Top 10 in Tech - What to know for Week ending July 21, 2023

1. SaaS METRIC OF THE WEEK: CAC payback (and accounting for the upsell) Often time many of the base metrics (CAC, CAC/LTV, etc.) are in service to VCs and operationally don't tell us enough to make great decisions. This article takes an operator view on CAC Payback that includes (and celebrates) the value of net revenue retention, and here is a very relevant article on the importance of CAC payback in our current Bear/recessive market.


2. CUSTOMER SUCCESS - Quota: this is an expansion of celebrating Customer Success Teams' contribution as NRR and CAC payback referenced in #1 above. In past newsletters, I have referenced AE and SDR metrics and quotas. But what about quota expectations in renewal and cross-sell/upsell within a Customer Success Team? Tomasz Tunguz takes a look based on a report a couple of years back from Gainsight. Most Customer Success Managers can handle between $2-$5M in ARR and between 10-500 accounts (but it varies based on segment/ACMR).


3. SALES OPS: For those lucky enough to be in Scale-Up mode but not in a PLG way. Scaling creates some real teething problems, especially regarding revenue teams and moving beyond the founder being the primary (or only) salesperson. Eventually, a dedicated team will be needed (that doesn't involve the founder), and, in more modern times, Sales Ops operators are needed to help coordinate cross-departmental activities to help a revenue organization hum. Read this Sales Ops primer article from Point Nine Capital on starting all this.


4. PRODUCT: Now matter how much Workshopping and strategy development goes into a product, things sometimes work out differently 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.


5. SEGEMENTING: I raised the topic of account-level segmentation a few weeks ago, and someone over at Userlist shared this article that they thought would be interesting. It's true - an excellent article outlining best practices for B2B SaaS companies in effectively segmenting accounts versus individual users.


6. BUYERS: Software generally benefits during Economic downturns - the downside is more competitiveness. So take note that (according to Gartner's 2023 Global Software Buying Trends report) almost 70% of SMBs plan to increase their spending on software this year, many to increase productivity (47%), and 42% rank as a top priority. G2 has just launched its 2023 Buyer Behavior Report with slightly different stats: 49% plan to increase budgets, and 86% require a security audit!


7. PLG TRAP: This is a great read (across 3 parts) - starting with Tomasz Tunguz's article a few months back, where he noted that (post-COVID) publicly traded PLG companies were operating about 5–10% less profitable than sales lead counterparts. Part 1 lays out what the "PLG Trap" is. PLG is not a revolutionary silver bullet for many, and the article points to where initial growth strategies and product offerings are no longer sustainable in driving revenue - showing PLG's scale limitations.


8. PLG vs. SLG: According to the Expansion SaaS Benchmarks report (it's a downloadable PDF), PLG businesses lead the pack, but as stated above - SLG can outperform PLG, and according to this article, it's not a "vs." thing - you don't have to choose, both strategies can co-exist.


9. AI MONEY: A look into how the heck AI companies monetize their AI-PLG apps and how revenue models are built (free trials FTW)...and need to be built to ensure a sustainable AI business is being established (the old Revenue vs. Cost optimization challenge). Bonus at the end of the article - CAC Payback is overrated!


10. CASE STUDY: Meta is back in the news lately by launching Threads, a Twitter competitor that was the fastest-growing app ever (beating out this year's ChatGPT!), but Threads also seems to be cooling off in a major way. Despite their current popularity shortcomings, however, the original Facebook app still has a solid moat, and quite unbelievably, it has a higher DAU/MAU ratio than in its early days.


POD OF THE WEEK: Complimenting 7 & 8 above from Stage 2 Capital: How and when to layer Sales into PLG with Tony Granados (DataDog and Airtable). ​