1. SaaS METRIC OF THE WEEK: Consumption-based LTV. If you are consumption-based - you probably have revenue that is not entirely consistent. Variable revenue is now a big thing in SaaS. Check out How to calculate LTV with variable revenue customers from the SaaS CFO (with a template!)
2. EXPONENTIAL GROWTH: It's all marketing hype and doesn't exist in real life. Take a look at this article which explains it more by taking a deep dive into the numbers of "Exponential" companies such as Slack ($0-$10m ARR in 10 months!!), Facebook, and HubSpot. According to McKinsey, despite the sector's image as a bastion of hypergrowth, only a tiny share of SaaS companies sustains growth rates above 30 to 40 percent.
3. CUSTOMER SERVICE: In this current age of the customer, enhanced by COVID, SaaSx makes the argument that in the SaaS world, Customer Success is actually the product. Want to start building out that product? Check the HubSpot guide on getting started with your Customer team.
4. VERTICAL SAAS: A lot of Big Tech is under threat from narrowly focused SaaS companies taking market share in niche areas and building massive businesses (for example, Toast is currently valued at $10B +). Check the difference between vertical and horizontal SaaS here and then look at how these vertical SaaS companies are taking market share from those cloud giants.
5. SALES: Looking to establish your first (non-PLG) SaaS Sales Comp plan? So first, check this excellent report on the State of Startup Compensation from the team at Carta. They look into questions such as what makes up for the largest share of compensation spend, what roles get paid the most, and whether startups are still hiring remote workers (yes, remote hires now represent 62% of all new contracts). And then, read this post from Jason Lemkin on how to construct a framework for the first SaaS sales compensation plans.
6. INFLATION: Not sure if you have noticed, the cost to serve in SaaS is getting spendy, and according to this SaaStr survey, over 50% of respondents are planning on increasing their SaaS pricing in 2023 - are you? Jason Lemkin dives deeper into this and adds some words of caution on raising your prices too much.
7. DATA PRIVACY: Transformation is underway with Data Privacy, and personalization has historically been a big part of marketing efforts via tracking Cookies). Web3 is making changes to better privacy, and Third Party Cookies are now a thing of the past. So what does that mean for personalization? Venturebeat dives into this topic and also looks at how marketing, in general, can be a bit more private.
8. UNEMPLOYMENT: The news coming out of big tech regarding layoffs and hiring freezes may be headwinds for everyone else, but unemployment in the tech industry is still crazy low: 2.1%.
9. DECENTRALIZATION: With the Web3 hype going mainstream, the movement from "big-tech" Web 2.0 to a decentralized Web3 can seem a little bombastic. So here are some specific models and principles of decentralization that are a little more palatable.
10. CASE STUDY: This is from those of you just getting started: Cliently, a sales engagement SaaS website, grew their web traffic from 0 traffic to 75k monthly in just 8 months, netting $7k new monthly recurring and 700 signups every month. Here is how they did it.
POD OF THE WEEK: A great podcast on Benchmark Capital's history and founding story.
1. SaaS METRIC OF THE WEEK: Churn. So, according to CatchJS, we're all calculating churn rates wrong. But if you love Statistics, the article is worth reading. It even gives some Python code to perform the more complicated probability-based equation they recommend. Is this not how you want to start your new year? Then check out this tool (as a handy Google Sheet) from Newfund as a way to analyze the strength of revenue streams for any B2B startup. A complimentary article outlining the methodology behind the tool is here (and you should read it first).
2. BILLING AND PRICING: What are your pricing plans for 2023? Check this joint report from SaaS Optics and Chargify on B2B SaaS Trends in Billing & Financial Operations to benchmark yourself. According to this report, Forty-Two percent of us opt for a sales-negotiated pricing model. Additionally, 37% are planning to expand into new pricing models. A variable pricing model (such as consumption-based pricing) is the most desired addition. ARR remains the top priority for most SaaS businesses.
3. PRODUCT: Now matter how much Workshopping and strategy development go into a Product, things don't always work out 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.
4. DIGITAL TRANSFORMATION: I learned this during the GFC recession: Inflation and other economic factors pressure below-the-line business costs (Capex and Opex). This, in turn, triggers a bunch of Technology based transformations within a company to optimize productivity and lower operational costs. According to this report, 70% of CFOs agree and are ready for aggressive tech investments. Plenty of B2B SaaS opportunities are in store.
