A Structural Pricing Competitive Advantage in SaaS – The Three Part Tariff

There are three pricing strategies for startups. Maximization dominates SaaS products in the mid-market and enterprise markets; penetration is synonymous with freemium in the SMB market. Once you’ve decided on the right strategy for your company, what is the best way to price? By seat? By minute? With or without a platform fee? Modern behavioral economics study three different pricing structures. Let’s contrast them for a hypothetical web analytics vendor.
  1. Linear Pricing (LP) - Each analytics event costs $0.10.
  2. 2 Part Tariff (2PT) - The analytics software has a base platform fee of $10,000 and each analytics event processed by the system costs $0.10 more.
  3. 3 Part Tariff (3PT) - Again, the software has a base platform fee but the fee is $25,000 because it includes the first 150k events are free. Each marginal event costs $0.15.
Which is the best for software companies? For the first Continue reading "A Structural Pricing Competitive Advantage in SaaS – The Three Part Tariff"

Tomasz Tunguz, Partner at Redpoint Ventures: Benchmarking Your Startup (Video + Transcript)

In anticipation of the upcoming SaaStr Annual 2017, we’ll be releasing the full series of transcripts and videos from all the awesome 2016 sessions. Tomasz Tunguz, Partner at Redpoint Ventures, chats with Connie Loizos, Silicon Valley Editor at TechCrunch, about benchmarking your SaaS startup when you’re raising Series A funding. In true Tomasz style – thanks to his clear affinity for numbers – he throws in plenty of charts, graphs, and statistics into his talk to illuminate and clarify his points. Given the calibre of companies he’s worked with in the past (e.g. Twilio, Zendesk, Stripe, JustEat, RelateIQ) and his focus on early stage software companies, Tomasz knows a thing or two about what a company should do to prepare for raising a Series A round, the changing landscape of funding, private market devaluations, and how to reduce burn – all incredibly important considerations when it comes to
1-zeroMRR
2-artvsscience
3-mergers&acquisitions
4-salesperson
5-acquiringusers
6-marketcap
7-machinelearning
8-bluecollar
Continue reading "Tomasz Tunguz, Partner at Redpoint Ventures: Benchmarking Your Startup (Video + Transcript)"

SaaStr Podcast #042: David Yuan, General Partner @ TCV on Why Now Is the Time for Aggressive Growth

podcast-featured-42-yuanWelcome to Episode #42! David Yuan is a General Partner at Technology Crossover Ventures, where he has enjoyed no less than 4 IPOs and 5 acquisitions. Some of David’s investments include the likes of Facebook, Linkedin, ExactTarget (acq by Salesforce), Splunk and many more incredible companies. He also sits on the board at Act On, App Nexus, Merkle, and Site Minder and is an adviser to Pinterest. Prior to TCV, David had stints at JP Morgan and Bain & Company. David_Yuan

In today’s episode with David you will learn:
How did David make his way into the investing world in 2000?
How has David seen the evolution of SaaS revenue multiples over the last decade?
How can VCs balance the drive for profitability with their need for big wins over a short 5-7 year investment cycle?
How does David approach investing cadence in correlation to market cycles? Does his strategy alter Continue reading "SaaStr Podcast #042: David Yuan, General Partner @ TCV on Why Now Is the Time for Aggressive Growth"

Oracle takes the cloud revenue fast track with $9.3 billion Netsuite deal

Larry Ellison, chairman of Oracle Corp. When Oracle bought Netsuite yesterday for a cool $9.3 billion in cash, it let the world know it was now totally serious about growing cloud computing revenue — it wasn’t always the case. In the early days of the cloud, Oracle was content to sit on the sidelines and make fun, while it raked in traditional license and maintenance revenue. In fact, CEO Larry Ellison… Read More

That’s a nice little $1–2M SaaS company you have here. Call me to discuss if it will scale!

About two years ago, Josh Hannah of Matrix Partners wrote an excellent article titled “That’s a nice little $40M eCommerce company you have there. Call me when it scales.” In it he argues that an eCommerce business with $10 to $20 million in revenues is not that hard to build and also not very valuable. I would recommend that you read the full article, but one of the key points of the article was that if you fill a niche and have distinctive product/market fit with a set of customers, you can acquire customers very cheaply — up until a certain point, when you’ve maxed out the cheap customer acquisition channels and need to tap into more scalable channels. At that point it becomes a lot harder because the next set of customer acquisition channels will likely be much more expensive. As a side note I’d add that the value of
?
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Should I compensate people who made VC connections?

Yes — if the deal closes. If someone introduces you to a VC that writes you a significant check, just give him or her a few options. No cash. But a few options. It says thank you. People don’t say thank you enough, in general. They definitely don’t say thank you enough when someone risks and invests their social capital to help you get funded. They just got you $2m in VC capital?? Give them 2,000 or 20,000 options, or whatever, as an advisor. Not a fruit basket. View original question on quora

Friday Q&A: Should you outsource your blog writing?

Every Friday, we’re answering your questions about business, startups, customer success and more. Happy Friday! This week’s question comes from Pedro C., who asks: We get some form of this question pretty often. To try and be as helpful as possible, I’ll explain why we DON’T outsource our content, but why it might still be a good choice for some. Outsourcing our blog content was never an option we considered. Here’s why:
  1. The blog is about OUR journey as a business. Who can tell the story of that journey better than we can?
  2. It was really important to us to build deep relationships with our readers, because those relationships are the reason that many of them later become customers. One of the best ways to build that relationship is to have them hear directly from us every single week.
  3. There’s a lot of value in writing beyond simply as Continue reading "Friday Q&A: Should you outsource your blog writing?"