Top 10 in Tech A WEEKLY NEWSLETTER

Top 10 in Tech - What to know for the week ending April 30, 2021

4/30/2021

SaaS METRIC OF THE WEEK: PQL vs Activations. In my mind the try-before-you-buy approach to software subscriptions are the best way to get to my money - that is pretty much what PLG is - so put away your SQL and MQL metrics for a second and focus on their newer cousin: PQL (Product Qualified Leads) - this tracks potential customer who has exhibited buying intent based on product interest and usage. Now you know that - measuring PQL vs Activations are the two metrics to measure in unison.
PRICING SENSITIVITY: I do post about pricing a lot (because a 1% increase in price can generate up to an 11% increase in your profits) So this week lets take a more nuanced approach by looking at different concepts within pricing strategies starting with priced based sensitivity: which is basically a measure of the percentage of sales you will lose or gain at any particular price point relative to another lower or higher price point. Profitwell can explain it much better - so take a read of their article about how to measure and optimize it (check the Van Westendorp's Price Sensitivity Meter")
WFH (DEEP DIVE): OK - so here is the big question-of-our-time we all want to be answered: Are we more productive or less productive working from home and petting our cat/dog? Upwork reports that the WFH forced experiment IS working but their platform has kinda consisted of WFH people since those golden days pre-Covid - so they may have an agenda - they say 'empirically,' but in more qualitative not quantitive ways. So let's also look at a more trusted and independent source: The Economist (if you have a sub to their site) and Harvard (if you don't). In their study they unearthed a better metric: Productivity sharply rose by 7.5% when workers went remote with no sacrifice in customer satisfaction reviews. Slack takes a bit of a different path on their study: WFH is not for everyone but if you are an employer: People prefer choice (72%). So if you want to hire good people you need to be flexible about where they will work. Ultimately the winning metric is forecasting that the WFH boom will lift productivity in the U.S. economy by 5% (mostly because of savings in commuting time).
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 have this article late on PR for SaaS - with some sample scripts!
SAAS SPEND: This is actually a really good benchmarking report for your spending habits. I (semi-often) joke that SaaS is just a big Ponzi Scheme - because running a SaaS company requires a boatload of money being spent on other SaaS Companies products (Slack! Zoom! HubSpot! AWS! Google! Microsoft! Adobe! Atlassian! etc etc etc). But how much money do SaaS companies spend on everything? Well, check the first chart on SaaS company spend - remarkably to no one bootstrapped companies are being outspent by venture-backed companies - but the average is 80% of ARR 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).
AI TRENDS: Even though we're 1/3 of the way through 2021, this s a fun article on trends in AI for 2021 from Forbes. d\Deep fakes are becoming more and more alarming - but AI for Kids caught my attention the most - but the ones with impressive commercial potential are Advanced Pre-trained Language Models - AI is now writing poetry, you dig??
OPEN STARTUPS: Most Startups are very secretive about their metrics but over the last 6 years Baremetrics has been chipping away at this industry norm to get SaaS companies to be more open about performance; Theorizing that radically transparency can actually be beneficial - it works for me to compare and contrast my own business performance.
WRITING: Being able to write well is a skill that needs to sit with founders. So here is 3 step guide - Step 1. How to position your startup and achieve your unique value prop; Step 2. how to write well and one more version for good measure; and Step 3 top tips for telling stories.
ONBOARDING CHURN: This is the sibling to the post above as abandonment can be a signal of poor onboarding. Here are 3 reasons why users abandon the onboarding process (identify verification, slow onboarding experiences, and being asked for too much data) and AppSee has another 8 reasons in this article (adding Privacy and Ad clutter to the list).
CASE STUDY: Datadog - who, you may ask? Well, I use 'em, I bet your platform engineers may too along with a truckload of others because they generate a whopping $700 Million+ in ARR and growing at 61% year-on-year. The top 7% of their customers generate 75% of revenue and 60% of revenue growth comes from existing customers!

POD OF THE WEEK: Scaling Zapier To $140M ARR from The 20 minute VC - it includes 25,000 landing pages you know.

