1. SaaS METRIC OF THE WEEK: Developer productivity: There are two primary frameworks for measuring developer productivity: DORA (with a free poster!) or the GitLab source. 5 metrics for a four-letter acronym to measure DevOps performance and SPACE - a more holistic framework for productivity. And also, as a little bonus, how to measure DevEx (Developer Experience)
2. ANNUAL DISCOUNT: If, like me, you are part of the great SaaS Ponzi Scheme, it may come as no surprise to you that annual contracts are discounted. But how much? 10% is the median - and the range is tighter than I thought - 6%-14%.
3. FRAMEWORKS: Beyond the above laws, a successful framework can distill complex processes or models to make execution more of a simple recipe. Kinda why OKRs exist. Sarah Tavel has compiled a great list of compelling Frameworks covering: The 10x model, The hierarchy of engagement, Hype cycles, and more!
4. DUE DILIGENCE: As reported last week, Startup formation has significantly declined over the past 3 years. Some of which is VC based. This means that Due Diligence of the VC kind has gotten more complicated and longer. So read this article from Allison Weil Lechnir at Hyde Park Venture Partners for great insight into what VCs expect when deciding to invest. FE International has a similar article but written from an acquisitions lens.
5. CAPITAL: Another follow-up from last week's report on the significant decline in Startup formation over the past 3 years comes with news that Sequoia Capital has downsized two of its recent funds - the crypto fund is down from $585M to $200M. They also halved the ecosystem fund from $900M to $450M. This is likely to provide/return liquidity to their partners - it also looks like Sequoia is going through some non-fund restructuring.
6. MOBILE: 2022 was a negative growth year both in app downloads and mobile consumer spend but in H1 2023, $67.5 billion in consumer spend and 76.8 billion app downloads were measured globally across iOS and Google Play (that's a 5.3% and 3.2% increase respectively), most of the spend was on iOS (5.8% vs. 4.3% on Google Play). TikTok is the major player in consumer spending outside of gaming -31% growth. At the same time, other apps that rely on subscriptions, such as Disney+, YouTube, and Duolingo, also delivered solid growth at 33%, 39%, and 48%, respectively.
7. APPLE-GPT: Get outta the way Siri, expanding on #6 above, to keep their iOS stronghold in terms of Mobile Growth; how might more modern AI fit into the Apple Empire? Take a read of this analysis and report from Bloomberg. Historically, they may be late to the party with these significant technology adoptions - but their execution is where they excel.
8. SALES COMP (PLG): Figuring out the proper sales comp and plan is super tricky for high-growth companies, and it gets even trickier for companies that have PLG + Sales. So check this guide on PLG Comp Plans from the team over at OpenView.
9. FOLLOW-UP: I probably push this too hard on Sales follow-ups and nudges, so I needed to subject myself to this article last week: How often to follow up: Follow-up Frequency to Close Deals Instead of Annoying People. It was great to see "Way more than you think." though 🙂 . There is also this concept of the "Rule of 7," which states that a potential customer needs to see or hear your message seven times before they buy something.
10. CASE STUDY: Z-Scaler is probably got some of the best growth metrics out there, and most people have never heard of them - FYI, they are a cloud security company: $1.5 Billion ARR, 125% NDR, 46% YoY Groth and 45% of revenue is non-US.
POD OF THE WEEK: From Lenny's Newsletter and complimenting #1 this week: How to measure and improve developer productivity from Nicole Forsgren (Microsoft Research, GitHub, Google).
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 on Single-touch attribution models, Multi-touch attribution models, attribution tools, and more to make better data-driven marketing decisions.
2. PRODUCT MARKET FIT: Oof. More than 50% of the time, the lack of Product-Market Fit (PMF) factors into a startup's failure (keep reading this article, though, as it goes through how StartupOS figured their PMF out). AirTree (an early-stage VC) has just published this article taking a look at what metrics VCs like them look at for signs of Product-Market Fit - and also what the red flags are. Also, this article has some great PMF definitions. PMF was called "the only thing that matters" to early-stage startups by Marc Andreessen 12 years ago. Now his team gets a little more nuanced, suggesting focusing on Product-User-Fit as an indicator towards achieving PMF. A similar nuance is also true post-PMF with repeatable-scalable revenue models as a precursor to a repeatable-scalable business model (you know - the one with actual profits).
3. STARTUPS: Whoa - Crunchbase reported a significant decline in Startup formation this week over the past three years ('21-'23) across the US, EU, and Israel. Over this time, the number of new startups in the US is down 85+%! This is likely the triple whammy of Covid, Global Economies, and access to funding.
4. FAILURE: This is a skill. Prove me wrong. Failure also requires a culture of safety and permission to be wrong, Tall Poppy doesn't help. As many organizations look to best practices from the tech industry, one hard lesson is that innovation needs a lot of failure before success, something they often do not configure culturally.
5. 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 with the person you know who needs the bookmark) - Estimating Software Projects by Jacob Kaplan-Moss (and What to Do when you mess up).
