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Curated SaaS and tech insight from around the web repackaged for people to put to good use
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1. SaaS METRIC OF THE WEEK: CUSTOMER SCORECARD - This article from ProductLed introduces the "Customer Scorecard" and highlights the power of a key metric, the "North Star," to align team and user interests.
2. SCALE: This is a must-download. Mark Roberge, the founder of Stage 2 Capital and member of the founding team at HubSpot, has launched this incredible playbook for scaling. In this detailed book, Mark has defined different stages of scale, established quantifiable measures for each stage, structured the sequence and signals of when to move from one stage to the next, and explored the optimal go-to-market design of each one. 3. VENTURE-STRAPPED: This is a Top10inTech-ism for your tech dictionaries for a hybrid startup that is a mash-up of the old debate of bootstrapped vs. VC financing and applies to startups who raise only once. Which anecdotally seems to be a more common practice in these new market conditions (including Klaviyo and Zapier). Jason Lemkin notes this new one-and-done third way. 4. VALUATIONS: Despite the economic doom and gloom and VC challenges, early-stage companies are seeing high valuations driven by strong investor interest, especially with AI still frothy, but also in biotech. 5. LAW: From CBInsights is a 67-page report covering the 11 laws driving success in tech. These law-isms cover concepts such as Amazon's 2-pizza rule, the 80/20 principle, and more. 6. AI (SALES): AI sales reps are seeing rapid growth, but VCs look to be cautious due to long-term sustainability concerns and competition from incumbents (Salesforce has released agents that execute tasks such as answering inbound lead questions and booking meetings (RIP SDRs?). 7. RAISE: Whoa - a whopper guide (149 pages) that provides actionable insights for navigating the complexities of raising capital, covering investor relations, pitching essentials, market awareness, and the fundraising process. 8. PLG: Bessemer Venture Partners outlines an updated-for-2024 ten key principles for driving product-led growth (PLG); it's all about user experience, data-driven decision-making, and seamless onboarding. The article also touches on the need for continuous product iteration, clear value communication, and alignment of the entire organization around PLG strategies. 9. IT SPEND: Last week's copy of Clouded Judgement took a look at how Generative AI could double software's share of IT budgets (from roughly 25% to 50%). This increase would also result in a reduced headcount and outsourcing spend as AI-driven solutions become more integral to IT strategies. And in a separate report from IDC, worldwide spending on AI is forecast to hit $632B by 2028. 10. CASE STUDY: ONBOARDING: Kate Syuma breaks down key behavioral principles and dark patterns in user onboarding, with examples from Dropbox, Figma, and more. Learn how to optimize onboarding to improve user activation and retention. BONUS: The article also offers insights from "The Holistic Growth Playbook," including a deep dive into user psychology. POD OF THE WEEK: A great episode of Carta's Data Minute that covers how VC investment strategies work, pre-seed deals, the differences between multi-stage and small funds, and how SAFEs and pre-seed investing have changed. 1. SaaS METRIC OF THE WEEK: Metric plot twist: ownership. Let's say you have done the hard work and clearly understand the metrics you want to measure in your business. So go check this framework for assigning metrics ownership within teams. After all, clear ownership helps drive better performance and data-driven decision-making.
