If you’re looking for the top SaaS blogs and influencers you’ve come to the right place. We’ve decided to put together a killer list, categorized and organized to help you find and consume world class SaaS and subscription content from the best people and companies in the market.
The list is organized in four categories: entrepreneurs,venture capitalists, communities and companies. Each entry includes social media links, tags with their specialities and details about why they made the list. Keep in mind there’s no specific order of appearance.
Of course the list went through a personal validation and it’s totally subjective to say if someone should be listed or not — but its important to notice that we used a large number of references to compile the list, including Medium posts, Quora answers, Linkedin groups, Twitter lists and more. If you believe we missed any specific profile please feel free to leave a comment and we’ll discuss about that.
As you can imagine this list may vary over time, but instead of updating it I’ll make sure to write another post next year.
Ok, let’s get down to it:
Hiten Shah started two SaaS companies, CrazyEgg and KISSmetrics. He has an very good weekly SaaS email newsletter and a pretty awesome entrepreneurship and business podcast together with Steli Efti, The Startup Chat podcast.
Founder and CEO of Close.io, Steli is a well known reference for startups and B2B sales, and prides himself of being a hustler. He writes frequently at Close.io’s blog, has many videos published at Close.io’s YouTube channel and also presents the The Startup Chat podcast.
Brian is the founder and CEO of HubSpot, a super hot startup founded in 2006 in Boston that went public in 2014 — leading the marketing automation market worldwide. Brian is pretty active on twitter and has also written a book with his HubSpot co-founder Dharmesh Shah.
Originally from Dublin, Ireland, and now living in San Francisco — Eoghan is the founder and CEO of Intercom, one of the hottest SaaS startups out there tackling the customer communication problem for SaaS. He tweets at lot and also writes at Intercom’s blog.
Co-founder and Chief Strategy Officer at Intercom together with Eoghan McCabe, Des is a frequent writer at Intercom’s blog and very active on twitter. He’s also a frequent speaker, and recently participated in an AMA with the Product Hunt community.
Stewart founded Flickr that was later acquired by Yahoo! where he became Sr. Director of Product Management. After leaving Yahoo! he founded Slack, possibly the hottest startup out there. Stewart has an active twitter profile and also writes at Medium.
Peter if the co-founder of Segment, a San Francisco based startup graduated from Y Combinator that raised $15M to create a customer data hub solution. Peter has his own personal blog, writes on the Segment’s blog and also tweets a lot.
Danielle is the co-founder and CEO of Mattermark, a platform that provides the premier database for private companies and startups. Danielle is very active on twitter and shares her thoughts on medium regularly.
Alex became famous in the SaaS space because of the Startup Journey blog, sharing everything on the journey of his startup Groove, to $500k in monthly revenue. Curious fact is that the blog actually started with a $100k MRR goal, quickly achieved that and turned to $500k.
Founder and CEO of Box, Aaron is a well known entrepreneur in the SaaS and cloud space. He’s very active and participate in a lot of events such as TechCrunch Disrupt and SXSW. He contributes to TechCrunch, tweets at lot and can also be found on Quora.
Co-founded CrazyEgg and KISSmetrics with Hiten Shah. Well known marketer and growth hacker, writes great content about inbound and content marketing at his personal blog and at Quicksprout’s blog. Neil is also a frequent speaker in a number of SaaS and startups events.
Parker is the CEO and funder of one of the fastest-growing startups ever. His company, Zenefits, took less than 8 months to reach $1M ARR. Recently they raised $500 million Series C round of funding at a post-money valuation of $4.5 billion. You can find Parker on twitter.
Although Marc is not an active blogger, it’s impossible to make a list of top SaaS influencers and not include him, since he’s the CEO of Salesforce.com, the most valuable SaaS company in the world. Marc is active on twitter, and you can find tons of interviews with him online.
Aaron Ross is not a CEO nor founded any company, but who cares — he’s the guy that built the process that brought Salesforce.com $100M in extra revenue. He later wrote about that on a best-selling book called Predictable Revenue. He writes on his blog and is also active on twitter.
The most well known SaaS thinker and writer. David’s web site has some priceless articles including “SaaS Metrics 2.0 – A Guide to Measuring and Improving What Matters“, possibly the best SaaS article ever written. He’s General Partner at Matrix Partners and you can find him on twitter.
Tomasz is famous and well respected in the SaaS space. His data-driven blog posts are vastly shared and considered one of the main sources of Saas knowledge on the internet. Tomasz is a Venture Capitalist at Redpoint Ventures, and very active on twitter.
Former CEO and founder of EchoSign, acquired by Adobe. Jason is currently the Managing Director at Storm ventures and the creator of SaaStr, the largest SaaS community on the internet. He also organize and host SaaStr Annual, the largest SaaS conference in the world.
Based in Germany, Christoph is one of the most active SaaS investors in Europe, with some very successful investments such as Zendesk. He’s the Managing Partner at Point Nine Capital, writes a lot of great articles at his blog The Angel VC, and is also very active on twitter.
Brad is a well known entrepreneur, investor and writer. He’s the Managing Director at the Foundry Group, as well as the co-founder of Techstars, one of the top accelerators in the world. He has written many books, some awesome articles on his personal blog and also tweets a lot.
Byron is Partner at Bessemer Venture Partners, one of the leading venture capital firms in the SaaS industry. Their portfolio has companies such as Twilio, SendGrid, Box, Linkedin, Pinterest, Skype, Intercom and more. Both Byron and BVP are very active on twitter.
Lincoln is known as a SaaS marketing genius. Expert on customer success, retention and growth, he’s currently working as a Customer Success Evangelist at Gainsight and as a Growth Hacker at Sixteen Ventures. He’s a very frequent writer and also tweets a lot.
Founder and General Partner at Social+Capital Partnership, an early stage venture capital firm. Mamoon is board director of many great SaaS startups including Slack, Intercom, and Box. He’s tweets frequently and is definitely worth following.
Scott has been a Venture Capitalist since 2000. He’s the founder of OpenView Venture Partners, a Boston based venture capital firm focused on expansion-stage software companies. Together with other partners he writes some great articles at OpenView Labs.
Created by Jason Lemkin, SaaStr is the largest web community of SaaS entrepreneurs. The core SaaStr content appears on the web site and on Quora, as well as via syndication in Forbes, The Wall Street Journal, and other leading media. SaaStr also hosts SaaStr Annual conference.
SaaS Club is a newsletter for the SaaS community that shares cool SaaS products and SaaS related articles every monday. Saas Club is currently curated by Vanier Rachel, Content Marketing and Communication at eFounders, a Startup Studio based in Paris, France.
Created by Sean Ellis, early growth marketing at Dropbox and Evenbrite, and also founder of Quaraloo. Although Growth Hackers is not a community dedicated to SaaS, you can find tons of awesome content for entrepreneurs such as AMAs, videos, discussions and even a job list.
HubSpot provides a tool to manage your inbound marketing efforts, and is definitely the reference for inbound and content marketing, globally. As you can image HubSpot uses their blogs as their number source of leads. They write great articles, white papers and guides.
Intercom is a new generation CRM tool, serving not just for sales purposes but for the whole customer communication space. Their blog, Inside Intercom, has some great posts about, product development, design, and customer engagement/success.
Kissmetrics enables you to optimize your marketing based on metrics, delivering insights and interactions to turn visitors into customers. Their blog is full of resources about this topic including infographics, guides and webinars.
