1. SaaS METRIC OF THE WEEK: What KPIs do venture firms consistently care about across stages? This article highlights how KPIs evolve from early traction metrics like CAC and LTV to more advanced indicators like NRR as companies scale and also shifting into survival metrics like cash runway to operational efficiencies.
2. 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. 3. GROWTH: There are so many nuggets in one little post that summarizes the ChartMogul SaaS Retention Report mentioned in the newsletter a couple of weeks back. SaaS growth slowed in 2024 as it's harder to come by, and expansion is driving 40% of ARR growth for companies with $15M-$30M ARR (it was 30% in H1 21). Achieving 100%+ NRR is harder as subscriber counts grow. Good retention is key. 4. GTM: Earlier this month was the SaaStr Annual Conference, and during the event, Tomasz Tunguz the Theory Ventures team launched their 2024 Go-to-Market Survey results (you can also download the PDF here). This new annual survey looks at the state of SaaS sales and marketing strategies. Some super interesting observations: The perceived gains of AI are high, but that hasn't translated into conversion rates (yet); sales cycles are lengthening (with a median sales cycle now 12 days longer, which has a knock-on effect for payback periods, which are up by 12% average. 5. SALES TRANSITION: Moving from founder-led to AE-led sales? This article from Bain Capital Ventures makes the case that it's all about the "MVP/ICP Handshake." Nailing the alignment between your Minimum Viable Product and your Ideal Customer Profile is a crucial step. Without this, bringing in AEs too early can stunt growth (which has been seen time and time again in startup land). Solidify the customer segmentations and product-market fit before even thinking of adding a sales force. 6. FUNDING: According to CrunchBase, August was a slow one for Venture, hitting the lowest point of the year, with $18 billion raised (a 36% MoM decline and a 23% drop from August last year). AI and healthcare remain the leading sectors, propping everything else up, with AI companies alone raising $4.3 billion. North American startups scored 66% of the total funding, continuing to dominate, but any kind of exits or IPOs remain sluggish. 7. PRODUCT-MARKET FIT: A long-running general rule (called a Growth-ism) in the Startup world is that getting to $1m of ARR is a strong sign of Product Market Fit (PMF). Kaitlyn Henry from Openview runs contrary to this Growth-ism, stating that there's no specific revenue indicator that defines PMF, but she also continues to write about concrete signals of PMF available beyond a $$ amount and gut feel. Read more about all those signals here. This sits well with Brian Balfour's work, who wrote an amazing article on the subject that is now almost 10 years old and still incredibly relevant for figuring out what stage(s) you may be at. 8. JTBD: Jobs to be Done is one of my favorite frameworks - it's a way to make the process of innovation accessible and tangible in very pragmatic ways. Take a light read here on a lightweight JTBD framework - broken down with real-world business examples; you can also skip straight to the templates. Or go for the more comprehensive one here (that also has a template). Theory Ventures 2024 Go-to-Market Survey. 9. CONVERSION LESSONS: After reviewing 20,000 website conversion experiments, Kyle Poyar and co from Growth Unhinged's show that less is more. Simple, clean designs beat complex features like social proof, homepage videos, and strikethrough pricing, which often hurt rather than help conversions. If you're looking to improve site performance, keep it chill! 10. CASE STUDY: Ok - looking at #7 above - what could Product Market Fit experientially look like? Asking the PMF question, in my opinion, is always the nobler focus (as opposed to being focused on answering the question). But sometimes - you just gotta know! So here is a case study on how Superhuman did it. POD OF THE WEEK: It's a bit of a long one (coming in at almost 2 hours) - but SEO is changing fundamentally (and it's something I find quite fascinating and also equally annoyed by), so Lenny's Podcast interviews Eli Schwarts (an SEO consultant)covering how to re-think SEO in the age of AI. 1. SaaS METRIC OF THE WEEK: It's time to rewatch a video that should be Mandatory for onboarding every person in a SaaS company. It's from David Skok (a legend in the SaaS world) and covers hardcore B2B SaaS metrics such as Rule of 40, Repeatability, Net new ARR, Bookings, LTV:CAC, churn, etc., etc. - it's a metric-packed 20 minutes.