2. REVERSE TRIALS: Crack open up your tech dictionaries to add in this term. Reverse Trials are a play on freemium, where new users start with a time-limited trial of all your paid features. At the end of the trial, they can either buy or downgrade to a fully free tier - this article also explains how Airtable does this well. The benefit here is that, emotionally, the users experience loss aversion, where the pain of losing something is twice as powerful of a motivator as the pleasure of gaining. 3. PRODUCT MARKET FIT: A big Startup-ism - More than 50% of the time, the lack of Product-Market Fit (PMF) factors into the reason a startup fails (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 get a little more nuanced, suggesting to focus 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). 4. SEO: OK - rant time. It's actually more like S.E.Oh-No. I grow increasingly frustrated with Google Search and how the whole internet has gone to shit. It's gone even more to shit since last November, with changes to the Google Search Algorithm, which prioritized results from Forums such as Reddit and Quora (Side story - that created its own AI Hallucination Flywheel). So now brands are exploiting these forums, turning them into marketing channels and further diluting the authenticity of user-driven discussions. Can we not just have one thing?? This shift in Google's algorithm makes finding genuine, unbiased information harder as forums become overrun with brand-driven garbage-town content. Bring on SearchGPT! Time to optimize your website and keywords for Conversational Queries. 5. GTM 2.0: Now that tech companies are expected to show a balanced growth/efficiency strategy, what does that look like from a Go-To-Market Metrics standpoint? Growth Unhinged has you covered with a revamped approach to GTM metrics, spotlighting KPIs like CAC Payback, SaaS Magic Number, and Gross Margin and how to optimize these metrics for sustained profitability. 6. P&L + COGS: SaaS P&Ls are structured in specific ways, as 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 for COGS as well as how to structure a SaaS P&L. According to the Author - 90% of them are structured incorrectly, 5% are close, and 5% are correct. 7. TITLES: Earlier this week, I discussed the importance of titles in startups with a startup co-founder. Titles shape perceptions, both internally and externally, influencing early team dynamics and culture. Stay away from the C-Suite title sinkhole early - this article outlines why titles in startups should not be ego-stroke labels but strategic descriptions to reflect the stage and structure of the biz. 8. VENTURE: VCs are facing a challenging moment, with many looking to exit their investments as the market cools and layoffs happening internally. Rising interest rates, slower growth, and reduced valuations drive the trend, prompting a reality check among investors (with a 50% drop in funds being raised from 2021). This is a big shift in VC sentiment. I don't know how permanent it will be, where the focus is now on sustainability and profitability, and I'm not sure what that will do downstream to fund returns. 9. COMPENSATION: The Carta State of Startup Compensation report for H1 2024 is out, and it looks like benchmarks have remained flat since H4 2023. Companies are also much leaner across the board. For example, seed-funded startups had an average of 5.3 employees, down from 6.9 in H1 2021. 10. CASE STUDY: Scaling your Dev team by Stage. Bessemer Venture Partners has a great article on scaling your dev team from 1-10, 10-20, and 20-50. POD OF THE WEEK: Expanding on #9 above, Carta and Waseem Daher of Pilot discuss what founders should pay themselves, among other great SaaS financial metrics. 1. SaaS METRIC OF THE WEEK: RULE OF 40: Back in 2021, OpenView observed that "investors have forgotten all about the Rule of 40." Last year's response: the Rule of 40 is "back from the dead." This year, it's increasingly essential but a very tough bar to continually achieve Quarter on Quarter (but see #3 below).
2. JTBD: Jobs to be Done is one of my favorite frameworks. It makes the innovation process accessible and tangible in very pragmatic ways. Take a deeper read here on a lightweight JTBD framework—broken down with real-world business examples—or skip straight to the templates. 3. PROFIT MARGINS: Great Rule of thumb from CJ Gustafson at Mostly Metrics this week, who states, "Make sure your target model shows +25%" bottom line at scale." This Rule is excellent for a number of reasons: It demonstrates a sustainable business model (not just a business with a revenue model), you can still plow 30% of revenue into sales and marketing, and you only need to grow 15% per year to achieve the Rule of 40% (see #1 above). Keep reading the article; he also outlines a few businesses with varying profitability ranges. 4. AHA!: Not talking about the Band. Take a look at this great read on product design centered on discovery - what the author references as "Aha moments" - through a customer journey from first encounters through to deep adoption that really focuses on the concept of long-term retention. Go-Practice has a great complimentary article on how to design for Aha (with examples). 5. CLOUD 100: Bessemer Ventures/Forbes created a "Cloud 100" list a few years back, an annual ranking of the world's top private cloud companies in its ninth year. The 2024 list is out, and things had already started to look different last year with the first-ever drop in overall aggregate value. This year saw a bounce back to strong valuations (median valuation of $1.7B), with companies staying private for longer (but demonstrating sustainable growth at scale - see #3 above). These top cloud companies had a median ARR of $170M and multiples at 23x. FUN FACT: A former Bessemer Ventures Alum just won 2 Olympic Gold Medals for the U.S. in Cycling after picking up a bike for the first time in 2017. 