Top 10 in Tech A WEEKLY NEWSLETTER

Top 10 in Tech - What to know for Week ending February 25, 2022

2/25/2022

SaaS METRIC OF THE WEEK: CPA - Cost per acquisition is often conflated with Cost of acquisition, but they are different. Andrew Chen dives into the details as to why (and also how to calculate CAC accurately).
KNOWLEDGE BASE: This is very relevant to my pain right now. Building a comprehensive and valuable customer Knowledge Base platform is difficult. Keep in mind that 67% of customers prefer self-service (if executed well), and almost 90% of customers now expect a company's website to include a self-service application.
SECURITY: According to a 2021 IDC cloud security study, 98% of companies experienced at least one cloud data breach in the past 18 months—up from 79% in the previous period. Security should be part of the dev cycle and know your weak spots. Founder Institute discusses 6 points of vulnerability in a tech stack that may be a bit leaky, and the lessons from Log4j: Cybersecurity defense isn't just about tech.
SHAPE UP: A refresher for your tech dictionaries. 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) have developed ShapeUp, their publications, and a toolbox of techniques designed to eliminate chaos when it comes to creating, prioritizing, and shipping products/features.
STARTUP SALARY: How much should you pay yourself as a founder after raising some capital? There are lots of good answers and also lots of different situations. A good rule of thumb, according to Nathan Latka, is if you're a two-co-founders and just hit $1m in ARR, you should each be making about $100k per year and Increase to $150k at $2m in ARR.
ESTIMATION: Estimating effort in Software projects is mega hard, and we're all terrible at it. McKinsey found that IT projects are on average 45% over budget and 7% over schedule, and the larger a project gets - the worse these stats become. So you should definitely bookmark this series (or share with the person you know that needs this bookmark) - Estimating Software Projects by Jacob Kaplan-Moss (and what to do when you mess up).
MARKETING FOR ENGINEERS: For all of you technical entrepreneurs who have built something and trying to get it out in the wild, check this GitHub-based curated collection of marketing articles and tools to grow your product. It's the ultimate GTM Repo!.
GROWTH: Zoom, Slack, Dropbox, Chrome, etc., are all software products that most of us use every day - they are frequent products. It's Tax Season in the US, so my annual pilgrimage into TurboTax software land is just about to begin. I will be enthusiastically welcomed back (Turbo Tax is a phenomenal lesson in good UX btw) - this is an outstanding lesson an excellent example of an infrequent Software product. The growth of an infrequent product is VERY different from that of those used frequently. Reforge have a great framework regarding this called the ICED Theory. (add it to your tech dictionaries) It's a great post discussing the nuances of infrequency, and they have just launched a complementary article to this post on strategies to grow an infrequent product.
PRIVATE MARKETS: From Carta's perspective, here is a look at the state of private capital markets leveraging their data. The number of rounds increased 31% over 2020 to over 7500, and the proportional amount of cash invested was up 111%!!! Every sector saw an increase in dollars - but healthcare saw the most significant jump. 2022 has already been a year of correction - so I'll report back at the end of Q1.
CASE STUDY: Adobe! Remember when Adobe products were just software licenses? This seems like a generation ago in Tech years. Adobe Creative Cloud launched a decade ago in mid-2012, and the transition was fast; Creative Cloud surpassed product revenues VERY quickly (by mid-2013). Adobe now is at a whopping $12.24B ARR just on subscriptions revenue (as of Q4 2021). Here are seven lessons for us all on this transition, and from ChartMogul, here is a break down the strategy that got them here.