Top 10 in Tech - What to know for the week ending April 23, 2021

4/23/2021

SaaS METRIC OF THE WEEK: NPS: We all like to be liked - Net Promoter Score is basically 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.
TESTING: Everything is a hypothesis in a startup and testing should be embedded in everything you try towards growth and product. When conducting experiments such as A/B tests, Go Practice has some great advice on how to make these experiments run faster.
PLG (aka Product Lead Growth) - as a refresher read this to understand the 4 basic principles behind PLG and then check this article out that goes into lengthy detail of how to design for PLG across the customer journey (and creating a flywheel) - trying to get a user to a point at which they understand the value they can get from your product (aka the AHA moment). Still confused? This is a great article using the hierarchy of needs as an explainer.
SEO: Want More SEO Traffic? Follow this self-guided process to get a 7-week SEO Action plan from Neil Patel for your business! Moz also has a great little guide on keyword research complemented by their other article on Search Intent and here is a pretty good (current) guide from Founder Institute.
REVOPS: aka Revenue Operations is definitely 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 but the plot twist being that in this Age of the Customer it’s also a way to align this operational excellence around the customer experience. Here is a good introductory article from Chargebee on RevOps and here are 3 nuggets of wisdom from some significant RevOps leaders. BCG also has a great deep dive for you to read here.
GROWTH: Adding onto the above and using real-world companies Zoom and Twilio as examples (both also notable product-led) a16z make the case that the new era of enterprise go-to-market requires growth-plus-sales - which is just a fancy-pants way of highlighting the evolution in customer buying behavior for high-end B2B. Great read.
CONVERSION RATE: There are many, many conversion rate metrics you could track - so which ones are the most important? It really depends on the goals of your business - so let Neil Patel tell you his 8 Most Important Conversion Rate Metrics.
COOKIES: This is an expansion from above, so not the chocolate chip kind of Cookies. Love them or hate them, the reality is that browser cookies are heading the way of the Dodo, so conversion tracking via cookies being phased out creates a new attribution problem to solve. Conversion modeling is a way forward, so if attribution is a necessary part of your business or your channel/partners Business, take a read of this article from Google on why conversion modeling will be crucial in a world without cookies.
MACHINE LEARNING: A rather bleak article for many highlighted that AI is set to replace 50% of low skilled jobs in the next 5-7 years starting with a market growth of $112.2 billion (46%) by 2022 - that's next year for those of us like me that haven't adjusted to 2021 yet. Sooooooooo, want to check out something new after that? Well, take a looksie at these 28 Free AI, Machine learning, Data Science, and Python eBooks all ready for download directly to the device of your choice now.
CASE STUDY: Taking a look at Twilio this week as an expansion of #6 above. In August 2019 Jason Lemkin noted the impressive metrics of Twilio as it reached $1B in ARR. Fast forward to January of this year, he's update observations now that they are at $2b+ ARR - yup - a $1B ARR increase in 18 months - now 60B market cap and growing at about 53% YoY thanks to an NDR clocking in at 140%!

POD OF THE WEEK: From 16z Podcasts: An episode about Developers as Creatives with the CEO and co-founder of Twilio, Jeff Lawson.

Top 10 in Tech - What to know for Week ending April 16, 2021

4/16/2021

SaaS METRIC OF THE WEEK: CAC! Understanding customer acquisition cost can help create, measure, and improve a growth strategy that can put a business on the path to profitability. Here is a deep dive into the whys, the whats, and hows of CAC.
MARKETPLACES: 2020 was a bit of a gut punch for many marketplace categories, I even (very optimistically) in a pre-covid newsletter mused what marketplace consolidation will occur in the upcoming year. Little did I know! a16z have just updated their Marketplace 100 and guess what? Consolidation was very much a thing: last year, four startups accounted for 76 % of consumer spending. This year more than 70 % of Market Value can be attributed to just one company (Instacart is the Covid winner) and 10% of companies from last year went public or were acquired. Ed Tech is also the newest category winner.
VENTURE CAPITAL: BOOM! Investments to US-based companies surged to a record high of $62 Billion in Q1 21 according to the PwC and CB Insights Q1 2021 MoneyTree Headline report (that's up 62% from Q4 of last year) - to put this into context, it's almost half of all money raised last year (and 2020 was a historical high). Deal activity is also up 14% YoY (1,735 deals) - great sign, unless you are looking for Seed $$'s, as deal activity is up in all stages except seed (which is down in comparison to Q4 of last year)
PRODUCT MARKETING: Marketing is a very broad practice, see here for a list of the separate marketing functions that can exist. So here is a very helpful dive into Product Marketing and specifically what the roles and responsibilities are of a Product Marketing Manager.
PERSONALIZATION: Did you know that marketing personalization can reduce acquisition costs as much as 50% and 87% of companies see a lift in key growth metrics when they employ personalization? SaaS marketers have been leveraging personalization to increase conversion rates, improve customer success, and increase the quality of sales/marketing funnels for some time so here is a great article from Chart Mogul on the (modern-day) personalization fundamentals.
DEATH TO EMAIL: Just kidding. Email is a long way from going bye-bye, we spend, on average, over 3 hours a day using it, so don't rush out to delete your inbox just yet. Communication platform companies have been making this death-to-email statement for years though - looking at you Yammer. The irony is not lost as I'm sure many of you are suffering from intense Slack/Zoom/Teams fatigue. But guess what? These platforms are absolutely not going anywhere. A new (VERY Slack-centric) report from Slack shows the impact and importance of collaboration platforms in our new post-pandemic workplace environments: 40% of meetings can be replaced, 95% of Slack users say they prefer Slack to video calls when connecting with their team, and 100% of Slack users want to keep using Slack even after the pandemic!
RENEWALS: Existing customers are the lifeblood of growth in a SaaS business, so making sure they renew is an exercise in revenue efficiency. New customer acquisition costs about $1.10+ per $1 of ARR). Compare that to the cost of retaining or up-selling existing customers (about 12c-15c per $1 of ARR) - that’s 8 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.
COMMISSIONS: How do you pay out your different sales channels? Commission levels of sales are pretty stable across sale types at about 10-14%. Commissions on renewals are only 3% and upsell is 9% - however about 50% of the time, this is not paid at all. (Bringing up another subject on how much revenue a Customer Service Manager can manage).
CSM ATTRIBUTION This is an extension of the last link above: How do you account for, or budget the cost, of a Customer Sucess team? The team at Gainsight dives deep into this question and comes up with some fantastic insight - even though the question itself is complicated and the answers end up being more non-monetary than you would probably like. Owning the renewal, up-sell, cross-sell are key delineation points between expense attribution across different departments who CSM teams may sit under.
CASE STUDY: Dropbox! I've been a big Dropbox user since inception - I was an early birder! As were they to Product Lead Growth strategies - they have a legendary story of 3900% growth in just 15 months! Just mind-boggling. Check out how they made all that happen.

