Top 10 in Tech A WEEKLY NEWSLETTER

Top 10 in Tech - What to know for Week ending May 28, 2021

5/28/2021

SaaS METRIC OF THE WEEK: MRR (monthly recurring revenue). In a surprise statement to no one, this is one of the most important metrics a SaaS company has. But MRR is a nuanced metric with a few flavors and this is something that everyone needs a deeper understanding of. There are different ways to calculate the metrics and once nailed, can then be leveraged to easily forecast where you are going as a business and which types of MRR are performing best.
MARGINS: Real talk time - Investors love SaaS because of the annuity-like returns (with prolific growth) - but if we really scratch the surface on what the margins are.........it's not good. Sammy Abdullah takes a look at 42 publicly traded SaaS companies (so this is theoretically companies with decelerating growth) to highlight how anemic (that it is negative) the median operating margin of these companies are (TL;DR - it's minus 21%) -most are operating at an operating loss.
INFLATION: Huh? What the heck does this have to do with tech? Well if you have a tech-heavy investment portfolio you sure as heck know why after the last couple of weeks wild Stock Market (and Crypto) ride - let's assume that the fixed Margin costs (see #2 above) are some of the reasoning - but also Tomasz Tunguz gets into it this week looking at the Inflationary pressures within the Tech Industry in regard to valuations. It's quite a wild ride - especially post 2019 (60% spike)and the market is making it clear that valuations need a cool-off.
PRODUCT MARKET FIT: Everyone thinks they have it (when they don’t). Andrew Chen from a16z is great and his PDF/deck on going from zero to Product-Market Fit is excellent (For SaaS he calls this a 5% conversion rate from free-to-paid, or 3X CPA to LTV ratio, or less than 2% monthly churn rate, or TL;DR.... just a clear path to $100k MRR). He also has an accompanying article with notes
TRENDS: In March 2020 the search term for “how to make hand sanitizer” grew by 4,950% worldwide. Opportunity via search is a real thing. Every google search is a problem looking to be solved - some big some small. So how, as an entrepreneur, can we track these kinds of rapid trends? Google lays down the lesson on how to stay on top of market trends leveraging…..you guessed it: Google Trends.
OUTBOUND: LinkedIn a pretty good source to secure outbound opportunities. From the Predictable Revenue team is a great article on how SDRs can turn 100 LinkedIn profiles into 10 meetings and Forbes gives a view on the pros and cons of cold calling.
CONTENT MARKETING: I bet you have been told that you need to focus on the top of the funnel - but here is something controversial to read: When it comes to Content Marketing - focus on the bottom of the funnel first to drive signups. Whaaaaaaaat? The thinking is - top of the funnel already know their stuff, it’s the bottom part of the funnel that's truly on the learning search.
DEMO or DECK?: When it comes to closing deals the teams at Zoom and Chorus got together to take a look at what works better - a presentation or a product demonstration, or a bit of both? Read away for more (and I don’t want to spoil it as the infographic is full of amazing nuggets!).
GROWTH: Jason Lemkin swooping in this week with a fantastic top 5 tips to grow an extra 10-20% faster this year - he's always looking for ways to squeeze more performance out of those growth engines metrics and here is an accompanying article about what kind of growth metrics you may wanna squeeze
CASE STUDY: I got mobbed by Monday.com adds in 2019 and 2020 - thankfully they are gone but I did evaluate their product for use (so they worked). They have now filed to IPO a couple of weeks back and reporting a whopping $240m ARR with an 85% YoY growth. FYI - they launched 6 years ago. Jason Lemkin has some great insight on their numbers here.

POD OF THE WEEK: Expanding #8 above from Dan Martell - How to give product demos that sell using these 5 tips

