1. SaaS METRIC OF THE WEEK: Start with a Point Nine Capital article on everything you always wanted to know about cohort analysis (but were afraid to ask), and here is a free Cohort Analysis template from the SaaS CFO. GoPractice has a Product-focused article on forecasting key product metrics through cohort analysis, and The Startup looks at this metric from a VC Due Diligence perspective.
2. DUNNING: Bringing this actual term with a weird-ass name back to the newsletter - it's a phrase for involuntary churn (aka bad or failed payments). According to Baremetrics, on average, SaaS and subscription businesses lose around 9% of their MRR due to failed payments. Learn more about a successful dunning (and pre-dunning) process.
3. TRIALS: Are proven funnel methods for a solid go-to-market strategy. Check this article on 9 ways to optimize your SaaS trial, and then note from Tomazs Tunguz how long your customer trial period should be?: TL;DR: Longer trials do not convert customers at greater rates. Two weeks, two months, same results.
4. DEEP TECH: Commercializing scientific research can take a longer horizon than most VCs are comfortable with. Bessemer Venture report on the sector this month and introduce us all to the XB100 - a ranking of the world's top private deep technology companies across AI, Aviation, AgTech, Quantum, and Space.
5. 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.
6. REFERRALS: Cracking the referral loop is a dream outcome, but making this work is pretty rare. Kyle Poyar has written a guide on how to do it ( a collab with Stefan Bader from Cello, makers of referral software).
7. TRUST: For #6 above to work, people trust people over brands when it comes to trust. Chart Mogul has posted an 'Ultimate' Guide to Using Customer Testimonials to Boost Sales, noting that a generic and insincere endorsement is just as helpful as not using anything. It's also possible to take it further by leveraging those frothiest customers into a referral channel.
8. AI: I find this topic fascinating - Mark Roberge of Stage 2 Capital looks at the hype cycle about AI and asks who could win the go-to-market AI race - Startups vs. Incumbents? Adding fuel to this one with CB Insights AI 100, the 100 most promising AI startups of 2023.
9. VR: Facebook's ambitions for the Metaverse were embarrassingly out shadowed by Apple's announcement of their Vision Pro earlier this month - but my biggest question with all things VR and a big hurdle given the price tag is: Why should I care? Ben Evans explores these same sentiments in this essay, exploring what the heck it is exactly Apple is trying to build.
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 lot of time, knowledge, 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: From Lenny's Podcast this week is Melissa Tan (Webflow, Dropbox, Canva) discussing how to build high-performing teams.
1. SaaS METRIC OF THE WEEK: Value metric. Similar to the One Metric That Matters in that a Value Metric may be unique to your business or GTM model, these metrics directly align revenue models to the customer acquisition model. There are two types of value metrics: functional and outcome-based. Learn more here.
2. PRICING: This is an ongoing experiment, and we expect it to evolve forever (FYI, we are all 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 choosing the most suitable SaaS pricing model.
3. DOCUMENTATION: A few months back, I complained that building a comprehensive and helpful customer Knowledge Base platform is complex. Here is something to consider (it's certainly a helpful article for my mindset): There are stakeholders/purchases of your product who do not respond well to traditional marketing and may actively hate it. These people are like me, and while I may moan about how difficult creating good documentation is, it may be one of the best anti-marketing-marketing tools you have available, Especially if you have an API as part of your product.
4. 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.
5. SALES: Insight Partners have their latest edition of the SaaS Sales KPI Report out. A couple of trends: Growth rates overall are normalizing after the 2021 COVID-19 digital push, and it didn't matter on company size - CAC payback is at least 10.5 months across all those surveyed.
6. GROWTH: Fast follow from above covering SaaS Growth Trends in 2023 via ChartMogul. The top quartile of SaaS business (ARR of $1 to $30 million) grew 62.1% in 2022 (vs. 93.4% in 2020), and retention strategies are now viewed as growth strategies. Lots of referencing of the SaaS Benchmarks Report in this one, and this Tweet is reporting that new revenue growth is falling across most enterprise tech companies.
7. CATEGORY CREATION: We all want to be up to the left in one of those fancy-ass Gartner/Forrester Quadrant reports. So watch this presentation on category creation from Neo4 and another version from Gett.
8. TAM: A critical question at the very early stages of startup land is, "What's the market size?" The size potential of this startup is directly proportional to the size of that market. Having a clear understanding of the 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.
9. ICP: Another entry for your Tech Acronym Dictionary. An ideal customer profile (ICP) is a detailed and specific profile of your startup's ideal customer. Being clear about your ideal customer profile (ICP), as it evolves is critical, as it drives everything in the business, including marketing, product, and engineering.
10. CASE STUDY: From Netflix to more modern apps such as Midjourney (via Discord), this is an excellent blog covering how the biggest apps acquired their first 50,000 users. Bonus Fact: It appears as if Midjourney is generating about $200M Annual Revenue.