6. VENTURE 1: Last month, according to Crunchbase, VCs invested $23B+ into startups, it's a slight dip from June but a 20% rise YoY. Healthcare and biotech led ($6B), while A.I. funding at $5.8B (but this doubled for Q2). A.I. companies are absent from billion-dollar acquisitions as tech giants are opting for strategic licensing instead for now (to bypass regulatory hurdles). 7. VENTURE 2: PitchBook just released its quarterly U.S. Valuations Report and, as reported last month, there are a bunch of mixed signals: Flat and down rounds hit a decade high; median valuation growth for early-stage A.I. is a whopping 115% (see #9 below), which probably helped the average early-stage valuations to nearly double from 2023 ($169m) 8. A.I.: Always lots going on, but are we in an A.I. bubble yet? (there is definite over-investment, but maybe not a bubble yet.). Here is an estimated breakdown of OpenAI's revenue (55% B2C, 21% from B2B, and 15% B2D). But Chat A.I. isn't at PMF yet, even though 70% of us use it all the time. 9. GLOOM BOOM: Andrew Chen makes the case that starting a company in a recession is super advantageous. There is less competition, lower costs, more focused investors, etc. Founders can build stronger, more sustainable businesses and also be positioned for serious success when the market recovers. 10. CASE STUDY: This article showcases Hootsuite's effective content repurposing strategy. By converting existing material into many diverse formats unique to different platforms, Hootsuite maximizes its reach efficiently. Proactive content repurposing is a great brand approach to helping Marketers with #3 above: sustained and capital-efficient engagement and reach. POD OF THE WEEK: A great podcast featuring Brian Halligan, co-founder and former CEO of HubSpot - consensus is the enemy of scale and other great snippets! 1. SaaS METRIC OF THE WEEK: CARR - Contracted Annual Recurring Revenue. This is a forward-looking SaaS revenue metric that estimates the maximum revenue size of a SaaS company, measuring current recurring revenue from your SaaS P&L and future revenue that sits in newly won customer contracts.
2. AGILE MARKETING: Hold on to your hats, Marketers - Agile processes are coming for ya! This is another one for our Tech Dictionaries - it's how to really validate learnings, make mistakes, and deliver impactful results. Hubspot covers this concept in detail and outlines how DoorDash hardcore-leveraged this methodology to increase revenues from $885m to $2.89 billion in a YEAR! 3. MARKETS 1/2: Earlier this year (see #8 here), Sapphire Ventures released their State of the SaaS Capital Markets report. They are now back with a mid-year update to see how some of their SaaS Market prediction (both public and private) are holding up. Flat and down rounds, Investments in AI, Unicorn creation slow down, and Efficient growth are all things that are tracking well. But a measurable increase in multiples, the re-emergence of Growth Mindsets, VC funding growth, and IPOs are things they either got wrong, or it's still too early to tell - great read! 4. MARKETS 2/2: Also, take a read of the full report; there are some other metrics of note in there outside of Sapphire Ventures predictions: Growth has fallen to 13% average, this is the lowest rate on record. But funding is on track to surpass 2023 levels - all driven by substantial AI investments. There was also a 21% increase in M&A compared to last year, with significant SMB deals - consolidation trend? 5. CYBER/CLOUD: With all kinds of outage drama happening lately, it's time to hammer this home: Regardless of the size of your SaaS business, security and redundancy should be part of your dev cycle, but know your weak spots well. Founder Institute discusses 6 points of vulnerability in a tech stack that may be a bit leaky. Security needs to be rolled up into the process - DevSecOps being the port-portmanteau, or is that SecDevOps? Heavybit has a great article discussing cloud security challenges (as apparently, if we extrapolate this data from #4 above, 88% of SaaS is now sitting on public cloud). This infographic from Genuine Impact shows how that is distributed in Public Cloud, with Amazon's AWS (and specifically US-East-1) taking on the brunt of that. 6. DEATH (of the internet kind): This post from Noah Smith explores historical trends, current challenges, and future opportunities in the internet sector - insightful stuff to lull on. Despite recent downturns, the long-term potential remains strong, driven by ongoing innovations and shifting market dynamics. 7. HOMEPAGES: IS your homepage a barrier? This article makes the case that it quite possibly is (as potential users want to get their hands on the end product as quickly as possible) - it's a time to value play across PLG and classic Sales lead SaaS. 8. DEV-REL: Dev Relationships are a real things. Developer happiness (and corresponding productivity) are important to measure. There are two primary frameworks for measuring developer productivity: DORA (also the GitLab source) and SPACE - a more holistic framework for productivity. And guess what - we're terrible at it because, according to this new Stack Overflow survey, the majority of developers hate their jobs. And it's not because of AI. It's old-school failed expectations and technical debt. 9. CONTRADICTION: Point Nine Capital discusses the importance of embracing contradictions in business and also uses one of my new favorite phrases, "Startup Advice Industrial Complex". Startup Leaders should balance conflicting priorities, such as growth vs. profitability and innovation vs. stability, to drive success. In theory, understanding and managing these paradoxes should lead to more resilient and adaptable companies (and teams). 10. CASE STUDY: Do your profit margins need a tweak? Here are 40 strategies for improving your profit margins from Sameer Dholakia, with a case study on SendGrid (from high burn to growth and IPO). POD OF THE WEEK: Lessons from product scale guru Brian Tolkin on scaling Uber and Opendoor. 1. SaaS METRIC OF THE WEEK: CLV. How far out should you calculate your customer's lifetime: two years, three years, five years? It turns out that the shape of the decay curve matters, as does the maximum customer lifetime.
