On Wednesday, October 7th at 9:30 AM PT, Redpoint Office Hours will welcome Kaz Nejatian, the VP & GM of Shopify Financial Solutions (including Shopify Capital). Prior to Shopify, Kaz was the Product Lead for Payments and Billing at Facebook and was the former CEO of Kash, a payment technology company that he founded and which was acquired in 2017.
During the conversation, we’ll discuss:
What does the future of financial services look like?
What are best practices for when and how to add financial services into your platform? Watch outs?
What offerings should you prioritize (e.g. payments, financing, banking, and insurance)?
The Shopify Capital experience: what has gone well, what have you learned, where are you headed?
High growth software companies are valued based on forward revenue multiples. In other words, to calculate the enterprise value of a business, you multiply the revenue by the forward multiple. But, how does the market set the multiple? What predicts the forward multiple, or correlates with it?
I pulled together the data for the basket of the roughly 60 publicly traded SaaS companies and ran a linear regression to understand the predictive power of the many key metrics reported by public companies.
The answer: revenue growth and sales efficiency dominate the model. Cash flow margins, net income margins (profitability), gross margins, and many other metrics are largely irrelevant.
Revenue growth correlates with forward multiple at 0.81.
Sales efficiency isn’t far behind at 0.75.
If you’d like to predict the forward multiple for the next software company to file their S-1, use this formula.
Forward Multiple = 6.3 Continue reading "How to Predict the Forward Multiple of a Software Company"
<a href="https://www.economist.com/briefing/2020/09/12/covid-19-has-forced-a-radical-shift-in-working-habits">The Economist ran a story about the future of work</a> this week. Working remotely, we have reduced meeting length by about 15% and increased our total time at work by 2 hours per day. We might declare we have found an extra 10 hours in the workweek from nothing.
This productivity boost might seem universally positive, but there’s a catch. One of the critical topics in many boardrooms today is managing employee burnout. Sheltering-in-place, managing schooling, healthcare for elderly family members are just a few things that have become more difficult. Working longer hours while managing these stressors may compound the exhaustion.
Christina Maslach is a social psychologist and specialist in occupational burnout at Stanford. And she’s published research on burnout. There’s an excellent summary of her research here.
There are six progenitors of burnout: work overload, lack of control, insufficient reward, breakdown of community, absence of fairness, and
Many companies today pursue a pincer GTM. First, target the individual user and then convince the economic buyer, typically a manager, director, or VP depending on the scale. Two constituents in the sales motion, but only one website raises a conundrum. Who do you serve on the home page?
Technical products often face this two persona quandary. And it surfaces on the website because of the constraint of a single home page.
Successful marketing builds trust. Building trust with engineers is entirely different than building trust with marketers. Engineers prefer to spend time in Github evaluating a product’s technical prowess, in the documentation to learn how to wield the technology, and in the forums understanding the nature of the community. Technical acumen, applied content marketing, and superlative documentation build that trust.
But don’t apply the same approach with a VP Marketing or Sales and expect success.
There’s a front door Continue reading "How to Maximize the Impact of Your Website When Targeting Two Personas"
Where is the SaaS world relative to how far it can go? With valuations of as-a-service companies and all-time highs or close to it, and more and more startups leveraging this model to serve an ever-larger number of consumers, I wondered how much more business is there to capture?
Let’s try to estimate. We do have enough data to get a sense of total as a service penetration. Last year, Zylo published a study suggesting that the average business spends about 10,000 dollars per year on as-a-service (aaS) software.
There are approximately 120m workers in the US. Today, sixty percent of which are white-collar workers. Assuming a $10k SaaS budget per year for those workers, we obtain a theoretical market size of about $720b annually.
How does that compare to market research? Gartner’s research contends aaS spending in 2019 totaled $228B. 32% of the potential market has migrated to as-a-Service.
Continue reading "Can You Still Make Money Starting a SaaS Company?"
When a new leader joins a startup, their impact hinges on their ability to build their teams. Whether you manage a team of engineers, a team of regional sales managers, or the company, your first responsibility is to hire and successfully manage the seven people who will form your leadership team.
Managers who hire those seven people - either from talent inside the company or outside the company - will be more effective. Why?
First, as a company grows, the most important thing is recruiting. If you have a leadership team of seven recruiting on your behalf, you will be way more effective than someone with only two or three managers.
Second, a leadership team will have the capacity to focus on many more important topics than a team of two or three people. The combination of more throughput and greater specialization should lead to better results.
Third, different perspectives Continue reading "Your Responsibility as a Manager is to Hire 7 People"
On Tuesday, September 15th at 10 AM PT, Redpoint will welcome Kimbre Lancaster as the next co-host of Office Hours. Kimbre is the former Director of Global Events and Field Marketing at Gremlin where she managed the industry sponsorships program, Gremlin’s produced conferences (Chaos Conf, Failover Conf) and the new remote field program. Prior, she built and scaled the programs at both Split and Scalyr.
During the presentation, we will cover the keys to success for hosting virtual events, including building audiences, managing sponsors, and programming. We have seen the lead generating potential of virtual events across our portfolio, and we believe this type of marketing will become essential in the next decade.
This Office Hours will be a virtual event. We will collect questions from participants beforehand and try to cover them throughout the discussion. We’ll also answer questions from the audience at the end.
If you’re interested Continue reading "Redpoint Office Hours with Kimbre Lancaster on Hosting Successful Virtual Events"
How do you tell if your sales team and marketing team are working well together? There’s a simple diagnostic that I’ve come to use. Compare the slopes of marketing’s lead generation efforts to sales’ bookings trajectory.
The marketing pipeline trend should be the pipeline for this quarter, pipeline that’s available to close (ATC). ATC is a concept I learned from Lambert Billet, the CRO at Looker. It means the prospect will buy this quarter. Sometimes, teams report aggregate pipeline generated, but prospects ready to buy 12 months from now aren’t relevant.
If the marketing slope is up and the bookings slope is up, the teams are aligned. Ideally, the marketing slope is greater than the sales slope, which means the marketing team generates more pipeline than sales can close. If the slopes are identical, that’s fine too. Marketing sources enough pipeline for sales to hit their numbers.
If the marketing
Asana filed their S-1 this week. Asana builds productivity and task management solutions. When they launched, their vision of eliminating email through task management made big waves in the market. Today, the company is a massively successful SaaS business and another example of the flywheel business model that creates demand at the individual user and leverages that interest to sell department and company-wide contracts.
Asana competes with SmartSheet, another publicly traded productivity company. In this analysis, I’ve compared the metrics of the two companies at the time of IPO. Also, I’m trying a new format for these analyses that you might call a baseball card analysis, rather than a series of charts. Let me know which you prefer.
Demand generation limits growth. To scale, a company must find customers in ever larger numbers.
The ideal scenario is one where purely external signals confer a prospect’s propensity to buy. A prospect experiences hypergrowth is perfect example. Massive headcount growth presages large software purchases and expansion. A company anoints a new department head catalyzing change.
The more external the signal of lead quality, the easier the demand generation task will be. External signals are powerful proxy metrics.
Most of the time, these external signals won’t suffice. Internal data points are critical additions: adoption of new infrastructure technology, dissatisfaction with an incumbent vendor, budget availability, or a new project or initiative.
Mnemonic frameworks like BANT (Budget, Need, Authority, Timing) and MEDDIC (Metrics, Economic Buyer, Decision Process, Decision Criteria, Identify Pain, Champion) remind sellers to solicit these internal signals during qualifying calls. This data collection is one reason salespeople are critical to Continue reading "Why Startups Should Establish Qualifying Signals for Sales Teams Early On"