Top 10 in Tech - What to know for the week ending May 21, 2021

5/21/2021

SaaS METRIC OF THE WEEK: CPA - cost per acquisition. This is often conflated with the cost of acquisition, but they are different. Andrew Chen dives into the details as to why (and also how to calculate CAC accurately).
VALUATION: Complete with a downloadable sheet for ya: This SaaS-Capital Index worksheet (Excel) can be used as a starting point for a comprehensive valuation analysis of a (your!) SaaS business. Check the whitepaper PDF here as the starting point to work through this Excel sheet (especially the bit on how revenue should be measured). SaaS-Capital also reports quarterly on how this valuation index is performing overall. An impressive observation specific to growth rate is that every 1% increase in growth rate corresponds to a 0.38 increase in valuation multiple (starting with a flat growth valuation of 5.1x ARR). All part of the growth-at-the-expense-of-profit strategies.
FREEMIUM: Freemium is continuing to gain popularity as an effective growth strategy for B2B SaaS companies. Canva and Slack have contributed to the re-emergence of this growth strategy. So, why is Freemium becoming popular again? Read more on that here, then check the 3 main flavors of Free and then these 3 Famous Freemium SaaS Strategies (And why they’re so good). But perhaps the more pragmatic article is from a company called Chameleon on making freemium models actually work for you.
CONTENT MARKETING: Mastering great content writing is a skill - and I've snagged a great guide for us all here on that topic and here is great info on how to plan a data-backed B2B content marketing strategy
SECURITY, SECURITY, SECURITY: If you didn't notice - a big US gasoline pipeline got ransomwared last week leading to some serious gas shortages. So time to revisit this: Security should be an integral part of your dev cycle and you need to know your weak spots. Founder Institute discusses 6 points of vulnerability in your tech stack that I bet may be a bit leaky. These high-profile breaches are going to make Due Diligence a lot trickier to navigate (there is a growing need for chief compliance officers for example). What should you start focusing on? Start with more detailed Log Management (listen to the Podcast below to understand why in the now infamous Solar Winds case)
SALES TEAMS #1: Betts Recruiting releases a compensation guide every year and the 2021 version is now out (Or check this for the more interactive version if you don't want the PDF). It covers salaries of some of the most important roles at high growth (mainly tech, mainly sales) companies. Big take-home: Covid hit hard in Sales this year. People moved out of the sales hots spots big time (of NYC and SF); AE's had the first year of no overall Compensation increase; SDR's saw about a 3% rise and; Sales leaders saw about 5% rise.
SALES TEAMS #2: Now that you have some great baseline metrics based on the reports above from Betts, take a good read of this article from David Sacks on the simple math you can use to set up a sales team. With Individual plans, team plans, and expansions/renewals considered for a high growth sales team structure.
SMS: 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.
BUSINESS MODEL: You will be asked often (especially when pitching) about your go-to-market business model: This is a pretty long, but very high value, read from Alex Jarvis with real-life examples of good business models (with some good humor thrown in). The business model is always more important than the product (but of course they both matter - but so does timing). There is a longer PDF version - so I got that for ya too.
CASE STUDY: Check this complimentary case study to #4 above on how Leadfeeder used a long-term Content marketing strategy to increase their monthly signups.

POD OF THE WEEK: Expanding the security post (#5) this week, take a listen to the a16z tear down of how the Solar Winds hack went down (technically). Really great listening for anyone that loves Serial-style podcast covering super tech issues.

Top 10 in Tech - What to know for Week ending May 14, 2021

5/14/2021

SaaS METRIC OF THE WEEK: CLTV: This metric represents the average revenue that a customer generates before they churn - Customer Life Time Value. ChartMogul has a great online calculator here. Go to 'advanced mode' as this calculator references the traditional formula as well as the David Skok version (which is the advanced one, but viewed as being more realistic)....and check here for a thought-provoking read of why your LTV may be lower than you think.
SECOND ORDER REVENUE: Doubling down on LTV this week and a little contrary to the last link above Jason Lemkin claims that CLTV isn’t the whole story and often references a term called "Second-Order Revenue". He states that traditional CLTV analyses underestimate true revenue generated by customers by 50-100% (whaaaaat!!!) in most SaaS models selling to any businesses larger than SMBs.
PITCH: The days of mandatory in-person pitch meeting to a VC are mostly behind us (at least for the foreseeable future). Pitching over Zoom is where we are at. Before you focus on getting the perfect lighting though - check these 16 rookie errors founder make pitching to VCs from Jason Lemkin and read here on how you will be Zoom-judged by the VCs you are pitching to.
CODE: Hard truth - some of your code is pretty stinky. Take a read of this for the kind of bad smells your repo may have. Meh - but how much does it really matter? Well here is a report from Stripe that gives you that cold-hard number and also calculates that the developer "community" is valued at about $3 trillion GDP globally.
WEBSITE: Do you have a pretty high churn rate from your home page or landing pages? Maybe you have a trust problem. This article outlining the Trust Pyramid is very much worth a read but TL;DR A website must meet users' basic trust needs before a visitor can be expected to engage meaningfully. With the Trust Pyramid, there are 5 distinct levels of trust-based engagement, each with separate design requirements.
GROWTH: For public SaaS companies there is a wealth of online benchmarks in regard to performance - but it is much harder to scratch the surface of private SaaS (when there is no compliance requirement to share the data). But here is a couple of reference documents for ya (both from SaaS Capital): 1) Growth - here is their latest report on Private SaaS Companies' growth rates. Some snippets: It takes approximately 5 years for companies to reach $1 million in ARR, 87% of those surveyed reported annual revenue growth of greater than 10%. 2) I've posted about this before - but spend is just an important measure as growth - bootstrapped companies are obviously being outspent by venture-backed companies - the average is 80% of ARR to 115% ARR!!
PRODUCT DEBT: This is a nuanced (and more customer-centric spin) on Technical debt: Product Debt is just as bad as Technical Debt - it's all the decisions that have been made, often tactical and acute, without a clear product vision or sufficient consideration about the long term effects of that moment/decision. The link above also has a great case study of Google Messaging's product evolution.
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 in detail what is involved in a convertible loan and what to look out for.
LANDING PAGES: One of the most common reasons why a search engine-based marketing campaign fails is that it does not have optimized landing pages to continue the journey, take a look here at some best practices, real examples, and templates for Google Ad-based Landing Pages. Then also Check this site out - a collection of the best landing pages around the web with a focus on copywriting and design - finally (this is a repeat-post) IceBreakerVC lists best practices for good landing page planning and strategy.
CASE STUDY: STRIPE: Stripe just raised a new round, remaining private. It was a $600 million funding round that boosted its valuation to $36 billion - but how did they come out of nowhere to dominate the payments space? The answer: Developers! They focussed on going after developers — the main group of people involved in integrating payments into all kinds of digital applications.