POD OF THE WEEK: Customer churn is the bane of SaaS businesses - data can help understand the causes of churn and take action to reduce it.

Top 10 in Tech - What to know for Week ending April 9, 2021

4/9/2021

SaaS METRIC OF THE WEEK: Where do you start at the early stages of a startup when it comes to tracking metrics? The most important bottom-up SaaS metrics to track (and how to best visualize them) are in this article and neatly broken out via pre-revenue and post-revenue.
PRICING: Many SaaS Companies are shifting to usage-based models (me too!). Charging per-use makes the product more affordable and accessible (and take advantage of the features they need), so check out this usage pricing guide from Baremetrics.
SPEED MATTERS: Yup - I write about speed a lot lately. When I write this newsletter I prioritize speed and prioritize content over spelling, editorial tightness, and grammar. (But big shout to Grammarly who I outsource all that to). James Somers feels the same and Brad Dickason goes a step further - calling Speed the killer feature with firm examples of where speed matters in a digital experience and can be a great UX moat. Google obviously makes speed a priority for their tech stack but Netflix is my favorite great speed-focused tech company, which (amazingly to me) de-prioritized uptime in favor of speed and also become their own CDN as part of their speedy-experience solutions.
MARKETING: Guess what? Your marketing team is slow!. Take a read of this article on frameworks to make your marketers speed up. Tech companies are market differentiators in part because they operate at a cadence that is faster than most. Speed is a competitive advantage that your marketing teams need to leverage!
TEST TEST TEST: Evaluating the functionality of a software application at every stage is critical to shipping something awesome. Take a good read of this PDF guide (along with real-life examples) and then bookmark this Google Site (blast from the past) page for a comprehensive list of the Stages of Test Development. That list is kind of old school though - so take a read and sprinkle some of this more modern (ie Agile) take on testing. into your QA world.
CLOUD: This is actually pretty big news: Cloud infrastructure spending by Enterprise surpassed on-premise spending for the first time in 2020 - it grew by 35% to reach almost USD $130 billion. I do find this number quite a small piece of the approximate $2 Trillion in total annual cloud spend Bessemer ventures reference for 2021 in their Cloud Index.
LINK BUILDING: This kind of seems like an SEO tactic of the past, where businesses build links to create a more organically positive Search rating. So is it still a relevant practice in 2020? Well......yah! But the rules have changed quite a lot. Check this article on how to optimize (by careful curation and intent) what to link.
JAVA: This is actually outstanding news this week (unless you are Larry Ellison). The U.S. Supreme Court ruled that Google was legally allowed to use part of Oracle's Java API while building its Android mobile operating system. This court case has dominated tech industry news for yeeeeeaaaars (about 10)
CORPORATE VC: (or CVC) CVC-backed deals declined from a record high of 3,416 in 2019 to 3,359 in 2020, however corporate VC groups participated in 182 mega-rounds in 2020 ($100M+ deals) — a 48% increase compared to 2019 which bumped up the total funding to record highs (screw you Covid) of $74.1 Billion USD. Full (downloadable PDF) report from CB Insights here.
CASE STUDY: Canva - I'm a big fan (and user). Apparently, I'm not alone as in just 7 years they acquired over 15 MILLION users - this was back in 2019 when they were valued at $3.6 billion. Jumping over to 2021 they are now a decacorn and passed $500 million in annualized revenue, up 130% from last year!

