Top 10 in Tech - What to know for Week ending November 1, 2024

1. SaaS METRIC OF THE WEEK:  AI Metrics: This is a great one from David Kellogg, who recently presented at SaaS Metrics Palooza 2024 on "The Impact of AI on SaaS Metrics"  slides in a PDF version here.  The event he presented at is actually whacked full of good talks, so well worth the (somewhat weird) on demand replay you can get access to here.


2. PROFESSIONAL SERVICES: For a lot of us in the B2B SaaS world, we generate a significant amount of revenue from implementation and deployment projects, often captured as revenue from Professional Services. So check out Dave Kellogg's post called the Professional Services Paradox, where there are times when only a Startup can deliver the services needed to execute a transformation strategy. BTW - on average, Service Revenue as a percentage of Total Revenue caps out at 11%. Jason Lemkin notes that his perceived rough range is about 8-10%. Fun fact: The more professional services, the less churn.


3. STARTUP PLAYBOOK: Check out the Emerging Startup Playbook, which lays out eight key emerging strategies taken from high-growth SaaS leaders. Emphasizing "speed over perfection," it suggests streamlining decision-making and embracing usage-based pricing for sustainable growth. Key takeaways? Optimize product stickiness before scaling sales and pivot based on data to stay competitive. This is a great read for early-stage founders figuring out their growth tactics (well, more like experiments).


4. NCT: Crack open your tech dictionaries, I have a new acronym to lob your way. OKRs are old school.  Ravi Mehta's NCT (Narrative, Commitments, Tasks) model simplifies goal setting. So instead of vague objectives, start with a clear Narrative explaining the "why" behind each goal. Next, set 3-5 measurable commitments for the quarter, with Tasks as actionable steps. The difference is that OKRs can be overly ambitious, but NCTs focus on achievable milestones that align closely with strategic priorities, more Agile in a way as course corrections are easier (and it increases team accountability).


5. VENTURE: The Q3 2024 Pitchbook-NVCA Venture Monitor is out, and VCs seem to have hit the 'bust' part of the boom and bust cycle. Limited exits and liquidity in the current VC ecosystem means that activity has fallen off a cliff -  the number of active VC investors is down 62% from peak levels, and about 25% of active investors from last year have halted new investments. Mega deals seem to be propping it all up - as is the AI buzz. M&A is even worse off and has almost fully collapsed in 2023 and 2024.


6. EXITS: A fast follow from above. If you have or are raising funds at a high valuation - it's a double-edged sword. High valuations raise acquisition expectations, often requiring a 2x–3x return, which can limit exit options - doubly true in this market (see above). SaaStr points out that many startups must aim for IPO or risk stagnation if acquisitions don't materialize. PitchBook notes the current downtrend, with exit multiples and cash-on-cash returns seeing notable declines, highlighting the risks in this volatile exit market.


7. AI GOVERNANCE: The World Economic Forum has launched a well-thought-out paper on Governance in Generative AI. Core recommendations include setting clear guidelines for data transparency, ethics in model deployment, and ongoing monitoring for biases and unintended outcomes.


8. MARKETING: The MKT1 article I posted last month on how to measure what marketing activities are actually driving revenue was popular. So here is a follow-up to that (as a part of their Annual Planning Series for all of you at Fiscal/Calendar EOY planning stages) on how to prioritize marketing activities & avoid random acts of marketing ( I love that term). TL;DR: set clear goals, define your metrics, and create a focused strategy. But you need to read it as it's way more in-depth and step-by-step.


9. CONFLICT: David Kellogg's book ends this week's newsletter by suggesting we should design our businesses to surface essential conflicts. Instead of reducing conflicts, leaders should identify which ones add value and make sure they are heard. For example, separating Sales and Customer Success encourages transparency around upselling conflicts. By purposefully structuring teams, leaders can maintain productive tensions that drive growth and reduce irrelevant friction.


10. CASE STUDY: GROWTH HACKS. This is a fun case study of some of the infamous and unethical growth hacks used by Startups in their early days. It stars Reddit, YouTube, Facebook, OpenAI, and Uber (and their legendary Greyball System; if you haven't watched the TV show yet, I highly recommend SuperPumped).


POD OF THE WEEK: From David Kellogg and Co: CARR, ARR, and the Impact of Usage-Based Pricing. Contracted Annual Recurring Revenue (CARR) and Annual Recurring Revenue (ARR) are commonly used terms in the SaaS and Cloud Industry but are not standardized, leading to inconsistent calculations.