1. SaaS METRIC OF THE WEEK: One I discussed in detail at a session last week: People are the most important (and expensive) metric for any company, especially SaaS (yes, more important than the actual product). Revenue per FTE is one metric to measure regarding company efficiency via people efficiency, but a better one, perhaps, is the ROSE Metric (Return on SaaS Employees). This metric highlights the tradeoffs between a SaaS company's headcount, recurring revenue, and EBITDA growth.
2. BENCHMARKS: ChartMogul launched their 2nd edition of the SaaS Benchmarks Report last week with data from over 2,100 SaaS businesses covering growth patterns and retention, churn, and growth rate benchmarks - LOTS to digest!
3. GROWTH: According to the report above and the SaaS growth in 2022 was the slowest it has been in years, and retention was a key driver of growth, and it caught the attention of Jason Lemkin, who has more to say. Today, top quartile SaaS companies are still growing 65% (and seem to be rebounding) - but in Q1 2021, it was 97%.
4. GROWTH 2: Testing new tactics for marketing growth takes a lot of resources, and most of us often need more time to run experiments? So check this Google Doc from Dashly, where they collected 100 growth marketing hypotheses tested by their experts. (includes advert retargeting, the wait list for product launches, niche glossaries, etc.)
5. SALES COMP: ICONIQ Growth partners just published their Sales Compensation guide (pdf) - a very detailed 77 pages with tons of content, but to tease you into the click: 50/50 base to variable remains the standard comp structure in B2B Sales, OTE/Quota is 4-5x, and Enterprise SDRs need to book 5 SQLs Per Month, but Mid-Market SDRs crank out about 20.
6. FREE TRIALS: According to Userpilot's State of User Onboarding for 2023,74% of SaaS companies now offer a free trial (way up from 43% in 2022). Openview Partners have a great article on how to optimize these free trials. BONUS: Tomasz Tunguz also conducted a survey on Free Trials a few years back, which has one of my favorite facts: Conversion rates aren't impacted by trial length (so make them shorter).
7. PATTERNS: The Data-Driven VC looked late last year at what data patterns can be analyzed across successful startups. Super interesting read, but TL;DR: most important is the number of executives, the split of business versus tech roles, the split of male versus female founders, and their age and degrees.
8. CAPITAL: Another week, another Pitchbook report - this one covers Enterprise SaaS, which remains pretty robust: In Q1 '23, U.S.-based enterprise SaaS startups raised $13.9B (across 363 deals). Funding remained strong for the enterprise SaaS sector last year, second only to the record-setting totals of 2021. YoY, this is tracking down by about 18.5%. But this figure is still way higher than 2020 by about 85% ($34B - $62B).
9. GROWTH LOOPS: Elena Verna (Head of Growth at Amplitude) had an excellent presentation at their Amplify 2022 event about predictable and defensible Growth Loops and how to make money from them. Elena makes the interesting argument that revenue is an outcome and should not be a KPI in Growth. Reforge now has a recent article with some examples and feedback on how to implement Growth Loops.
10. CASE STUDY: Adding onto #9 above, Growth Loops are hard to understand without a concrete example - Git Hub is a great one. This is how they built a 40M+ user platform via loops.
POD OF THE WEEK: From Software Snack Bites, Kyle Poyar from Openview goes all in on tips & tactics, pricing & packaging, sales & marketing, and case studies across the PLG World (including how to make product-led sales work).
1. SaaS METRIC OF THE WEEK: Expanding on post #4 from last week is a revisit of NDR and its cousin, GDR. Modern SaaS is all about acquisition, retention, and expansion; it's a bowtie, not a funnel. Crunchbase has done the work to calculate what good NDR benchmarks should look like.
2. RETENTION: Now expanding on #1's bowtie above - I referenced Gross vs. Net Retention Rates a couple of weeks back, but Chartmogul also has retention trends benchmarks for 2023, which is essential because Companies with best-in-class retention grow at least 1.5-3x faster than their peers - but in this market, it's now more challenging than ever. BTW: According to a report from SaaS Capital, yearly contracts don't actually increase NRR.
3. REVERSE TRIALS: Crack open up your tech dictionaries to add in this term. Reverse Trials are a play on freemium, where new users start with a time-limited trial of all your paid features. At the end of the trial, they can either buy or downgrade to a fully free tier - this article also explains how Airtable does this well. The benefit here is that, emotionally, the users experience loss aversion, where the pain of losing something is twice as powerful of a motivator as the pleasure of gaining.
4. PITCH: Want to compare how your Pitch Deck compares to others? Here is an absolute MONSTER resource link for you (and your pitch team). Pitches from AirBnB, Uber, Shopify, lesser-known startups, and famous flameouts (such as Fyre) can be found on Billion-Dollar Pitch Decks and Pitch Deck Hunt. A cool approach on OpenDeck that lets you search by Category/funding year. If you want to see a breakdown/analysis of pitch decks, then look at Alexander Jarvis - he has over 500 decks broken down by the good and the bad things people do. Added Bonus here - this tweet from earlier last year is liley now redundant thanks to OpenAI (of ChatGPT fame)- Katelyn Gleason observed that no real generation-defining startup has been founded since 2014. But we now have one outlier - OpenAI (2015)
5. LEGAL: In startup land, there is a long tail of BS founders need to navigate, and in a surprise to no one, much of that is legal. So check this huuuuuge article from Clerky on legal concepts all founders need to understand (incorporating, vesting, notes, etc.)l. Ready to get started drafting some documents? Here are some great resources for free legal docs to stick to the mission: Avodocs - 3 free per month. In addition, Cooley Go has a library of documents for the US and UK from Penn State Law School - a startup Kit bundle, and for all you Kiwis, Simmonds Stewart has a comprehensive library of agreements and templates.
6. IDP: You need your Tech Acronym Book open for a new entry. IDPs (Internal Developer Platforms). Stack Overflow's latest developer experience (DX) survey shows that most developers are running a bunch of CI/CD, DevOps, and automation tools. Still, only ~40% had a Portal or Platform to access the right tools and services. According to Forrester - good IDP is key to increasing productivity. Here are some popular players: Roadie, env0, and CloudQuery.
7. STATE OF STARTUPS: The 2023 edition of Pilot's State of Startups is out. The first slide shows we're an optimistic bunch - with 74% of those surveyed being optimistic about their startup's outlook (and view on layoffs) - but less optimistic about revenue growth compared to last year (2x vs. 4.9x). In addition, 56% are remote/office-less, and just over half of startups surveyed have more than 12 months of runway.
8. DEMO: For my daytime business, demos play a pivotal role in our sales process to experientially show and discuss the value we can bring to a prospective customer. The team at Content Beta analyzed a bunch of Product demo videos (100+) and reported back on places where these videos went wrong, so yours don't have to.
9. VENTURE: This is a bit of a pitch deck - but the PDF is packed with really interesting slides on Venture - it's called the Data-driven VC Landscape 2023 (report, I guess?). The pitch is........that VC is pretty latent in terms of digitization - hah! 84% of VCs want to increase data-driven capability, but only 1% have initiatives deployed, and Machine learning models can outperform human investors in deal screening. Talent is distributed equally, but capital is not, with North American startups raising more capital proportional to population than anywhere else, and in terms of accuracy and recall, Machine learning models are on par with the best investors (80%) and relatively outperform the average/median investor by 40%/33%."
10. CASE STUDY: The path to ChatGPT from Rama Ramakrishnan of MIT - Rama gives a long (104 Slide) informal explainer on how ChatGPT was built (including what GPT actually means - slide 42, of course).
POD OF THE WEEK: If you have yet to see SuperPumped (aka Uber: The Travis-blitz scale years), you should, as it's part 1 of this podcast post. Part 2 is the un-ubering of Uber with the post-Travis CEO, Dara Khosrowshahi, turning that toxic, blitz-scale culture around.
1. SaaS METRIC OF THE WEEK: ARR per FTE: Capital Efficiency is a new-fangled metric we all want to track in these LeanOps times. Benchmarking this - the median is $143K per FTE according to the 2022 KeyBanc Private SaaS Report. With public companies, it's double that, according to data from Maritech and Kyle Polar from Openview, breaks this down to tell whether you're on the right track.
2. AD BOT: The internet is only half human - Imperva's annual Bad Bot report revealed almost half (47.4%) of all internet traffic was from bots, with bot traffic of the bad kind accounting for over a quarter (27.7%) of all traffic.
3. DEX: Crack open your tech dictionaries for another acronym-based entry: Digital Employee Experience. This is all about your internal users - your team. In a surprise to mostly no one, 95% of employees say IT issues decrease workplace productivity and morale - which is a bigger deal AND a more significant challenge to solve now that digital tools are more mission-critical in today's WFH/Hybrid/Remote work environments.
4. SaaS (Born again): Great article from Harvard Business Review summarizes how the traditional sales model "funnel" does not apply to modern SaaS and equates a customer life-cyle to look more like a "Bowtie" rather than a funnel shape because most revenue takes place outside the marketing funnel (which is why modern Customer Success and NDR exists).
5. B2B SAAS: Silver Cloud lining time! Adding onto the Harvard Business Review article above is from Boston Consulting Group, who make the case that overall Tech may be cooling off, but B2B SaaS is not. They also bring receipts to back up that claim (B2B SaaS is outpacing Industry growth by 10x) and deliver a playbook that B2B SaaS companies can make to continue the growth trajectory
6. PR: Getting good PR if you're an unknown startup is hard (and also can be seen as a low priority in the endless stable of things to get done) - but it's easier than you think without a publicist. Here is a great 101 article from Point Nine Capital (they call it PR for dummies) on how to get great press coverage. ChartMoguls also have this article late on PR for SaaS - with some sample scripts!
7. ENTERPRISE ADVICE: a16z convened some early-stage CEOs for a recent event, discussing business management need-to-knows like hiring, firing, scaling, sales, and marketing.
