1. SaaS METRIC OF THE WEEK: SaaS METRIC OF THE WEEK: CLTV: This metric represents the average revenue that a customer generates before they churn - Customer Life Time Value. ChartMogul has a great online calculator here. Go to 'advanced mode' as this calculator references the traditional formula and the David Skok version (which is the advanced one but viewed as more realistic)... Check here for a thought-provoking read of why your LTV may be lower than you think.
2. GROWTH: ChartMogul's SaaS Growth Report is out and has some juicy insights on SaaS growth metrics. Quick peek: Growth is steadying (kind of good news - it's not shrinking), top-notch startups grow over 100% YoY, and here is one I haven't considered before - SaaS looks to be mildly seasonal (and corollary to budgets?) with Q1 being the best and Q4 the slowest.
3. BUDGETS: Speaking of annual budgets - for those who run calendar Financial Years - it's Budget/strategy planning time! It's time to get next year's budget drafted, circulated, revised, completed, and board approved! Don't panic. I have an article for you to read for that (it's a couple of years old but still prime) to better understand how businesses allocate their resources - it's based on interviews with over 600 SaaS startups.
4. FORECAST: This is a great article to get you to forecast your subscription growth better, shifting focus from immediate earnings to long-term revenue. It uses a great walk-through example emphasizing the importance of understanding retention rates.
5. IPO MARKET: Is the Public Market back for Tech/SaaS? I'm still calling a Q1 '24 return to "normal" (but fewer IPOs than the bonkers 1035 IPOs of '21), but Klaviyo just submitted their S1, joining ARM and Instacart. This is definitely a signal, and the Team at Genuine Impact also sees a potential AI-infused spike. Other VCs are not as convinced. Looking back to where we were pre-downturn, the average SaaS IPO took 12 years. It also took, on average, ten years to get to a $1B+ acquisition/exit in SaaS.
6. MULTIPLES: Adding more context to #4 above, Interest Rates and Forward Multiples are two significant considerations with Tech IPOs. Jamin Ball of Clouded Judgement runs the numbers deep in this post and notes that forward multiples are currently below the 10-year average (6x vs. 7.8x), BUT when adjusted to growth (because every software company has seen their growth slow down), current multiples are currently ~50% HIGHER than their long term average. Public valuations are technically still historically expensive.
7. PPG: Grab your tech dictionaries, everyone! I have another acronym for you: PPG, or People Powered Growth. This derivative of Product-led growth consists of a cross-functional team with customer-and non-customer-facing members. It's a People + Product partnership that develop and test solutions, searching for ways to scale human interactions/intervention with a product. Some examples of PPG companies are Drift, Dropbox, and Loom.
8. SALES: Looking to establish your first (non-PG) 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 startups are still hiring remote workers (yes, remote hires now represent 62% of all new contracts). And then, read Jason Lemkin's post on constructing a framework for the first SaaS sales compensation plans.
9. MVSP: Here is one more for your tech dictionaries - this stands for Minimum Viable Secure Product. This is a simplified security checklist for B2B software and outsourcing providers. It outlines essential controls to ensure a minimal yet effective security posture. It's not quite the SOC/ISO/APRA level stuff I have to deal with - but it's great for those outside of Enterprise and Financial Services.
10. CASE STUDY: Check out how Vanta found product market fit, starting with signing up 600 customers without a website and totally solving their problem without first writing any code. You could also fast-forward to the timeline graphic version here.
POD OF THE WEEK: Funnel and revenue math, kindly explained by Mark Roberge and Matt Plank of Rippling in the Science of Scaling podcast.