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Curated SaaS and tech insight from around the web repackaged for people to put to good use
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1. SaaS METRIC OF THE WEEK: SaaS METRIC OF THE WEEK: DAU/MAU. The DAU/MAU ratio is a popular metric for companies that need to measure user engagement. Rule of thumb: Average is 13%; apps with over 20% = good. If you have 50%+ - you're world-class.
2. PRODUCT POSITIONING: It's easy for startups to underestimate the significance of product positioning and marketing in the early stages. This article highlighted the importance of understanding the product, customers, and competitors and had me at the subheader: "A lot of startups suffer after initial growth because they can't figure out what they are building & for whom." 3. PRICING: This is a constant experiment, and we expect it to evolve forever (FYI, we are not charging enough). Intercom makes the case that a solid pricing strategy should help shape an entire business model, and here is an excellent article on how to choose the right SaaS pricing model. 4. INVESTOR UPDATES: The NFX team has read many investor updates and published a guide where they share common mistakes and how you can avoid them (and also deliver hard news). 5. DECIDE: Because human beings are weird, we often make decisions using predictable (and fairly subconscious) mental shortcuts - in the UX world, the term used is 'Heuristics.' Check this (ultimate) guide to heuristics evaluation, complete with cast studies! Sidebar bonus - Look at this guide if you need help with decision-making frameworks. 6. SALES 1/2: Looking to establish your first SaaS Sales Comp plan? So first, check this 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). Then, read this post from Jason Lemkin on how to construct a framework for the first SaaS sales compensation plans. If you need more Lemkin - see the Pod of the Week. 7. SALES 2/2: Loading more to #6 above (and #5 on deciding). To scale your Go To Market effectively, you must tailor a sales team to match your audiences, product complexity, pricing model, and GTM strategy, ensuring they possess the necessary skills for success. Alignment is key for optimal execution. It also comes with a template from which you can get inspiration. 8. SEGMENTATION: A SaaS business doesn't cater exclusively to just one type of customer. So, to focus on size-relevant engagement strategies and cater to the needs and problems of these different customer types, Segmentation is key. Here is an interesting case study/article on how Segmentation can be combined with LTV (Life Time Value) to grow MRR (from a subscription box startup). From Point Nine Capital is a great article on Customer Segmentation, and here comes the real modern-times question: Can you use AI to automate the segmentation analysis? TL;DR - Yes. 9. MARKETING: I've already shared this with a bunch of founder-friends; it's a great article listing ten low-effort, high-impact marketing tactics for quick wins. 10. CASE STUDY: Adding an excellent case study to #1 above from Lenny's Newsletter, Duolingo reignited its user growth via gamification, push notifications, and optimizing streak features. This led to a 350% increase in active users. These strategic changes were data-driven, using some pretty innovative growth models (which got them a successful IPO). POD OF THE WEEK: A new go-to podcast from Lenny's newsletter, something most of us have the least experience with - building sales teams. Great insight from Jason Lemkin on how long to wait, what the first hires should look like, and how to comp them. 1. SaaS METRIC OF THE WEEK: BURN MULTIPLES. In this new capital-efficient SaaS environment, operators must balance 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 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.
2. SALES EFFICIENCY: Also known as the Magic Number and 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. 3. SALES TEAMS: Take a good read of this article from David Sacks on the simple math you can use to set up a sales team. Individual plans, team plans, and expansions/renewals are all considered for a high-growth sales team structure. 4. MARKETING: I feel personally attacked by the title of this article, "You Suck at Marketing." As an operator wearing many hats, including marketing, I begrudgingly have to agree. Most of what works for us is inbound and the result of Content Marketing - so read this article from the team at Organic SaaS Growth on how to be less sucky at that. 5. EXPERIMENTS: In a 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 critical 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. 6. FOLLOW UPS: I probably push this too hard on Sales "follow-ups" and "nudges," so I need to subject myself to this article from time to time: How often to follow up: Follow-up Frequency to Close Deals Instead of Annoying People. It was great to see "Way more than you think." though 🙂 . There is also this concept of the "Rule of 7," which states that a potential customer needs to see or hear your message seven times before they buy something. 7. AI: Last week, we saw another game changer, OpenAI, which now does text-to-video with the release of the short-form video generator Sora, and the AI formerly known as Google Bard was rebranded as Gemini. Not to be out-thunk by AI, the team at a16z has launched a thought leadership "agenda" by calling this new phase of tech change driven by generative AI the "Era of Abundance" - built onto of an AI-enabled Pitch Deck generator, of course, (gamma.app) and also came with an interesting Market Map. 8. VALUATIONS: Throwback to a 13-year-old (dotcom 2.0 bust) article that may as well have been written this year on valuation multiples and how not all revenue is treated (forward multiple) equally from Bill Gurley (of Uber fame). Adding flavor to this is a take from Santosh Sharan on the recent acquisition of Drift by SalesLoft, which he views as more of a merger so Vista Equity (the parent company of both) can keep forward multiples high, especially given the original sticker price they paid prior to the downturn. 9. CONTRACTS: This is the report none of us knew we needed - but my word, there are some insightful gems: A guide on SaaS Contracts, complete with benchmarks such as customer signature roles (3/4 are Executives), AI and ML clauses (5x increase from Q1 to Q4 last year), and the big one, time to sign - 3-5 days-ish (SMB to Enterprise). Have a read - I bet you will be pleasantly surprised. 10. CASE STUDY: Complimenting #5 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: Alex Lieberman and Ian Ito have done the hard work and consolidated the best podcast interviews according to a survey of over 300 people. It's an extensive list. 1. SaaS METRIC OF THE WEEK: Gross Dollar Retention: Net Dollar Retention is an important metric for our new capital-efficient LeanOps world we live in, but let's also consider NDRs twin - Gross Dollar Retention (GDR). GDR measures the revenue that you keep just from your existing customer base. The big difference is that it doesn't include new or expansion customer dollars. Read more via the SaaS CFO here.