2. EQUITY: This bookmarkable series from Femstreet covers the startup founder's guide to equity. Don't worry about Part 1 - it's a very basic primer. The good stuff starts in Part 2 and covers the different types of equity at a startup (founder, investor, vesting, liquidation, pro-rata, etc, etc) and Part 3 - covers cap tables and things you can do if they are messy. 3. INVESTORS: Following up from above - the motherlode! Check out this Ultimate Investors List of Lists from The VC Corner. This list includes everything from venture capital firms to family offices, active angel investors, Corporate Venture Arms, and accelerators. Bookmark now! 4. CLOSURES 1: Startup closures continued to rise in 2024, and Q1 saw a record 254 startups shutting down, according to Carta. Check the graph - it's pretty alarming. This is a 58% increase from last year and came after a 124% jump between the first quarters of 2022 and 2023. It's hard to find updated data, but it looks as though this momentum has continued into Q2. 5. CLOSURES 2: And it's not just Startups. According to Equal Ventures, the VC landscape is facing consolidation pressures as large firms dominate the capital flow. In 2024, 44% of VC funding went to just two firms, and many smaller funds may not survive. The article predicts that 30-50% of venture firms could disappear, leaving the VC world increasingly homogenous and less innovative. 6. VENTURE: In another Carta report, the State of Private Markets: Q2 2024, we get a mixed bag of sentiment (this is for U.S. private startups) - mainly cautious with some whiffs of optimism: Median valuations increased somewhat across stages, but deal volume remains low. Early-stage startups are particularly affected, with fundraising still tough. Seed-stage valuations rose slightly, but it's still a volume problem, as the number of deals dropped significantly. Series B and C valuations are looking good, with Series D seeing a 200% increase. Adding in data from Crunchbase as it's taking longer and longer to close rounds (28 months' median time between Series A & B funding). 7. CUSTOMER SUCCESS: Great question: Where Should Customer Success Sit on your balance sheet? This article from Mostly Metrics answers whether CS teams should report to Sales or Product or operate independently. The answer? It depends. So read through because you may need to take a more flexible approach. 8. TERM SHEETS: Bookmark this for future reference. This Term Sheets guide explains the most important clauses—like valuation, liquidation preferences, and anti-dilution protections--it also offers some strategies for negotiating more founder favorable terms. 9. B2B MARKETING: Why do most B2B marketing plans fail? According to this article, it's because of "random acts of marketing." Complete lack of clarity is the main culprit. Then, they provide the goods with a structured approach. The article also has a helpful B2B marketing plan template with steps for planning long-term initiatives. 10. CASE STUDY: Adding onto #6 above, here are 15 SaaS Marketing Campaigns that had some pretty innovative strategies. This includes examples from Dropbox, Mailchimp, and Slack. POD OF THE WEEK: All about SAFEs - this podcast has pretty extensive conversations on fundraising with SAFEs, liquidation preferences, and the relationship between founders and lawyers. 1. SaaS METRIC OF THE WEEK: Growth Endurance Score (GES). This is a new one for me, and it's a metric that assesses a company's ability to sustain growth over time (something I have been discussing quite a bit lately, trying to maintain my own growth momentum). GES measures this efficiency by factoring in both net retention and customer acquisition efficiency. A high GES correlates with long-term business health and resilience. This score provides valuable insights for businesses aiming for consistent, sustainable growth. Bessemer has drilled deeper into it and Bessemer and plotted ARR growth lost YoY, and found that the decay is fairly predictable at 30%. That's a benchmark. In other words, you should expect next year's growth rate to be 70% of the current year as the stakes get higher.
2. GO TO MARKET: Go-to-market motions can be pretty specific and your GTM motions can impact your marketing strategy and your org chart. Robert Kaminski has distilled GTM motions into 5 types in this article based on a number of use cases; the summary diagram at the bottom is great. 3. NET REVENUE RETENTION (NRR): NRR is one metric I'm a fan of and has become a new modern gold standard for SaaS growth. So much so that ChartMogul now has a trends and benchmark report: industry average NRR ranges from 90% to 100%, and the top-performing SaaS companies achieve NRRs 120%+. It's an action-packed NRR report, though, with lots of fantastic insight. 4. CHANNEL: If, like me and a lot of other enterprisy B2B SaaS, channel-based partnerships are something you want to explore, take a good read of BVP's guide to building SaaS channel partnerships. Selecting the right partners, aligning incentives, and establishing clear communication and training protocols are all included. 5. SAFEs: Last month we reviewed how much dilution founders typically experience during SAFE rounds. But how does that reflect how much equity founders typically give up during these SAFE rounds? Check this short but sweet Carta article with data on the average valuation cap by stage and fundraise size. For example, raising $250K-$499K ("Angel Round") often comes with a median valuation cap of $8M, while $5M+ rounds ("Jumbo Seed Round") see a median cap of $36M. Founders should focus on ownership dilution as much as valuation caps to understand the real impact on their equity. 