What’s Happening to the SaaS Market?


This post is by Tomasz Tunguz from Tomasz Tunguz


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What a difference three weeks make! Since I wrote “The Correction in SaaS Company Valuations”, SaaS company valuations have continued to fall. As a basket, SaaS companies have fallen 33% from their highs (median), wiping all the gains for the last year. To make that point more explicit, below I’ve charted the total value of public SaaS companies over the last ten months. In that time period, the aggreggate enterprise value has fallen from greater than $150B to $117B today.

What’s Happening to the SaaS Market?


This post is by Tomasz Tunguz from Tomasz Tunguz


Click here to view on the original site: Original Post




What a difference three weeks make! Since I wrote “The Correction in SaaS Company Valuations”, SaaS company valuations have continued to fall. As a basket, SaaS companies have fallen 33% from their highs (median), wiping all the gains for the last year. To make that point more explicit, below I’ve charted the total value of public SaaS companies over the last ten months. In that time period, the aggreggate enterprise value has fallen from greater than $150B to $117B today. And these share price decreases have been distributed across all the basket of SaaS companies. Below is the distribution of share price changes from the 10-month highs, which doesn’t quite follow a uniform distribution, but shows that only one stock is currently at its 10 month high. The others are off on average about 30%. It would be hard to claim the underlying businesses have worsened since February.
Continue reading "What’s Happening to the SaaS Market?"

Anatomy of an early-stage startup demo


This post is by Subraya Mallya from PrudentCloud


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Product Demos start much before the product has come into being. Startups would do well to follow Steve Blank’s customer development, in arriving at the definition of what the product would be. While most of the demos with prospective customers would be around the problem, the degree of pain, day-in-a-life of the end-user and the benefits of your proposed solution, a demo to prospective investors would be slightly different.

Judging from demos of 20+ companies from two accelerators I was part of, in the last week, it was clear that this is one area where startups/entrepreneurs have to do some work. As I was giving my inputs/feedback, I thought it would be useful if I created a template for a early-stage startup demo.

Notice that I am not saying it is “early-stage product demo”, with good reasons. As an early-stage startup, while you might have an incarnation of your product ready, it is bound to change.

Continue reading "Anatomy of an early-stage startup demo"

The Surprising Compensation Trends of Startup Executives


This post is by Tomasz Tunguz from Tomasz Tunguz


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Since 2008, there has been a secular trend to increase cash compensation and decrease equity to startup management teams. Tho two tables below tell the story for VPs of Engineering (VPE) and VPs of Product (VPP) across the US broadly and in the SF Bay Area. VPEUSSF Cash+10%+16% Equity-19%-17% VPPUSSF Cash+26%+8% Equity-31%-25%
In the past 5 years, VPEs have benefitted from a 10 to 16% increase in their cash compensation, but have seen their equity grants fall by 17-19%.

The Surprising Compensation Trends of Startup Executives


This post is by Tomasz Tunguz from Tomasz Tunguz


Click here to view on the original site: Original Post




Since 2008, there has been a secular trend to increase cash compensation and decrease equity to startup management teams. Tho two tables below tell the story for VPs of Engineering (VPE) and VPs of Product (VPP) across the US broadly and in the SF Bay Area.
VPEUSSF
Cash+10%+16%
Equity-19%-17%
VPPUSSF
Cash+26%+8%
Equity-31%-25%

In the past 5 years, VPEs have benefitted from a 10 to 16% increase in their cash compensation, but have seen their equity grants fall by 17-19%. The same pattern holds true for VPPs: an 8-26% increas in cash and a 25-30% drop in equity grants. Above, I’ve charted the cash compensation trends, (salary+bonus), for the different roles and different locations. The Bay Area (marked as SF) is in red; the US is in blue. Below is the same chart for equity. I’m using a data
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Quantifying the Cost of a Bad Hire


This post is by Tomasz Tunguz from Tomasz Tunguz


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The chart above compares the contribution of two hypothetical inside sales people with $400,000 quotas to an early-stage startup’s finances. In this case, contribution is the 18 month revenue of sold customers tallied cumulatively minus the salary costs of $100k annualized of the sales person. I’ve modeled a six month linear ramp for the sales person to reach 100% of quota. The red line shows the case for a successful sales hire.