6. API: The latest State of APIs report is out from Postman. Some interesting findings: APIs are viewed as moneymakers (43% said APIs generate over a quarter of company revenue), which means pricing really matters. Also, the two most popular API integrations are Salesforce (not surprised) & WhatsApp (surprised).
7. TRENDS: Here is a report on the latest SaaS trends that backs up my "SaaS is just a big Ponzi Scheme" statement from Productiv. The website is a little funky with its navigation tricks - so here is the PDF version too. A few interesting tidbits to tease you into the click include: Average SaaS spend per employee is ~$10K, and the average department uses 87 SaaS apps.
8. AWS SATELLITES: Amazon is readying to launch a lot of broadband satellites via Blue Origin Rockets, the competitor to Elon Musk's SpaceX, to compete against Elon Musk's Starlink. The sky will get busy as they plan to have over 1000 satellites launched by July 2026.
9. LLMs: I, for one, am at the start of the journey to integrate LLMs into our Product stack, and this is a really well-thought-out (part 1) article/framework for how to think about security concerning LLMs features and how to categorize risks based on different use cases and deployment types (in-house, 3rd party, etc.).
10. CASE STUDY: I did write about Meta's newest app, Threads, last week - but here is a much better breakdown of the fastest-growing app ever (this will be a case study for years on Product Launch), as we compare that launch to the rebranding of Twitter to..........X this week, given Elon's very Succession-like desire for Twitter to become an "everything app" but with AI. Apparently, we don't Tweet anymore; we send Xs?
POD OF THE WEEK: Jason Lemkin's turn this week from SaaStr Europa - The cold, hard truths about SaaS in 2023 (part 1).
1. SaaS METRIC OF THE WEEK: CAC payback (and accounting for the upsell) Often time many of the base metrics (CAC, CAC/LTV, etc.) are in service to VCs and operationally don't tell us enough to make great decisions. This article takes an operator view on CAC Payback that includes (and celebrates) the value of net revenue retention, and here is a very relevant article 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 quota expectations in renewal and cross-sell/upsell 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. SALES OPS: For those 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 Ops operators are needed to help coordinate cross-departmental activities to help a revenue organization hum. Read this Sales Ops primer article from Point Nine Capital on starting all this.
4. PRODUCT: Now matter how much Workshopping and strategy development goes into a product, things sometimes work out differently IRL. First Round Review is back again this week to discuss this topic and have a list of things to avoid when building highly-technical products.
5. SEGEMENTING: I raised the topic of account-level segmentation a few weeks ago, and someone over at Userlist shared this article that they thought would be interesting. It's true - an excellent article outlining best practices for B2B SaaS companies in effectively segmenting accounts versus individual users.
6. BUYERS: Software generally benefits during Economic downturns - the downside is more competitiveness. So take note that (according to Gartner's 2023 Global Software Buying Trends report) almost 70% of SMBs plan to increase their spending on software this year, many to increase productivity (47%), and 42% rank as a top priority. G2 has just launched its 2023 Buyer Behavior Report with slightly different stats: 49% plan to increase budgets, and 86% require a security audit!
7. PLG TRAP: This is a great read (across 3 parts) - starting with Tomasz Tunguz's article a few months back, where he noted that (post-COVID) publicly traded PLG companies were operating about 5–10% less profitable than sales lead counterparts. Part 1 lays out what the "PLG Trap" is. PLG is not a revolutionary silver bullet for many, and the article points to where initial growth strategies and product offerings are no longer sustainable in driving revenue - showing PLG's scale limitations.
8. PLG vs. SLG: According to the Expansion SaaS Benchmarks report (it's a downloadable PDF), PLG businesses lead the pack, but as stated above - SLG can outperform PLG, and according to this article, it's not a "vs." thing - you don't have to choose, both strategies can co-exist.
9. AI MONEY: A look into how the heck AI companies monetize their AI-PLG apps and how revenue models are built (free trials FTW)...and need to be built to ensure a sustainable AI business is being established (the old Revenue vs. Cost optimization challenge). Bonus at the end of the article - CAC Payback is overrated!
10. CASE STUDY: Meta is back in the news lately by launching Threads, a Twitter competitor that was the fastest-growing app ever (beating out this year's ChatGPT!), but Threads also seems to be cooling off in a major way. Despite their current popularity shortcomings, however, the original Facebook app still has a solid moat, and quite unbelievably, it has a higher DAU/MAU ratio than in its early days.
POD OF THE WEEK: Complimenting 7 & 8 above from Stage 2 Capital: How and when to layer Sales into PLG with Tony Granados (DataDog and Airtable).
1. SaaS METRIC OF THE WEEK: Get stuck into the world of lead generation metrics with PPC (Pay-Per-Click) and PPL (Pay-Per-Lead) campaigns, where you can track impressions, clicks, click-through rates, cost-per-click, and conversion rates. PPL is super nuanced but can be super effective in driving quality leads.