Close.io is one of the top CRMs in the market, automating data collection of sales activities such as calls and emails. Close.io’s CEO, Steli Efti, writes many great articles about sales, has an awesome free startup sales course as well as a lot of short videos on their YouTube channel.
Buffer is a social media scheduler and help you share to Twitter, Facebook and other social media. They’re well known for being insanely transparent, both within the company and to the public. On their blogs you can find everything from legal documents to current buffer metrics.
Saasmetrics is a software that helps SaaS and subscription companies to keep track of all the important metrics of their business. Our blog contains a series of comprehensive posts about metrics and a wiki with detailed description and formulas of many SaaS metrics.
Totango is a customer success platform that helps you manage and keep track of your customer engagement metrics. They have a very good blog and a some incredible resources about customer engagement and customer success.
Groove is a simple help desk software for small teams. They have an incredible blog sharing their journey to $500k in monthly revenue, and after it’s success they’ve created two other blogs, one about customer support and another one specifically for the product.
Pricing your SaaS product optimally can mean the difference between success and failure for your business. Even a great team that’s building a great product can fail if they get their pricing wrong.
The more you think about pricing, the more confusing it can get. There are so many different roads you could go down, and it seems like there’s a good argument to be made for why you should go down each and every one of them.
What you can expect from this post isn’t the ultimate truth of SaaS pricing – there is no such thing. It’s a simple framework that we’ve successfully used for our own SaaS sales product and have also seen many other early-stage SaaS startups successfully implement.
Value-based pricing vs market-based pricing
It’s easy to just look at the pricing of competing vendors and match your pricing to theirs.
However, we don’t suggest you do this. Instead, base your product price on the value that it created for your customers.
Read more on charging your users:
The most common SaaS pricing is based on number of users in a multi-tiered pricing grid. If you do this, how do you decide which features to include in which pricing tier? What’s the right price point for each tier?
And then there are plenty of other options. Should you charge based on usage? Should you offer freemium? (Listen to my freemium discussion with Hiten Shah from KISSmetrics).
Get out of the building
One of the great advantages you have when you’re starting out is that you can aggressively test different pricing strategies. Your prospective customers are the only people who can truly give you insights into how much you should charge. Offer them your product with different price points and keep track of their responses.
Don’t be cheap
Product-focused founders often underprice their products. As a SaaS startup, you want to be slightly tilted towards premium pricing Read more on charging your users: http://blog.close.io/charge-your-users
Responding to price pressure
What do you do if a competitor drops their prices, or a new low-priced alternative takes away market share from you?
The best way to win a price war is to not get into a price war. Think how you can differentiate yourself and provide more value than your lower priced competitors.
Premium pricing doesn’t ‘feel right’
Do you know which person will complain the most about pricing if you position your product in a premium segment? It’s you! Charging high prices for your own product forces many founders out of their comfort zone – which is exactly the place where most growth occurs.
Remember that it’s about creating the most value in the long run – and ramen profitability isn’t the best foundation for creating more and more value for an ever increasing customer base.
Read more on premium pricing:
How to raise prices without alienating customers
If you’ve already have an existing customer base and want to raise prices, it’s important not to hit them over the head with a price hike (the 2011 Netflix price increase disaster is a lesson we should all heed). Instead, turn your price increase announcement into a sales opportunity by offering to grandfather their new seats for a limited time.
Read more on raising your prices:
How to deal with pricing objections
Prospects will always try to push back about pricing. It’s important that you differentiate when pricing is the real issue and when not. Read more on pricing objections: http://blog.close.io/what-is-usually-hidden-behind-the-price-objection-in-sales
There’s no definite truth in SaaS pricing
It’s complex. That’s one of the reasons why building successful startups is hard – because you’re dealing with complexities on all levels. It’s key to simplify it as much as possible, move fast and learn a lot. Use the guidelines laid out in this post to get closer to your optimal price point in minimum time.
Don’t allow anxiety or perfectionism to slow you down – instead, proactively seek out customer feedback by listening to what they say, but also by observing their behavior and how it affects your bottom line.
We are proud to announce that we have just published our latest book, The essential SaaS metrics guide. The book is a compilation of what we’ve learned about managing SaaS companies – particularly about how dealing with subscription metrics can mean the difference between the success and failure for your business.
In the book you’ll find thoughts on the subscription economy, the differences between managing a traditional versus a subscription business, what are the right metrics for each stage of your company, and six different key Saas metrics explained in details.
We hope you like it. Don’t forget to share it with your friends and give us your feedback, we’ll be glad to hear your thoughts. You can reach us any time at firstname.lastname@example.org or on twitter @saasmetricsco.
Atlassian — Inside Story Behind a $5B IPO
Key insight: Think about “Product Expansion paths”
- Create a natural network effect built into our products. Think about organic expansion inside the organization
- Product strategy is important. Atlasssian thinks about the team collaboration.
- Profile the end users — Make them happy.
- Be an advocate for your customer and they will be an advocate for you.
- It was a right decision to divert energy and build a second product.
New Relic: Scaling Even Faster the Second Time
Key insight: You’ve got 180 seconds to impress the user
- I had knowledge of the problem, the customer;
- Focus on the first minute of experience. It is the most important minute, and that was missing in enterprise software.
- Make the customer love your product from day 1;
- Multiple SKUs are distracting. We’d all love to be able to focus on just 1, service the same customer on doing product lines.
- Get distribution partners. Relic got 400 customers on day 1;
- Got by the end of 2008 without salespeople;
- Started adding salespeople in 2009, calling customers, trials.
- Focus of salespeople — Prioritize the decision NOW. People don’t have time and they can always wait for another week;
- Sales team was about getting people who already liked our product to become customers.
- Affordable for SMB, but scalable for enterprise customers
- As we grow, a lot of competition appears in the SMB space;
- Learn to be less canadian, defend yourself and punch back;
Hiring your first VP Sales
Brendon Cassidy, Sam Blond, Emmanuelle Skala
Key insight: The first VP Sales has to be you. Get 2 reps up and running and go for the VP hunt.
- Perfect timing: You already have 2 reps performing. You have the leads. It is not a true VP of Sales if you only have 1 rep;
- Have different styles, different profiles for your first reps;
- The wrong VP of Sales will delay your startup for 1 year.
- #1 job of the VP Sales is recruiting;
- Hire ASAP once you have a repeatable process;
- Your VP Sales must know/have 3–5 sales reps to bring in with him. If not, red flag;
- VP Sales must take action fast. Assess the team, hire and fire fast;
- VP of Sales should not carry an individual contributor quota. They exist to teach reps how to do it.
- You must see results in one sales cycle. More revenue per rep, shorter cycle, 5-10% growth, etc.