Quantifying the Cost of a Bad Hire


This post is by Tomasz Tunguz from Tomasz Tunguz


Click here to view on the original site: Original Post




The chart above compares the contribution of two hypothetical inside sales people with $400,000 quotas to an early-stage startup’s finances. In this case, contribution is the 18 month revenue of sold customers tallied cumulatively minus the salary costs of $100k annualized of the sales person. I’ve modeled a six month linear ramp for the sales person to reach 100% of quota. The red line shows the case for a successful sales hire. Through the first three months, as the salesperson ramps, his contribution to the business is negative because his salary costs outweigh the lifetime value of his sales. Note, I haven’t included the recruiting costs here, just wages and commission. Starting in the fourth month, new customers closed by the salesperson begin to offset his costs and by month 5, the company is better-than-breakeven on the hiring decision on a customer lifetime value basis. The blue line shows the
Continue reading "Quantifying the Cost of a Bad Hire"

Quantifying a SaaS Startup’s Revenue at Risk


This post is by Tomasz Tunguz from Tomasz Tunguz


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One of the key metrics that I don’t think gets enough notice when reviewing the health of a SaaS business is revenue-at-risk or RaR. For SaaS businesses with quarterly or annual contracts, each month some subset of the customer base’s contracts must be renewed. The RaR is the sum of the revenue from these customers in a given month or quarter. RaR is a useful measure because it captures the company’s opportunity to minimize lost customer revenue.

Quantifying a SaaS Startup’s Revenue at Risk


This post is by Tomasz Tunguz from Tomasz Tunguz


Click here to view on the original site: Original Post




One of the key metrics that I don’t think gets enough notice when reviewing the health of a SaaS business is revenue-at-risk or RaR. For SaaS businesses with quarterly or annual contracts, each month some subset of the customer base’s contracts must be renewed. The RaR is the sum of the revenue from these customers in a given month or quarter. RaR is a useful measure because it captures the company’s opportunity to minimize lost customer revenue. Identifying customers at risk and proactively engaging them, cultivating a relationship and providing them account support can meaningfully improve a SaaS company’s churn rates. I’ve seen two ways to calculate RAR: a probabilistic method and a customer-by-customer method. The probabilistic method multiplies the MRR by the historical monthly revenue churn rate. That figure is multiplied by 12 to annualize it. Probablistic_RAR = MRR x Revenue_Churn_Rate x 12 The probabilistic RAR is top-down, so Continue reading "Quantifying a SaaS Startup’s Revenue at Risk"

The Promise of SaaS Customer Success Metrics


This post is by Joel York from Chaotic Flow by Joel York


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saas customer success metricsOver the past few years, the SaaS community has gained a solid understanding of SaaS financial metrics, as well as many of the operational principles required to achieve them. However, there has always been an obvious gap between what happens on the top line and what happens on the ground. It’s one thing to claim that a 50% reduction in churn will result in a 2X increase in recurring revenue, but it’s quite another thing to make it happen. Achieving that 50% reduction in churn is usually a tedious and unreliable process of trial and error. This is about to change. As the SaaS industry matures, we are witnessing the evolution of SaaS metrics beyond simple, historical financial measures toward sophisticated operational measures in the form of new SaaS customer success metrics and predictive analytics.

saas customer success metrics kpi dashboard

We are witnessing the evolution of SaaS metrics beyond simple, historical financial measures
toward sophisticated SaaS customer success metrics and predictive analytics.

This is the second post in a series inspired by my ongoing collaboration with Bluenose Analytics that explores the new Metrics-driven SaaS Business and its foundation of emerging best practices in customer success metrics. [Attention SaaS CFO’s and VP’s of Customer Success! Please see the exclusive invitation at the end of this post if you like this series and would like to explore more in person.] The first post discussed the unique qualities of SaaS that enable the Metrics-driven SaaS business to apply a more analytic approach to management than traditional licensed software. This second post drills down on the promise of customer success metrics to bring greater rigor to the processes of churn reduction, upselling and customer success management for increased recurring revenue and decreased recurring costs of service.

saas customer success metrics

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An Ocean of Customer Success Data

The promise of customer success metrics is immense. Unfortunately, so is the challenge of developing them. Continue reading "The Promise of SaaS Customer Success Metrics"