1. SaaS METRIC OF THE WEEK: The old classic Active Users! An active user is any user who interacts with your platform in some defined way during a specific time period that you can identify (depends on your business but can be daily, weekly, or monthly). Many consider this a vanity metric these days but here is why this is still important.
2. PRODUCT MANAGEMENT: The Syms Method - another for your Tech Dictionary that goes beyond features vs benefits but is definitely more a guide on pure feature selection using some good old-fashioned Venn diagrams.
3. STORYTELLING: Adding onto last week's listing on a post discussing Emotional Moats as a competitive advantage: I anecdotally feel like my way of storytelling has shifted from pre-pandemic ways, and Google seems to agree with my sentiment.
4. GROWTH MARKETING: Some of us old-schoolers still use this phrase (it dates back eons, all the way to 2010). Take a read-through here to better understand the differences between growth marketing and traditional marketing. It includes some great examples of companies who execute growth marketing strategies well (such as Dropbox) along with some great infographics, including a reference to "Pirate Metrics" referenced in this newsletter.
5. SALES: ZoomInfo has unleashed an excellent playbook for all your business development teams, which I've already shared with my team. The PDF contains 16 of the best go-to-market plays from B2B sales and marketing pros across different stages of the sales funnel.
6. POC: We switched to proof of concept (POC) based paid trials as part of our enterprise sales process last year, and I like it! It's working well as part of our customer journey and is the fastest time-to-value metric we can deliver for various enterprise stakeholders. Want to get your POC up and running fast? The team at Work-Bench have a step-by-step framework AND a template of a POC Agreement for you here.
7. SECURITY: The RSA security conference happened IRL earlier this month in SF, and the big 2022 take home: If it's not yet, security should be a significant priority in your stack this year - legislation is coming. Take a read here on how early-stage enterprise startups should think through building a security foundation (great for the sales process too, ya know!) On the enterprise side of town, CIOs are expected to spend 90% of their budget on vital tech like cloud and security (the other 10% still in the mix for POCs (see above)) - it's also a pretty recession-proof budget line.
8. PERSONALIZATION: SaaS marketers use personalization more and more to increase their conversion rates as personalization reduces acquisition costs by as much as 50%. Twilio just released its latest report, The State of Personalization 2022 edition. 35% of companies surveyed feel they are successfully achieving omnichannel personalization, which is a 45% increase from last year. And about half of consumers surveyed said they will likely become repeat buyers after a personalized shopping experience.
9. CONSUMER BEHAVIOR: So what's really changing in the economic downturn of 2022? Each month, the Google Market Insights team analyzes billions of recent search queries and consumer behaviours to develop a deep understanding of what's happening. Read on more here, where wallet tightening, as seen via search, is a real thing in 2022, divided into 4 pillars: Inflation mitigation, financial knowledge, Consumer research, and online/offline shopping.
10. CASE STUDY: The Design Process. This article made me smile as it takes the reader through a deep dive across the entire design journey of something so simple (but so design challenging): Making the world's most satisfying checkbox.
POD OF THE WEEK: The weekly All-In Podcast was mysteriously on hiatus for almost a month. We find out why in the latest edition - TL; DL - Jason Calacanis did something awkward, and the uber-wealthy tech-boy band almost broke up.
1. 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 actively not cancelling.
2. FREE-ER: It's not necessarily a time to rethink Freemium as a SaaS Go-To-Market strategy. But it's probably a good time to think about a more free-as-a-sales-strategy - according to Jason Lemkin from Saastr - more-free seems to be working well these days. BTW Freemium is not just for B2C businesses like Dropbox and Spotify. Freemium is now a strategy employed in gaming, Enterprise, Cloud, and Online Payments.
3. PLG vs SLG: Product Led Growth remains a popular topic (according to my click-through rates) - why? Just take a look at this Expansion SaaS Benchmarks report (it's a downloadable PDF). Again, product Led Growth businesses lead the pack! So let's look at the differences in PLG vs more traditional SaaS Go-To-Market Strategies - Sales Led Growth. But according to this article, it's not a "vs" thing - you don't have to choose.
