1. SaaS METRIC OF THE WEEK: Attribution. Marketing attribution models help marketers assess the data behind user touch points and conversions to understand the return on Investment and effort. Learn more here about Single-touch attribution models, Multi-touch attribution models, attribution tools, and more to make better data-driven marketing decisions.
2. PAYFAC: Crack open your Tech Dictionaries—I have implemented PayFac (or Payments Facilitator) to create an additional (recurring) revenue line for the business, but I was not aware of this 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. It's very low-touch once it's up and running! 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 - the full report is here, which expands into what roles you should hire and what the org chart looks like. 4. SALES OPS: For those of us lucky enough to be in Scale-Up mode but not in a PLG way. Scaling creates some real teething problems, especially regarding revenue teams and moving beyond the founder being the primary (or only) salesperson. Eventually, a dedicated team will be needed (that doesn't involve the founder), and in more modern times, sales operations operators are required to coordinate cross-departmental activities to help a revenue organization hum. Read this Sales Ops primer article from Point Nine Capital on starting all this. 5. COMPENSATION: To complement #3 and #4 above (and also add to last week's popular link covering How Cheap a Product Can You Have And Still Have Salespeople?), here is a three-part Guide to Sales Rep Compensation for startups highlighting compensation plans (part 1), SPIFFS (part 2), and Commission Rate benchmarking (part 3). 6. MVT: Here is another one for your tech dictionaries: MVT, or Minimum Viable Testing, is about creating hypotheses and conducting tests that allow you to predict whether a market will appreciate a product before even launching an MVP. 7. PRICING: Pricing AI products is complex due to variable costs. Late last week, I was asked questions about pricing AI. After some research, SaaStr has a solid piece on how to price and package AI SaaS products. 8. STARTING: Who's been asked the "How do I get started" Question before? Y Combinator has a deep-read startup playbook that distills key advice into actionable segments: Idea, Team, Product, Execution, and relevant podcasts. For anyone wanting to get started, it's all about simplicity, understanding the market, and maintaining operational momentum as the critical fundamentals for success. Highly bookmarkable for those at the earliest stages. 9. FEMALE VENTURES: According to the Pitchbooks All In, Female Founders in the VC Ecosystem report, Startups founded and co-founded by women entrepreneurs in the U.S. received about 28% of all total VC dollars last year. This is up from 2022 and shows progress (albeit slowly), but most of that $$ was with OpenAI. Take that out of the equation, and cumulative dollars are actually down. Interestingly, Pitchbook has slightly similar stats on their Female Founder Dashboard (25.5%) and a good chart showing how Female founder-only startups get a MUCH smaller piece of the pie. 10. CASE STUDY: Moving upmarket into larger organizations is a standard SaaS growth strategy and Tech-ism. Increasing ARPU (Average Revenue Per Customer) is good! However, there is a lot to learn and a lot of time, learning, and effort required to succeed in this market segment. It's not easy, but it can be done. Here is an excellent guide from Outreach on breaking into deals over $100k ARR. POD OF THE WEEK: The Video version of #7 above from Unusual Ventures - How to price and package AI SaaS Products. 1. SaaS METRIC OF THE WEEK: In 2024, efficiency is a key measure - see this post from SaaStr and this one from IceHouse Ventures. On the balance sheet, People are the most important (and expensive) metric for any company, especially SaaS. Revenue per FTE is one metric for company efficiency via people efficiency. 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 as a PDF).