More on the subject: This video completely blown my brain in 14′ and inspired us a lot at Rock Content. #thxlemkin, thx Matt Doyon: http://www.saastr.com/how-to-hire-a-great-vp-sales-the-full-video-and-transcript/
CXO Talk Live
Michael Krigsman, Zach Nelson
Key insight: Never turn an enterprise deal into a mid market deal 😉
- NetSuite was started in 98, went public in 07. Zach came from McAfee, where he was helping the company with internet sales;
- Initial metrics where deal size and # of deals per rep/month (1 at the time). Never loose historical data, that’ll help find the next growth engines.;
- Distributed team very early;
- Priorities: #1 Company vision, #2 Financial management, #3 People
- Track employee vesting schedules. Once they are fully vested, they’ll starting looking for new jobs. Retain these people;
Sales & Market Segmentation
- Netsuite was selling to SMB’s in the early days, but they were mission critical applications;
- Cracking the way on how to sell complex applications throught the internet was critical. It allowed Netsuite to sell to midsize business and later (harder) to do enterprise;
- It’s harder to work for a mid-size business than for enterprise. A U$ 10k mistake is way more dangerous in mid market than on the enterprise;
- NetSuite once competed with SAP on a 8 million dollar deal. The rep closed a 400k deal. That’s when we learned that the mid market rep would turn enterprise deals into mid market deals. To go enterprise we had to “sorta” create a new organization.
- When you go public, you have to have a clear answer to “what are your next growth engines? “.
- Really ugly software, right? None of it works. SAP did a massive 3 billion dollar failure. They should have copied NetSuite.
- They have not built a single product. They just buy a couple companies and sell it as X on the web.
Building a World-Class Sales Organization
Dave Bernan, Bill Binch, Jason Green, Erica Ruliffson-Schultz
Key insight: The 3 key sales motivators – Personal growth, recognition, compensation.
The VP Sales role
- VP Sales with little experience that are Alpha Reps are ok in the early stage;
- At about 10 reps, you need an A+ VP Sales who can train, onboard, and recruit. Someone to build systems;
- Customer network is also important, specially in enterprise;
- Your sales leader must be able to tune strategy to segment the team (SMB, enterprise, industry specific, etc.);
- When scaling, you need a VP Sales who gets his hands dirty;
Early days strategies
- Marketing on the early days, set quota based on number of deals. Pipeline can be faked;
- Marketo started with zero discount policy, defined it once the patterns were there;
- Build a cadence for sales, a motivation machine. Create a spirit of winning;
- Salespeople are competitive;
- Motivation factors: #1 growth, #2 recognition, #3 compensation
- For growth: Encourage 6 months promotions,
- For Recognition: The leadership must recognize the champs. “Hey, i Saw that deal. Super important for the company”. Have a president’s club. Target for 20% of people. Make sure people get as much fun as they can’t miss it next year
- For compensation: If you are great on #1 & #2, you can be ok at #3;
Sales Training and Operations
- If you have 8–10 sales reps and are adding 1 a month, you MUST have training and enablement. It’ll payback faster than you imagine;
- Sales Ramp up benchmarks: SMB 60–90 days, Mid Market 6 months, Enterprise 9 months;
- Measure activities. If a rep is trainable and putting in the effort, give them an extra quarter;
Most interesting moment on the talk
Big Binch believes in specialization: “Hunting and customer care are two separate animals. I don’t lump churn and sales together.”
Erica notes that in a product with “high adoption” it is great to have the AE involved in the expansion.
Customer Success: Upsells, Cross-sells and Expansion
April Oman, Dabid Obrand, Santi Subotovsky, Sarah Kokin
Key insight: They only people happy when the customer closes the deal is the salesperson. Finance gets happy when money is in the bank. Engineers are happy when customers actually use the product. CS is happy when customer is successful. Happiness == adoption. Move a significant part of sales compensation towards adoption.
Right time to invest
- Sometimes, prior to sales. Early goal = Solicit feedback;
- As fast as possible;
- For finding your first CSM: Look for consultative people, ability to learn from the customer;
- Retention is the most important, and first priority;
- Focus on user engagement, if you have it, you have retention;
- Customers that want to be a reference. Create passion;
Other notes, ideas
- Have a clear customer profile. Communicate it to the team;
- Have a clear alignment across your organization. Make everyone on the organization become passionate about CS;
- Don’t sell to the wrong customer;
- Tie part of sales reps comission to retention/adoption;
- Have a consultative conversation with customers about their one-off requests;
- Support == cost, Customer Success == Investment;
From Day 0 to IPO: What Went to Plan, What Most Certainly Didn’t
Key insight: It takes more than technology to build something big.
Wrong assumptions (questioned):
- Having MBA’s on team is bad. Hubspot has 6 in Management positions;
- Nobody succeeds selling to small and medium businesses. Hubspot is a billion dollar company selling to these customers;
- Focus on only 1 thing. Hubspot builds everything a marketer needs (landing pages, seo, smm, email, reporting);
- Charge early, charge often. Your product sucks, that’s ok;
- Come up with a pricing fast. Do not rocket science it, make it simple. Hubspot had one pricing, one plan, for years;
- Label your industry. You sell transformation. Hubspot invented “Inbound Marketing”;
- Don’t be just a brand, be a movement. If you want to create a category, make people be part of it;
- Freemium hack: Instead of giving people a solution, give them a problem. A Diagnostic tool is a great freemium version, without freemiuns hassles. More on the topic here: https://blog.kissmetrics.com/hubspot-marketing-culture-sales/ ;
- Absence of cancellation is not proof of presence or delight. Hubspot created the customer happiness index;
- Lemkin notes: There are some customers that seem active, they seem to be using your product but they’re actually prisoners, waiting to migrate from your product. It’s tricky to find them;
- Q: How do you resist going enterprise? A: It is easier going upmarket, it is great. The downside is that it is very competitive. The SMB & mid market are infinite.
The Journey to a Unicorn — And How We’re Doing It Even Better This Time
Scott Dorsey, Gordon Ritter
Key insight: Make sure you become a must have, not a nice to have. Become mission critical. Talk to customers everyday.
- Your product needs to be acessible. Exact Target was laser focused on ease of use. Helping the non-technical marketer be able to do email marketing;
- Once a small company called Groupon signed via inside sales. A couple months later, they said. We’re gonna be your biggest customer. The ability to serve small and huge companies is critical. SMB helps with virality. Some of those companies will grow fast;
- Have feature flags: Ability to turn features on and off is critical;
- Filled to go public in late 07′. A difficult moment, just like right now;
- Felt the need for a culture framework at 1500 employees. Omniture color was green, Salesforce was red, we wanted a part of it. Being orange was an advantage;
- 6 acquisitions, all worked incredibly well: 3 international, 3 product expansions;
- The reseller network was critical for international.;
- Selling to Salesforce was great, we were SF customers and had a great partnership. They were moving in the marketing cloud direction and it made sense. Salesforce is a PHD in SaaS (stayed for 1 year only);
- Great moment in Salesforce: Rehearsing Dreamforce keynotes online to all Salesforce employees. Every single employee could rate and comment.;
- Salesforce is incredibly fast;
- Integration is critical for success. Exact Target, Buddy Media, Radian 6, lots of companies working in sync.
That’s it for day 1! Feel free to comment, suggest improvements and if you like it, please share it on social networks and send it to your friends that couldn’t make to SaaStr 16′! Stay tuned for tomorrow.
Had a lot of fun yesterday, if you want to check day 1 summary, click here. Here’s my notes for Day 2.
Bubble? What Bubble? How It’s Different This Time. And How It Most Certainly Isn’t
Jason Lemkin, Mark Suster
Key insight: In SaaS? It’s time to cut costs, and focus on responsible growth. Not a good time to grow at all costs.
