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. New B2B customers, on average, take 2 years and 2 months to become profitable. This highlights a deepening dependency on access to capital to fund a SaaS company's growth through these SaaS Cash Flow troughs. Here is an article that looks at ways to shorten CAC Payback, and this article takes an operator view on CAC Payback that includes (and celebrates) the value of net revenue retention.
2. AI OPEN SOURCE: According to this article from Crunchbase, many Startups are turning to open-source large language models (LLMs), challenging major "incumbents" like OpenAI - it's weird to call OpenAI an incumbent. Backed by investors seeking cost efficiency, these open-source alternatives offer a bunch of benefits, such as more flexibility, lower expenses, and competitive pressure, despite being technologically behind.
3. AI: Speaking of actual "incumbents," earlier this year, Mark Roberge of Stage 2 Capital took a look at the hype cycle with AI and asks who could win the go-to-market AI race - Startups vs Incumbents? Adding fuel to this one with CB Insights AI 100, the 100 most promising AI startups this year.
4. CLOUD: So let's back up the statements in #2 and #3 above with some incumbent data, given that the big Cloud players just had some Quarterly earnings calls. Looking at the Clouded Judgement summary, AWS, Azure, and Google Cloud hint at an uncertain re-acceleration for software (YOY - AWS: 12%, Azure: 28% YoY, and GCP: 22% YoY), Azure's AI contributed significantly, as without AI, its growth actually decelerated. SaaS valuation medians show overall 5.4x, High Growth of 11.0x, Mid Growth of 7.5x, and Low Growth 3.4x. Checking in with the Tomasz Tunguz analysis, he also notes Microsoft's AI-fueled growth, diversifies algorithms and boasts a booming Copilot business. Google's growth decelerates (28% to 22%), but their AI products like Duet expand.
5. INVESTMENT: A couple of weeks back, I posted that Andreessen Horowitz is back with a new, post-pandemic manifesto, 'The Techno-Optimist Manifesto'. However - looking at their 2023 investment pace so far - that manifesto is all words and diminishing dollars. Last Q was the lowest for the firm in seven years (11 deals/$1.5B) - but to be fair, this is all relatively optimistic compared to their VC peers.
6. CUSTOMER SUCCESS: For all you CS-focused people - ChurnZero has released this year's Customer Success Leadership Study - they have been running this since 2020, so we can start to measure trends: The percentage of CS teams that own the renewal process is trending downward, with dedicated renewal teams picking up the difference and Key CS metrics have shifted, with teams putting more focus on churn rate, renewals, and expansion revenue.
7. B2S: The "S" here is for Startups - do you sell to other startups? If so, Olena Avramenko, from Miro, emphasizes treating startups as a unique user category. She outlines creating a startup program, securing internal buy-in, establishing measurable outcomes, launching minimally, and scaling thoughtfully, highlighting real-world insights.
8. ENGINEER vs ENTREPRENEUR: Good context for #10 below. I love this article as it also represents the battle in my head: Engineers love to get it right, and Entrepreneurs love to get it done. It is such a simple statement that materializes in so many ways.
9. PLANNING: 2024 is almost here - and it's the time of year when I start emphasizing articles centered around planning. This year has seen startups face unprecedented churn pressures, rising costs, and an increased time gap between funding rounds, pushing a shift in strategies - to address these pressures, this piece emphasizes restructuring customer interactions and reassessing team roles to enhance value and streamline costs into 2024.
10. CASE STUDY: A masterclass in Scaling Developer-First Products with Eeke de Milliano. Developer-first companies like Stripe and Twilio revolutionized product development by prioritizing developer needs and preferences at every operational level, from marketing to customer success.
POD OF THE WEEK: This was a good listen for me - in B2B land, we're not up against "the competition"; we're up against buyers' inaction. They are more worried about messing up than making a decision. Resonate with you??? Then, take a listen to April Dunford talking with Lenny's Newsletter on typical B2B purchasing processes and providing a two-part sales pitch structure that could actually transform your sales process.