5. VENTURE 1 (CAPITAL): In the US, California-based Startups remain the poster child for VC investment according to Pitchbook's Q3 report by raising 3x more than New York-based startups, who were in second place on a State by State measure. Meanwhile, on the other side of the pond, European VC funding dropped 43% for Q3 22 compared to Q3 21, and the UK is down 60% from last quarter.
6. VENTURE 2 (DEBT): Venture debt levels halved in Q3 22 ($4.7B) compared to Q2 ($9.7B) - rising interest rates are likely to blame. In addition, structured financing deals have become common with restrictive terms that favor investors and structured debt (convertible, warrants, preferred equity financing). Investor-friendly deals like this are preferred to the other dreaded option - raising down rounds. There is so much to learn in these new down markets.
7. FINTECH CLOUD: I need to yell this one: NINE OUT OF TEN BANKS STILL USE FRIGGIN MAINFRAMES! So, because it's not 1982, check out what Google and Amazon are doing to get this FinTech business via their Mainframe migration tools called Dual Run and AWS Mainframe Modernization. Public Cloud, across the board, is aggressively coming after businesses' budgets.
8. GREEN vs. BLUE: Apple is a business who have done something impressive: They have locked in a new generation of users using peer pressure and color. Thanks to the use of a gross green color and mainly because of the group vibe of Apple Messenger - keeping things strictly Blue-bubbled in peer-based groups has led to iPhone ownership among US Teens hitting almost 90%, more than double since 2012.
9. CUSTOMER: There was an interesting discussion in one of my Slack groups a few weeks back about customer surveys and how customers know the past best and not necessarily the future. It got me thinking way more than most comments, and this article validated why earlier this week. I'm always listening to customers, what they talk about, the problems in their business, how they talk, etc. So when it comes to Product, it's important to be user-focused and not necessarily user-led.
10. CASE STUDY: The study of a SaaS CEO. This one is a rollercoaster of totally relatable anguish and smiles. From SaaStr: 5 Very Good Days, and 5 Pretty Bad Days, as a SaaS CEO.
POD OF THE WEEK: If it ain't blue, I can't be friends with you". This is the podcast version of #8 above - about how iPhone users judge other people with green text bubbles. A great podcast about how Technology forces us to make specific choices.
1. SaaS METRIC OF THE WEEK: NPS: We all like to be liked - Net Promoter Score is a way to quantify that for your product. This White Paper from Ask Nicely reviews NPS (among other common customer experience metrics) and explains how to measure and calculate NPS. See this link for some methods to improve the NPS of a SaaS product. Neil Patel then gets into a 3 step program of how to leverage NPS for your business.
2. COOKIES ARE DEAD: Not the chocolate chip kind of Cookies. Love them or hate them, the reality is that browser cookies have headed the way of the Dodo, so conversion tracking via cookies being phased out creates a new attribution problem to solve. However, conversion modeling is a way forward, so if attribution is a necessary part of your business or your channel/partner's Business, read this article from Google on why conversion modeling will be crucial in a world without cookies.
3. IP: If you haven't noticed Facebook's general MO, many startups in the software space are vulnerable to their competitors producing copycat technologies. Take a read of this interview from Nico Hodel of Start It Up NYC on how to better protect your Tech IP and from Entrepreneur magazine - 4 IP Mistakes startups make and how to avoid them.
4. ANNUAL DISCOUNT: If you are part of the great SaaS Ponzi Scheme like me, it may be no surprise that annual contracts are discounted. But how much? 10% is the median - and the range is tighter than I thought - 6%-14%.
5. ENTERPRISE: Moving upmarket into larger organizations is a standard SaaS growth strategy. Increasing ARPU (Average Revenue Per Customer) is good! But it's hard to pull this move off as a tiny startup selling to large organizations. So here are 10 tips for selling to big companies as a little guy.
6. DEMO: This one is very interesting to me - as the path to Demo is precisely the primary call to action my website is designed for. I assume it is the same for many B2B people, so..... "Should Your Website Drive Prospects to a Demo?" Read the article to determine if this is a problem at your startup.