POD OF THE WEEK: #6 above in Podcast format - SaaS Growth Trends in 2023 from ChartMogul with Christoph Janz (Managing Partner at Point Nine), Daria Danilina (Co-founder, Salesroom), and Peter Walker (Head of Insights at Carta).
1. SaaS METRIC OF THE WEEK: SaaS Metrics 2.0. This is a big one - we all know the core SaaS Metrics - CAC, LTV:CAC, ACV, etc., etc. But Kyle Poyar from OpenView Partners is making the case for the next era of core metrics. Product lead, expansion, and margin profiles (such as ARRR per FTE) are at the core of this new potential playbook.
2. MARKETING: Marketing is an extensive practice covering many disciplines and specialties. Which one should be the focus of a startup's first hire?
3. ONBOARDING: Doing this well is critical to increasing value, lowering churn, and creating advocates - so here is how some of the best do it: Leveraging email, this is how ZenDesk document their comms flow, and ChartMogul has a guide to their non-email version too. From HeavyBit, here is a 4-phase plan, and this article covers 5 Tips to Speed up Sales Onboarding without Sacrificing Quality.
4. IDEAS: Everyone has them, like all the time. So here is a framework for managing them. This one is bookmarked for me, and the template is now on my wall! The 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.
5. CONTINUOUS DESIGN: My post on DesignOps was popular last week - so here is another design-based article: Thomas Sutton is pitching a new Continuous design framework to bridge this divide between theory and practice that I like to call "Everything everywhere all at once." A bonus here is the "How do you design" document that covers more than 100 design process models. Why are these important? This article makes the case that Agile and UX are a failed marriage.
6. FAILURES: According to data from this morbid Crunchbase page, at least 72 startups have shut their doors in 2023. This doesn't quite indicate the trend in terms of YoY spreads - but the fact they have built a page can not be because of positive trends. The hypothesis is that a disproportional amount of failures are now occurring due to the VC Boom that ended in 2021 and the hard-core tightening of VC Wallets that happened almost immediately after.
7. ESOP: Employee Share Option Plans are a fantastic 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 standard ESOP terms.
8. ESOP BENCHMARKS: A fast follow from #7 above is this wonderful site that has compiled Option benchmark data comprising over 20,000 option grants from more than 1,650 startups across the US and Europe sorted by Seed or Venture stage.
9. BOOTSTRAP: This is a fun series just started from Inc mag (and currently at 2 parts) - part 1 here and part 2 here - covering How to start and grow a Tech company with less than $100 - it's all GTM, so make sure you have that whole product thing figured out first.
10. CASE STUDY: Spotify and its Squads. A few years back, a really inspiring and memorable video circulated (in one of those cutesy handwritten animation styles) describing the Agile Squads that Spotify employs in its apparently cooler-than-cool Utopian Developer department. Well, guess what? Sorry to burst your Spotify bubble, but they abandoned it. (How Agile of them)…. In this post-mortem assessment, the most significant fundamental failure was such a SaaS-based one: It was solving the wrong problem.
POD OF THE WEEK: From the Invest Like the Best team - a recent interview with Bessemer Venture Partners (one of my favorites). It's actually a VC firm that is over 100 years old and has a unique operating model and plans for building a VC Firm that last centuries.
1. SaaS METRIC OF THE WEEK: Renewal rate: You have to scroll down to the bottom of this article before you get to the informative bit on measuring this metric, but don't! (I could link you to this one). Please read the first part, too - it's great. TL;DR: Don't be a jerk when it comes to renewals. If you have to be, maybe it's you, not your customers (and then keep scrolling again to see the 5 main reasons why people unsubscribe). This additional article from Profitwell on Renewal Rates also describes the differences between retention and renewals.
2. PRICING: Openview has surveyed well over 1,000 SaaS companies about pricing. Check out the pricing evolution as companies mature (TL;DR ACV increases by about 60% from seed to expansion).
3. DESIGNOPS: Here is another one for your Tech Dictionary: Listen up! Design isn't a thing; it's a process. The principles of which can be used and adopted across all lines of business (which is why design thinking is trendy). Please read here to get a better rundown of what I'm trying to say. Then, how to use design thinking (and OPs) in product teams to build better products and experiences.
4. BUYERS vs. USERS: The person writing you a check is not necessarily the same person getting value from your business. So read this insightful article from HeavyBit on differentiating messaging based on this premise and the different profiles.
5. M&A: According to this report from Kroll, M&A Deal value is down 52% in Q1 2023 (compared to Q1' 22), but deal volume is up 23% (compared to Q4' 22)? M&A may be something you are evaluating in the near future, so here is a guide to running an M&A process as a founder from First Round Capital.