2. M&A: Navigating an acquisition process is a relatively unexplored topic in this newsletter, so check out this guide to running an M&A process as a Founder from First Round Review. 3. NOLS FRAMEWORK: Management talk time: Not all decisions are made equally, and as a former outdoor educator and part of the National Outdoor Leadership School's (NOLS) network, I love articles from another life that apply today. This one focused on group decision-making, outlining 6 different ways to make decisions in a group. 4. MONETIZATION: What are the best ways to monetize based on market segment? It's kinda obvious: For the SMB market (100-200 employees), self-serve is critical. Product-led sales are optimal in the mid-market (200-1000 employees). At the enterprise level (1000+ employees), sales-led reigns supreme. But a bigger question to ask (and Jason Lemkin asks it): How Cheap a Product Can You Have And Still Have Salespeople? 5. RAISING: There is quite a big gap for startups at the Seed and Series A stages, so check this guide for founders to understand the difference between raising their Seed round vs. their Series A. Some seed investors should also read this. 6. VENTURE: Last week, we referenced Corporate Venture, so this week, let's look at Family Offices. The Western World is amid a massive transfer of intergenerational wealth, from the Baby Boomers down to the young-uns. This is also true in the Family Office world, and according to Pitchbook, the VC industry could witness a huge influx of the $100T or so worth of family office assets being transferred over the next 25 years. 7. AI 1/2: Quite a few moves in AI this week and two from Apple: Apple acquired Canadian AI Startup DarwinAI (which specializes in manufacturing efficiency, which makes sense and only Apple's 3rd acquisition in over 2 years)), but surprisingly, rumors are circulating of Apple integrating Google Gemini, into their devices, all part of Tim Cooks promise last month to have AI news "later this year." On the infrastructure side, NVIDIA, fresh off a banner market cap year, unveiled its next-generation AI GPUs and is apparently in advanced talks to acquire AI infrastructure platform Run:ai. 8. AI 2/2: This post speaks volumes to me and my daily use of AI co-pilots/assistants and where I also see it headed (and see the use case for users in my B2B SaaS day job): AI copilots transitioning to "AI co-workers" that can complete tasks and workflows on their own. 9. COMPENSATION: Carta's State of Startup Compensation (H2 2023) came out last week and has all kinds of interesting data - one is broken down into this Twitter post outlining what the first 5 hires at a startup typically receive in terms of equity compensation. BONUS CONTENT: New Zealand Tech industry compensation report from Potentia. 10. CASE STUDY: Last week's Podcast, which discussed lessons learned launching new products at Atlassian, was surprisingly popular, so let's double down again this week with a case study via Tara Seshan (ex PM at Stripe and Watershed), who shares lessons from her playbook for going multi-product. POD OF THE WEEK: From Peter Walker discussing Startup funding in 2024, the year of layoffs or recovery? And why down rounds may not be such a bad thing. 1. SaaS METRIC OF THE WEEK: ACV, or Annual Contract Value, is one of the most popular metrics in the SaaS world. Chartmogul's article details what it is, how to calculate it, and how to leverage it in your business. Here is some good recent data on ACV within scaled SaaS companies. TLDR, the median ACV is $49K. But not all annual revenue is created equal - check out this analysis by CJ Gustafson
2. CASH MANAGEMENT: Here is Part 1 of a 3-part Guide to Cash Management for Startups, which highlights bank account strategies at different Stages. The startup phase needs basic checking and savings accounts for operational expenses and emergencies, maintaining liquidity, managing cash flow, and keeping financial controls strict. It prioritizes simplicity and security in banking structures. 3. ANNUAL PRICING: I'm sure you see this all the time: options to pay monthly or annually on a SaaS pricing page. This is great for all you non-consumption-based folks out there. It's a really great choice for cash flow, but is it the right option for your business? Jason Lemkin has the low-down. 4. ESTIMATION: If you have a services element in your startup, estimating effort, especially 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 it with the person you know who needs to bookmark it) - Estimating Software Projects by Jacob Kaplan-Moss (and what to do when you mess up). 5. FORECAST: This is a great article to help you better forecast your subscription growth. It shifts focus from immediate earnings to long-term revenue and uses an excellent walkthrough example to emphasize the importance of understanding retention rates. 6. MULTIPLES: The Clouded Judgement newsletter took a look at SaaS revenue multiples this week, and here is the news: Overall, the Public Median is climbing back up and is now at 6.2x (we were at 5.2x this time last year). Public multiples don't have a direct correlation to private multiples, but they are definitely a signal that the direction of private valuations should be trending up. SaaStr covers pre-IPO Multiples well in this article. 7. CORPORATE VENTURE: (CVC). Back in the good ol' days of '21, Global CVC-backed funding more than doubled ($169.3B). CBInsights has just launched their Global 2023 State of CVC Report (pdf), and it's down, way down. Total deals were down 32% (3,545), and funding dollars were down 46% - roughly in line with declines in the traditional VC market. But - silver linings: CVCs are still very interested in early-stage startups (it's about 2/3 of all capital deployed) 8. AI 1/2: I read a great article earlier this week titled AI won't take your job - someone using AI will...and apparently, companies are also willing to pay a premium for that worker according to this survey by AWS (up to 47% more). 9. AI 2/2: The AI Tech Bro wars are underway. Elon Musk, not happy with how OpenAI is now operating (a for-profit wrapped up in a non-profit entity—similar to Mozilla), has filed a lawsuit against them. But for context, here is the original pitch for OpenAI that Sam Altman sent to Elon. Cynically, OpenAI is concerned that Musk could use the discovery process in the lawsuit to help aid his own artificial intelligence company, xAI. 10. CASE STUDY: Moving upmarket into larger organizations is a standard SaaS growth strategy. Increasing ARPU (Average Revenue Per Customer) is good! But there is a lot to learn, and a bunch of time, learning, and effort are required to be successful in this market segment. It's not easy, but it can be done. Here is a great guide from Outreach on breaking into deals over $100k ARR. POD OF THE WEEK: Megan Cook, the head of product for Atlassian's Jira Software, discusses lessons learned from launching new products and how to get buy-in. 1. SaaS METRIC OF THE WEEK: Consumption-based LTV. If you have a consumption/usage-based model, you probably have revenue that is not consistent month on month. Variable revenue is now a big thing in SaaS. Check out How to calculate LTV with variable revenue customers from the SaaS CFO (comes with a template!). An analysis of usage-based pricing from Bessemer Ventures is here to help you think about your own pricing models.
