Top 10 in Tech A WEEKLY NEWSLETTER

Top 10 in Tech - What to know for Week ending October 29, 2021

10/29/2021

SaaS METRIC OF THE WEEK: CLTV: This metric represents the average revenue that a customer generates before they churn - Customer Life Time Value. ChartMogul has a great online calculator here. Go to 'advanced mode' as this calculator references the traditional formula as well as the David Skok version (which is the advanced one, but viewed as being more realistic)....and check here for a thought-provoking read of why your LTV may be lower than you think.
SECOND ORDER REVENUE: Doubling down on LTV this week and a little contrary to the last link above: Jason Lemkin claims that CLTV isn’t the whole story and often references a term called "Second-Order Revenue". He states that traditional CLTV analyses underestimate true revenue generated by customers by 50-100% (whaaaaat!!!) in most SaaS models selling to any businesses larger than SMBs.
PERSONALIZATION: Did you know that marketing personalization can reduce acquisition costs by as much as 50% and 87% of companies see a lift in key growth metrics when they employ personalization? SaaS marketers have been leveraging personalization to increase conversion rates, improve customer success, and increase the quality of sales/marketing funnels for some time so here is a great article from Chart Mogul on the (modern-day) personalization fundamentals.
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 a quantifiable measure for each of these stages, structures the sequence and signals of when to move from one stage to the next, and explores the optimal go-to-market design of each one.
TRIALS: Are a proven funnel method for a solid go-to-market strategy. Check this article on 9 ways to optimize your SaaS trial and then take note from Tomasz Tunguz on how long should your customer trial period be?: TL;DR: Longer trials do not convert customers at greater rates. Two weeks, two months, same results.
FINTECH: CBInsights released their fourth annual Fintech 250 earlier this month across payments, insurance, crypto, digital banking, etc. Excel sheet of members here for download, the pretty infographic version here. About 65% are based in the US, with the UK being home to the 2nd most.
PRICING: It's been a while - so time for another pricing bit (because a 1% increase in price can generate up to an 11% increase in your profits). This one is interesting as the author explains how his startups approached pricing at the early stage (for their SaaS product)
CYBER: According to this 2021 State of Ransomware Survey & Report, 64% of those surveyed had been victims of a ransomware attack in the last year, 83% of those paid the ransom and 50% experienced a loss of revenue. Ransomware is everywhere and has got the CEO of Google to ask governments to do more at a Geneva Convention for Cybersecurity.
$100M ARR: I know - weird title. But this article from Bessemer Ventures is cool (and honestly also a little depressing). It's a benchmarking report, complete with a downloadable PowerPoint for what it takes to reach $100m ARR - asking the big questions: What should your gross margin be? How much should you be spending on R&D as a percent of revenue? How does your companies growth rate compare to peers?
CASE STUDY: This one is for all of you interested in Product Led Growth - How Ahrefs (an SEO product) scaled to $100M ARR with a team of 69 and 0 salespeople. (hint - it required a team of 10 marketeers)

POD OF THE WEEK: An interview from Profitwell with Mark Roberge - creator of the playbook listed in #4 above - The Science of Scaling.