8. DOWN ROUNDS: According to data from Pitchbook, down rounds are on the rise but don't worry - read this article with the author making the point that down rounds won't kill you.
9. STATE OF WORK: A new report from software.com on the future of work (for Software Development) is an AI baseline of sorts that we should revisit next year. TL;DR - Devs have better work-life integration post-pandemic (with fewer late nights and weekend work), productivity remains unchanged (BUT devs are spending a little less time coding per week), and that's because AI is starting to show up. It will fundamentally change how Devs work.
10. CASE STUDY: I'm still trying to figure out why, but last week's article on Product Market Fit was very popular, so let's double down on how some popular companies got found PMF (via a Tweet Thread).
POD OF THE WEEK: As AI continues on a burn, founders and CEOs (me included) are discussing how to integrate this new superpower and also considering essential questions around data privacy, accuracy, and pricing (me included). Please take a listen to a16z's Podcast on what we are all already talking about.
1. SaaS METRIC OF THE WEEK: This week, you get to watch a video that should be mandatory for onboarding every person in a SaaS company and required watching annually. It's from David Skok (a legend in the SaaS world) and covers hardcore B2B SaaS metrics such as Rule of 40, Repeatability, Net new ARR, Bookings, LTV:CAC, churn, etc., etc. - it's a metric-packed 20 minutes.
2. AI LAYOFFS: According to Dropbox, AI-based Layoffs are here, same with Insider - not caused by AI but because they need more of it. Overall layoffs in tech remain strong (even though Google's AI is not happy about it), so the sound advice for those who are laid off seems to be to get into AI NOW! (from the former CEO of Reddit)
3. AI VENTURE: A few months back, I noted that Pitchbook had launched an AI platform called VC Exit Predictor. But I totally missed a complimentary report from them on recent VC investment into AI. VCs have steadily increased their positions in generative AI: $408 M in 2018, $4.8 billion in 2021, and $4.5 billion in 2022. So far, in 2023, we're at $1.7 Billion (announced).
4. VENTURE (Private Markets): According to Carta's State of Private Markets for Q1 2023, the total amount of capital raised by startups dropped 80% in the last 12 months (Q1 '22 to Q1 '23). Deal count fell 45% over the same span (an obvious indicator of smaller deal sizes), and 20% of all venture investments in Q1 '23 were down rounds.
5. INVESTOR UPDATES: The team at NFX has read a lot of investor updates and has published a guide where they share common mistakes and how you can avoid them (and also deliver hard news)
6. TALENT: 2023 has flipped from a candidate's to an employer's market, so even though things have changed, what talent is necessary at what stage? Openview has a 2023 Talent report for you and provides excellent insight into the mix of teams at different stages. Early-stage teams are product and engineering-heavy (56%). Past product-market fit, it's all about the go-to-market teams, and sales and marketing h overtake product and engineering.
7. PRODUCT-MARKET FIT: A long-running general rule (called a Growthism) in the Startup world is that getting to $1m of ARR is a strong sign of Product Market Fit (PMF). Kaitlyn Henry from Openview runs contrary to this Growthism, stating that there's no specific revenue indicator that defines PMF. Still, she continues to write about concrete signals of PMF available beyond a $$ amount and gut feel. Read more about all those signals here. This sits well with Brian Balfour's work, who wrote a fantastic article on the subject that is now almost 10 years old and still incredibly relevant for figuring out what stage(s) you may be at.
8. MISTAKES: I saw this original presentation from Anand Sanwal of CB Insights way back at SaaStr back in 2017 - but it's memorable because of its Silicon Valley-like (the TV Show) accuracy of things not to do. 100 things NOT to do when building a SaaS company.
9. ANNUAL PRICING: I'm sure you see this all the time, options to pay monthly or annually on a SaaS pricing page. Great for all you non-consumption-based folks out there. It's a great cash flow choice - but is it the right option for your business? Jason Lemkin has the low-down.
10. CASE STUDY: Ok - looking at #7 above - what could Product Market Fit look like experientially? Asking the PMF question, IMO is always the more noble focus (instead of being focused on answering the question). But sometimes - you gotta know, and here is a case study on how Superhuman did it.
POD OF THE WEEK: Carilu Dietrich of Miro, Segment, Atlassian, and 1Password discusses how to achieve hyper-growth via Lenny's Podcast
1. SaaS METRIC OF THE WEEK: Customer Renewal Rate measures the percentage of customers who renew their subscriptions at the end of each subscription period. High renewal rates inform companies about product-market fit, market, pricing fit, value, business model viability, etc. The authors of this article from Profitwell describe the formula and differentiate between renewal and retention - one is actively renewing, and the other is not actively canceling.
2. DOWN-ROUNDS: According to data from Pitchbook, almost 7.5% of all venture funding rounds in the U.S. in Q1 2023 were down rounds. They also note that over 400 unicorns haven't raised new funding since 2021, and 94% (of tech unicorns) are unprofitable.
3. VENTURE: But wait - there is more. The Q1 '23 Venture Monitor report from Pitchbook dropped last month, and we may have the beginnings of a Startup pipeline problem: The angel and seed markets are at a 2.5-year low. The early stage Venture is the same (A&B rounds), while the late stage is at pre-2018 levels (21-quarter low). CBInsights has the same news, just different graphs.
4. DEMO: This one interests me (and apparently some people reading last week's newsletter) - as the path to Demo is precisely the primary call to action my website is designed for. I assume it is the same for many of you B2B people, so....." Should Your Website Drive Prospects to a Demo?" Read the article to determine if this is a problem at your startup.
5. MARKETING: Bookmark this article from the MKT1 Newsletter that dives into how to organize a B2B growth marketing team as we move away from just a demand gen/Growth hacking worldview.
6. BOTTOMS UP: Crack (get it) open your tech dictionaries for this one. Stage 2 has a Go To Market Analysis Model called the Bottoms Up Model (Bonus Worksheet here), starting with Current State to assess if Sales & Marketing efforts are well matched to the products' finance plan and unit economics.
7. VIDEO: Complimenting the above, nailing introductory and Demo videos is an art form. Need help to figure out where to start or have video-block? Get inspiration from this curated collection of some of the best, and here is a list of 6 videos every SaaS Company needs. (TL;DR Explainers, Company, Testimonials, landing, page, FAQ, and Personalized Sales)
8. INTERNET: Big earnings from Big Tech last week, and see #10 below for a reason for this post; over the past 30 years, the Internet has launched some of the world's biggest companies - Google (~$1.4 Trillion), Amazon (~$1.1 Trillion), Facebook (~$615 Billion), and Netflix (~$150b). BUT - growth was all almost single digit. AI has landed, and none of it is powered by Big Tech (yet). The next earning season will be informative on that front.
9. AI: Another week, another eternity of progress in AI: Italy restores access to ChatGPT, the Godfather of AI quits Google, StabilityAI releases a ChatGPT competitor, Palantir releases a Military AI Platform (and it's scary), and a study found ChatGPT outperforms Physicians both in skill and empathy.
10. CASE STUDY: The World Wide Web turned 30 years old (publicly) last week, and we've come a long way since the Web protocol and code became royalty-free in 1993. Here is a history of how that all started from the OGs of Web Tech (where it was birthed pre-public in 1991) - CERN - with the badass domain of home.cern. The Wall Street Journal has an excellent visual story of the Web with images of Mosaic (the first image-based browser), AOL Online CDs, and Y2K flashbacks!
POD OF THE WEEK: Complementing #6 above - Mark Roberge of Stage 2 covers common SaaS sales potholes and how to avoid them.
1. SaaS METRIC OF THE WEEK: Space Metrics. The biggest rocket in history launched (and exploded) last week, so here is a great deep dive into the relevant Space industry metrics, acronyms, and Market Sizing that's driving real competition (including the loss of Virgin Orbit earlier this month) - Why should we care? The rise of Heavy Launch Vehicles has just started, and see Pod of the Week for more details - TL;DL - it's all about the global movement of goods and materials.
2. SHAPE UP: A refresher for your tech dictionaries and reading list. Software product development requires innovative strategies based on today's cadence expectations of continuous integration, micro-services, feature delivery, and scale. The team at Basecamp (I'm an old-school fan) has developed ShapeUp, its publications, and a toolbox of techniques that can eliminate chaos when it comes to designing, prioritizing, and shipping products/features.
3. SALARY: Hey Founders, a recent TechCrunch article recommends that founders pay themselves rather than doing it for the equity - after all, paying people is what Venture should be for, right? So how much? This doesn't mean you get Market Rates; startup founder's and CEO salaries can often range from zero to a gated raise based on ARR. See here for lots of good answers and also lots of different situations. According to Nathan Latka, a good rule of thumb is that if you're two-co-founders and just hit $1m in ARR, you should make about $100k per year and Increase to $150k at $2m in ARR.
4. PRODUCT BENCHMARKS: I'm hoping for an updated report soon, but this report is a must-read for those of you starting or deep into product-led growth. It's year 3 of the Openview product Benchmark Reports - downloadable here. Products continue to perform well as acquisition, conversion, and expansion tools, so this is an excellent report to gauge what's good vs. what is great regarding product conversion. In a hurry to benchmark yourself? Use this interactive calculator to see how your user journey compares to businesses of a similar size and scale. FUN FACT: 61% of companies in the Cloud 100—including Calendly, Amplitude, and GitLab—leverage a PLG model.
5. GO-TO-MARKET: The team at ContentBeta has teased their now-released Go-To-Market Playbook for 2023. Check here for some great nuggets - guides, ebooks, and research reports are still the best content assets to differentiate your software (more than video), and cold email is still a strong go-to.
