The team attended the annual Saastr 2018 in San Francisco last week. This conference is attended by 10,000 Execs, Founders and VC’s. It is a great forum to learn about software companies from a venture capital perspective.
Our key takeaways from the Saastr conference were;
1. A lead indicator for a company missing its sales budget is if they miss their recruitment targets.
2. Product development is a key part of the growth plan. New features/products can deliver a higher ROI and sales & marketing investment.
3. It takes 10-15 years for SaaS businesses to reach scale. They all have issues and growth is not linear (just like all businesses).
Our notes from specific seminars are below.
David Skok - General Partner of Matrix
It can be misleading to look at total customer numbers. There can be a lot going on within that. Looking at a cohort of data and tracking it over several years can be more insightful. E.g. Take all of the customers acquired in a single year and analyse their churn and upsell in the subsequent years.
The biggest indicator that a company will miss its sales forecast is if they fail to hit their recruitment targets. If a budget model is based on a number of sales recruits and the actual number of salespeople is lower it is likely that sales will be lower than budget.
You cannot calculate an addressable market by looking at global revenue and assuming that a company wins X%. You need to look at the number of serviceable customers, make an assumption for market penetration and average selling price.
Karen Peacock - COO of Intercom
Intercom is an in app/website messaging layer. It helps websites to convert customers. As COO, Karen is responsible for; sale, marketing, admin support, product and data.
She advised not to drive the business based on ARR milestones. Creating value for customers is the most important thing. Tracking users per day, customer engagement or conversion rates give more insight than ARR.
When asked how to get a quick win when working with a new business, she said to look carefully at the customer onboarding process and make sure that you give them a wow moment. If you can give customers something really useful in their first experience they will remain customers for longer.
Stewart Butterfield – CEO of Slack
The company is an internal messaging and file sharing programme. It can be incorporated via API into website and intranets.
The company has raised $800m. In the last 4 years, their staff headcount has increased from 80, 320, 600 to 1000. It has 6m users
Slack has 150 software vendors. They estimate that large enterprises buy in software from 1000 suppliers. This gives an indication of the scope of opportunities for SaaS companies.
Roman Stanek – CEO of Good Data
Customer lifetime value = ARR x gross margin / customer churn rate
Review each component and think about how to improve it on a monthly basis.
The average SaaS churn rate is 10% pa. If LTV is less than 3x CAC then the business model does not work.
Stephanie Schatz – SVP Sales at Xamarin
You can find very good salespeople within your customers' organisations. Former users will have the most insight on benefits and objections.
Don’t use probabilities to forecast sales (5 prospects with 20% probability of closing may not equal 1sale). Make sure there is some contingency.
Ryan Smith – CEO of Qualtrics
Qualtrics provides stakeholder experience management services. They have 4 modules; product, customer, employee and brand. The company has $250m ARR.
They boot strapped until a $3m series A. Their model was for renewal revenue to cover overheads. While new customer revenue funded expansion.
They created the SaaS category of experience management. To create a category, you need to be the winner and it takes a long time (10-12 years).
Kathy Lord – SVP Sales at Intacct
The company provides accounting software. They were acquired by Sage for $850m (9.8x ARR). It took 8 years to get from 0 to $2m ARR in 2007 and a further 10 years to reach $80m.
To progress from a product to a platform you need to provide API’s, original data and/or an eco-system. That is how a competitive edge is created.
In addition to analysing the sales funnel, they also monitored qualitative measures such as tech/product awards and staff reviews on Glass Door.
Eric Gundersen – CEO of Mapbox
Mapbox software is used by developers to build map-based features into apps. They have 1m registered developers and their tech features in apps such as Snapchat. Mapbox harvests location data from 300m end users. This gives is dynamic, live, location data.
They estimate that Google Maps generates $1.5bln revenue. 30% of people who see an ad in Google Maps then visit that store.
Mapbox raised $164m from Softbank last year.
Autumn Manning – CEO of YouEarnedIt
When raising a series A round the company met 30 VC’s and received 5 terms sheets. They accepted an offer with a valuation 25% lower than the top offer because the VC was the best fit.Back to Insights
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