6. COMPENSATION: This is a great dive into dilution from a CEO's lens- asking what CEO equity looks like by Fundraising Round or at time of IPO?
7. CASH: Here is an interesting analysis. According to Carta research, early-stage startups have to reduce spend (Series B and prior) and that that, which correlates to a decrease in the median daily cash spending ability for seed, Series A, and Series B startups by 25%, 57%, and 65% year-on-year, respectively.
8. AI-1: Uhoh. According to the May 2023 Challenger Report, AI has already begun replacing us humans in jobs. With nearly 4,000 positions lost last month due (including at IBM). Gizmodo has more details.
9. AI-2: I am (and I encourage my team to be) an avid user of AI tools to help complement productivity, learning, and administration. Happily, the HI (Human Intelligence) that is Tomasz Tunguz, did some analysis work for us all this week by asking the question we all need to be answered: "How much more efficient should a SaaS startup be when using AI?" TL;DR - about 13% overall - but Engineers should be smashing it.
10. CASE STUDY: Overhauling pricing is scary, but the payoff can be great for your balance sheet. Here's how Disco increased pricing by 5–10x!.......and more than doubled growth year over year.
POD OF THE WEEK: Adding onto #10 above - How Spotify moved away from Squads and many other things in this 1:30 podcast from Lennys Newsletter with Gustav Söderström (Co-President, CPO, and CTO at Spotify).
1. SaaS METRIC OF THE WEEK: One I discussed in detail at a session last week: People are the most important (and expensive) metric for any company, especially SaaS (yes, more important than the actual product). Revenue per FTE is one metric to measure regarding company efficiency via people efficiency, but a better one, perhaps, is the ROSE Metric (Return on SaaS Employees). This metric highlights the tradeoffs between a SaaS company's headcount, recurring revenue, and EBITDA growth.
2. BENCHMARKS: ChartMogul launched their 2nd edition of the SaaS Benchmarks Report last week with data from over 2,100 SaaS businesses covering growth patterns and retention, churn, and growth rate benchmarks - LOTS to digest!
3. GROWTH: According to the report above and the SaaS growth in 2022 was the slowest it has been in years, and retention was a key driver of growth, and it caught the attention of Jason Lemkin, who has more to say. Today, top quartile SaaS companies are still growing 65% (and seem to be rebounding) - but in Q1 2021, it was 97%.
4. GROWTH 2: Testing new tactics for marketing growth takes a lot of resources, and most of us often need more time to run experiments? So check this Google Doc from Dashly, where they collected 100 growth marketing hypotheses tested by their experts. (includes advert retargeting, the wait list for product launches, niche glossaries, etc.)
5. SALES COMP: ICONIQ Growth partners just published their Sales Compensation guide (pdf) - a very detailed 77 pages with tons of content, but to tease you into the click: 50/50 base to variable remains the standard comp structure in B2B Sales, OTE/Quota is 4-5x, and Enterprise SDRs need to book 5 SQLs Per Month, but Mid-Market SDRs crank out about 20.
6. FREE TRIALS: According to Userpilot's State of User Onboarding for 2023,74% of SaaS companies now offer a free trial (way up from 43% in 2022). Openview Partners have a great article on how to optimize these free trials. BONUS: Tomasz Tunguz also conducted a survey on Free Trials a few years back, which has one of my favorite facts: Conversion rates aren't impacted by trial length (so make them shorter).
7. PATTERNS: The Data-Driven VC looked late last year at what data patterns can be analyzed across successful startups. Super interesting read, but TL;DR: most important is the number of executives, the split of business versus tech roles, the split of male versus female founders, and their age and degrees.
8. CAPITAL: Another week, another Pitchbook report - this one covers Enterprise SaaS, which remains pretty robust: In Q1 '23, U.S.-based enterprise SaaS startups raised $13.9B (across 363 deals). Funding remained strong for the enterprise SaaS sector last year, second only to the record-setting totals of 2021. YoY, this is tracking down by about 18.5%. But this figure is still way higher than 2020 by about 85% ($34B - $62B).
9. GROWTH LOOPS: Elena Verna (Head of Growth at Amplitude) had an excellent presentation at their Amplify 2022 event about predictable and defensible Growth Loops and how to make money from them. Elena makes the interesting argument that revenue is an outcome and should not be a KPI in Growth. Reforge now has a recent article with some examples and feedback on how to implement Growth Loops.
10. CASE STUDY: Adding onto #9 above, Growth Loops are hard to understand without a concrete example - Git Hub is a great one. This is how they built a 40M+ user platform via loops.
POD OF THE WEEK: From Software Snack Bites, Kyle Poyar from Openview goes all in on tips & tactics, pricing & packaging, sales & marketing, and case studies across the PLG World (including how to make product-led sales work).