6. COLD EMAIL: So based on #5 above, cold email remains a go-to modern-day sales tool - but diving deeper, this method historically has a shallow response rate (1% for cold emails historically but has dropped below 1% in recent years). 1. Jason Bay has spot-on methods to optimize response rates, 2. Predictable Revenue has this PowerPoint deck on the four pillars they think constitute a quality sales-based email campaign. 3. This is a quality case study for anyone with email marketing as part of their businesses - a deep dive into a single cold email and why the author actually opened it (TL;DR - yes, it's all about everything in the design of the email, but its more about how targeted the message is). 4. So here (from LeadIQ) is their 3-step guide to getting noticed by email. And finally, with a VERY focused mission on getting to Demo - a guide to booking 70+ demos/month/rep using cold email.
7. SAAS SPEND: Maybe in part to the AI boom of '23, but there is a growing demand for cloud that will push spending to about $600 billion by the end of the year, according to a new report from Gartner, with 1/3 of that spending on SaaS (about $200 million up 18% YoY)
8. EARLY STAGE FUNDING: Startups go through various fundraising lifecycles. This article guides understanding startup funding/investing for all of you at the early stage of Startup life.
9. ONBOARDING: Userpilot has just released their State of User Onboarding for 2023. 74% of SaaS companies offer a free trial, up from 43% in 2022. There may be a bit of survey bias here as they state that only 4% of companies relied on demos for customer acquisition - prob a ton of enterprise b2b SaaS that would disagree. It may be a hangover from their prior MarTech focus.
10. CASE STUDY: AutoGPT: OK - it's been a couple of weeks since AutoGPT was launched (which is like a year in AI time); here is everything you need to know (via a Twitter thread) - until, of course, things change.
POD OF THE WEEK: Complementing number 1 above. Why should we care about Space? Well, listen to the All In Podcast that hosted SpaceX investors and team members discussing how transportation (especially of goods and materials) could rapidly change in the next 10 years by traveling sub-orbital, at scale, and in big-ass rockets).
1. SaaS METRIC OF THE WEEK: OTMM - aka One Metric That Matters (to you!!!). Another acronym for your Tech Dictionaries. Metrics can be personal, ya' know. And sometimes, all you need is a singular focus to get stuff done. So to shift the needle, check this great article that reviews the methodology to uncover your unique OMTM.
2. DEAD or ALIVE? Time for some reality here. If you want to try (or are expected by your investors/Board) to operate with no growth capital for the foreseeable market future (18-24 months?), then the question to be asking is: Will your business reach profitability before running out of money? Time to take read this throwback article from 2015 that dives deep into this question and also has a great visual calculator.
3. CAPITAL: Tomasz Tunguz notes a strong (and strengthening) correlation between interest rates & venture capital investing. It is strong enough to build a simple prediction of early-stage venture capital activity in 2023.
4. SCALE: This is a must-download. Mark Roberge, the founder of Stage 2 Capital and member of the founding team at HubSpot, has launched this excellent playbook for scaling. In this detailed book, Mark has defined different stages of scale, established quantifiable measures for each stage, structured the sequence and signals of when to move from one stage to the next, and explored the optimal go-to-market design of each one.
5. REVENUE PER EMPLOYEE: As an operator - asking the real question on scale: What should my annual recurring revenue (ARR) be per employee? Here is the chart in one TL;DR visual, but if you want to read the whole article, you can check it out here and also here (PDF).
6. CRYPTO: a16z has released its specialized crypto publications for the year, including the 2023 State of Crypto report that tracks data, indicators, and trends - active users are still way up. They have also introduced their State of Crypto Index, a tool for cutting through the money hype and focusing on crypto as a tech tool.
7. GTM: Go-to-market motions can be pretty specific, and your GTM motions can impact your marketing strategy and your org chart. Mark Roberge at Stage 2 Capital gives some PLG context on Go To Market Strategies. It's a really great presentation - I've watched it twice :-). The slide deck from the presentation can be found here.
8. CHATGPT: ChatGPT has taken the world by storm, and the Product Management, UX, and UI design part of the world have some significant ChatGPT use cases. Lenny's Newsletter has some great examples for getting real PM stuff done leveraging ChatGPT, and FastCompany has some methods that designers can superpower their work.
9. ZERO-OPS: A new entry for your tech dictionary, ZeroOps is a set of practices that result in developers focusing solely on coding and creating, with 0% of their time spent on operations or infrastructure.
10. CASE STUDY: Freemium. It's not necessarily a time to rethink Freemium as a SaaS Go-To-Market strategy, but ProdCamp did and learned a lot after removing and bringing back their Freemium tier.
POD OF THE WEEK: Complimenting #7 above - How to Prepare your Go-To-Market Strategy for a Downturn with Alexa Grabell of Pocus.
1. SaaS METRIC OF THE WEEK: RETENTION: Hey! Capital is currently costly for startups, so prioritizing customer retention is critical. Gross revenue retention (GRR) and net revenue retention (NRR) are key metrics to master. Here is a valuable guide to all things retention (and having merry customers).
2. VENTURE: New data out from Crunchbase last week puts the state of Venture Capital funding worldwide down 53% in Q1, and this includes the mega OpenAI (of ChatGPT fame) raise ($10B) and Stripes Series I (their 18th round overall) of $6.5B.
3. PRODUCT DESIGN: Getting better at Product is a '23 Goal, so I love this step-by-step guide (along with some solid examples/case studies) on how to package up and present all that extraordinary research, design, functionality, and user testing that product designers have to endure.
4. MISTAKES FEATURETTE: A morbid list of mistakes and failures to learn from this week. First up is a list of Seven deadly ones startups make. Next, Jason Lemkin lists his top 10. Failory has a free Notion Document from over 80 startups who have failed and identified some of their common mistakes (some fatal). Marketing problems seem the most abundant (and deadly) - but product-market-fit, market size, and value add are all creeping around too. CBInsights also lists their top 12 reasons Startups fail.
5. IP: If you have not noticed Facebook's general MO, many startups in the software space are vulnerable to their competitors producing copycat technologies. Now Twitter is in Zuck's cross-hairs. Please read this interview from Nico Hodel of Start It Up NYC on how to better protect your Tech IP and Entrepreneur magazine: 4 IP Mistakes startups make and how to avoid them.
6. CONTENT: Viewing content (of your content marketing) as a "product" was an aha moment for me, as was being told that the strategy of "producing ten blog posts" is wrong. Instead, read this Two-part blog (part 1 and part 2) to change your mindset on what good content should be.
7. SECURITY: It's table stakes that Tech companies should be continually concerned about the security of the software being built (it's why DevSecOps is a thing). But for all of you in the B2B Enterprise-y space, technical Due Diligence is also a critical part of the sales cycle (there is a growing need for chief compliance officers, for example). Having some kind of compliance, certification, or training, such as SOC-2 or ISO-27001, can reduce security/audit friction. Here is a guide to getting started on SOC-2 and an ISO-27001 guide. BONUS - I'm currently trialing trustshare.com as my compliance portal.
8. DIFFICULTY: Having all your security and compliance ducks in a row is MEGA hard, so the payoff (in terms of customer ACV) has to be worth it. Payoff > Difficulty. This is called the Difficulty Ratio - discussed more in a Substack post from David Sacks earlier this month.
9. AI: Weekly AI posts will likely be the norm for a bit - because the space is moving that fast right now. This week is a SaaStr Workshop Wednesday presentation from Tomasz Tunguz that he created via Ai Startups (Gamma, Midjourney, and IA Presenter) covering the four questions a startup should ask themselves about building a startup that uses generative AI. BONUS: The Video is a must-watch, too (starts at watch the whole thing as there is a BUNCH of value before Tomasz even gets to the presentation - and the Q&A after).
10. CASE STUDY: Complimenting #4 above: The top 10 Mistakes from the CEO of Gainsight - Nick Mehta - on his way to 100m ARR.
POD OF THE WEEK: Complimenting #4 above and probably one we all need to share around - this brilliant video covering all aspects of failure and resiliency - and how to get back up when you get let down.
1. SaaS METRIC OF THE WEEK: Burn multiple measures the capital efficiency of a startup. Burn multiple calculated by net burn/net new ARR. In a surprise to no one (because Burn is now a terrible word in this new market), Startup burn multiples have changed markedly in 2023.
2. PRODUCT LED MARKETING: Here is the ultimate deep-dive into PLG from Kyle Poyar of OpenView, one of the OGs of the PLG world. It contains tactical advice, real-life examples, and actionable next steps.
3. TECH MACRO: Every year, Benedict Evans goes on an absolute blinder in PowerPoint, exploring macro and strategic trends in the tech industry. He's back with this year's version noting that (across his 104 slide deck!) big-tech is becoming bigger-tech and the ultimate gatekeepers of the tech economy.
4. PRODUCT DEBT: Modern-day businesses create Technical Debt via Product Debt. Stop taking shortcuts, as it's all the decisions that have been made, often tactical and acute, without a clear product vision or sufficient consideration about the long-term effects of that moment/decision. The link above also has a great case study of Google Messaging's product evolution, but this link also has a great PM-focused article on how to design out of it (or at least your backlogs).
5. CONSISTENCY: I have been delivering this newsletter weekly since December 2018, holy smokes - I even took significant breaks that no one noticed! So this article resonated this week on why being consistent matters - outside of his monetization, podcasts, etc. :-).
6. OPEN SOURCE: Here is an excellent dashboard of the top open source projects by growth, retention, and usage. It can be visually confusing, so read the Substack article outlining the dashboard in more detail here.
7. API: APIs allow different programs and services to get along and work together, which is why they're essential in today's crowded technology space. For your continuing education credits: A Full Guide: Understand Everything About APIs (with Examples).
8. AI: Stanford released a massive 386-page report on the state of AI, showing how heated the market has been getting for years - Newly funded AI startups have tripled in the last ten years, primarily in the US - and also showing how the past three years have been incredibly rapid paced across many measures (including AI-related lawsuits).