POD OF THE WEEK: From Invest Like The Best this week is an interview with Michael Seibel - the CEO of Y-Combinator's startup accelerator - he has reviewed literally thousands of applications to YC.

Top 10 in Tech - What to know for the week ending May 7, 2021

5/7/2021

SaaS METRIC OF THE WEEK: Renewal rate: You have to scroll down this article before you get to the informative bit on how to measure this metric but don't because I could just link you to this one). So read the first part anyway: Don't be a jerk when it comes to renewals. If you have to be, maybe it's you, not your customers (keep scrolling again to see the 5 main reasons why people unsubscribe). The difference between retention and renewals is described more in this comprehensive Profitwell article on Renewal Rates.
CUSTOMER SUCCESS: Take a (deep) read of this extensive guide for building great customer success teams - CS is not just about limiting churn, but it also creates a department and practice to convince existing customers to buy even more from you. As Jason Lemkin said back in 2015: "Customer Success is where 90% of the revenue is”. Want a working example? Chart Mogul expands on this and explains its approach to a (successful) success management strategy.
FINANCE: Founders - take a good review of this! How many of these mistakes are you making? (I'm making a few but less than I was) : 8 Finance Mistakes Growing SaaS Businesses Make (and How to Fix Them).
FRAMEWORKS: Beyond metrics, a successful framework can distill complex processes or models to make execution more of a simple recipe. Kinda why OKR's exist. Sarah Tavel has compiled a great list of compelling Frameworks covering the 10x model, the hierarchy of engagement, hype cycles, and more!
PRICING: Usage-based pricing 2.0. Usage-based pricing helps minimize friction during customer onboarding, as customers only pay for what they’re using. This strategy typically sees best-in-class net-dollar retention results. The cool thing is that the current understanding of ways UBP is being applied in forward thinking SaaS companies is so fresh that this article is an updated understanding of UBP from November 2020 - but here is that playbook anyway (as a downloadable PDF) It's evolving fast as a new best practice. One of my favorite slides in that playbook is slide 324 - a flowchart that helps organizations decide if a usage-based pricing model is for them.
POC’s: (aka Proof of Concepts) are a powerful sales tool and a critical part of a customer journey, especially when it comes to those long-ass enterprise sales. But oftentimes they can be just as big an anchor in sales as an accelerator (hands up if you feel me on that one?). Here are some pro tips if your POC’s get stuck from Heavybit with some pro tips on Leveraging the PoC to Move that deal forward.
CUSTOMER JOURNEY: When it comes to measuring success, clearly mapping out a Customer Success Journey via a visual map is a great way to know at what areas a Customer Success Team needs to be involved in (and what their responsibilities will be) via a variety of engagement models. You can also access a sweet design process here.
FINANCIAL FORECAST: Your new financial year is just around the corner! Just kidding, but now is always the second-best time to get started(the first being two months ago). This is a great article with a complimentary excel download here from The SaaS CFO - it's a SaaS Financial Plan for Startups (and also works for most SMB’s). It also comes with a handy complimentary video tutorial to the worksheet.
MARKET RESEARCH: Love it or hate it - knowing how big the market is of people willing to pay for your stuff is kind of a big deal. Here is a pretty comprehensive step-by-step guide for startup market research and this article has a great template for all of us B2B market researchers (which is harder than B2C).
CASE STUDY: Netflix is my favorite case study regarding a speed-focused tech company,. They (amazingly to me) de-prioritized uptime in favor of speed and also become their own CDN as part of their speedy-experience solutions.

BONUS: Bringing this one back from the archives - because of #10 above and also as it's so relevant in our Zoom-dominated world now some are returning to offices: It is a hilarious Chrome Extension featured on Product Hunt called Netflix Hangouts. It basically disguises Netflix in a fake four-person conference call. Such a terrible idea? yeah, but nah, but yeah.

POD OF THE WEEK: You may or may not have heard about NFT's lately and the number of money people who are prepared to pay. You may also squint at this news and still not understand what it is. Me too, but it's not just art - a16z got us all covered on explaining what NFT's are (and why they are seeing these remarkable payouts).

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Top 10 in Tech - What to know for Week ending May 28, 2021

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Top 10 in Tech - What to know for Week ending May 28, 2021

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