Top 10 in Tech - What to know for Week ending October 18, 2024

SaaS METRIC OF THE WEEK: BURN MULTIPLES.

In this new capital-efficient SaaS environment, operators are expected to find the balance between growth and efficiency. So it's time to brush up on those efficiency metrics in this 2 part post covering Burn Multiple and Sales Efficiency metrics (see post 2). A Burn Multiple measures how much a startup is burning in order to generate each incremental dollar of ARR. The higher the Burn Multiple, the more the startup is burning to achieve each unit of growth. Here is how to calculate this metric and here is an example.

SALES EFFICIENCY

Also known as the Magic Number, it is the sister metric to Burn Multiples above. Sales Efficiency measures how effectively your company generates $$ via front-end spend - basically new revenue generated over a specific period with the expenses incurred on Sales & Marketing during that same time frame. Check the SaaS CFO on calculating the Magic Number, and this article deconstructs it and highlights that it's a complex metric influenced by factors like market conditions and company spending, making it difficult to pinpoint specific areas for improvement.

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 not as hard as 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 has this article late on PR for SaaS - with some sample scripts!

LEGAL

In startup land, there is a long tail of BS that founders need to navigate, and in a surprise to no one, much of that is legal. So check this huuuuuge handbook 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 so you can stick to the mission: Avodocs- 1 free per month. Cooley Go has a library of documents for the US and UK from Penn State Law School - a startup Kit bundle.

BUYERS vs USERS

The person writing you a check is not necessarily the same person getting value out of your business. So, take a read of this insightful article from HeavyBit on differentiating messaging based on this premise and the different profiles.

VC MATH

Lots of clicks on last week's Venture post on CBInsights Q3'24 State of Venture Report and one conversation about how VCs make money. Well, this week I have a pretty great response to that from Forbes with a breakdown of how (most) VC funds make their money and run their maths.

LIQUIDITY

A fast follow from above. Tomasz Tunguz put together an article discussing the collapse of M&A in Software, over the last two years. It's visually remarkable, and Jason Lemkin from SaaStr notes that there is almost no liquidity for startups and scale-ups at the moment.

SOFTWARE

This is a great, non-tactical read about where we are currently in the tech industry. The thousands of new SaaS products launched each year make it harder and harder to compete/standout/grow but AI is now revolutionizing software development, making it faster and cheaper (even I did stuff this weekend in hours that would have usually taken days, and by someone else), flooding the market even more, across industries. Consolidation in the software industry is to be expected, and Coding Jobs are already changing.

AI

What a time to be an AI consultant! Accenture booked $3B worth of "AI" bookings for the fiscal year, with $1B of that in Q4 alone. I'm in the wrong business. I am backing this up with this in-depth report on AI Adoption from Cledara. AI adoption in 2024 shows record-breaking growth (82% of companies use AI) but mixed ROI - only 47% of businesses report real value. Most plan to increase AI spend, but cautiously. Think we are still full hype...

CASE STUDY

As mentioned in #8 above, today's AI-powered tools are boosting developer efficiency by 10-40%, but this paper proposes that AI is set to revolutionize enterprise applications by breaking down siloes between different enterprise products and making automation and integration easier (be warned it's a long and detailed analysis).