2. 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. 3. DEMO ANALYSIS: For my daytime business, demos play a pivotal role in our sales process to experientially show and discuss the value we can deliver 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. 4. INVESTORS: A great article from Cruchbase reviews the startup landscape with seven super informative charts. After a tough 2023 (the lowest startup funding in five years) and an ongoing valuation correction, 2024 looks to bring some stability. Seed funding remains robust, but there will remain a cautious approach to hiring (efficiency per employee as a new key metric). It also shows the shift away from Web3/metaverse (remember that?) toward AI Investments. M&A activities have slowed but may pick up as/if valuations improve. 5. SEED: Speaking of seed (see above), early-stage fundraising in tough markets requires focusing on key metrics. Capture investor attention by showing the capabilities of the business and market: Burn rate & runway (efficiency and planning), TAM (market opportunity, and CAC (sustainable customer acquisition and growth). 6. TECH TRENDS: This is the final tech trends report of the year, I promise - but this is always a good one from CB Insights. There is a lot to summarize in the 100+ slide report covering 20 trends, so I'll lob in some teasers: Generative AI dominated the investment scene, attracting almost 50% of all AI funding (which was $42.5B across 2,500 deals, which US companies also dominated), Google was the most active investor in Q4'23, there is also a pretty sweet nod towards quantum computing, and it's continued path to commoditization/commercialization. 7. ASYNC CULTURE: Crack open your tech dictionaries again for this one - it's something we do at my day job that we are trying to get better at; I just wasn't aware there was a label for it. Management and leadership can get very out of sync 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 those pillars (especially the stuff around documentation). 8. BUYERS vs USERS: The person writing you a check is different from the person getting value out of your product. So, read this insightful article from HeavyBit on differentiating messaging based on this premise and the different profiles. 9. REVERSE TRIALS: My article on trials was popular last week, so 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, and 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. 10. CASE STUDY: CATEGORY CREATION: I know we all want to be up and to the left in one of those fancy-ass Gartner/Forrester Quadrant reports. So take a watch of this presentation on category creation from Neo4 and another version from Gett. POD OF THE WEEK: Lots are covered by the 20-minute VC this week, who talks to Adam Fisher of Bessemer Ventures about his 27 Years in Venture Capital. 1. SaaS METRIC OF THE WEEK: BOOKINGS. I have a love-hate with bookings, but in the SaaS world, accurate bookings data is critical for tracking sales performance, forecasting revenue, and calculating efficiency metrics. But getting accurate bookings data to support strategic decisions is a struggle - so the SaaS CFO has a great article and template for us all to use to better manage the struggle.