4. MOATS: As mentioned in past posts, Moats are one of the best ways to provide a competitive advantage for your business, and moats come in all kinds of different flavours (such as speed, Brand, or growth). But here is a great one that conceptually covers b2b and b2c: EMOTION!. Regarding B2B, this post lists some popular and effective ways companies create moats for their products.
5. VALUATIONS: Check this real-time market data feed from AngelList Venture. At the Seed end of town, early-stage valuations are in flux, but more significant than that - deal frequency has slid down a big bank, and founders are diluting more on deal close.
6. ENGINEER vs ENTREPRENEUR: I love this article as it's a manifestation of the battle that lives in my head: Engineers love to get it right, and Entrepreneurs love to get it done. Such a simple statement materializes in so many ways.
7. NOW WHAT?: We just experienced the incredibly abrupt end to almost a decade and a half of SaaS prosperity. So now, what do we do as operators? Bill Gurley (the guy I mentioned in #8 a couple of weeks back) has some Twitter-based commentary for you (it ain't his first rodeo), and the CEO of Gainsight has put together an excellent framework for executives to get through the rocky times ahead.
8. NEGOTIATE: In 2021, forty-two per cent of us opted for sales-negotiated pricing models - HubSpot will totally negotiate, FYI!. Negotiating is tiresome, so read this article for some hot tips on why you may be negotiating your SaaS contracts all wrong.
9. CLIMATE TECH: While we are seeing venture funding across SaaS and Startups drop, we may have a bright spot; investment in the climate tech sector is expected to remain strong. Climate Tech already went through a significant downturn - but investors think it's different this time #climatetech2.0.
10. CASE STUDY: As someone forced to use Yodlee, I envy those who get to use Plaid - a financial services connector currently valued at $13.4 Billion. Check here for an explanation of what Plaid is and why it's so valuable for those of us in the financial services or financial adjacent. (it's the legacy technology the highly fractured US banking systems are built on).
POD OF THE WEEK: Expanding on #10 above - I'm enjoying the "Equity" podcast from Tech Crunch who have some gossip on the Stripe vs Plaid drama.
1. SaaS METRIC OF THE WEEK: CAC payback (and accounting for the upsell). Often many base metrics (CAC, CAC/LTV etc.) are in service to VCs and operationally don't tell us enough to make good decisions. This article takes an operator view on CAC Payback that includes (and celebrates) the value of net revenue retention. Here is a very relevant essay on the importance of CAC payback in our current Bear/recessive market.
2. CUSTOMER SUCCESS - Quota: this is an expansion of celebrating Customer Success Teams' contribution as NRR and CAC payback referenced in #1 above. In past newsletters, I have referenced AE and SDR metrics and quotas. But what about renewal and cross-sell/upsell quota expectations within a Customer Success Team? Tomasz Tunguz takes a look based on a report a couple of years back from Gainsight. Most Customer Success Managers can handle between $2-$5M in ARR and between 10-500 accounts (but it varies based on segment/ACMR).
3. PLG PILLARS: Last week, my post on Product Led Groth was popular, so I added another PLG link this week that focuses on leveraging community play strategies with a PLG mindset.
4. SENTIMENT: Earlier this year, Tomasz Tunguz conducted a survey on Market Conditions and shared his insights in last week's blog post. TL;DR: 30% of respondents are seeing longer sales cycles. Companies selling to mid-market and enterprise see this pattern with about twice the frequency of those selling to small businesses. Longer sales cycles may be a leading indicator of slowing demand...
5. NO, NADA, NOPE!: An overlooked skill is how to say "No" well. This post was triggered by an article shared by one of my team from a programmer's perspective, and it's just way too good to not share as it is one of the most important skills a programmer can learn. TL;DR - it's all about keeping the code base small and solving the right problems/jobs! On the flip side - when it comes to selling, "No" is almost a curse word. So this article goes into depth about ways to be Yes, rather than have to say no - it's a great way to think about how to say yes through the product. Want to get started on your "no" journey? Here are a bunch of templates for ya!
6. LAYOFFS: Question of the quarter: Is the Tech Industry heading toward mass layoffs? According to Layoffs.FYI, a layoff tracker, over 16,000 tech workers lost their jobs in May and June is off to a similar start. It's not as bad as the initial COVID layoff freakout - but it's the most significant bump since - but is this just a freakout phase or a new pattern? Read here for a deeper dive that's updated often.