- There’s a lot of VC money out there and the majority of the money in VC is going to late stage;
- 55% of money in the system does not come from VC;
- VC’s are accumulating investments, but not having returns. M&A activity is not up. This is the first january in a decado with zero IPO’s;
- Median valuation went up 3X in 2 years, but seems to be corrected in Q4 (trend ??);
- 61% of VCs believe valuations are going down in 16′;
- Companies are moving towards cost cutting, burn rate reduction and profitability;
- Not a lot of “FOMO” (fear of missing out) in Silicon Valley anymore. VC’s do not feel the rush to close, and the pace is slowing down. 70% of investors surveyed said their investments have slowed down. They’ll still invest… but not as quickly.
- Companies aren’t talking about it, but they’re cutting costs.
- ABR. Always. Be. Raising.
— SaaStr (@saastr) 10 fevereiro 2016
What’s Happening in the Markets: The Real Data
Key insights: Raise now OR cut burn and get profitable.
- In 10 years: 3x more startups getting funded, 6x more capital deployed;
- We started 15′ at fastest pace of VC deployment in the last 10 years, in 16’things slowed down to 14′ levels (23%);
- Private funding levels reacted strongly to public markets. Funding announcements lag 1–3 months. Raise now!
- Seed Stage companies: Medium deal is at U$1.8M now;
- Series A companies: Going up, right now around U$9.8M;
- Series A deals are getting done at decent prices, but there’s more competition than before;
- Series B rounds: Going up, right now at U$24m. Also getting more competitive;
- Early stage investors are doing inside rounds in their hottest companies.
- Cutting costs is a great Plan B right now;
- Keep calm, read Saastr, raise now!
— SaaStr (@saastr) February 10, 2016
The Insider’s Guide to Becoming a Pre-nicorn
Ben Uretsky, Eogahn McCabe, Tiago Paiva
Digital Ocean: Developer focused, easy to use cloud services
Key insight: Get organic penetration in the enterprise. CTO is not in charge anymore, developers are.
- Second company, got first one to U$6m arr, 20 employees;
- Started with the problem: How do you position, and differentiate a business;
- Focus on developers: The smaller the market segment that you attack, the greater your likelihood of success;
- Rackspace owned the “great support” message;
- At Digital Ocean, we focus on the developer and the best user experience;
- Digital Ocean is the simplest way to run your cloud. It lets you get your app running fast;
- It’s like stripe for cloud services, it’s just beautiful;
- Site is great, product is great, people just love it. Quoting Simon Sinek Start with a why;
- Getting to 9 digits revenues;
- 3 VC rounds ( 1st round U$3m from IA Ventures, 2nd round U$37m from AH, 3rd 83M from Access Industries);
- The VC’s that believe the vision and experience are the ones that invested;
- Started with a product that sold itself, always focusing in self service. It was getting on average 1000 new customers a day. Right now they are building the first sales team;
- Biggest challenge was evolving as a leader. Getting to 200 employees company;
Intercom: A360 view of the customer, marketing, support, crm solution.
Key insight: Product first companies are a new trend. Product is great. Leads are almost free;
- U$66M raised;
- 50% of customers are abroad;
- 30 days sales cycle;
- >50% of customers are touchless;
- Bringing 10’s of millions in ARR;
- 3k ACV;
- Super high volume, reps brings more than 15 deals per month. High activity;
- Timing: Zendesk and Marketo laid the path for companies like Intercom;
- Intercom was a better solution for real problems. The product itself was contrastant with the market solutions;
- Selling to developers and product people;
- In the new world, our customer approach sales people and says “I wanna buy”;
Talkdesk: Easy to use Call center technology
Key insight: Keep going upmarket, step by step. Lead SMB, go to Mid, lead Mid, go Enterprise.
- Growing 20% MoM;
- Bringing 10’s of millions in ARR;
- From 15 to 200 employees in 1 year;
- Last year was at U$4m arr;
- 1y paid upfront brings cash advantages and small dilutions;
- Got to U$1m arr on a U$500k investment;
- Biggest change in last 18 months: Transitioning from SMB to mid market & enterprise;
- Sales now at 45 headcount;
- Expecting 125 in 12 months;
- Our SMB customers took us upmarket. They grow and keep adding people. We have to adapt to serve them;
- Great integrations and ease of use were the differentials to win modern buyers;
- Drove price point up, 4–5X in 2 years, by adding more functionality. Competitors were complex and expensive, as they closed their feature gaps, they could leverage “new features” to upsell and go upmarket;
The Real Story Behind Mergers, Acquisitions & Corporate VC
Key insight: Salesforce is both #1 VC and acquirer in SaaS.
- SF started investing strategically in partners in the SF app ecosystem in 2009;
- 6 people team;
- Sample great investments: Docusign, Hubspot;
- Every investment requires a executive sponsor from a business unit.Make financial sense;
- 3 people in investment comitee. We’re fast;
- 50% investment pipeline split between ventures team / business unit sponsor;
- Lots of intros from VC community;
- Doing 10–15 investments per quarter (new investments & follow ons combined);
- 150 active companies in portfolio. 50% are A rounds, 30% are B rounds;
- SF does not take board seats;
- SF Ventures is a good fit is SF brand and customer base are potential assets for you. Ventures goal is to help companies navigate SF ecosystem;
- Invests of the balance sheet, so everything is disclosed;
- Ask for notification rights. You have to disclose to SF before selling;
- Encouraging companies to get burn rates down and get on the path to profitability;
- But if you have low churn, there is no reason not to invest in sales growth;
- Does not invest before U$3M in ARR. If you just got into the app store, it’s too early.
— SaaStr (@saastr) February 10, 2016
M&A at Salesforce
- 8 people team;
- You have to date before getting married;
- You have to have an exit strategy. Most good companies will end in M&A.
- Executive relations are crucial for getting shot at being acquired;
- There are 1000 cool companies @SalesForce could buy for every 1 that it does.
— SaaStr (@saastr) February 10, 2016
If someone, even low-level, at a company who may acquire you wants to talk to ANYONE on your team, take the meeting. #SaaStrAnnual
— SaaStr (@saastr) February 10, 2016
Big Arse Companies: Why They Buy from Startups — The Real Stories
Jonathan Lehr, Tom Carroll, Joyce Shen, Scarlett Sieber
Key insight: Yes, big cos buy from startups. Be pragmatic, understand their priorities, and go straight to the point.
- Startups are more nimble and give big cos an opportunity to be at cutting edge in tech;
- Corporate buy from startups by getting close to accelerators, meet ups, being part of ecosystem;
- As as startup sales rep, keep it to the point, give context, make a relevant approach and understand the industry;
- Be specific. State how you can help, how you differentiate. Figure out early who should you talk to and tailor your message. 3 sentences email. Don’t start with with a 6 paragraph email. Do not send a template email;
- Do not assume early that they will be a distribution center before helping them. Do your homework before showing up, do not show up like an idiot.
- Connect on Linkedin & Twitter. Social works on the enterprise too;
- We’re not interested in knowing what big data is. Show me the value chain!
- Have an evangelist. Ask what’s going on. Understand the decision chain. Ask for help;
- They look for product, customer proofs/testimonials.
Benchmarking Your Startup
Tomasz Tunguz, Connie Loizos
Key insight: Only 2% of software is in the cloud. We’re still in the SaaS early days. But just being SaaS, staying in the cloud is not enough anymore;
- Redpoint focuses on A rounds;
- 3.8B managed, 400+ active investments;
- Successes include: Stripe, Zendesk, Expensify, Twilio, Heroku;
- Tom analyzed 60 SaaS companies and brought some benchmarks for SaaS startups for their A rounds;
- Average A size round: U$9.3M in 15′, growing from U$8.5M in 14′ ;
- Average A round MRR: U$163K, but 27% of Series As Generate $0MRR;
- 16′ is a year of change. Markets have changed.