6. AI: There are some fancy charts in this University paper on ChatGPT use: Journalists, developers, and marketers are the highest users of ChatGPT compared to other roles. Here is some great revenue data for the big AI players, as well as the Top 100 AI Consumer apps according to a16z. 7. SPEND: Kinda bleeding out of #6 above, AI vendors like OpenAI are leading first-time purchases and a sharp increase in AI-related AP spend, according to this great business spending report from Ramp. Companies are also leaning into independent contractors and pulling back on advertising, indicators of a more cautious approach as economic uncertainty continues for most. This shift toward AI and flexible labor indicates where companies see value in the current market. 8. PITCH DECK: I know pitch deck posts are popular here because creating the perfect pitch deck is every Founder's stress-dream. Data-driven VC offers some data drive insight on optimal decks from startups that nailed their presentations, highlighting key elements like storytelling, market validation, and financial projections. 9. PIPELINE: Looking for some inspiration to build additional pipelines for the rest of the year? The Growth Unhinged Blog has some inspirations for you to review. 10. CASE STUDY: Talk about diversification - with thin profit margins on their primary business, Uber has now diversified heavily into advertising. They are generating $1b in advertising revenue, according to their Q2 20224 report. POD OF THE WEEK: Last week's Founder Led Sales post was a popular one - so here is a great Pod covering Founder led Sales and why PMF, problem solving, getting those early adopters, and invalidating things are all best done by founders. 1. SaaS METRIC OF THE WEEK: ARR per FTE: Capital Efficiency is a new-fangled metric we all want to track in these LeanOps times. Benchmarking this - the median is $143K per FTE according to the 2022 KeyBanc Private SaaS Report. With public companies, it's double that, according to data from Maritech, and Kyle Polar from Openview breaks this down to tell whether you're on the right track.
2. COMPENSATION: Kruze Consulting has a great article, with a calculator and awesome visuals, covering startup CEO Salaries based on data collected earlier this year. YoY salary is beginning to recover (but the data is diluted over a longer time between stages). Sadly, the gender gap persists. The data tracks well with a report from June 3. PITCH: Last week's whopper guide on Raising was popular, so here is a little bit extra: Need to craft some super effective pitch decks? Take a look at this "Pitch Deck eBook" by Deck Doctors and Hustle Fund, covering all the pitch deck's greatest hits: problem statement, solution, market opportunity, business model, traction, and team. (Real-world examples and insights are also included.) 4. CAPITAL EFFICIENCY: Capital Efficiency is back in Vogue (see #1 above and also #5 and #6 below)! According to Bessemer Venture Partners, here are the benchmarks for B2B SaaS to measure your payback against (full report here). Across all companies, Engineering is consistently the largest department, Customer Success and Product at about 10% and Marketing at only 7%. This slide also has median headcount by stage - which is a great metric to track. 5. SPEND: Question - How much do you plan on spending on your future operational plans? SaaS Capital has a wonderful B2B SaaS Spending Benchmark report to best forecast what to send on sales, marketing, CS, COGS, and R&D. And because 2024 will continue to be your year of LeanOps - here is how to manage burn and extend your runway into 2024 from Capchase. 6. ACCOUNTING. Check out this excellent guide from the SaaSCFO that covers key aspects of SaaS Accounting, such as recognizing revenue, managing deferred revenue, and tracking key metrics. It emphasizes what can sometimes be a bit of a disconnect, which is the importance of aligning accounting practices with our SaaS-specific challenges to make sure we have the right SaaS financial reporting to support good business growth. 7. DEVSECAIOPS: This is not a real port-port-portmanteau. I just made it up (you're welcome). With AI transforming every landscape, AI security is unavoidable and a crucial problem for builders and integrators to solve. This article dives into how enterprises are securing AI/LLMs, highlighting the shift towards security for AI (DEVSECAIOPS), with categories like governance, observability, and security leading the charge. 8. FOUNDER-LED SALES: I've had some healthy discussions on this over the past few weeks: Founder-led sales is a well-documented part of the startup journey, especially in the early days and often with very inexperienced or more technical founders. Here is a great article (with Engineering-based analogies) on how Founders can mentally re-frame and execute an excellent sales program. Here is a great diagram that summarizes how this works as you scale - do not skip steps (especially Step 2)! 9. PERSONALITIES: No one wants high-performing assholes - and there is now data to prove it! This article from The VC Corner explores how a founder's personality traits impact company culture, decision-making, and investor confidence. Resilience, vision, and adaptability can make or break a startup. Also - good news for you cool people: "Hipsters," "Hackers," or "Hustlers" are twice as likely to succeed. 10. CASE STUDY: Expanding on number 8 above, here is a list of 10 Founder-Led Sales lessons learned with a recent roundtable from Race Capital. POD OF THE WEEK: Generative AI won't take over your job anytime soon, but coding skills may become less critical in the future, according to Paige Bailey of Google. |
Archives
October 2024
|