2. HYBRID PRICING: Adding onto the metric above, Kyle Poyar of OpenView has noted in this article (and updated from this one a couple of years back) a) usage-based pricing isn't merely a pricing change but an org structure one and b) UBP adoption has cooled (from 46% to 41% '22-'23) shifting towards "hybrid" pricing models that combine usage and subscription pricing, especially in the SMB side of town. 3. SALES PLAN: Adding just one more onto #1 above, when creating Sales plans, here is a great article from a16z on creating a Usage-based Sales Compensation Plan. 4. TAM: A critical question at the very early stages of startup land is, "What's the market size?" - if you don't get it right, it can create trust issues as the size potential of this startup is directly proportional to the size of that market. Having a clear understanding of Total Available Market (TAM), Serviceable Obtainable Market (SOM), and Target Market (TOM) can give all the confidence in the world to answer that question. But y'all really need to get started first with this TAM Masterclass. 5. FIRST PRINCIPLE THINKING: This phrase has been thrown around a lot in recent years, so do you want to be more like old-school Elon (the one without all the SEC/Twitter/kids dramas)? Take a read here on the concept of First Principles Thinking. In addition, here is a full guide/website. 6. RAISING: How long does it take startups to reach each venture stage? Carta's Head of Insights, Peter Walker, shared his analysis, which also clearly highlights the impact of the difficult fundraising environment we are currently in (Last year was the lowest for venture funding globally since 2018, - $285 billion according to Crunchbase data) 7. SALARY (Updated for 2024): Hey Founders, a TechCrunch article from last year recommended that founders pay themselves rather than doing it for the equity. But how much? Unfortunately, this doesn't mean you get Market Rates. Fortunately, there is a new report in town that dives deep into this question; the "Founder Compensation 2.0" report (Europe-based) aims at providing data-driven insights for setting founder pay, especially those of us from Seed to Series B, offering a clearer picture of what is considered "normal." It also comes with a Compensation Calculator! 8. ESOP (also updated for 2024): Employee Share Option Plans are a wonderful idea to incentivize and retain great staff, but under the hood, ESOPs are complex, especially with changing valuations, both positive and negative, in today's market. Check out Airtree Venture's best practices for communicating the value of ESOP to teams. This article also has a bonus financial model template (value calculator, salary package calculator, and vesting schedule). Check this cheat sheet for common ESOP terms. How much equity should you be setting aside for employees in 2024? Peter Walker again - coming through with the good data via this LinkedIn post (check the comments for good Q&A). ESOP starts with around 13% fully diluted at Pre-Seed and Seed and grows to about 20% fully diluted at unicorn valuation. 9. GROWTH HACKS: This article suggests we avoid using "growth hacking" in pitch decks; investors prefer structured GTM strategies. Focus on market understanding, a clear plan to gain market share, and mastery of chosen channels. But IRL, outside of telling VCs you don't, here are five real growth hacking strategies you can use right now. 10. CASE STUDY: Adding onto #9 above, here is how First Principle Thinking can be applied IRL - in this example, towards a Product Lead Growth business. POD OF THE WEEK: Adding onto #6 above, Chartmogul has a great panel discussion about what matters most when pitching in 2024 and what advice they have for SaaS companies looking to raise this season. |
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