- Seed investors have grown 5X in 5 years;
- Public investors value SaaS in revenue multiples. Right now the average is 3.3X revenues;
— SaaStr (@saastr) February 10, 2016
- Content marketing and email retargeting keep growing fast and proving themselves as cost effective acquisition strategies;
- Channel partnerships are becoming an effective SaaS distribution strategy;
- 2 Big forces in SaaS will bring a new SaaS wave: Machine learning, conversational, chat interfaces;
- Mobile brings a new distribution paradigm. Expensify cracked mobile distribution, people download the app and get their financial team to switch platforms. This has being a really powerful tool for growth. You get social proof in the organization. Unlike SEO, expensive and competitive, you can still get app installs for cheap;
Driving SaaS Success Using Key Metrics
David Skok, Alex Konrad
Key insight: The thing that surprises many investors and boards of directors about the SaaS model is that, even with perfect execution, an acceleration of growth will often be accompanied by a squeeze on profitability and cash flow. — Ron Gill, Netsuite CFO
- SaaS is a machine. Several levers, metrics that you should care and want to optimize.
- What we care about the most? 3 fundamentals are: 1) Growth, 2) Profitability, 3) Cash;
- First, make sure we understand the SaaS cash flow. (more here: http://www.forentrepreneurs.com/saas-metrics-2/ );
- Then understand unit economics (see previous article);
- The golden LTV > 3xCAC formula is alive and still applies 7 years later;
- Use variable, multi axis pricing. Axis 1: Product tiers (basic, pro, enterprise). Axis 2: Users (per seat, per storage, per leads, etc…). Don’’ panic about it too early.
- For cash, always think about “months to recover CAC”. Drive this number down to build a great SaaS business. Months to recover CAC must be less than 12 months;
- More on CAC: Understand Sales Complexity, and model acordingly. CAC growth by model is not linear, it’s logaritmic. Remove complexity. Adding humans is umbelievably expensive.
- Primary unit of growth is adding salespeople. Understand a “salesperson” cash flow and its unit economics. The average salesperson takes 23 months in ramping and costs up to U$110k to become profitable.
- Interesting benchmark: According to Skok OTE (on target earnings) should be around 5X quota (I don’t see this close to being a reallity in brazil);
PS: If you’’e from Brazil (just like me), some time ago I translated SaaS Metrics 2.0 to portuguese => http://webholic.com.br/traducao-metricas-saas-2-0-o-guia-definitivo/
10 Laws of Building a Unicorn
Byron Deeter, Alex Konrad
Key insight: Follow the 1–1–1 rule. Less than 1X new ARR in burn, Less than 1% churn, Less than a year to recover CAC;
- Law #10: Be on Demand. Everything is on Demand these days. People expect on demand;
- Law #9: Grow or Die. Every 10% more in growth, 1x more in multiple;
- Law #8: Sales efficiency is oxygen. You can live some days without water or food. Oxygen, 8 minutes means you’re braind dead. Sales efficiency reduces dilution;
- Law #7: Customer Success is key. 1% improvement in churn means way better revenues and valuations;
- Law $6: Control your destiny. Cash is King. Cost of capital is rising right now;
- Law #5: know the 5c’s of cloud. CARR, CAC PAYBACK, CHURN, CLTV, lost the last 1 (am i doomed?).
- Law #4: The best product is starting to win;
- Law #3: Developers are becoming the customer and decision maker. There are 20M developers in the world. Use API’s to accelerate the business;
- Law #2: Inspire. Have a vision. Hire great people, that believe in a true north;
- Law #1: Mobile is eating the world (wide web). 85% of your customers are on a smarthone. More than 50% of web usage is mobile;
Presentation can be downloaded here.
Building a Killer Company in a Nonobvious Market
Andy Wilson, Scot Chisholm, Daniel Chait, Aileen Lee
Key insight: You don’t need to be super sexy. You need to match a real demand and you’re gonna get great growth, even if it’s a nonobvious market.
- If you’re niche, it’s not easy to raise money early. The first dollar raised is the hardest.
- HR is somewhat easier. A lot of people think what we’re doing is meaningful and they actually care. You have several ways to differentiate;
- Traction is your best friend if you’re raising;
- Thought leadership is a key to succeed if you’re not mainstream. Come with a complete new concept and tell people;
— SaaStr (@saastr) February 10, 2016
— SaaStr (@saastr) February 10, 2016
— SaaStr (@saastr) February 11, 2016
Building — And Monetizing — A Partner Ecosystem
Neeracha Taychakhoonavudh, Narinder Singh, April Underwood, Ilya Fushman
Key insight: Be big enough. People will come to you.
- 20% of slack’s team works in platform;
- Platform is not to everyone;
- You need either data, or API’s to make developer’s life easy;
- Sometimes you need a service, not a platform. You can provide it as an API, and maybe not a platform;
- A platform is a huge commitment;
- You’re distribution, but they increase your adoption;
- Aim to solve a big problem. That’s the foundation;
- Bringing big partners early accelerates everything;
- Keep the partner bar high. People trust and will ask the platform;
- If the end goal of what you’re working on is just to make a specific platform better, think broader.
— SaaStr (@saastr) February 11, 2016
— SaaStr (@saastr) February 11, 2016
That’s it for today guys, see ya tomorrow for day 3. Also, if you have any idea on how to make this better, feel free to tweet at me at @dttg.
Final day at #SaaStrAnnual 16′. This was the best event that i attended as a SaaS founder. If you want to review the previous days, here’s my notes:
What Makes a Great SaaS CEO
Josh Stein, Jason Lemkin
Key insight: If you can get to U$1m in ARR you are smart enought to do it. The question is: Do you want a put the effort it?
- It is crucial to set a great vision;
- Met Aaron Levie 2y before the investment;
- He burned the boat early to leave B2C and focus on enterprise. He had to “rebuild himself” to become an enterprise leader. All with discipline and hard work;
- He became the go to guy for thought leadership in the industry;
- Don’t say “I’m not a good public speaker. I’m not an enterprise guy.” You have to practice. You have to embrace the change.
- Set values and principles, that’ll make things easier;
- As you grow, be less exposed to day to day ops. Assemble a great team;
- 3 stages that require great changes: Up to 50 people, 200 people, 1000 people. You have to emerge as a figure, scale yourself;
- Set clear responsibilities for CEO, COO, CRO, etc;
- Empower people to make decisions and not bottleneck;
- Do not ask yourself if you are capable to become a CEO. Just take the commitment. It takes a lot of effort on the side. It takes reading every single business book. The key question is: Do you want to do it?
- You always have to be thinking 6–12 months in advance. Get advice. Bring external feedback;
Marketo: Winning, IPO’ing, and Going Upmarket
Key insight: Ignore the competition. Let them chase you, do your own thing.