7. AI: I moderated a panel on AI in the insurance industry last week, so, FYI, the era of machine learning has arrived! I said as such. A Google Engineer backed up my claim earlier this week by claiming a Google AI was sentient (and also asking for a lawyer, so........). CB Insights has just published AI trends to watch in 2022 following all of AI-based technology's positive and negative roles: Protecting the metaverse, the $67B AI chips race and weeding out all those deepfakes and Elon's fake Twitter accounts.
8. IDEAS: here is a framework for managing them - I found this a beneficial article with a template that is now on my wall! An HD version of it is here. A little bonus is a compilation of mental models that entrepreneurs and investors leverage to develop new startup ideas & venture theses from the same author.
9. VENTURE CAPITAL: What is the overall impact on the VC world in an economic downturn? We already know that deal cadence and valuations have rapidly cooled, but what about the rest? Take a read of this article for more (including the upside).
10. CASE STUDY: ZOOM remains a total SaaS and PLG rockstar company. Last we visited Zoom in this section (March '21), they were at $3.5B in ARR, not just a year-and-a-bit later, they are at $4.3B. They have an extremely optimal payback period of about 3-months and a net dollar expansion of 130%+ while spending just half the average SaaS company spend on sales & marketing (25% vs. 50% of revenue).
POD OF THE WEEK: How to value startups from the team at This Week in Startups interviewing the CEO of Aether, Ryan Shearman.
1. SaaS METRIC OF THE WEEK: Beyond Customer Satisfaction Surveys or Net Promoter Scores is this idea of a Customer Engagement Score. This is a valuable tool for managing a company's customer base, making segment decisions easy, therefore enabling different priorities and engagement strategies - and measuring the impact of those strategies over time. So get started reading this article.
2. VALUE-BASED PRICING: It's a tough nut to crack as it makes the most of the maximum cost customers would be willing to pay for a product or service - this means there is no magic guesswork or thumb-suck number. These prices need to be arrived at Empirically. Paddle.com have a pretty good guide on what this means (with examples), and Profitwell has a comprehensive guide on making it happen (and how to go about calculating/measuring it).
3. PRODUCT BENCHMARKS: For those starting or deep into product-led growth, this report is for you. It's year 3 of the Openview product Benchmark Reports - downloadable here. Products continue to perform well as acquisition, conversion, and expansion tools, so this is an excellent report to gauge what's good vs. what is great for product conversion. In a hurry to benchmark yourself? Use this interactive calculator to see how your user journey compares to businesses of a similar size and scale. FUN FACT: 61% of companies in the Cloud 100—including Calendly, Amplitude, and GitLab—leverage a PLG model.
4. CUSTOMER JOURNEY: What the heck is a Customer Journey anyway, and why do you need to create one? OK - so now you know you need one; mapping out a Customer Success Journey via a visual map is a great way to tell what areas a Customer Success Team need to be involved in (and what their responsibilities will be) via a variety of engagement models. And a "complete guide" with some great, modern templates can be found here.
5. VALUATION MULTIPLES: By now, we all should be aware that Companies looking to raise in 2022 should be prepared for a compression in valuation and possibly a down round. This article has looked at valuation multiples based on the SaaS Capital Index and the Bessemer Emerging Cloud Index for insight. This chart, in particular, is interesting - as it shows that most of the crazy valuation increases in 2020-2022 are attributable to companies added to the index since 2019. Growth is still the most crucial valuation driver.
6. FUNDING: Backing up #5 - According to Crunchbase News, global venture funding continued downward for May '22. $39 billion in total, which is down 14% from April. Good news! It's mainly on the big-deal end of town. The seed stage is fairing pretty well - no real change from April ($3.1 Billion).
7. CLOUD: Battery Ventures historically published an annual Cloud Report, and while attempting the 2022 version, the market was changing so fast that they had to keep re-writing it. So they have switched to a Quarterly edition, which you can view here. It's a dense 40-page document, but, as we know, valuations have plummeted, and the big takeaway is that investors are shifting their focus quite dramatically from growth to profitability.