2. 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.
3. UN-SCALE: Sometimes, while building a repeatable scaleable business model, some un-scaleable things have to be done. This article highlights three specific non-scalable things sales teams should be doing right now.
4. SECONDARY MARKETS: Pitchbook analyzes that LPs are under performance pressures and a lack of liquidity as cash distributions from VC funds are far from great right now. Check this chart for how different pre-2016 funds are to 2019. This is manifesting itself as secondary stakes in portfolio companies, but it's a buyer's market, so only the best assets are in demand.
5. VALUATIONS: Adding onto this buyers market theme above, we all know by now the shift of value in SaaS from growth to valuing based on profitability. Tomasz Tunguz notes that in public markets, software companies have seen 40-112% increases in valuations over the last few months, but only for the top performers - strong unit economics & margins are vital to seeing this valuation creep. The era of efficient growth is now.
6. PLG: A successful PLG strategy goes beyond just having sexy UIs and "delightful" onboarding experiences. This Substack article highlights the importance of what needs to be under the hood - good data analytics, conducting experiments, and building a community centered around the product.
7. DIFFERENTIATION: Tricky question founders get asked all the time. Standing out in a saturated sea of SaaS is a tricky problem to solve - pro-tip - never do it on price alone. So ask yourself, "Why should someone buy from you?" It requires balancing familiarity and differentiation - read this article to get you thinking on the topic more.
8. A/B Tests: If you're looking for a concise guide on how to run, measure, and react to split test experiments, this bookmark-worthy article is a valuable resource.
9. WEBSITE: I've had this discussion at least four times this two weeks, and Jason Lemkin's blog post on the need for quality Marketing Websites this week wraps #6, #8, and #10 in this week's newsletter nicely together. Yes, your marketing site really does matter.
10. CASE STUDY: This chart got me on this one. It visually shows how finding your Ideal Customer Profile can lead to way more organic growth, word of mouth, and referral vs. Paid, low-quality paid signups: How Visily scaled to 100K signups in 5 steps.
POD OF THE WEEK: Customer Acquisition Strategies with Farzad Rashidi, who discusses how to grow and convert website traffic, get landing pages to rank, what content promotion strategies work best, and more.
1. SaaS METRIC OF THE WEEK: Consumption-based LTV. If you have a consumption-based model, then, like me, you probably have revenue that is not consistent monthly. 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!).
2. CUSTOMER SUCCESS MODELS: Like customers, not all CSMs are built the same. And it depends, based on stage and strategy, as to how your CSM teams will evolve…...but they will. Gainsight proposes five basic kinds of CSM and a corollary org chart. But keep in mind, IRL, they all will be different hues. SaaSx has this model. Which one best resonates with you?
3. MVT: Here is another one for your tech dictionaries: MVT or Minimum Viable Testing, which is about creating hypotheses and conducting tests that allow you to predict if a market will appreciate a product before even launching an MVP.
4. BOTTOMS UP: Bottoms-up adoption is hard to crack😉 (learn more about the bottoms-up model here). For example, according to Gergely Orosz, Hashcorp has 4,300 customers, but only ~800 generate 90% of their annual revenue.
5. NOLS FRAMEWORK: Not all decisions are made equally - As a former outdoor instructor and part of the National Outdoor Leadership School's (NOLS) network, I was pretty excited to stumble across this article from another alumnus discussing some of the excellent management frameworks to come out of there. This one focused on group decision-making, outlining six different ways to make decisions in a group.
6. AI: This article from Honeycomb discusses the tough challenges of building LLM-based AI products. Context window limitations, slow performance, prompt injection risks, legal compliance concerns, and the limitations of early access programs are all covered - must read if you have LLMs on your product roadmap.
7. AI INVESTMENT: The race is on for AI Investments. Just look at the astronomical Deals chart in this article from Pitchbook. Q1 2023 says $1.7b invested across 46 deals, with an additional $10.7 B announced (but still needs to be closed).
8. FIRST PRINCIPLE THINKING: Want to be more like old-school Elon (the one without all the SEC/Twitter dramas)? Take a read here on the concept of First Principles Thinking. Not gonna lie, I've re-read it for the 15th time this week, and it is a great way to make my brain hurt. Want more? Fine. Here is a full guide/website. Now that you are an expert on this principle, here is how First Principle Thinking can be applied IRL - in this example, towards a Product Lead Growth business.
9. PRODUCT POSITIONING: It's easy for startups to underestimate the significance of product positioning and marketing in the early stages. This article highlighted the importance of understanding the product, customers, and competitors. It had me at the subheader, "A lot of startups suffer after initial growth because they can't figure out what they are building & for whom."
10. CASE STUDY: Hootsuite migrated from a Sales based to a Product Led strategy with a 6-step process outlined in this article from their head of growth.
POD OF THE WEEK: Complimenting #7 above is a good listen from Bessemer Ventures with Dave Rogenmoser of Jasper discussing mistakes made by building out AI products.