- Fun fact: Lemkin was one of the first 10–15 Marketo customers;
- Marketo started focused on mid market. Huge race to the bottom, with 6–7 competitors;
- Before marketing automation, they started as a SEO product. Pivoted after A round;
- In the enterprise there was need for innovation, budget and less competition;
- Average deal size is U$50k;
- We saw Eloqua as a interesting company between Siebel and Benioff. But on the same budget;
- We highjacked their brains by not engaging in their game. We didn’t respond, they start following. You don’t wanna be responding to the competition;
- Should we worry about relative velocity? Should you care if your competitors are growing faster? Have a real strategy on what you’re doing. Ultimately, first mover takes the largest share, as SaaS compounds, but segmentation is crucial. Focus on finding out what’s the next play to scale the business;
- Success doesn’t have to mean taking the market… it means we’re growing & scaling within a huge category.
- The degree of change from $1m to $10m is incredible. You need continuous learners to keep a evolving team;
- We weren’t great at strategic planning at U$30m, so we hired for that. U$30m was too early for us to hire a “big company” executive. The organization had a hard time with it. The seduction of the big SAP-type exec is powerful. Be careful if it’s too early;
- Spend about 30% of your time with customers. The cocaine of user acquisition can be very dangerous;
Scaling from 30–1,500 in SaaS: Lessons From the Frontlines
Key insight: Be transparent, polite, work hard to help everybody to develop their self awareness sense.
- Joined as an account manager, at 30 people. Primary job was dealing with enterprise customers. At that time, we spent time explaining what cloud computing is, and the advantages of the cloud;
- All i wanted was a job close to home. I had consulting background. So i had to align business proccess internally and with our customers. I made a lot of mistakes. I moved away from those fast, and that’s key. Be agile. I like building and changing. Don’t stop building and changing;
- I fundamentaly believe that if I don’t learn something new everyday, I’m failing;
- You need to have culture. It’s not about ping pong tables, candy walls. You need to trust each other. It’s about relationships. The employees are the culture;
- To create a great culture, acknowledge, and mantain it. You have to care about what you’re doing. You gotta have a mission and stay true to that;
- People who are not great fit for the next stage: Offer paths and mobility. Give special attention for folks that did an awesome job. Let them know what they’re not good at. Help them develop their self awareness. Help hem create their own plans;
- When you create a clear, measurable plan, it is easier to coach people. People will tell you if you’re being successful or failing if you ask. You have to be clear with feedback. Straight to the point;
- The I’s don’t scale. The We’s do!
- Forget the MBA, get a psychology degree. It’s all about communication and motivation;
- How to deal with great talent decided to become a “manager”? Tell them you’re just not ready. Tell what’ s missing. In some cases they’ll leave. That’s ok. Hope you’re helping them giving that info;
- You have to be street smart. You have to be able to “read a room”;
- I became the boss of my boss early on. It is all about the vision. It’s hard. Try to think 3 years in advance. Have a dream. Let people know what that big dream is. Have the tough conversations on whether they can or cannot scale. It is better to the individual. You shouldn’t surprise anyone. Be gracious, but separate business from the individual.
- Tell upfront to the person. You have to perform at top level. I don’t know what your path is. But trust me. If you rock, I will create a path.
- Phil mentioned about the cocaine of customer acquisition. I think about the crack of happy customers;
- Customer success is knowing the science of your customers. Back them we used spreadsheets. Now you can automate a lot of it;
- Customer success manager is responsible for utilization of the solution, making the solution sticky, and help the customer realize the value, and uncover needs and goals of the organization. The account management team, runs renewals and upsells based on the uncovered needs;
- People is your biggest asset. Treat them with respect;
Marketing: Running the Box Playbook – Even Better The Second Time
Anthony Kennada, Menaka Shroff, Aaron Levie
Key insight: It gets easier the second time. The product might change, you might have different customers, but your first time mistakes will happen way less often. The second time, you have a draft playbook, at least.
- Both panelists came from Box, and the topic of the panel is doing marketing for SaaS for the second time. Key lessons, mistakes, etc.
- Takeaway #1: Go big with the brand and message. See picture bellow, from 2009. (If you do a billboard, make sure people will have time to read it.)
Aaron Ross was an early employee at Salesforce and created a sales process that added over a billion dollars in revenue to the company.
Aaron is know most known for writing a book called predictable revenue that became the sales bible in Silicon Valley. His ideas on sales transformed businesses around the world and made him well know in the software industry.
I recently caught up with Aaron to chat about the challenges of SaaS sales, how big companies are transitioning to a subscription business model, and to talk about his new book with Jason Lemkin, From Impossible to Inevitable.
If you like what you hear, check out more episodes on SoundCloud.
If you rather read, here’s a full transcript of the interview.
Hi, this is Leo at Saasmetrics. Today I have the great pleasure and honor to talk to Aaron Ross, Aaron thank you very much for your time.
Hey, nice to meet you. Glad to be here, thanks Leo.
It’s my pleasure. So I don’t think you need to be introduced to our audience. You’re well known in the SaaS space and the software industry, but why don’t you give a little bit of background on yourself and we’ll start from there.
I’d be most known for writing a book called predictable revenue. It’s called the sales bible of the Silicon Valley now. Now if you haven’t heard of it, it talks about my story and some big ideas in sales. So, I started an internet company and it failed. It raised 500 million in venture capital, it didn’t work. One of the reason was because the CEO didn’t know how to build a sales team, and I didn’t know how to build a professional sales organization. I hired a VP of sales, but when it wasn’t working I didn’t know what to do.
So I shut down the company, and thought if I do this and start another company, I need to know how to sell as a CEO and professionally sell and build a team. So I got a job at sales force, the lowest sales job they had, which was the only sales job they had, and there are about 150 people. I like to say I started it early but not early enough, I still have to work, and I ended up creating an out bound prospecting system called “cold calling 2.0” to generate all the sale pipeline we needed in order to hit our new sales goals. So to help doubling their salesforce.com’s growth. By now its been about 10 years adding about a billion dollars in revenue. Sales force.
So that’s the book. When I get emails saying “hey I read the book, it transformed my business and ideas”. There’s three or four big ideas around it. The one around specializing your sales people is probably the simplest and most important. So the book covers a lot about lead generation and about prospecting.
Specializing your sales people is the idea that if you’re not doing it, and it means having prospectors that prospect, which is separate from the closers who close, which is usually separate from sales roles, other roles handling current customers sort of having more types of sales roles while doing fewer things better, but that is the number one thing to do to make everything work better including, sales people, lead generation, and the whole company. But people will say doing that transformed our business.
Well that indeed is a great book! I had a chance to read it a couple of times myself and it really makes sense. As you said Its simple ideas but they work! Organize leads the way you specialize the sales team; it makes a lot of sense the book was written five years ago right? What’s changed since then?
It’s interesting that a lot of the lessons that I’ve learned over the last few years, you know there’s a new book coming very soon called “from impossible to inevitable”. A lot of the lessons I and my coauthor, Jason Lemkin, have learned over the past years. So Jason founded a company called “EchoSign” and sold it to adobe for more than 100 million dollars and grew it from zero to more than 100 million in revenue.
So it’s not so much thing the way people are buy things and selling and generating leads are evolving, say the number one lesson that’s in the new book that I think everyone is going to need or I see everyone does need both individuals and companies isn’t so much how people buy or sell but we call it how to nail a niche. So its understanding why if you have an idea, why aren’t people excited about your idea or product? Or you talk to friends, you get ten customers and try to get 50 more, it stops working whatever you’re doing.