Top 10 in Tech - What to know for Week ending October 22, 2021

10/22/2021

SaaS METRIC OF THE WEEK: Net Dollar Retention is an important metric in the new world of Product Led Growth. It’s used to help answer the following: "Does my startup need to increase customer acquisition/marketing spend?" Tomasz Tunguz writes in detail about this and Crunchbase does the work to calculate what good NDR benchmarks should look like.
THE FUTURE (of the Internet) part 1: Two significant reads this week (and one in 2 parts) - the first one is from a16z who are proposing an agenda for the future of the Internet. The firm envisions a post Web 2.0 article and discusses "web3" (which is mainly all things crypto. blockchain, De-Fi (see below), NFTs, and DAOs). Their positioning is that this isn’t just a new wave of innovation — it’s an opportunity for a reset.
THE FUTURE (of the Internet) part 2: This two-part series goes beyond an agenda and describes what could await us in this more decentralized future. Change is coming! Part 1 here (taking us through Web 1.0 and 2.0, 2.5 and 3.0) and Part 2 here on how to create that future.
DEFI: Open source is coming to the fintech world, and a real possible future within that is leveraging blockchain ledger capabilities beyond cryptocurrencies such as Bitcoin and Etherium via Decentralized Finance (Defi) - here is a little 101 intro on what Defi Infrastructure is.
CRYPTO CAP TABLES: While I'm in the crypto mood this week, have you ever wondered how the funding and cap-table of a crypto/token-based startup works? Tomasz Tunguz explains how the equity and token cap tables work.
CHAOS THEORY: OK - hear me out on this one: There has never been a more significant time for a different way of thinking about change in modern organizations. Digital Transformations are important, strategically. But the mindset needed requires a certain kind of improv style to get there - as the systems in place that are needed to change or pivot are usually very complex - change IS chaos. So take some time to read this article to understand more of what this is about - I also aspire to have the title of "Chaos Manager" one day...
AI: Now it's its fourth year (which is like 28 Dog AI years) the State of AI Report is out for 2021 and it's a 188 page Google Slide deck! AI has been pretty clutch in the last year with faster simulations of human machinery such as proteins and RNA - starting at Slide 24; 88% of top AI educators/faculty have received funding from Big Tech (MSFT, APPL, IBM, et al); and a record amount of funding this year into AI startups with over USD $115B raised (slide 141)
IDEAS: This is a framework for managing them - I found this a really helpful 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.
MARKETING - Here is a list of 9 great marketing tips for B2B SaaS businesses and BTW - 2022 is coming. It can't be worse than 2021 (can it??) so here is a planning guide for all you B2B marketeers.
CASE STUDY: Contrary to traditional startup lore, not every founder is a domain or industry expert (and I've got my hand up here). Here are 6 lessons from founders who (successfully) founded a startup in a space they are not an expert in.

POD OF THE WEEK: From SaaStr to compliment #1 above: Churn is dead. Long live Net Dollar Retention (NDR) with David Kellogg

BONUS: Here is a free online pass to TechCrunch's SaaS event next week (Oct. 27). Use the code "techstarsfree".

Top 10 in Tech - What to know for Week ending October 15, 2021

10/15/2021

SaaS METRIC OF THE WEEK: DAU/MAU. The DAU/MAU ratio is a popular metric for companies that need to measure user engagement. Rule of thumb: Apps over 20% = good, if you have 50%+ - you’re world-class.
MARKETING: In early-stage start-up land, often time marketing is an after-thought. The Founder Coach lists seven things he wished he knew about Marketing early on and HeavyBit has a great article and video on early-stage positioning - one of the best things you can do starting up. Not sure how you rank? Go take the Tomasz Tunguz Marketing Scorecard.
VENTURE part 1: The State Of Venture Q3’21 report was released by CBInsights late last week - PDF version here. The run continues! Global venture funding reached $158.2B this quarter which is a 105% increase YoY compared to Q3’20 ($77B). The last 2 quarters have been the best ever in terms of total venture funding. The average deal size is up from $16m in '20 to $25m in '21.
VENTURE part 2: Crunchbase analysis shows that Tiger Global and the SoftBank Vision Fund are ahead of the rest of the field by a wide margin in terms of capital contributions for Q3 2021. SoftBank led 48 rounds and participated in 16 more. Tiger led 53! and participated in an additional 29. US VC firm a16z was the most active multi-stage investor in the U.S., yet with 46 investments (8 of which were outside of the US).
VALUATION: The public SaaS valuation listing a couple of weeks back created a bit of forward-multiple discussion - so I'm adding practical-private valuation-value this week with a downloadable sheet for ya: This SaaS-Capital Index worksheet (Excel) can be used as a starting point for a comprehensive valuation analysis for a privately-held SaaS business (from the SaaSCFO). Check the whitepaper PDF here as the starting point to work through this Excel sheet (especially the bit on how revenue should be measured). SaaS-Capital also reports quarterly on how this valuation index is performing overall. From a forward multiples perspective, the gap is widening between public and private SaaS - it sits currently at 50% on average.
SEO: If you are new to SEO you can consume this comprehensive starter-guide from Google on the topic but if you are just looking for a comprehensive guide of SEO best practices (like 180 of 'em) - take a bookmark (as it's constantly updated) and read of this page.
GROWTH: Back in 2017 I attended a HeavyBit conference with a mind-changing presentation from Patrick Campbell of Profitwell. I reference it all the time in this newsletter. This data has been updated for 2021 and the perspective hasn't changed too much: Acquire users, monetize them, keep them around as much as possible. This updated article re-iterates the point of the original pre-Covid presentation - SaaS companies seem addicted to solely acquisition-based growth, which is dangerous as competition is getting harder and more prevalent.
DATA: I don’t think I have more to add than the title of this article: "You Cannot Be Data-Driven Without Experimentation”, well OK fine, I do: The opposite of that is also a truth to hammer home "You Cannot run experiments successfully without being data-driven”. We all overestimate our experimentation skills AND our Data collection skills.
LINK BUILDING: This kind of seems like an SEO tactic of the past, where businesses build links to create a more organically positive Search rating. So is it still a relevant practice as we head toward 2022? Well......yah! But the rules have changed quite a lot. Check this article on how to optimize (by careful curation and intent) what to link.
CASE STUDY: Upwork - I have awesome full-time staff that came from shorter term gigs on Upwork, who is now worth $6 billion and at $400m+ in ARR. 2020+2021 gave them a chunky Covid boost and they are only just getting started with the good ol' fashioned "move-upmarket" strategy, with an absolute classic 80/20 rule in effect. 80% of clients are SMB's but 80% of the revenue comes from 20% of clients.