Top 10 in Tech - What to know for Week ending February 18, 2022

2/18/2022

SaaS METRIC OF THE WEEK: NPS: We all like to be liked - Net Promoter Score is a way to quantify that for your product. This White Paper from Ask Nicely reviews NPS (among other common customer experience metrics) and explains how to measure and calculate NPS. See this link for some methods to improve the NPS of a SaaS product, and Neil Patel then gets into a 3 step program of how to leverage NPS for your business.
RENEWALS: Existing customers are the lifeblood of growth in a SaaS business, so making sure they like you enough (see #1) to renew is an exercise in revenue efficiency. New customer acquisition costs average about $1.10+ per $1 of ARR. Compare that to the cost of retaining or up-selling existing customers (about 12c-15c per $1ARR) - that's eight times cheaper. So take a peep at this article that not only lists 5 SaaS Renewal Best Practices but also explains how best to go about calculating renewal rates.
SPEND: How much money do SaaS companies spend on stuff? Well, check the first chart in that link on SaaS company spend - bootstrapped companies are (obviously) being outspent by venture-backed companies - but the average difference is 80% of ARR compared to 115% ARR! (operating at a loss to support growth - because growth is a Moat). Keep scrolling through - way more goodies in there (such as spending by ARR levels).
EMAIL: DEEP DIVE. When it comes to outbound marketing, email works best. Yes, organic search is consistently the most significant source of traffic (Driving up to 68% of all traffic). Email accounts for less than 5% of traffic, on average, but has an incredibly high ROI, upwards of 3,800%! Digital Olympus has a great guide on effective email outreach (HINT: This takes time and effort!). Andrea Bosoni gives an IRL story about how he worked hard to improve email open rates, and Gong provides a bunch (43 to be exact) of highly effective Call-To-Action templates you can use in email campaigns.
SMS: Contrary to the above - did you know that the average open rate for marketing emails is around 20%, while SMS open rates range between 82-98%? Check this article for this fact and more on SMS-Marketing basics.
SECONDARY DEALS: As mentioned in #9 last week - public SaaS has taken a beating since Dec '21, and the market has been seeing a rise in Secondary Deals, which is a mechanism where investors buy secondhand equity stakes from early backers, founders, and employees. Over the last few weeks, investors and some late-stage VCs have been busy trying to build positions in their existing portfolio companies.
CHURN: In this post, Lenny Rachitsky asks the question, "What is a good monthly churn for a SaaS business?". Zero is the obvious answer for me - but he took to a benchmarking exercise and sourced some quality data sources to develop this chart. For B2C SaaS: 3% - 5% churn is GOOD, less than 2% is GREAT. For B2B SMB: 2.5% - 5% is GOOD, less than 1.5% is GREAT. For B2B Enterprise: 1% - 2% is GOOD, less than 0.5% is GREAT.
DE-SCI: Crack open your tech dictionaries and add this one to the list. Deci (or Decentralized Science) is one of the latest Web3 movements and IMO one of the more interesting. It is trying to address two issues: 1) efforts within the scientific community to change how research is funded and knowledge is shared, and 2) efforts within the crypto-focused movement to shift ownership and value away from industry intermediaries. What's not to like? Read more here on Deci from a16z.
DEBT: Tomasz Tunguz asks if 2022 will see the rise of Debt in Venture? Debt is always less expensive than equity because it's far less dilutive. His conclusion, according to the data: interest rates (which may arise by the Fed in 2022) do influence how much debt startups acquire, but the ratio of debt/equity for startups is relatively constant throughout time. The increase in access to Venture Debt in recent years has seen the rise of essential services such as Lighter Capital and The 20-Minute Term Sheet in the past couple of years. Here is how it works and what these financiers care about
CASE STUDY: Square is a fintech with a heavy focus on developing and retaining high-quality engineers, and they have created and openly published their Growth Frameworks for Engineers and Engineering Managers success at Square and also made their internal Engineering Career Ladder freely available for us all to view (and it's a downloadable PDF).

POD OF THE WEEK: Dannie Herzberg is now a Partner at Sequoia Capital but, prior to this, spent four years at Slack as their Head of Enterprise Sales and over five years at Hubspot building sales. She is a PLG guru, and this podcast is about building sales teams with a Product-Led-Growth GTM strategy.