So its this idea of why is there this problem with your first customers, or from getting from zero customers to a few and from getting a few customers to a few dozens, that phase to actually being able to grow faster. So explain why there is a problem, why there is this chasm and what to do about it, because if you can’t nail a niche, everything you do is going to be a struggle.
Yeah totally, so I read the draft of the book with Jason Lemkin and I really loved it, and I really liked the idea of nailing a niche especially in the early stage of your company it makes sense. But I do question myself when we talk about start ups right especially when planning to raise money VC’s usually tend to force you to look to the broader picture to target a big market.
I heard Jason talking about a hundred-million-dollar business a couple times already do you believe there is a number to be targeted in terms of the size of the market you are going after.
First with Jason. His audience is a lot of investor funded companies who want to grow big and grow to one hundred million dollars in revenue or more. Now I have heard and think wow I have a million-dollar business or two hundred-million-dollar business and I don’t want a bigger business, there is this pressure to grow.
So I think for some people in some companies, great, if you do want to grow big, 50 or 100 million dollars or bigger. But there’s lots of companies like where you are in brazil or where I am in LA and people don’t want to grow that big but they want predictable income and stability and a great team but they aren’t on the hyper growth track where it means to grow as fast and as big as you can no matter what.
In terms of market sizes if you’re going to raise money from investors, they want to know you’re not limited by your market. Nailing a niche doesn’t mean your thinking small, it means you can have an idea to address a large market but wherever you start is where you’re being focused. So its not about being small its about being focused.
A common thing is having a product or an idea, might have some customers, and again you’re spreading your marketing and sales across to many amounts of people and customers and you’re just spreading your energy around and not focusing on the few customers that need you the most because you want to find the customers the need us versus when are we nice to have. Everybody could use us, but only the ones who need you are going to put in the time and energy to learn about you, get started, buy it, and actually implement it and train people to make it actually successful. Focus on where are you a need to have.
Totally! I couldn’t agree more. It’s the vitamin versus pain killer thing right? So about Jason, I’ve seen you two working together lately really seems like a productive partnership and I’d like to know in what circumstances did you meet him and where did the idea for the notebook come from.
I met him in 2007 when I was an entrepreneur in residence at a venture capital fund at paualto I don’t remember how I met him but we were introduced. His company EchoSign was still early at that point I thought it was a great idea, I liked him. We didn’t really talk till 6 years later. He had sold EchoSign to adobe and he started to do some blogging. I saw his blogs, I liked him.
At some point I reached out and asked him if he was interested on being a coauthor on a book together. He said yes. He was more of a writer and I am more of an author. Together we put our stuff together as a package. Doing a book is frustrating and fun at the same time. How do you take the smallest amount of content into something specific? Its been a great partnership. He’s doing great and I am a bit jealous. His conference has taken off.
Cool, awesome, so you mentioned EchoSign and adobe here. And there is a very interesting point around that, tum Tonga is from red point ventures, wrote a blog post a few months ago saying that although were talking about SaaS for a decade now, were still at the beginning. Over 93% of their revenue are still controlled by the traditional legacy software vendors like oracle Acp and Microsoft etc. We see adobe being a successful case of transition from a traditional business model so my question is how do you see that movement from the traditional companies and how that an effect opportunities’ for SaaS startups out there.
There’s a book called the innovators dilemma that says, once you’re a successful business its hard to switch directions to do a competitive business or a business that can cannibalize. That’s where a lot of companies are making the shift. It’s a huge financial change for companies especially a public company that says this year we’ll do a billion dollars in software deals.
Switch and say were going 100 percent to subscription, instead of a billion dollars this year, we’re going to 200 million. We’re going to lose 80 percent of our revenue into a subscription model. It doesn’t work, there’s other reasons like technology, culture, the way people sell. Their actually different businesses in a lot of ways.
Its taken years I think for companies to figure out how to make that kind of transition. The bigger they are the harder it is. Lots of companies sell both on premise software and subscription. There’s not really one model that fits everything. Not every business should be a SaaS business. Whatever the problem is your solving, you don’t want to be a subscription just because its subscription but what’s the best way to solve it for customers and for yourself. Sometimes it might be on premise but commonly its on subscription.
The more choices there are, it can be harder on entrepreneurs and I know salesforce.com from the early days said no software, for example, they maybe had the chance to complete if they had sold all their licensing to Meryl Lynch for their on premise they said no to it, stick to what their best at and the market understood and agreed with it.
Yep, what I found really interesting is not just a new way to build software but to sell it. Adobe creative clown like Photoshop, you still need to install it on your desktop computer but its sold as a subscription model.
Like Microsoft office 365. There’s some blending of that and I think It comes back to the customers want and what they need and what is going to make them successful and what’s good for you.
Cool! Great! Going back to your book, I really liked it, one part resonated with me. It says there is not recipe for success you guys mentioned a lot of SaaS companies that did that have in common and worked out. That helped them achieve hyper growth. Is there one special thing that companies out there should be paying attention to or looking for?
Nailing a niche. Coming up with something that somebody or a company needs. How to deliver it. You know how to find them. It sounds easy, sometimes it takes companies a couple of years to get to your first million in revenue. Okay we’ve got core customers down and our product and messaging down and were ready to grow. Even Jason in the new book, there’s a section that says “you need to give yourself two years before you know if its going to work”.
Yep, Don’t give up on a bad day!
So that’s one, the second thing is if you want to grow, you have to want to grow. It’s not just going to happen by default. So that means pushing yourself to do things that are out of your comfort zone. If you’ve been doing a services business for ten years and you’re not growing, maybe you need to start a new kind of program. Maybe you need to write a book for yourself, or create a software service.
Do something different. A lot of companies are held back because they’re comfortable. You’re not going to get growth by doing a lot of the same stuff. So if you really want to double or triple or grow by ten times your going to do things different. Get out of your comfort zone, get uncomfortable, and think bigger.
Yeah! I know another thing you said “you can’t build a big business out of small deals” people should double their deal prices. Companies tend to under price their products and when they grow they struggle to raise prices. Id like to know what your thoughts are on SaaS pricing on terms of free models, free trials, and expansions and etc.
These seven sections of the new book, each one is a painful truth. The fourth is its hard to build a big business out of small deals. So if you’re starting a company, you start with whatever you can get. You want to get a few customers just to see what the business is going to be like and get started, but as you grow and you put up an app or a book or some post and it goes viral and suddenly you’re overwhelmed with leads.
Once you’ve got your core customer product down, figure out not only how to generate more leads for that but increase the deal size. How do you go upmarket as soon as you can tell sell bigger deals? If you can sell a fifty dollar a month app to one person, but you can change that to create a team version plus add more features so maybe you can sell a package of five people for five hundred dollars a month, and if you’re selling to teams, companies, generally once you get away from the really small customers, those smaller customers tend to have a lot higher attrition and more problems.
As you go upmarket to teams and bigger companies, who are willing to pay upfront, or to do longer contracts. They’re usually willing to put more resources, there’s more commitment. The customers end up being generally happier they stay with you long and you make more money.
Yeah. We’ve seen companies like box who started serving mass MB’s and overtime moved to serve certain enterprises and it makes sense right? But what about freemium models. Specifically, how to I get freemium models.
You know if it’s a business and you’ve got investors and you need to have a lot of revenue, generally freemium I think, needs a lot of people to make it work. In the book, Jason says you need tens of millions of people to make freemium to work as a financial model, or a hundred million users.