POD OF THE WEEK: Customer churn is the bane of SaaS businesses - data can help understand the causes of churn and take action to reduce it.

Top 10 in Tech - What to know for Week ending October 8, 2021 - SaaStr ANNUAL Special

10/8/2021

SaaStr Annual 2021 came to an end last week and many of us could not be there in person. So I've snooped the internet and put together a list of 10 key learning for us absentees

CONSUMPTION BASED PRICING: I have been known to talk about this from time to time (but I call it usage-based) so watch BCG pricing practice experts affirm EVERYTHING I say :-). 20-25% increase in ARR by changing pricing models anyone?
CHURN: Repeat customers are likely to spend 67% more than new customers and increasing customer retention by just 5% can increase your company's profitability by 75%. These are just two knowledge bombs dropped by Verifone's VOP of client success in this presentation of 7 strategies to reduce Churn and give retention rates a boost. Watch here.
STATE OF THE CLOUD: I've already written about this one - but the Bessemer Venture Partners presentation every year was always my favorite and this year's presentation is well worth watching all the way through - so check their State of the Cloud 2021: The Age of Cloud Unicorns presentation that covers the state of the industry, future trends, and provides a deep dive into a how-to guide to get to Unicorn status. Cloud is almost at a $3 trillion market Cap with a post FAANG index called MT SAAS. But that is just the start of this report - stunning metrics of the industry (and dry powder).
ENTERPRISE BUYERS: G2 conducted (a somewhat self-serving) Software Buyer Behavior Report and presented the highlights at SaaStr this year - you can download the full report here - but there are some great nuggets of insight: Buying is happening faster and becoming more frictionless - 48% of enterprise software purchases are made on credit cards and security was the top consideration for buyers with 88% reporting security as very important when making purchasing decisions with 83% requiring a security or privacy assessment when purchasing software. Complementing this report is another SaaStr Annual 2021 talk that covers how B2B buyer behavior has changed.
TRUST: Watch here - That last comment in #4 above leads nicely into this next one. Given the state of breaches worldwide selling trust is just as important as selling your product. How - Sydney Archer of TugBoat logic recommends a well-documented InfoSec program. But it's not just about your customers - so also watch this presentation covering trust in your brand across a variety of stakeholders.
CATEGORY CREATION: I know we all want to be up and to the left on one of those Gartner/Forrester Quadrant reports. So take a watch of this presentation on category creation from Neo4 and another version from Gett.
DEVELOPERS: Watch here - Stack Overflow's SVP presented the results from their 2021 Developer Survey, which is full of insightful nuggets: Developers primarily learn online (60% of respondents learned how to code via online resources) - sop L&D is a big requirement - but not as expensive an investment. Technical certs are important - but don't underestimate the power of StackOverflow, Podcasts, and the like. AWS is the most widely used cloud platform, but GCP and Azure made some gains, devs are still mostly men, and this year React.js surpassed jQuery as the most commonly used framework.
INTENT: Watch here - From the CMO at Marqeta comes a great presentation on how buyer intent is the new marketing buzzword to qualify and nurture prospects when they demonstrate an interest in you. It's about reaching out (far from your website) to where prospects show intent (and how to discover that).
REVENUE GROWTH: This one is from the archives as I consider it one of the best presentations at SaaStr Annual - it’s from Mark Roberge of Stage 2 Capital and Harvard Business School. Providing a handy step-by-step guide to revenue growth (downloadable PDF!)
CASE STUDY: Toast. For many of you, this is the Point of Sale system you have probably never heard of. It's only 9 years old but listed on the NYSE last month and is currently valued at about $27 billion with approx $475m in Revenue (that's about 56x according to my math). Why so hot? 118% growth and pretty much a half bill in revenue is not too shabby but check here for some detailed notes from under the hood.

