding of what they are measuring and why it matters. Sometimes, it’s as simple as the statement: “We define ARR as monthly recurring revenue × 12.”
Solution
Venture capital has a role in making people feel comfortable and included in an environment that can be a closed and tight sector. Diversity and Inclusion (D&I) should be more focused in the ecosystem over recent years, but the language we use still poses a barrier to entry for founders.
We are all guilty of using tech jargon, often inadvertently rather than intentionally. But I believe it is one of the greatest barriers to making our industry more accessible. While the misuse of technical terms may keep some people out of the industry, it also affects those within venture capital firms. Relying on jargon also displays a lack of understanding and communication skills among institutional leaders. High-performing investment teams should reduce the use of technical terms and articulate what they mean to focus on the essence of the founder’s strengths and weaknesses, and that of the company.
It is in the public interest to learn to speak clearly. The ability to communicate clearly and succinctly is a core skill in any industry, but it is a skill that founders will struggle to develop if they have not been led by example.
Source: https://techcrunch.com/2023/11/27/saas-earnings-reports-q3/
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