Top 10 in Tech - What to know for Week ending February 11, 2022

2/11/2022

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 many things; 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, the other is not actively canceling.
CRYPTO CAP TABLES: Have you ever wondered how the funding of a crypto/token-based startup works in relation to cap tables? (hint - they maintain more than one). Tomasz Tunguz explains how equity and token-based cap tables work.
GROWTH MARKETING: Want solid pro-tips on growth marketing ideas that just plain work? Here are a bunch collated from Intercom - a lot is centered around being user-focused, and if you don't like that one, try this: Notion's marketing secrets for those of us with small teams.
RECRUITMENT: It's always been a challenge but anecdotally, oh my word! Finding good people is so very, very, hard right now. Take a good read (and an even better bookmark) of this page from Heavybit - a comprehensive process and guide to developing a successful (and founder-led) recruitment strategy for those at the early stages.
REVOPS: aka Revenue Operations is a thing, and it needs to be - but do you need it? Well, you may already be practicing this without using the platitude - it's just a high-impact way to maximize revenues and provide some operational efficiency. Still, the plot twist is that it's also a way to align this operational excellence around the customer experience in this Age of the Customer. Here is an excellent introductory article from Chargebee on RevOps, and here are three nuggets of wisdom from some significant RevOps leaders. BCG also has a great deep dive for you to read here.
BUILD or BUY: I'm constantly in a debate (mainly with myself) of whether to build or integrate with an existing app/service to solve a problem in my business or introduce a new feature on behalf of a customer/feature request. So (like me), you should read this article to get a better grip on assessing the pros and cons of a build vs. buy strategy.
SOFTWARE: Last weeks post on productivity (measured by the most popular apps at work) was a REALLY popular one (most click-throughs of this newsletter ever), so I'm doing another post this week as we all use some products more than others with G2's Best Software Award Winners - all ranked based on a combination of their G2 satisfaction revues and Market Presence scores.
MARKETING: There are many marketing strategies organizations can deploy that are relevant for their line of business and target audiences, from pay-per-click to content marketing. Bloom lists the differences between the three main categories. Cutting to the chase though, creating a solid marketing strategy is no walk in the park, so take a look at how to create a solid one in 7 steps. (BTW - benchmarking budget - Marketing teams spend 5-10% of a companies ARR).
MULTIPLES: This is a preferred metric used to value SaaS companies, which generally carry very few assets, little to no profitability, but all kinds of potential. That number is wildly variable, and Public SaaS and Tech companies have suffered a massive beatdown in 2022 (starting in Dev 21) that has had a significant impact on multiples. This chart shows that Tech/SaaS has almost reverted to pre-2019 multiples. Will it bounce back? Jason Lemkin remains bullish.
CASE STUDY: Uber made the call to completely re-write their app way back in 2016. But the cool thing was that the redesign is less than a 100MB as at the time that was the max size of an iOS app available via cellular download (the app these days is 300MB +) because most first time customers need this because they download the app curbside). This is how they did it - it's a pretty crazy developer ride.

POD OF THE WEEK: Expanding on #9 above. SaaStr has a podcast covering the 6 Steps to managing Marketing when everything in the business is locked into hyper-growth

Top 10 in Tech - What to know for Week ending February 4, 2022

2/4/2022

SaaS METRIC OF THE WEEK: DAU/MAU. The DAU/MAU ratio is a popular metric for companies measuring user engagement. Rule of thumb: Apps with over 20% = good. If you have 50%+ - you're world-class.
REVENUE GROWTH: This one is from the archives, as I consider it one of the best presentations at SaaStr Annual. It's from Mark Roberge of Stage 2 Capital and Harvard Business School, who is providing a handy step-by-step guide to revenue growth - broken down by stage (as a downloadable PDF!).
CONVERTIBLE LOANS: They are a kind of debt until they are not. But Convertible Loans are a quick way to access money quickly via an interested investor. Point Nine Capital describes what is involved in a convertible loan and what to look out for.
BUYERS vs. USERS: The person writing you a check is not necessarily the same person getting value from your Business. So take a read of this insightful article from HeavyBit on differentiating messaging based on this premise and the different profiles.
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???? Yeah, I knew you would. 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.
BRAND MARKETING: Just how much does brand matter in B2B?….well, put your bias away as it's a lot according to this article and this one. Need to get started or run a branding review? Check this article on how to get started.
PROFESSIONAL SERVICES: It's a weird open secret that many B2B SaaS businesses generate a significant amount of revenue from implementation and deployment projects, often captured as revenue from Professional Services, due to deployment and configuration complexity. So what are the revenue benchmarks for a SaaS Business to capture revenue through professional services? On average, it caps out at 11% of all annual revenue with Enterprise focused businesses, but even at the lower end of town, it's still 5% of revenues with SMB focused companies.
CULTURE: LinkedIn has published a fascinating new report into the rapid workplace culture shifts that have been in play since 2020 and what these shifts mean for your internal team branding. Flexibility and work-life balance beat out compensation and salary.
PRODUCTIVITY: Okta has released its 8th annual Business at Work report covering the applications and services workers use to be productive; plenty have emerged in response to WFH and pandemic-related shifts. In a surprise to no one, companies focused on collaboration and data security tools as the top 2 most popular categories.
CASE STUDY: From a VC perspective, the Series A funding round is a stamp of approval. It shows that product-market-fit is evident and that there is a venture-backable market out there for the Business to target. From the PointNine Capital blog comes the story of how PlayPlay managed to raise their €10M Series A (broken down into a digestible 9 point play).

POD OF THE WEEK: It's a video, not a podcast this week. The content pumping out of Y-Combinator at present is always good. YC Partner Carolynn Levy details the basics of startup financing and how modern early-stage financing rounds work using convertible securities, such as the SAFE note.

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