9. PRICING FEATURETTE: Optimizing Pricing is complicated, and it's never (ever) perfect. a) If companies decide to have a pricing page on their site (which is that whole other topic. Jason Lemkin lays out some thoughts of what makes a good pricing page. b) McKinsey gets technical, outlining how to leverage big data to make better pricing decisions. c) Want to look at competitor prices? Comptera has a great article on conducting a high-fidelity competitive pricing analysis project, and d) Productled has the ultimate "How to build the right SaaS pricing page" in 2023.
10. CASE STUDY: Down rounds are pretty standard this year (and probably next) - so what can we learn from Down Rounds of the past? Here is an excellent report about Docker which went through a down round and a 75% headcount reduction
POD OF THE WEEK: Complementing #2 above - The ultimate (podcast) guide to adding a PLG motion from Hila Qu, former director of growth at Reforge and GitLab.
1. SaaS METRIC OF THE WEEK: TTV - Time To Value: This week, I've had some mentoring discussions about Time to Value. Great to bring it back - TTV is similar to ROI (return on investment). Still, instead of realizing the financial success of an investment, it implies achieving the effectiveness of an investment or for a customer to realize value out of your product. There is also a corollary "trough of disillusionment" your customers may need to navigate.
2. EXPERIMENTS: In another very enjoyable mentoring session last week, we took a deep dive into experimentation - because every day, every path you take towards growth and revenue should be a hypothesis in startup land - Time to upskill your experiment skills by reading how to run a growth experiment (in 4 easy steps!). Testing versions of things is something to embed across your company and culture as you experiment toward growth - it's why failure is vital to not failing. When conducting experiments such as A/B tests, start with this refresher and then this Step-by-Step Guide. Go Practice has some great advice on how to make these experiments run faster too.
3. SALES: Looking to establish your first (non-PLG) SaaS Sales Comp plan? So first, check this excellent report on the State of Startup Compensation from the team at Carta. They look into questions such as what makes up for the largest share of compensation spend, what roles get paid the most, and whether startups are still hiring remote workers (yes, remote hires now represent 62% of all new contracts). And then, read this post from Jason Lemkin on how to construct a framework for your first SaaS sales compensation plans.
4. SDR BENCHMARKS: The new 2023 SDR Bridge Group SDR Survey is out - answering all the great benchmark metrics such as How much time does it take for an SDR to ramp up? And how many calls does it take to book one meeting? What about the SDR:AE ratio? BONUS: SDR compensation calculator (Excel).
5. ASYNC CULTURE: Crack open your tech dictionaries again for this one - it's something we do at my day job; I just wasn't aware there was a label for it. Management and leadership can get asynchronous with 100% remote and distributed teams across different time zones. So this is a great Async playbook for those who need to practice this. It's going on my wall, so I can work on a couple of these pillars (especially around documentation).
6. SALES CYCLE: Ouch - According to Tomasz Tunguz and his 2023 Go To Market Survey, the typical Startup saw a 24% increase in sales cycle in 2023 in the past year. It's worse if you sell to Enterprise - up 36%.
7. AI: We're (un)officially in the "Age of AI" - and anecdotally to me, it seems about right as it's everywhere conversationally, and I use it daily (except in this newsletter because writing is a unique tool). It looks revolutionary - but here is how we got there. BONUS: A post looking into the origin, drama, and people behind OpenAI, the parent of ChatGPT (and, of course, Elon is there).
8. CRYPTO: Coinbase was served a Wells notice (I just heard of this term this week) for trying to follow the US guidelines for digital assets. A tougher environment for all Web3 companies is inbound, and a significant regulatory battle is incoming.
9. CAPITAL: Jason Lemkin notes that it's now year 2 of the venture downturn, and "No" is becoming the default response. According to another post from Tomasz Tunguz this week, the most challenging round to raise in 2023 is Series B (where most of those NOs are).
10. CASE STUDY: Complimenting #2 above on experimenting. On the extreme end of A/B testing is booking.com, which often runs over 1,000 tests simultaneously! But here is the payoff: That flywheel enabled Booking.com to compound at healthy growth rates while maintaining ~30% EBITDA margins and scaling Google ad spend to approximately $4 billion per year!
POD OF THE WEEK: The extension of #5 above on how to go totally asynchronous with a distributed team with no internal meetings.
1. SaaS METRIC OF THE WEEK: VALUE-BASED PRICING: It's a tough nut to crack as it makes the most of what the maximum cost customers would be willing to pay for a product or service - this means there is no magic guesswork or thumb-suck number. These prices need to be arrived at Empirically. Paddle.com has a good guide on what this means (with examples), and Profitwell has a comprehensive guide on making it happen (and how to go about calculating/measuring it).
2. PRICING: This one is totally a follow-up to #1 above and is interesting as the author is pitching a new, better (gasp!) way to decide your product pricing HINT: It's all about how you ask the question. And this is a variant of how to research and implement a value-based pricing model.
3. ENTERPRISE: Moving upmarket into larger organizations is a standard SaaS growth strategy. Increasing ARPU (Average Revenue Per Customer) is good! But it takes a lot of work to pull this move off as a tiny startup selling to large organizations. Here are 10 tips for selling to big companies as a little guy.
4. PERSONALIZATION: SaaS marketers have been increasingly turning to personalization in recent years to increase conversion rates, improve customer success, and increase the quality of sales/marketing funnels. So check out this great article from Chart Mogul on the (modern-day) personalization fundamentals. As a teaser: Personalization reduces acquisition costs by as much as 50%, and 87% of companies see a lift in key growth metrics when they employ personalization.
5. PLG DATA: One of the keys to excellent product-led growth is capturing and leveraging the right data to determine what to build next. Here's how to do that (REALLY in-depth with great examples).
6. INFLUENCE MAPS: I love discovering great tools - especially visual ones, as my mind works mainly in diagrams. Add Influence Maps to your tech dictionary this week - as one of the coolest Marketing Frameworks I've come across in a while and is an excellent tool for answering strategic marketing questions.
7. DEV: Great report from HeavyBit covering Software and Development Trends for Engineering Leaders, 16 pages of quality, including best practices, top languages, trends, and spending forecasts (Productivity Tools are top).
8. FINANCES: For many startups across the globe, it's been a heck of a month for finance teams. So for pre or post-mortem reasons, look at these guides on cash management and treasury management to help with more strategic planning or finance-based BCPs going forward. They are Google Docs - so be sure to make a copy!
9. VC AI: Pitchbook has launched an AI platform called VC Exit Predictor. This new tool aims to answer the question, "Of all the startups and funds, which ones are worth putting time into?". A full PDF report can be viewed here.
10. CASE STUDY: The Airtable links last week were popular - so doubling down on journeys into the Enterprise this week with a great article from Canny on how (tactically) they did it.
POD OF THE WEEK: From Ophelia Brown, the Founder of Blossom Capital, discusses why growth investors ruined the Venture market (mainly via follow-on investing), along with some insight into the European VC market.
1. SaaS METRIC OF THE WEEK: FINANCIAL MODELING: Fun fact: SaaS financial modeling is uniquely complex and requires careful thought and expertise. Luckily, there is a boatload of helpful content on the web to help with financial modeling. Baremetrics are incredible at this and have 1. An overview of why SaaS metrics are different; 2. A deep Dive on a usable model for you; 3. A Google Sheet that is ready to go (make yourself a copy).
2. SILICON VALLEY BANK: This week started with absolute chaos in the startup world, and hopefully, the crisis has been diverted, as it would have been a global GFC-style event. For an accurate unit economics breakdown of what caused the run on SVB leading to its demise in under 48 hours, read this post - or here for a longer Twitter version. I can't wait for the movie. (note this is written as of Wednesday this week, leaving plenty of room for more chaos before publication). Tomasz Tunguz has some wise words though "Take a Breath."
3. DILUTION: I didn't mean to scare you with that word. It's one of the most feared words a founder can hear. So here we go - let's make it a benchmark. What is the average ownership percentage by SaaS Founders at the time of IPO? Sammy Abdullah takes a review, and the median level of founders' ownership is 14% while the average is 23%, with VCs owning about 54% on median. Obviously, there is a significant difference in Bootstrapped vs. not in this dataset.
4. SPEND: I can't report all doom and gloom this week. For startups that sell B2B, good news, the Q1 2023 Cloud Software Spending Survey from Battery details a robust software spending budget. 46 % expect to increase budgets in 2023.
5. EXPENDITURE: Rounding out above with some opposite state stuff: We all know running a SaaS business is basically a Ponzi Scheme of having to spend a bunch of money on other SaaS Products. So in these operationally critical times, what are ways to cut some spending, especially as SaaS pricing inflation is five times higher than market inflation? TechCrunch has an article promising to cut your spend by 30%.
6. SHERLOCK HOMEBOY: Crack open your Tech Dictionaries so you can add this awesome phrase. The Sherlock Homeboy Technique is a way to reverse engineer your Content Marketing strategy for the rest of the year.
7. CHURN: Churn is not a Customer Success problem- it's a business one. Check out eight ways to move the needle on churn in this current economic environment.
9. AI: Sample size of 1 - NetDragon Websoft, a Hong Kong-based online gaming firm ($2.1B in annual revenue), has appointed an AI CEO (Ms. Tang Yu). Check out how Ms. Tang Yu outperforms the Hong Kong Stock Market by working 24/7 for $0 in salary. Not too bad considering that at Fortune 500 firms, the average CEO pay is now about $16m per year - time to take another look at #5 above.
10. CASE STUDY: Moving into the Enterprise is no mean feat. Here are the top 5 Lessons from Howie Liu, the CEO of Airtable, on their upmarket mission. Bonus content: how Airtable also leverages SEO.
POD OF THE WEEK: Complimenting #10 is from Lennys Podcast on Lessons from Airtable's unconventional growth strategy and how Airtable found its first super-users.