7. VIDEO: Complimenting above, nailing introductory and Demo videos is a bit of an art form. Don't know where to start or have video-block? Get inspiration from this curated collection of some of the best, and here is a list of 6 videos every SaaS Company needs. (TL;DR Explainers, Company, Testimonials, landing, page, FAQ, and Personalized Sales).
8. COMPUTERS: Here is some interesting data; according to Canalys, PC shipments plunged by 18% in Q3. FYI - it's back to school Quarter in the Northern Hemisphere - this drop in demand is the fastest fall in over two decades. The only bright spot is good old Apple - which saw a 1.7% increase and is the only brand not losing ground.
9. PRICING: This is always hard to nail, and we are not charging enough. Still, this highly bookmarkable 4-step pricing exercise from First Round Review is a great framework to put an objective product lens on pricing - it's something you can use for a pricing workshop with your team.
10. CASE STUDY: HubSpot's turn because I use them - this is another SaaS company that has managed to cross $1b in ARR (now at $1.7B and growing at about 41% YoY!!) even though I renegotiate lower rates with them YoY :-). They have been around for 15 years but didn't get started until about 2011. You can watch the $0 revenue to IPO breakdown here too.
POD OF THE WEEK: Erica Schultz has led revenue strategies for Oracle, New Relic, and Confluent and has some great advice on Scaling Revenue this year and next.
1. SaaS METRIC OF THE WEEK: CONCENTRATION: Break out your tech dictionaries again because I'm not talking about my brain's ability to get distracted. Lightspeed Venture Partners' Nnamdi Iregbulem has outlined a new metric he created called weighted average contract value (WACV). He argues this metric provides more meaningful information than ACV (see #1 above). The reason is that B2B SaaS revenue is highly concentrated due to the distribution of companies a SaaS company sells into also being very concentrated - a large number of smaller companies, a moderate number of moderate-scale companies, or a very small number of very large companies.
2. CONVERTIBLE LOANS: They are 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 what is involved in a convertible loan and what to look for.
3. M&A: According to this new report, Merger and Acquisition deals in the enterprise software sector are on track to pass last year's records and have already reached $104.7 B for the year, and the report doesn't even include Adobe's $20 B Figma deal. Many larger firms stepped up their M&A transactions hoping to scoop up cashflow-strapped companies as venture funding deals continue to pull back.
4. ESTIMATION: Estimating effort 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 that needs to bookmark) - Estimating Software Projects by Jacob Kaplan-Moss (and what to do when you mess up).
5. DEADLINES: Adding to #3 above, Author Douglas Adams once wrote, "I love deadlines. I love the whooshing noise they make as they go by.". It's funny because it's true. So, how do you make peace with that whooshing noise when it comes to software development? Check this article from Free Code Camp that discusses the art of managing the deadline - part of it is complementary to a reference to the sub-art of saying NO from a while back.
6. SATELLITE: In the latest hardware release from Apple, they have added Emergency SOS capabilities using satellites to the iPhone, and apparently, it's coming to their Smartwatches too. Open signal break down this announcement into what it means as a new opportunity space.
7. BENCHMARKS: Did you know more diverse teams grow faster? From Capchase, learn more about this benchmark in this report listing the metrics lenders, and investors care about most. In addition, there is a complimentary SaaStr presentation (Slideshare) and video here.
8. GROWTH LOOPS: Elena Verna is Head of Growth at Amplitude and has an excellent presentation from 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.
9. MARKETING FOR ENGINEERS: For all of you technical entrepreneurs who have built something and trying to figure out how to get it into the wild, check this GitHub-based curated collection of marketing articles and tools to grow your product. It's the ultimate GTM Repo!
10. CASE STUDY: Speaking of Repos, JFROG is a publicly traded Code Repository (same as GitHub and BitBucket), and, full disclosure, I had never heard of this company until I saw the write-up from SaaStr/Jason Lemkin. This is surprising as the company generates $270m in ARR and has 132% NDR and 97% Gross Dollar Retention - those metrics are crazy - but learn more here.
POD OF THE WEEK: Complimenting #2 above. The content pumping out of Y-Combinator is always good. YC Partner Carolynn Levy details the basics of startup financing and how modern early-stage financing rounds are done using convertible securities, like the SAFE note.