POD OF THE WEEK: I'm a bit obsessed with Darknet diaries - so this is another one from them (or maybe three, depending on how much you get into the story). It's about the massive user-data breach at LinkedIn back in 2012 - which had a cascading effect around the web leading to other breaches at Dropbox and now-defunct FormSpring.

Top 10 in Tech - What to know for Week ending April 1, 2021

4/1/2021

Welcome to another Benchmark special! I get asked for more of this quite often and, as it's Easter, it's a bit of a recycle. So this is a compilation of benchmark data reported from across the webs….

EXPANSION: Just acquiring customers isn’t enough of a strategy for long-term success: Expansion strategies are pragmatic growth practices that any good SaaS company needs to get a grip on as 37% of new ARR bookings are attributable to cross-sell/up-sell activities. Here is what good expansion looks like. OpenView Partners have gone to town to benchmark this metric with an extensive Expansion SaaS Benchmarks report. Product Led Growth businesses leads the pack!
RETENTION. To compliment #2 above, retention is deeply related to expansion as it relates to sustainable growth, and here is what good retention goals should be benchmarked against and how to optimize them.
CAC: This one needs nuance, David Skok, the godfather of SaaS Metrics has broken it down into i) blended, ii) new, iii) up-sell, and iv) expansion. It's getting hard out there though - Every dollar of new revenue in 2020 costs $1.60 (compared to $1.35 in 2019). Up-sell and cross-sell still remain the CAC bargain, but it’s still up YoY, with each dollar of new revenue costing $0.69 in 2020 (it was $0.61 in 2019). Big impacts on sales efficiency. This chart alone highlights why having a customer-focused strategy is critical for growth.
GROWTH: Median organic ARR growth for the year surveyed (2018) was 36%. Thus is across 424 SaaS businesses distributed globally (but 2/3 of which were US-domiciled). This rate is pretty evenly split across different contract size businesses - so there is no obvious relationship between ACV and growth. Companies surveyed average a median ARR of $8.7m
MARKETING AND SALES: Hubspot continues to benchmark Pandemic-times data for core business metrics like website traffic, email send and open rates, sales engagements, close rates, and more (aggregated from their global customer base of over 70,000 companies). It’s an incredibly useful tool as a benchmark to measure your business against. Explore all the benchmark data here or check this week's summary here. Chorus.ai is doing something similar by benchmarking sales organizations (daily!) across their user base. A recent Tomasz Tunguz summary can be found here.
GTM: Current and pragmatic Go-To-Market benchmarks are presented in this deck from Tomasz Tunguz and the team at Redpoint Ventures. Some good findings from their survey: 1) If SDR/BDR teams hit their numbers, so do Account Executives; 2) Most sales teams ramp Account Executives in about six months; 3) Marketing teams spend 5-10% of a companies ARR. David Skok also observes that the primary mode of Sales and Marketing efforts remains Field Sales based, with Inside Sales taking a very close second strategy for smaller businesses (under $10m ARR)
UX: Optimizing a User Experience is key to the long-term success of any service or product. Google is all over this and just launched Web Vitals, a program that offers developers guidance about best practice benchmarks on user experience. It’s benchmarking very Google-based metrics: loading, interactivity, and visual stability.
PROFESSIONAL SERVICES: It’s a weird open secret that a lot of 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 captured 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 businesses.
SPEND: Figuring out how to optimize marketing spend and growth rate is a key question and this study doesn’t show great benchmarks - the percentage of revenue in pretty much equals percentage growth out, but with an ever-increasing range of outcomes as spend increases per business. More solid benchmarks are with the Sales vs Marketing spend ratios which stay at about 2:1 regardless of market-facing strategies (although Mixed is a bit of an outlier).
BOOTSTRAPPERS: This is for all of you choosing the do-it-without-investors route: The latest State of Independent SaaS Report based on hundreds of non-venture track, revenue-generating SaaS companies. It has really great Bootstrapped benchmarks: growth rates, demographics, validation approaches, and more.

POD OF THE WEEK: Of course it’s going to be How to Succeed at SaaS with David Skok

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