1. SaaS METRIC OF THE WEEK: CAC PAYBACK: Cash is king in the SaaS world, and the shorter the payback period is for the acquisition (CAC), the better (getting to cash flow positive). Here is an article that looks at ways to shorten CAC Payback.
2. OUTBOUND vs. INBOUND: How you handle an inbound lead vs. an outbound lead is quite different. Check this article from Jack Jorgovan on how Outbound leads differ (and how to close them). Oh, and do you want to binge some Outbound Sales TV? The team at predictable revenue has been running over 50 outbound sales experiments to find out what works best (and what doesn't). Watch the whole series on YouTube.
3. MLP: For your tech dictionaries - that's Minimum Lovable Product). MVP (Minimum Viable Product) is OK, but what if no one likes it? FirstRound capital uses the analogy of burnt pizza - pointing out that the fastest and cheapest functional prototype could produce a poor or flawed version of something that people may actually love.
4. SALES EFFICIENCY: Tomasz Tunguz has a banger of a post that takes a deep dive into Sales Efficiency through and after the COVID era. Since 2016, on average, Public SaaS sales efficiency has dropped from 52% to 47% (a drop of about 10%), and he notes that it isn't COVID - it's competition that's creating the slide.
5. PRODUCT MARKET FIT: To me, Product Market Fit is as constantly evolving (and never finished) as pricing. But way smarter people than me write about PMF in incredibly detailed ways - such as Brian Balfour, who wrote a fantastic article on the subject that is now almost ten years old and still very relevant for figuring out what stage(s) your startup may be at.
6. PRICING: Speaking of pricing never being finished (see above), here is a bookmarkable guide on leveraging product usage data to evolve your business and product packaging and pricing.
7. WEB3: The space has been quite volatile for several years, but investments and startups continue in the space, and McKinsey has a great article outlining the structures of Web3 that can take it beyond all of the hype and even have one for all you Web3-new CEOs.
8. FRAMEWORKS 1: HEART Framework - this was designed by Google'sGoogle's research team and is a methodology to improve software user experience (UX). It'sIt's an acronym for measurable UX evaluation: Happiness, Engagement, Adoption, Retention, and Task Success.
9. FRAMEWORKS 2: PIRATE METRICS (or AAARRR) were first proposed by 500 Startups. The great thing about this acronym-based grouping of metrics is that it can apply to non-software products or services as well as traditional SaaS as it's all about awareness/activation: Awareness, Acquisition, Activation, Revenue, Retention, Referral.
10. CASE STUDY: Sequoia Capital. According to a report from CB Insights (PDF version here), Sequoia Cap backed almost 100 startups last year. 1/4 of which were fintech startups. Three of the four deals in the capital markets sub-sector were follow-on rounds, meaning they remain pretty frothy in this category.
POD OF THE WEEK: Being first to market is not necessarily a winning advantage (looking at you, Friendster). Des Traynor (co-founder at Intercom and a great speaker) dives into elements that make a move into Enterprise effective.
1. SaaS METRIC OF THE WEEK: Usage-based pricing and MRR/ARR models are often mentally hard to compute collectively (I know this from experience), so this article was a sight for sore eyes earlier this week, discussing the mental mapping required from Annual to Monthly and Usage-Based Metrics (and introducing Implied ARR) from David Kellogg. A recent analysis of usage-based pricing from Bessemer Ventures is here to help you think about your own pricing models.
2. CUSTOMER JOURNEY: What the heck is a Customer Journey anyway, and why do you need to create one? Now that you know you need one, mapping out a Customer Success Journey via a visual map is a great way to tell what areas a Customer Success Team needs to be involved in (and what their responsibilities will be) via various engagement models. And a "complete guide" with some great, modern templates can be found here.
3. VALUATIONS: AngelList keeps a comprehensive set of Startup Valuation Data. Here are the highlights: Average valuations for startups in Q1 2023: Pre-seed $10M, Seed $19M, Series-A $95M.
4. SALES vs. MARKETING: Great (and relatively short) read from Jason Lemkin here for all you early-stage people discussing how a startup's growth problem was misdiagnosed as a sales one (when it was actually a marketing problem).
5. SLOW: One lesson my brain still resists thoroughly learning is that with any new technology adoption curve, regardless of how progressive or latent the core demographic is, customers will move way slower than you want them to.
6. REPRESENTATION - VENTURE: Women-founded startups raised just 1.9% of all VC funds in 2022, a drop from 2021. This comes at a cost for Female Founders who fundraise only from Female VCs. Women-led firms whose first round of VC funding was raised exclusively from female VC partners were two times less likely than those whose first round included male partners to eventually raise a second round.
7. REPRESENTATION - Web3: In Web3 only, well known for CryptoBros, 13% of Web3 founding teams include a woman, and only 3% have teams exclusively made up of women. Nasdaq has gone even further to ask what it is people are even building in the metaverse given the current gatekeeping status quo (and who's on a mission to fix it).
8. BUYOUT CONTRACTS: SaaS is increasingly competitive across markets and niches. To be successful, there are some cut-throat things you will have to do, one of which is offering buyout deals. If you want to steal a customer from the competition. Jason Lemkin goes into some detail on this topic via this post (including when Buy out contracts make sense and how to structure commission.)
9. ZERO-BASED DESIGN: Internal performance improvement may be higher on your agenda this year compared to previous years, so crack open your dictionaries to add Zero based Design. McKinsey goes even deeper than the Bain article linked with this paper, looking at what they call "Operations Practice," which is the kind of modernization process problem that companies such as ProMapp help solve.
10. CASE STUDY: Surely you have all tried ChatGPT out by now - but how the heck does it actually work? Here is an inside look into what ChatGPT is and how this kind of model (large language models or LLM - for your tech dictionaries) actually work.
POD OF THE WEEK: The extension of #6 above, a Podcast from TechCrunch covering more in-depth numbers and subjects such as pitching bias, the complications of imbalance, and more
1. SaaS METRIC OF THE WEEK: Here is another list (seven) of the SaaS metrics that VCs evaluate Startups on - the bonus is that it comes with a downloadable Google Worksheet template (make a copy for yourself).
2. BUSINESS MODEL: You will be asked often, especially when pitching, about your go-to-market business model: This is a pretty long but very high-value read from Alex Jarvis with real-life examples of good business models (and some good humor thrown in). The business model is always more important than the product (but of course, they both matter - but so does timing. There is a more extended PDF version - so I got that for ya too.
3. MARKET SIZING: The dreaded slide on everyone's pitch deck that is required to outline the business model and pricing in #2 above. What's the size of the market? TL;DR if the market is small, same with your startup. Understanding the nuances of TAM, TOM, and SOM is a great way to complete the slide but get started with your TAM first via this guide from Bling Capital on how to size a market (in 30 minutes!).
4. VENTURE 1: A couple of weeks back, I discussed the potential of a mass extinction event coming for early & mid-stage startups (#8 and #9)- same is probably valid for Venture and, according to this article, a "horde of ailing venture capital zombies" will emerge in the coming years.
5. VENTURE 2: Adding to evidence for the impending VC Apocalypse above, January's VC funding landscape stats are in this Crunchbase report - all rounds were down except seed. And that includes the banger of a round from OpenAI (ChatGPT's Parent) of $10 Billion.
6. SMB: In general, the Old SaaS-Skool guidance was to start chasing the most significant contract values as soon as possible (hello Enterprise!). But according to Craft, newer school thinking is to focus on SMBs, as sales velocity is a better strategy than chasing contract size - and SMBs are plentiful. However - the downside of SaaS-for-SMB is discussed in this article from SaaStr - CHURN!
7. PRODUCT LED FRAMEWORKS: Bookmark this as it's the first part of a pretty amazing 3-part series from Calixa covering PLG fundamentals, starting with defining what a PQL (product qualified lead) is and how to find it.
8. B2B MARKETING 1: SaaS B2B Marketing is a unique beast. I'm running a new demand generation campaign and finding out the hard way that growth marketing and demand generation are different. So don't learn the hard way, as I did. Instead, read this too-late-for-me article from Emily Kramer if MKT1 on the difference (and how to organize your B2B growth marketing team).
9. B2B MARKETING 2: Now that market conditions dictate profits are more important than growth, what is the role of growth marketing? And is it even marketing in the first place?
10. CASE STUDY: According to the Bessemer Cloud Index, only 11 of its 75 companies earn a profit today, but here is Slab's path to startup profitability.
POD OF THE WEEK: A great discussion in the Y-Combinator Podcast on the normalization of Startup jobs in the US and beyond (and how the drift from non-conformists (less than 15 years ago) to mainly conformity today.
1. SaaS METRIC OF THE WEEK: Net Dollar Retention is an essential metric in the new world of Product Led Growth. It's used to help answer the following: Does my Startup need to increase customer acquisition/marketing spend? Crunchbase has already done the work to calculate what good NDR benchmarks should look like, but this month, Tomasz Tunguz looks at what it takes to achieve 200% NDR!
2. POC: I switched to proof of concept (POC) based paid trials as part of our enterprise sales process last year, and I like it! It's working well as part of our customer journey and is the fastest time-to-value metric we can deliver for various enterprise stakeholders. Want to get your POC up and running fast? The team at Work-Bench has a step-by-step framework AND a template of a POC Agreement for you here.
3. CAP TABLE: How do you best manage dilution from a cap table perspective? Here is what is considered "Normal," and read this article from Heavybit that discusses Cap Table management in relation to growth and how to manage that Option Pool.
4. INCENTIVES: Need to move beyond Founder-led sales in your Startup? Close.com has a rundown of five different kinds of Sales Incentive programs, one of which I'm sure would be fit for purpose for you (along with incentives to keep a sales team motivated. This post from Jason Lemkin also outlines how to construct a framework for your first SaaS sales compensation plans.