2. ESOP: Employee Share Option Plans are a wonderful 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 common ESOP terms. 3. ESOP BENCHMARKS: A fast follow from above is this wonderful site that has compiled a set of 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. Carta has also recently done the math and found that for seed-stage valuations ($1M to $10M), the median pool size is 12.9% 4. UNDERSELL: If expansion fits into your growth strategy (it should), take a read of Tomasz Tunguz and Bill Binch's two-part series. Part one is about deliberately underselling as a sales strategy to minimize churn and increase upsell/expansion opportunities as a land-and-expand strategy. Post 2 is an expansion of land-and-expand that details how to structure a Startup sales team for optimal land-and-expand. 5. OUTAGES: Since the Crowdstrike incident (who are now being sued for half a Billion by Delta Airlines), we have now had two more major outages this week, one from AWS (which impacted Xero at end of month, and the like) and yesterday from Microsoft, which took out most of their products for about 10 hours. This will heavily impact Cloud/SaaS providers' trust as businesses fully realize their cloud dependency and rethink their tech stack strategies. Now is an excellent time to front-foot your architecture. For techies, Google actually has a great article on architecting disaster recovery for cloud infrastructure outages; here is a good DR Plan article and a good template. 6. PRICING PAGES: Check this article from MKT1 on why a plans and pricing page on your website is necessary. This is a great article from Chart Mogul outlining why pricing is the centerpiece of any startup/growth company's monetization strategy. They reviewed over 600 pricing pages to gather best practices on how startups communicate their monetization strategy, starting with Should you list your pricing? How many plans? Free Trials, all with great case studies. 7. DATA PRIVACY: Tracking and personalization have historically been a big part of marketing efforts via tracking Cookies. But regional legislation (such as GDPR and CCPA) and the death of Third Party cookies have changed everything. But Google has given up on killing Cookies, which they have talked about doing since 2019. Remarkably, they plan to keep third-party cookies and "introduce a new experience in Chrome that lets people make an informed choice" - some kinda Cookie opt-in thingy. Indiehacker dives deep into how to track users ethically. 8. SEARCH: I gave a talk on AI last week that brought up the idea of the demise of Google as a Verb (I Google less due to LLMs, which are often more efficient at solving my problems than a Google search), OpenAI followed my lead this week with the announcement of SearchGPT, something that ARC Search has been doing for a while (and I like). BTW - this shit is expensive, with OpenAI looking to burn about $5B this year (yes, Billion). On this news, Microsoft also announced that it's testing a Bing generative search experience. 9. SAFE NOTES: Oh - here are some great data points! Carta ran some numbers this week on SAFE notes, looking at how much is sold in a SAFE round. <$500k is about 7%, up to $1m is 11%-ish, $1-$2.5m is about 16.5%, and $2.5m -$5m (whoopers of SAFE rounds) are 21.4% 10. CASE STUDY: Pricing Pages (see #6 for more)! MKT1 reviews some pricing pages from Count, Klaviyo, and Lattice and here are 13 more from The Good. POD OF THE WEEK: From SaaStock, Tim Schumacher, co-founder of saas.group, shares his insights on exiting your SaaS business. |
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October 2024
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