2. BOTTOMS UP: Stage 2 Capital has a Go To Market Analysis Model called the Bottoms Up Model (Bonus Worksheet here), starting with your current state to assess if Sales & Marketing efforts are well matched to the finance plan and unit economics of the products. 3. DIFFICULTY RATIO: Once for your tech dictionaries. 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, which is discussed more in a Substack post from David Sacks. 4. SALES COMMISSION: I had some dialogue about a post a couple of weeks back on commission that excited me to uncover this post on creating a sales commission plan, including determining OTE, Quotas, Accelerators, Ramp Time, and Draws. 5. TRIALS: They are a proven funnel method for a solid go-to-market strategy, and according to this article, starting users with premium trials (aka reverse trials) can boost conversion. Also, check this article on 9 ways to optimize your SaaS trial, and then take note of an older article from Tomasz Tunguz asking how long should trial periods be? TL;DR: Longer trials do not convert customers at greater rates. Two weeks or two months, same results. 6. CUSTOMER SUCCESS: Great SaaS-ism dropping from Jason Lemkin this week: Hire one customer success manager for every $2m in ARR. But it's a relative rule and varies with deal sizes, and you can forget the $2m/CSM rule at the earlier stages of growth. But start segmenting & investing early: Big deals ($50k+ ARR): Hire a CSM per 2 customers; mid deals ($5k+): Proactive outreach is possible with 400 customers. Just automate! 7. SEO: This article offers several SEO growth hacks for startups, including building niche tools for backlinks, using "ref" tags on outgoing links, leveraging HARO for expert quotes in media, making small donations to crowdfunding campaigns for backlinks, writing testimonials for services used to gain backlinks, and optimizing pages using Google Search Console data. Double down on this last one - here is how to think about your Google/SEO keywords, and here is a starter guide from them. 8. TRENDS 2024: Sapphire Ventures have released their State of the SaaS Capital Markets report, start 9. VENTURE: This is a great Cheat Sheet from Antler - a guide for very early-stage founders on how much they can realistically raise in their first round. Especially if nothing has yet been built. 10. CASE STUDY: Adding onto #7 above - how Airtable leverages SEO to attract about 3 Million organic searches/year. This is also Grammarly's wheelhouse, so here is a great case study on their SEO. POD OF THE WEEK: The Pavillion CEO summit late last month had some great sessions, with one highlighting some key trends for 2024 (the sound pops out for a little bit - don't worry, it comes back). Some teasers for you: 1. the emergence of the $300,000 employee, 2. efficiency being crucial at different ARR levels, and 3. the importance of cautious hiring in the 'Lost Generation.' Tons more gold inside. 1. SaaS METRIC OF THE WEEK: From the brilliant minds at Bessemer Venture Partners comes a new metric for 2024 called "The Rule of X," challenging the traditional "Rule of 40" and emphasizing growth over profitability. It asserts growth impacts valuation more significantly than free cash flow (FCF) margins, advocating a 2-3x higher weighting for growth. This rule considers long-term market trends, recognizing that while profitability matters, sustainable growth drives greater long-term value. This approach is particularly relevant for the new world of late-stage private and public companies focusing on efficient growth strategies (see #7 on layoffs below).
2. 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. 3. DEMO 1: The path to Demo is exactly the primary call to action my website is designed for. I assume it's the same for many of you non-PG B2B people, so....."Should Your Website Drive Prospects to a Demo?" Take a read of the article to determine if this is a problem at your startup. 4. DEMO 2: Following up from above, here are some great tips for running a demo without being a salesperson, applicable to both sales and investment pitches. 5. AI: Big Tech is playing hard in this space with a few notable articles this week. First up - the new Big Tech Acronym - MANG (Microsoft, Amazon, Nvidia, Google), the newest group of prolific venture capitalists in data and AI. In 2023, their combined deals totaled $25B+ (8% of all North American venture capital). Secondly, Meta is desperate to be on that list and is playing catch-up after missing the Metaverse mark, so it is now pouring money into developing open-source AGI. What could possibly go wrong? Finally, Sam Altman of OpenAI wants to go more vertical by raising billions of dollars to set up a new AI chip-making venture to compete against NVIDIA and the like (who apparently sold. 6. SECTOR GROWTH. According to Tomasz Tunguz, the fastest growing software sectors will be Security and Data this year (security at 29% expected growth, outpacing Data at 23%). High growth rates in these sectors drive much better forward-revenue multiples. Both sectors average about 10x, significantly higher than others. He expects to extend this growth into private markets, influencing acquisitions and financings. 7. LAYOFFS: Tech industry layoffs are not slowing down into 2024 as right-sizing, R&D-based layoffs, and positioning into profitability (or Shareholder Value) measures continue. As of the writing of this newsletter, we have 94 tech companies reporting a total of 25k layoffs year to date. 8. M&A: Software M&A is also off to a quick start this year, and Janelle Teng tries to make some observations/predictions for the year in this post. Starting with valuation multiples compressing and a corresponding activity slow down due to valuation mismatches. Regulatory scrutiny will rise (impacting deal dynamics and timelines). Soft landings are becoming more common due to challenging operational conditions, and AI-driven acquisitions(see #5 above) are gaining traction. 9. SaaS TRENDS: Vendr runs a Quarterly SaaS Trends Report, and now that 2023 is over, they have just released their wrap-up report for the year. According to the report, some of the key findings are: Software buyers are consolidating their tech stacks and reducing spend, sellers are focusing on price transparency and lower discounts (for example, ACV dropped about 45% between Q1 and Q2), most popular categories for SaaS were sales and revenue and cybersecurity (see #6 above). 10. CASE STUDY: Atlassian has grown from a bootstrapped startup in 2002 to a $50 billion public company. This article outlines the pillars of their growth strategy: product-led, customer-centric, partner-enabled, and culture-driven and highlights some of the unconventional and contrarian decisions they made along the way, such as having no sales team, using rock-paper-scissors to resolve disputes and acquiring their competitors. POD OF THE WEEK: From the Go To Market Podcast - Building a top-down sales strategy while maintaining a bottoms-up approach to build longer-lasting relationships with customers and stakeholders. |
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