5. PROFESSIONAL SERVICES: It's a weird open secret that many B2B SaaS businesses generate significant Revenue from implementation and deployment projects, often captured as Revenue from Professional Services. This week Dave Kellogg has a post - called the Professional Services Paradox, where there are times when only a Startup can deliver the services needed to execute a transformation strategy. BTW - on average, Service Revenue as a percentage of Total Revenue caps out at 11% with Enterprise focused businesses. However, even at the lower end of town, it's still 5% of revenues with SMB-focused companies. Fun fact: more professional services, less churn.
6. SALES: ZoomInfo has unleashed an excellent playbook for all your business development teams, which I've already shared with my team. The PDF contains 16 of the best go-to-market plays from B2B sales and marketing pros across different sales funnel stages.
7. DESIGN: One of my many startup hats forces me to spend more time in Canva than I should (even though I'm pretty much canceling my Adobe Subscription as Canva can manage about 95% of my needs) - so this article a) Is visually lovely to look at and b) is in my Bookmarks of guides to reference: Visual design rules you can safely follow every time.
8. GENERATIVE AI: I bet most of you are already dabblers or active users (<cough> ChatGPT <cough>, so this should already be in your tech dictionaries, and by all accounts, Generative AI will be the next Consumer Platform. The use cases are everywhere - at least for me - and in particular, my new evolving relationship with Search and Google, a targeted integration into the business (KB articles and User Manuals), and my proximity to code.
9. CAPITAL: The article above on Generative AI then leads into more essential questions as this is a new functional application layer, so where will the value come from?
10. CASE STUDY: Founder-led sales is a well-documented part of the startup journey, often with inexperienced or more technical founders. Here is a list of 10 Founder-Led Sales lessons learned from a recent Race Capital roundtable.
POD OF THE WEEK: SaaStr is now running workshops every Wednesday - a great concept that hopefully lasts. Jessica Bartos of Salesforce Ventures was on the last one and noted that only 150 private SaaS companies have hit $100m+ ARR.
1. SaaS METRIC OF THE WEEK: ACV, or Annual Contract Value, is one of the most popular metrics in the SaaS world. This article from Chartmogul goes into detail about what it is, how to calculate it, and how to leverage it in your business. Here are some excellent recent data on ACV within scaled SaaS companies. TLDR, the median ACV is $49K.
2. WEBSITE: Quick Question "Is Your Website Stressing Out Visitors"? Quick Answer: Probably. Read further on the WJTBD (Web Jobs to be Done) or TL;DR - remove the noise and focus on the jobs you need the website to do.
3. VENTURE: From Law of VC is the Ultimate Guide to Fund Terms that can tell you all of the critical terms that govern venture capital funds so you can nod knowingly when pitching to all of those VCs.
4. REVIEWS: According to Gartner's 2023 Global Software Buying Trends report, user reviews, and ratings influence the purchase decisions most - 41%. And of those reviews - customer reviews are trusted by 49% and peer recommendations by 50%. On the other hand, recommendations from industry influencers are used by only 37%, 32% have outgrown their current technology, and 30% have concerns about security and cyber attacks - good information to know when targeting new SMB B2B Customers!
5. BUYERS: Software is generally a boom during Economic downturns - the downside of which is more competitiveness. So take note that in the same report above, almost 70% of small to medium-sized businesses plan to increase their spend on software this year, many to increase productivity (47%), and security is a Top Priority for Software Buyers at 42% (more so than ease of use - 38%).
6. PRICING: It's never right as it has to evolve (and we need to charge more). Intercom makes the case that a solid pricing strategy helps shape an entire business model.
7. PAYFAC: Crack open them Tech Dictionaries again: PayFac (or Payments Facilitator) is something I have implemented to create an additional (recurring) revenue line to the business, but it was only this week that I discovered a pre-existing portmanteau for that. Stripe has a good guide on bringing PayFac in-house, and here is a downloadable PDF on the same topic. Very low touch once it's up and running!
8. STARTUPS 1: This is a bit of a ying and yang 2-part post: Tom Loverro of IVP makes the case via a Twitter Thread (and also mentioned in last week's All In Podcast) that there's a mass extinction event coming for early & mid-stage startups this year and next (due to short cash runways and the acute inability to raise cash in this market).
9. STARTUPS 2: To contradict (a little) the post above, Nnamdi Iregbulem, a Partner at Lightspeed Venture Partners, makes an in-depth argument that we don't have nearly enough startups (well, at least the good ones)
10. CASE STUDY: Successful onboarding is challenging in person - it's 10x harder in today's remote work environments. This is how Zapier does it (and leverages their own product to use automation to do it), and here are some lessons learned from Slack.
POD OF THE WEEK: The Video-version of #10 - Employee onboarding secrets from Zapier founder Wade Foster.
1. SaaS METRIC OF THE WEEK: Churn is the metric that will make or break a SaaS business. This article is part one of a two-part series but lists 7 retention strategies that can assist you in retaining as many customers as possible:. Starting with scoring yourself to gauge where the business needs to improve.
2. WEB ANALYTICS: Being more data-driven is an intelligent 2023 move. So read this long-form article on how to be more web-based and data-driven this year (and why that's important).
3. EMPLOYEES: Here is a great question: How many employees should you have based on your ARR? In 2023 this answer may be much lower in our leanops market, but my former big boss David Sacks has a great slide from his SaaStr presentation on optimal SaaS Org Charts (Full deck here) - Series A is 40-50 at 1m ARR. Yup, that's only $20-$25k ARR per employee - full report here, which expands into what roles you should hire and what the org chart looks like.
4. MVT: Here is another one for your tech dictionaries: MVT or Minimum Viable Testing, which is about creating hypotheses and conducting tests that allow you to predict if a market will appreciate a product before even launching an MVP.
5. CYBER/API: APIs are big business these days, and the flip side of the rise of the API economy is that it catches the eye of cybercriminals. Based on figures from Salt Security's State of API Security Report, 94% have experienced security problems in production APIs, with a 117% increase in malicious API traffic over the past year. Check here for Trends, and also read on best defense practices.
6. MARKETING: So, how do you measure up in 2023 as a marketing business (that's all we secretly are)? Get started here with the 9 marketing disciplines of great SaaS companies, created by the former CMO of Zendesk and Slack, then complete the Marketing Scorecard Spreadsheet here, scoring each on a 1 to 10 scale. A deeper explainer is in this post.
7. LEAD SCORING (in a PLG world): Lead scoring is a way of assigning numerical values to prospects so sales and marketing teams can optimize their funnels and convert faster - so how does that work in a Product Lead World? This blog has all the answers.
8. LANDING PAGES: See below's Case Study link for the master of landing pages (Zapier had 25k of them). Scrapbook (who are getting very close to taking my money) looked over 100 SaaS landing pages and created a helpful (at least to me) landing page optimization checklist for SaaS.
9. MEETINGS: We all probably attend more meetings than we need to. In the US, there are 55 million of them a day. So check this great episode from Freakonomics on how to have healthier meeting habits or even better (if you are of the Product mindset), "If our meetings were products, no one would buy or renew" so here is How To Product Manage the Sh#t out of your Meetings.
10. CASE STUDY: I love Zapier (and their 25,000 landing pages). Here is how they built up one of the most incredible content marketing machines around.
POD OF THE WEEK: Complimenting #3 above is the SaaS Org Chart Podcast live from SaaStr with David Sacks. (Video version here)
1. SaaS METRIC OF THE WEEK: This week is another collection of metrics - this time from Olga Berezovsky, who runs the Data Analytics Journal newsletter, which digs down into standard SaaS metrics and the preferred Board KPIs to measure, be cautious about (ARPU, CAC, and LTV, Churn), and not to overlook (DAU/MAU, Expansion).
2. PRICING: Over the past decade, software pricing has shifted from per-seat licenses for legacy software to subscriptions with tiered pricing for SaaS. We are now headed into pricing based on actual usage as the primary pricing method (three in five SaaS companies now have consumption pricing deployed). Take a read of OpenView's latest guide to pricing transformations to see how you may need to review pricing for 2023.
3. CUSTOMER SERVICE: Add this to your bookmarks - I've already used a couple of these templates: 25 Customer Service email templates to cut response times.
4. ANNEALING: Crack open your Tech Dictionaries for the first entry of 2023: Market annealing is a company's effort to create a market pliable enough for early go-to-market motions. Often used when a company has a better idea than the market for what the market needs - check the article from a16z here - I would put all of Web3 and Quantum into that bucket.
5. PLG: (for complex products): While PLG is not a fit for many enterprise players yet - there is hope. Companies are starting to apply PLG techniques in totally new settings, such as complex (more enterprise-like)products.
6. QUIT? Sometimes after countless attempts, experiments, pivots, and money burnt, it's time to walk away - hard to do if you are full of grit and determination - but Accelerated has a great blog article this week with a framework on giving up.
7. CONTENT MARKETING: Whole new year, whole new content marketing strategy, right? Get up to date on the latest content marketing trends (via Stats you should know) with this article from Search Engine Journal. Also, be sure to read here on Startup content marketing mistakes and spot quiz hot-shot: How long should a Blog Post be? Hypothetically this long (but also literally not that long as it's a long-ass blog post).
8. MULTIPLES: The Clouded Judgement newsletter took a look at SaaS revenue multiples this week, and here is the news: Overall Public Median now sits at 5.2x - public multiples don't have a direct correlation to private multiples, but they are definitely a signal of the direction private valuations are trending.
9. LAYOFFS: Another big week for layoff announcements - this time from Google and Spotify. This prompted Tomasz Tunguz to look at startup layoffs and how they may differ between B2B & B2C companies. TL;DR - B2C companies suffer more cuts than B2B (likely due to longer-term contracts)
10. CASE STUDY: This is a great deep look under the hood of a startup's journey so far (six years in), covering equity allocation, expenses, product, growth challenges, and wins.
