Top 10 in Tech - What to know for Week ending December 6, 2024

1. SaaS METRIC OF THE WEEK:  CAC PAYBACK: The 'payback' period is the nuance of why we measure CAC. How long until we break even? Benchmark-wise, the negative trough is way longer than you think, so take a seat! New B2B customers, on average, take 2 years and 2 months to become profitable. This really highlights a deepening dependency on access to capital to fund a SaaS company's growth through these SaaS Cash Flow troughs. BONUS: Here are last week's CAC Payback benchmarks.


2. FUNDRAISING METRICS: Take a read and a bookmark of this guide to SaaS metrics for fundraising that breaks down the essentials. The big idea here is to build a "data deck" that answers investor questions upfront, focusing on what they perceive as important metrics like MRR, CAC:LTV, and churn patterns to demonstrate profitability and scalability. BONUS: Here is a guide on what should be included in investor reports.


3. CUSTOMER OPERATING SYSTEM: What exactly is the difference between Customer Success and Customer Support? Get started here to understand the nuances, they are both part of the same customer journey spectrum, and Totango posits, in this recent SaaStr Annual presentation, that we need a fresher look at Success and Support that they coin the "Customer Operating System" (Like the presso? Here are the Google Slides deck).


4. PRICING: The title of this article says it all - 5 SaaS pricing mistakes you're probably making. Stop lowballing! Pick the right metric, make purchasing easy, optimize upsells, and keep pricing dynamic.


5. EQUITY: This is a very bookmarkable series from Femstreet that 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 - covering cap tables and things you can do if they are messy.


6. VENTURE-STRAPPED: I googled this term already, and it's unique! It's my term 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 that raise only once. This anecdotally seems a more common practice in these new market conditions (including Klaviyo and Zapier). Jason Lemkin notes this new one-and-done third way.


7. AI INVESTMENTS: Menlo Ventures' new report highlights a significant shift in enterprise AI adoption. AI spending is now at approx $13.8 billion, which is up 6x from 2023. 60% of these investments are from innovation budgets, while 40% are integrated into permanent allocations. Enterprises are exploring an average of TEN AI use cases, with 24% prioritized for near-term implementation.


8. 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. Vertical SaaS isn't new (the difference between vertical and horizontal SaaS here), but look at how these vertical SaaS companies are taking market share from those cloud giants and how AI and Vertical SaaS are the outliers to achieving solid growth in this current market.


9. FOUNDER VESTING: This is a great one for all you founders. Four-year vesting schedules are standard for many founders (and they are still vesting during early funding stages). But with the time between stages now being longer, after this traditional 4-year phase, Investors are now pushing for re-vesting to ensure long-term commitment and minimize "dead equity."


10. CASE STUDY: Everyone loves a good old Pivot story - expanding on #6 above, here are 5: The Hidden Backstory of 5 Startup Pivots That Grew to $43B including Lyft and Discord and also a "definitive" Pivot list from Lenny of Lennys Newsletter (see below for more)


POD OF THE WEEK: Expanding on #8 above, why vertical SaaS is booming, and how to get 110% NRR from SMBs, with Jason Lemkin and the CEO of Mangomint.