Top 10 in Tech - What to know for Week ending October 1, 2021

10/1/2021

SaaS METRIC OF THE WEEK: If I've told you once, I've told you a thousand times, the Nag Metric is one of the more obscure ones. This one is fun (but not for everyone). A call to action within a site or customer journey is kinda like a parent trying to get their kid to clean up their mess. It just gets a bit naggy after a while. This can impact your brand/NPS over time or just irritate people into churn. The Nag Score - outlined in detail here, is an attempt to quantify this.
VALUATIONS: Inflation concerns are once again making the stock market jittery for tech this week and Tomasz Tunguz got into this a while back looking at the Inflationary pressures within the Tech Industry regarding valuations. It's quite a wild valuation ride and the market is making it clear that valuations need a cool off. This new article in Tech Crunch is following the same theme tracking the evolution of valuations from 5x valuations in 2016 to this week where the median SaaS valuation multiple for public companies stands at 22.8x! I say this week because it was 21.1 x when I referenced it not even a month ago.
PRODUCT LEAD GROWTH: You may have heard me talk about this category from time to time. But here is a sub-category term for you: Product-Led Storytelling. PLG isn’t for everyone, some people, like the author of this article, call it hype, but probably so he can hammer home his agenda/story: That Product-Led Storytelling is way cooler.
PRODUCT MARKETING: Marketing is a very broad practice, see here for a list of the separate marketing functions that can exist. So here is a very helpful dive into Product Marketing and specifically what the roles and responsibilities are of a Product Marketing Manager.
RENEWALS: Existing customers are the lifeblood of growth in a SaaS business, so making sure they renew is an exercise in revenue efficiency. New customer acquisition costs average about $1.10+ per $1 of ARR. Compare that to the cost of retaining or up-selling existing customers (about 12c-15c per $1ARR) - that’s 8 times cheaper. So take a peep at this article that not only lists 5 SaaS Renewal Best Practices but also explains how best to go about calculating renewal rates.
SDR RAMP: According to past studies, time-to-ramp for an SDR averages about 3.2 months. From Saleshacker here are some tips and tricks to make this ramp time as effective and successful as possible.
CSM ATTRIBUTION: How do you account for or budget the cost of a Customer Success team? The team at Gainsight dive deep into this question and come up with some fantastic insights - even though the question itself is complicated and the answers end up being more non-monetary than you would probably like. Owning the renewal, up-sell, cross-sell are key delineation points between expense attribution to different departments who CSM teams may sit under.
BUYERS vs USERS: The person writing you a check is not necessarily the same person getting value out of your business. So take a read of this insightful article from HeavyBit on differentiating messaging based on this premise and the different profiles.
SAAS ELDERLY: Fun facts to help determine those SaaS companies that are on the elderly side of startup land: 1. The average SaaS IPO takes 12 years and 2. It took on average 10 years to get to a $1B+ acquisition/exit in SaaS.
CASE STUDY: SaaStr 2021 is underway! So be prepared for an upcoming onslaught of SaaStr links starting right here with a great 10-learnings deep-dive on Vimeo at $330m+ in ARR, and especially, on how they do self-serve and enterprise at the same time.

POD OF THE WEEK: The video version of #10 above on how to run a SaaS business that has both a large self-serve component and a free edition (ironically a story about Vimeo hosted on YouTube).

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