8. SUPER PUMPED: OK - So I super binged SuperPumped (aka Uber: The Travis-Bro Years) last week and really enjoyed the show. Bill Gurley is one of the main protagonists and a real-life Silicon Valley VC - so sure enough, he is getting some press at present. Fair enough - he is a legendary venture capital investor known for betting big on companies outside of Uber, such as Dropbox, Instagram, Snapchat, Twitter, and Zillow. This is a deep dive into his 25 years of experience via every blog post he's ever written.
9. COGS: Not every listing I write has to be exciting; important is just as important. SaaS P&Ls are structured in specific ways, and defining what goes into the cost of goods sold (COGS) section is....important. So take a good read of what the SaaSCFO recommends to include. Bit of an eye-opener for me - where do you record your Support, Professional Services and Customer Success expenses?
10. CASE STUDY: Slack! I've written before on the fascinating week in the life of Slack CEO Stewart Butterfield via a Tweet storm - but this week (and complimenting #3 above) is the Slack growth formula of getting from 0 to 10 million users. PLG, of course - but it was called "going viral" or "growth hacking" back in the early days. These days Slack is at about 12 million users and was acquired by Salesforce for $27.7 Billion at the end of 2020.
POD OF THE WEEK: From SaaStr, a VCs perspective on where the venture markets really are today (recorded late last month).
1. SaaS METRIC OF THE WEEK: Triple-Double-Double is a classic mantra we hear a lot in the SaaS world, referring to an abbreviated version of what it takes (revenue-wise) to become a $100m ARR business. Jason Lemkin of SaaStr pitches that "10-100-110" is enough, which is 10m ARR, 100% YoY growth, and 110% net-revenue retention.
2. : Marketing is a practice covering many different disciplines and specialties. Which one should a startup hire first?
3. PRICING: It's never right as it has to evolve (and we are all not charging enough). Intercom makes the case that a solid pricing strategy helps shape an entire business model.
4. CAPITAL: This report from CB Insights predicts global venture funding to decline 19% in the second quarter, with retail tech and fintech sectors expected to witness a 50% and 28% slump. If that's not depressing enough for you, also take a read of last month's Sequoia Capital presentation on the downturn and what they think it means for startups.
5. SALES DEALS: Post COVID, Hubspot continues to benchmark sales and marketing data on the platform (aggregated from their global customer base of over 70,000 companies) for core business metrics using the January 2020 average. It's a handy benchmark tool to measure your business. Deals are up across all regions since 2020 - LATAM 43%!! Sales emails are on the decline, while Sales calls are WAY up (150% in Feb '22 compared to Jan' 20).
6. DUNNING: Discussing this one again with a client this week - and I suggested we build an automation for a "Dunning Letter", huh? What's that? Well, it's an actual term with a weird-ass name for involuntary churn (aka bad or failed payments). According to Baremetrics, SaaS and subscription businesses lose around 9% of their MRR due to failed payments. Learn more about a successful dunning (and pre-dunning) process.
7. ENTERPRISE SALES: 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 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.
8. NETWORK EFFECTS: Building and scaling products (like Slack and Zoom) requires getting past the awkward "cold start problem" of zero users, so take a read of this conversation between Andrew Chen and Des Traynor on how to build networks that can make your product thrive.
9. PITCH DECK: Pitch Decks won't be replaced anytime soon, even though people are trying nifty ways to bypass them. According to TechCrunch, these are the five most critical pitch deck slides most founders get wrong and here is a Tear Down of recent and Successful Series A Deck. Want more? Then check this monster collection of funded pitch decks (including the neo-classics: AirBnB, LinkedIn, Intercom, and Uber - see #10 below).
10. CASE STUDY: Have you watched the TV Show SuperPumped (the story of Uber) yet? Back in 2016, Uber made the call to completely re-write their app. The cool thing (back then) was that the redesign had to be less than 100MB - because that was the max size of an iOS app available via cellular download (the app these days is 300MB +). This was because most first-time customers download the app curbside). Here is how they did it - it's a crazy developer ride. But not as crazy as that TV show!
POD OF THE WEEK: Kickstarting June (how is it halfway through 2022 already?) with an a16z podcast on how to kickstart Network Effects looking at Slack and Zoom as prime examples.