How to Make Pretty Charts

When I first started writing, I wondered how I could make charts like those in the Economist or in the New York Times, the beautifully formatted ones. After some research, I figured out how. And this post explains how you can do it, too. Many data scientists use a free open-source language called R. It’s a great tool for processing data and I use R to process all the data for this blog.

What an Acquisition of Salesforce Means for Startups

Rumors swirled yesterday that Salesforce, the $40B SaaS behemoth, had been approached by an acquirer. Dan Primack speculated this morning that Oracle and Microsoft are the likely candidates. If Salesforce were to be acquired, the SaaS ecosystem would change substantially. Looking at the market caps and the balance sheets of the major enterprise acquirers, Microsoft could certainly acquire Salesforce outright in cash. Oracle would likely acquire the business in a cash & stock transaction.

A SaaS History Lesson – The First SaaS Company’s Exceptional Journey

The first SaaS startup started as a packaged software company. After selling floppy disks and CD-ROMs of expense software in computer software stores, the company changed models for the first time, and sold software licenses directly to enterprises. The company went public on this model in 1998. But soon after the crash of 2001, the startup’s market cap totaled only $8M. So the business evolved again and became a pure SaaS business, selling software accessible to anyone with a browser.

How Important Is It For a SaaS Startup to be Profitable?

The Information reported last week that in 2014, only 11% of tech IPOs in 2014 were profitable when they became publicly traded companies, an all time low stretching back to 1980, when the figure was 88%. This raises the seemingly absurd question, how important is it to be profitable for a startup? After all, growth is the largest determinant of valuation at IPO, not profitability. Only 19 of the 48 publicly traded SaaS companies in the basket I track have ever recorded a financial year with a positive net income.

Measuring Bookings, MRR, Revenue and Cash for Your SaaS Startup

Yesterday, I met with a bright, young SaaS entrepreneur who asked me to clarify four key numbers for SaaS companies: bookings, monthly recurring revenue, recognized revenue and cash collections. These four numbers are critical to understanding the health of a SaaS startup, and they can be quite different, so it’s important to have a strong grasp on the distinctions between them. MonthJanFebMarAprMay…Jan ACV Bookings12,000 Monthly Recurring Revenue (MRR)1,0001,0001,0001,0001,0000 Recognized Revenue5161,0001,0001,0001,000484 Cash Collections3,0003,000

Why the Bubble Question Doesn’t Matter

“Is there a bubble?” is a question that seems to be asked every day. But it’s the wrong question - in fact, it’s an unimportant question. Maybe there is a bubble. Maybe there isn’t. Instead of asking the question, let’s just presume we are in a bubble. Then, the far more important debate surfaces: given the bubble, how should a team manage a startup differently? If I were to survey entrepreneurs and board members, I presume I would hear something like this list:

The Innovator’s Solution for SaaS Startups – The Flywheel SaaS Company

In the Innovator’s Dilemma for SaaS Startups, I outlined the path of many software companies, which disrupt incumbents by first serving the small-to-medium business and then move up-market by transitioning to serve larger enterprises with outbound sales teams. I argued this transition is largely due to the more attractive characteristics of larger customers, namely higher sales efficiency and reduced churn rates. This is the “traditional” way of disrupting. But, as Kenny van Zant of Asana and Mike Cannon-Brookes of Atlassian told me, there’s another way, a novel way of building companies that still isn’t very well understood: the Flywheel SaaS Company.

How Faster Sales Cycles Become a Competitive Advantage

Sales cycles, the time from acquiring a lead to closing an account, vary quite a bit by industry, product type, and price point. But universally speaking for startups, shorter sales cycles are better. Maintaining a short sales cycle is a competitive advantage for several important reasons. First, faster sales cycles accelerate the discovery of a repeatable sales process. Different sales approaches must be tested: which role to sell to? which pitch (cost or value)?

Avoiding Poor SaaS Customer Alignment

saas customer alignmentWhen I’m not completely absorbed with my agile marketing software startup, I do a bit of SaaS consulting on the side. SaaS colleagues come to me with a wide variety of problems from positioning to sales compensation to churn analysis, but lately I’ve noticed a common theme: poor SaaS customer alignment. SaaS businesses develop intimate, long term relationships with their customers that are enabled by the always-on connection between the SaaS customer and the SaaS business through the SaaS product. Like many long term relationships, it is founded on a recurring cycle of needs fulfilled and expectations met, or not. And I don’t just mean customer needs and expectations. There are two sides to every relationship. SaaS businesses need to make money as much as SaaS customers need to spend it. SaaS customer alignment means aligning the goals and actions of the SaaS customer with the goals and actions of the SaaS business at every stage of the SaaS customer lifecycle.

This is the first post in a series that explores the importance of SaaS customer alignment. This first post introduces a simple framework for understanding SaaS customer alignment and its many benefits. Future posts will examine the challenges of achieving SaaS customer alignment in customer acquisition, customer success and early product market fit.

saas customer quality

In SaaS, customers are the fundamental unit of measure. Each new customer brings a new thread of subscription revenue that is woven into a larger tapestry to form the total recurring revenue of a SaaS business. The quality of that tapestry hinges on the quality of your SaaS customers. But,what makes for a high quality customer? Continue reading "Avoiding Poor SaaS Customer Alignment"

How Many Unicorns Sell Each Year?

How many companies sell each year for $1B or more? In the last ten years, on average, 2.5 US venture backed IT companies are acquired for $1B+. In the last ten years, a total of 20 companies have sold themselves for greater than $1B. Over the past 20 years, that trend has been relatively constant, with the exception of the euphoria in 1999 and 2000. The typical unicorn acquisition generates $1.