POD OF THE WEEK: We might not know what the future holds for Customer Success, but we're willing to go all-in on "efficiency" becoming the industry's word of 2023. Hear more on the future of Customer Success with Alli Tiscornia, chief customer officer at ChurnZero.
1. SaaS METRIC OF THE WEEK: a16z has the top 16 startup metrics that, from their VC perspective, are the most valuable to measure.
2. GROWTH: Silicon Valley has an obsession with growth. The 40% rule and the Mendoza line are examples of that. Tomasz Tunguz takes a view this week of growth rates and why they matter so much (it relates to the future values of a business and when that is created).
3. CYBER: With all kinds of cyber attacks happening lately, it's time to hammer this home: Regardless of the size of your SaaS business, for 2023, security should be part of your dev cycle, but also know your weak spots. Founder Institute discusses 6 points of vulnerability in a tech stack that may be a bit leaky. Security needs to be rolled up into the process: DevSecOps being the new port-portmanteau, or is that SecDevOps? - anywhoooo……beyond the DevSecOps article, Heavybit also has a great article discussing cloud security challenges (as apparently, if we extrapolate this out, 88% of SaaS is now sitting on public cloud).
4. EMAIL: In the middle of last year, Mailmodo launched a list of SaaS-specific Email flows and tips across customer flow from cold nurture to Churn prevention. It's a great article, and they are wasting no time this year by launching the State of Email 2023 Report - a 4 chapter report covering myths, benchmarks (SaaS has a higher open rate than average), and top tips for 2023.
5. M&A: As mentioned last week, Crunchbase forecasts that M&A activity in startups could pick up in 2023. Now is an excellent time to understand what's in an acquisition offer via this essential guide covering key terms and common issues.
6. RECESSION: Many of us are forecast to enter a recession in 2023. The good news is that software thrives during recessions because companies do a lot of optimization.
7. MARKETS: JP Morgans's Q1 2023 Guide to the Markets is now out, and they are noting that inflation and interest rates are peaking in the US. This is a good indicator that the slide in SaaS valuations is over - As they are inversely correlated to rising inflation (MRR gets less valuable as inflation increases).
8. PLG: Kyle Pola from OpenView has a roundup of four PLG growth tactics they have been excited about over the last two months that could help you grow faster.
9. MOBILE: Last year, consumers downloaded over 255B mobile apps and spent over $167B on them. In response, brands spent over $336B advertising on mobile platforms. This year, people will spend over 5 hours per day on their mobile devices. This and many more nuggets can be found in Data.ai's (formerly App Annie) State of Mobile report for 2023.
10. CASE STUDY: Grammarly - I'm a big fan, daily active user, and paid subscriber - but most users are on the freemium plan. So how did this product get to $90 million in revenue and last valued at $13 Billion? Here is the short version behind their growth, but here is the deeper case study on SEO, engineering, great content, and an embedded and rewarding product experience.
POD OF THE WEEK: Expanding on #10 above with Yuriy Timen, former Head of Marketing and Growth at Grammarly, discusses the ever-changing world of growth, emerging growth tactics, and how to find your growth engine.
BONUS: The fastest way to deliver the right software is to deliver the wrong software sooner.
1. SaaS METRIC OF THE WEEK: Net Dollar Retention is an essential metric in our new capital-efficient LeanOps world. It measures the revenue generated from expanding into your existing customer base. The SaaS CFO dives into how to calculate this metric (and comes with a free template).
2. FAIL: Here is a massive list of 200+ interviews with operators of both failed and active startups. There are a lot of wins and mistakes to learn from in this list (which is also sortable by Fails and Successes).
3. PRICING: In my last newsletter of 2022, many clicks happened for the podcast about the art and science of pricing from Lenny's Podcast. Is this because many of you have a New Year's resolution (NYR) centered on better pricing? Well, let's get started! Pricing Page Ideas have everything you want in pricing inspiration split out by freemium, one-time payments, consumption-based, and enterprise/premium (no Pinterest required). FYI to those who don't have this on your NYR list, 61% of companies in this survey adjusted pricing last year, which, on average, resulted in a 27% lift in ARR.
4. TECH TRENDS '23 (1 of 2): The 2023 Tech Trends report from CB Insights is out and can be downloaded here (59-page PDF) - if 2022 wasn't weird enough, Ambient health, immortality, menopause, house bots, virtual power plants, and smell-tech all make the list.
5. TECH TRENDS '23 (2 of 2): Fast Company also has its list of '23 trends (gleaned from over 40 domain experts). This one covers generative AI (Yes - we're talking to you, ChatGPT - literally), Web3, Security, the creator economy, and more.
6. M&A: Crunchbase forecasts that M&A activity in startups could pick up in 2023 - rising interest rates and the sudden increase in difficulty raising Venture Capital will pressure many venture-backed startups' short and mid-term sustainability and exit options.
7. JOBS: I predicted the newly announced layoffs from Salesforce in a newsletter post last year, and they, among other established tech companies, have launched many talented job seekers into the market who will be evaluating Early-Stage companies, with many making the leap. First Round Review has 20 top tips for any job seekers who may be considering making a move from Big tech to Startup. It's a very different beast.
8. MOATS: This is one of my favorite topics, as Moats are one of the best ways to provide a competitive advantage for your business, and they come in all kinds of different flavors. Jerry Neumann has an excellent blog post outlining most in his Taxonomy of Moats. Especially relevant in 2023 as Scale Moats are no longer Moat du jour.
9. ADVICE: What would 2022 you want to tell the entrepreneurs of 2023? Bookmark this link as First Round Capital (in a second appearance this week) has a great list of 30 best pieces of advice for entrepreneurs from 2022.
10. CASE STUDY: This one is for all you bootstrappers (or people trying to optimize more with less). It's the story inside Hotjar's bootstrapped PLG strategy that has so far taken them to $50 million+ ARR.
POD OF THE WEEK: From SaaStr to compliment #1 above: Churn is dead. Long live Net Dollar Retention (NDR) with David Kellogg
Welcome to the Benchmark Holiday special! This is a compilation of valuable benchmark data reported from across the webs in 2022 for you to put to good use.
1. SKOK: David Skok is a legend in the SaaS world, and I have written about his work extensively in the past, as well as convincing him to speak at an event. His former reports are now run in partnership with KeyBanc Capital Markets (KBCM), and the 2022 version is here - excellent benchmarks for any SaaS business.
2. EXPANSION 1. Acquiring customers is not enough for a SaaS company's sustained long-term success. Expansion strategies are pragmatic practices that any good SaaS company needs to grasp, as 46% of new ARR bookings are attributable to cross-sell/up-sell activities. Larger companies use this strategy more heavily than their smaller counterparts (2x more). This is likely due to relying on something other than pure acquisition strategies as the business matures.
3. EXPANSION 2: Expansion is such a big deal that OpenView Partners have gone to town to benchmark this metric with an extensive Expansion SaaS Benchmarks report in 2020 (downloadable PDF). Product Led Growth businesses lead the pack!
4. RETENTION: To complement #2 and #3 above, retention is deeply related to expansion regarding sustainable growth. Here is what reasonable retention goals should be benchmarked against (another downloadable PDF report) and how to strategically optimize for this metric. Churn still needs to be fixed overall. The YoY trend of a dollar churn is back to 12.6% this year. Similar to pre-pandemic levels.
5. PRODUCT LED GROWTH: As mentioned in #3 above (and from me from time to time in this newsletter), Product Led Growth (PLG) businesses lead the pack regarding expansion. PLG companies also deserve their own benchmark reports - so I got you covered with this one where you can benchmark 450+ PLG companies (it was only 250 a year ago - PLG is on a burn!).
6. CAC: This one is always nuanced. The report always breaks CAC down into blended, new, and up-sell/expansion so you can see the efficacy of spend to return. The median blended CAC comes in precisely the same as last year - $1.20 for every $1 of revenue realized. FYI it was $1.10 in 2019 and ($1.32) in 2020. New Customer CAC is up significantly YoY and at $1.78: 2021 ($1.67), 2020 ( $1.60), and 2019 ($1.34). This signals two things: 1. SaaS is increasingly competitive, and 2. CAC Payback is getting way longer. Upsell/cross-sell (see below) is still cheap at $0.61 per $1 of ARR earned (and down from $0.63 last year).
7. GROWTH: The 2021 growth levels were back up to a healthier 31% as the COVID disruptions settled (2020 was 20%!). This year is an ARR growth of 31%, and forecasts are always a few points more optimistic - still at the same 36% seen in 2021 and 2019. BONUS - you can see how that 31% is split by industry categories here.
8. MARKETING AND SALES: KeyBanc noted marketing spend dropped last year to 31% of ARR (down from 36%). KeyBanc correlated Sales and Marketing Spend to Growth Rates. In contrast, OpenView separated spend based on stage (33% average across the board). Both methods are interesting benchmarks. Sales employees range from 10-20% of all staff across the revenue stage - but that percentage increases at the higher end of town.
9. WEB VITALS: Optimizing a User Experience is key to the long-term success of any service or product. Google is all over this and launched Web Vitals a few years back, a program offering developers user experience guidance. It's benchmarking very Google-based metrics: loading, interactivity, and visual stability.
10. SPEND: The average SaaS company burns $52m to get to $100m in ARR, which takes under 9 years (8.7 to be exact). Figuring out how to optimize marketing spend and growth rate is crucial. This study doesn't show the benchmarks marketers want to hear: Results vary. While the median sales and marketing spend has dropped this year to 31% of revenue (down from 36%), to ramp up ARR growth, you gotta blow a lot more dough relative to revenue: the percentage of revenue in isn't much more than percentage growth spend out. Across all companies, Engineering is consistently the largest department, Customer Success and Product at about 10%, and Marketing at only 7%. This slide also has median headcount by stage - which is a great metric to track.
This will be my last post of 2022, so it's a forward look at the Holiday season, 2023, planning, and beyond. Have a great holiday season, and thanks for your continued readership. See y'all in 2022.