So I think freemium, if you’re a small company, and you want some extra lead generation and maybe you’ve got some other higher end things to sell you know it could be consulting or software it could be a good thing to try, but its harder than you think and people realize that to turn freemium into something that really creates a fast growing business.
Yeah. You are right.
So a lot of times if you have, especially in SaaS, a two-week free trial, you get to try the product then it stops, and then you have to pay. I think that’s more effective in business to business generally.
Yeah, and you mention professional services, I believe it is a very controversial within the software industry. Its not scalable, we have tight margins and I believe that VC’s make entrepreneurs skeptical about professional services. I personally believe there is a healthy mix between services and product, especially in services around your product or your platform. In terms of sales, what do you believe the differences are between selling professional services and selling your software product.
Generally, if you have a software business, professional services are incredibly valuable. I think in Silicon Valley, some people have picked up this idea that you want to avoid services, like professional services are bad. It means the product isn’t fully ready. The company isn’t scalable; the VC’s aren’t going to like it. There is definitely people that think they don’t want any professional services. Its totally wrong. A software company should add them just to make money, but they can be the best way to insure that your customers are successful.
So your internal people are becoming expert people at whatever you do. Hub spot has services internally to make sure customers are deployed successfully. Whether its free, included or paid, make sure they are deployed and know how to market. They can earn extra money that way. In terms of the people who are doing that are becoming better and better and better at being experts. So I think its incredibly important and vital to have professional services of some kind, but you have to have them.
Indeed. So as you know here at Saasmetrics we help companies around the world who grow their new career avenue by giving them insights and accurate business metrics. When it comes to SaaS sales, what are the metrics you like to keep track of and would suggest people to pay attention to?
Well beyond things like revenue, the number one best leading indicator of your growth is okay, say you’ve got a business, you’re selling something and you’re selling something regularly. You pass maybe ten customers but your into a few dozen or more, you keep track of the amount of the qualified pipeline created per month the better. We call it pipeline creation rate. Sometimes we call it lead velocity rate, but I think its confusing. If we’re creating half a million dollars in qualified pipeline this month, 750 thousand during next month, and then a million, that’s the best leading indicator of revenue.
If you can create qualified pipeline, the revenue will come. Assuming other things are equal. So that’s one I think is one of the best metrics. Another one is incredibly important is called attrition or churn. At what rate are customers leaving or churning. The ones that stay, do they buy more. There’s logo churn, which is the number of companies leaving and there is net revenue churn which is on the revenue dollar amount how much are you losing or gaining per year.
Stuff you probably write about in your blog.
Yeah we do.
Those are two number, the two most important ones that we actually have sections in the book about it. There’s another section in the book about let’s say more classic sales numbers. Things like close/win rates. Numbers of opportunities per salesperson. The point is its not about these are the number you need to track. The point of the section is look at them in a different way.
Higher win rates aren’t necessarily a good thing. Low win rates are a bad thing. If we use X and Y what changes so there are situations where a company has a win rate that is 20 percent of their pipeline and a company has an 80 percent, which one is better. What if the 80 percent win rate is all referrals because they don’t like to spend money on marketing.
So it’s a much smaller growth rate. If it’s the 20 percent growth rate, they’re much more aggressive to selling and marketing. So again they are different. Its having an insight on judgement and not numbers.
Incredible, so Aaron the book from impossible to inevitable went out on February the 8th, correct?
Yep, and at some point we’ll have a brazilin version. Leo here offered to translate the first chapter!
So you can ask him for it.
But yeah we will have a version in Portuguese at some point for Brazil, just can’t promise when. The next one coming out in China funny enough.
Wow! Okay. So if people want to buy it, we can find it on Amazon right?
Yeah its fromimpossible.com, you can find links from amazon.com and it may show up on the brazilin stores on amazon but I’m not sure how it works. I know predictable revenue is on amazon brazil. I know a lot of fans in brazil. I appreciate it everyone and thank you Leo!
No thank you! Thank you very much for being here and your time. It was a really great conversation. Once again congratulations on your new book and that’s it! Until next time!
When it comes to measuring subscription businesses, unit economics are crucial.
Miscalculating or misinterpreting these numbers can be really harmful for your business.
This set of metics will tell you if you’re building a sustainable business, and that is only possible with profits. One can say that making no profits is not necessarily bad, pointing Amazon as an example.
Amazon haven’t been profitable for years and still a very successful business. There are good reasons why one would raise capital and make investments that lead you to be unprofitable – like hiring new sales people and accelerating sales on a SaaS business – but they key point here is availability of capital fueling faster growth.
Despite investments, let’s see how to avoid miscalculating or misinterpreting your unit economics.
Let’s take a look at a very simple math: Let’s say Amazon buys a book for $10 and spend more $5 on fulfilment, making the total cost of the book $15 (COGS). Then Amazon sells this book for $20, making $5 Gross Profit; after taxes, makes $3 Net Profit.
Now let’s say Amazon decides to invest $5 on growth, to explore new product lines or even new business such as AWS. At the end of the day the company’s result will be $2 negative, right?
The difference between this and a bad unit economics are: Amazon is not loosing money on every single transaction, and therefore, they could become profitable at any moment if they slowed down growth.
I’m hypothetically analyzing Amazon as an example, but think of this on a large scale. If you make money on every single transaction, your company will certainly be profitable, unless you choose not to. That’s totally different than loosing money on each transaction, making it impossible to be profitable.
Managing your unit economics is making sure you’re not selling dollar bills for ninety cents.
Certain that you know how to interpret unit economics, let’s see how not to miscalculate them.
Customer Lifetime Value
The hard thing about calculating Customer Lifetime Value is the lifetime part. We usually use churn rate to get lifetime: e.g. If your monthly churn rate is 3% then Customer Lifetime would be 1/0.03 which is 33 months.
The problem is that early stage businesses don’t have a stable churn rate (or no churn at all), and therefore they have to make assumptions around how long a typical customer will be around before churning. And that’s dangerous, specially because entrepreneurs tend to be too optimistic when making those assumptions.
The second big mistake when calculating LTV is to consider revenue. To be accurate, you should consider the profits gained by the customer, deduce COGS and use Gross Profit to calculate it, not Gross Revenue.
e.g. A customer pays you $100 (Revenue), it costs you $70 do serve them (COGS), and your acquisition costs are $50. If you consider Revenue you’d be profitable, but if you consider Gross Profit ($30) you’d be loosing $20.
Customer Acquisition Costs
CAC can be measured incorrectly if it doesn’t capture the true cost of acquisition.
The default formula to calculate CAC is Sales & Marketing Expenses / # of New Customers.
The mistake here is to measure CAC by looking at the attributable marketing costs only, like paid advertising.
You should actually take your full marketing and sales spend including PR, content production, sales reps, advertising, marketing & sales software licenses (e.g. HubSpot and Salesforce) and then divided by your customers acquired to get your fully loaded CAC.
LTV:CAC Ratio and Payback Period
A smart and simple thing to do is to analyze these metrics in comparison with each other. One of the things you should do is to compare your LTV to your CAC and measure the ratio.
Even more important than that is to keep track of the CAC payback period. In SaaS it likely makes sense to sell to customers who don’t churn yield recurring revenues for 3+ years and positive LTV/CAC ratios.
But none of this matters if you run out of money. Sustaining short-term losses is all predicated on ability to finance the losses through venture capital or other means.