1. SaaS METRIC OF THE WEEK: Here is a good list of 10 growth metrics to track for 2023. No surprises here: Churn, LTV, CAC, CAC Payback (see #10 below), but the Quick Ratio is good, as is Customer Health Score. One that needs to be added to that list, though, and referenced in a newsletter I'm unable to link here from Matt Cameron (he has no web version of his newsletter) is Velocity! Here is an older slide from Matt's SaaStr presentation explaining that formula more, or watch the presentation in its entirety.
2. GROWTH: Gartner predicts an acceleration of business software spend in 2023, up to 11.8% growth from 9.8% in 2022 - monetarily, that is $100B, and more importantly, SaaS spend in the enterprise is forecast to grow 17% to $195 Billion. Cloud spending overall is expected to grow 22.1% in 2022 (from 18.4% in 2021)
3. eBOOKS: Holiday season is here, and who doesn't want to tuck into ebooks covering marketing, sales, development, web3, etc. - there are over 600+ free here. Also, take a looksie at these 28 Free AI, Machine learning, Data Science, and Python eBooks - ready for download directly to the device of your choice now.
4. FINANCIAL FORECAST: Your 2023 new financial year is just around the corner! Now is always the second best time to get started on getting started (the first being two months ago). This is an excellent article with a complimentary excel download from The SaaS CFO - it's a SaaS Financial Plan for Startups (and also works for most SMBs). It also comes with a handy complimentary video tutorial for the worksheet.
5. OPERATIONAL PLAN: Because your new strategic year is just around the corner and now is the second best time to get started getting started, Dave Kellogg has a great How-to guide on presenting your fantastic new operating plan to your board.
6. BUDGET: This could be a whole newsletter by itself: How much do you plan on spending on your 2023 operational plan? SaaS Capital has a wonderful B2B SaaS Spending Benchmark report to best forecast what to send on sales, marketing, CS, COGS, and R&D. And because 2023 will be the year of LeanOps - here is how to manage burn and extend your runway into 2024 from Capchase.
7. UNCERTAINTY: Will '23 bring a double-dip recession, extra inflation, and a new pandemic? We are in uncertain times, so when considering #4, #5, and #6 above, read this article from First Round Capital covering 6 tactics for rethinking planning in uncertain times.
8. COMPENSATION: Bookmark this free library of 20 sales compensation plans that can let you scenario plan into 2023. This is seriously next-level content marketing that has a significant amount of value.
9. SAASOPS: How many SaaS apps are too many in an Enterprise organization? According to the State of SaaSOps Report from BetterCloud, organizations are currently using 130 apps on average! Organizations are still using more SaaS apps than ever, but growth has slowed slightly in '21 and '22. But the net gain of SaaS apps used is still up 18% this year, with more to come in 2023, according to Gartner (see #2 above).
10. CASE STUDY: Speaking of uncertainty (see #7). Salesforce, the world's largest SaaS company, broke with established practice for its Q3 reporting and said it would not provide financial guidance for next year as "they just didn't know.". What is even more profound than that statement is in their underlying metrics: With some back-of-the-napkin/Twitter math, they currently have a CAC Payback period of 155 months (yeah - just short of 13 years)!!!! Certainly a case study for many sales and marketing layoffs in the new year.
POD OF THE WEEK: One of the best growth levers you can work on for 2023 is pricing and monetization. So check the podcast about the art and science of pricing from Lenny's Podcast.
1. SaaS METRIC OF THE WEEK: Ever heard of the Mendoza line? Well, it's a rule of thumb metric and a numerical that can help SaaS Companies answer that incredibly frequent question, "How fast do I need to be growing to be attractive to a venture investor?
2. LAW: Not the litigious kind - from CBInsights is a 67-page report covering the 11 laws driving success in Tech, such as Amazon's 2-pizza rule, the 80/20 principle, and more.
3. FRAMEWORKS: Beyond the above laws, a successful framework can distill complex processes or models to make execution more of a simple recipe. Kinda why OKRs exist. Sarah Tavel has compiled a great list of compelling Frameworks covering: The 10x model, The hierarchy of engagement, Hype cycles, and more!
4. IDEAS: Here is another framework for managing them - I found this a beneficial article with a template that is now on my wall! An HD version of it is here. A little bonus is a compilation of mental models that entrepreneurs and investors leverage to develop new startup ideas & venture theses from the same author.
5. CUSTOMER OPERATING SYSTEM: What exactly is the difference between Customer Success and Customer Support? Get started here to understand the nuances. They are both parts of the same customer journey spectrum. Totango posits, in this recent SaaStr Annual presentation, that we need a fresher look at Success and Support that they coin the "Customer Operating System" (Like the presso? Here are the Google Slides deck).
6. ENGINEER vs. ENTREPRENEUR: I love this article as it manifests the battle that lives in my head: Engineers love to get it right, and Entrepreneurs love to get it done. Such a simple statement that materializes in so many ways.
7. REVERSE TRIALS: Crack open up your tech dictionaries to add in this term. Reverse Trials are a play on freemium, where new users start with a time-limited trial of all your paid features. At the end of the trial, they can either buy or downgrade to an entirely free tier. This article also explains how Airtable does this well. The benefit here is that, emotionally, the users experience loss aversion, where the pain of losing something is twice as powerful of a motivator as the pleasure of gaining.
8. PRODUCT vs. SALES: Notion has the article we all want to be ask as we strategically head into 2023: Should my Go-To-Markey strategy be Product-Led or Sales-Led?
9. GROWTH: This is a pretty good summary of the year that was 2022 in SaaS from Capchase's recent Pulse of SaaS report - In 2022, bootstrapped SaaS companies are doing better than those that are VC-backed. Mainly as they lead the pack in terms of capital efficiency/LeanOps.
10. CASE STUDY: ChatGPT - I'm guessing you have probably heard a thing or two about ChatGPT this week - if not, it's a conversational AI model that can interact with users in a more human-like way, and it's a significant breakthrough that's demonstrating how things are about to change with the way we interact, do things and experience things digitally. Travis Jamison has a great long-form article breaking down many use cases ChatGPT and its future offspring will change (including poetry).
POD OF THE WEEK: RevOps Squared chats about all things SaaS metrics, focusing specifically on how to use metrics to inform your decision-making. Listen here.
Last month I reviewed the KeyBanc Capital Markets 13th annual SaaS survey for Private Markets (you can download it here) and offered a warning as the number of respondents has dropped significantly: Now 110 vs. 424 in 2019.
Another player in town, Openview, is also benchmarking privately held SaaS businesses with a PLG Lens. Their 2022 SaaS Benchmarks Report has a much broader sample size and combines over 3,000 respondents' results (and 660 this year) which make up this week's Top 10 (and can be downloaded here as a PDF); it's a much different story than in 2021 - but we still take it to 11:
1. GROSS RETENTION: OpenView's SaaS survey found that early-stage companies ($2.5m to $10m ARR) are seeing gross retention decrease relative to 2021. Those earlier-stage businesses should be focused on Churn as a primary KPI. PLG lead companies see best-in-class retention (128%) and have highly efficient growth engines (63% Rule of 40).
2. BURN: 2022 values profitability over growth rate, and most companies are cutting burn, regardless of cash runway or Growth Rate (see why with #3 below). LeanOps is the whiplash to what is happening both in the VC world and Public Market - also reflected by the rapid handbrake on minted Unicorns from Q4 '21 to Q3 '22 (from 139 to 24).
3. RULE OF 40: In 2021, OpenView observed that "investors have forgotten all about the Rule of 40." This year's response: the Rule of 40 "back from the dead." Cash is no longer cheap, and multiples have plummeted. Efficient Groth Engines and LeanOps practices are essential - PLG lead companies also stand out in this category with 63% tracking with the Rule of 40).
4. FINOPS: This slide could be a newsletter all in itself. A very meaty section that breaks down core FINOPS metrics by stage - headcount, funding amount, ARR, etc. This shows what it takes to raise funding in today's environment (Bold numbers are median performance).
5. CAC PAYBACK: According to KeyBancs report, New customers, on average, take 2 years and 2 months to become profitable. OpenView has a different take, and the answer depends on the market. Companies selling to consumers/SMB segment have shorter buying cycles/lower CACs than those selling to enterprise customers, and PLG outperform their peers (again).
6. NET DOLLAR RETENTION: This metric can be paired with #5 above. Being strong in both these metrics allows you to fuel high growth and stay efficient. Growing and staying efficient is only possible if you're strong in these two metrics. Great NDR is 116% in SMB and 125% in Enterprise.
7. REVERSE TRIALS: This is a crucial lever with those of us at PLG-Land: Reverse Trials allow users to try premium features during the trial. Companies are maximizing the upfront value for users and increasing the likelihood they will convert through usage paywalls.
8. PRICING: Just like Software Products - pricing is never done. 61% of the companies surveyed adjusted pricing in the last year, and, on average, this resulted in a 27% lift in ARR. Side note in that slide: 55% of respondents have at least tested usage-based pricing.
9. SALES AND MARKETING: This is similar to KeyBanc, who noted marketing spend has dropped this year to 31% of ARR (down from 36%) KeyBanc correlates Sales and Marketing Spend to Growth Rates, whereas OpenView separate spend based on stage (33% average across the board though). Both methods are interesting benchmarks. Sales employees range from 10-20% of all staff across the revenue stage - but that percentage increases at the higher end of town.
10, EMPLOYEE DISTRIBUTION: Across all companies, Engineering is consistently the largest department, Customer Success and Product at about 10%, and Marketing at only 7%. This slide also has median headcount by stage - which is a great metric to track.
11. REPRESENTATION: Or Women-Led Growth: Less than one-third of leadership roles are filled by women at most early-stage companies. Here is the kicker: EVERY BUSINESS with at least one-third of the team women has a greater growth rate than those that don't, regardless of stage.