“In the midst of chaos, there is also opportunity.” — Sun Tzu The landscape of founders, investors, VCs, consumer activity, and the world as a whole has been altered and…
9 takeaways from the #StateOfSaaS
Listicles + SaaS Surveys = the best blog post ever. For those of you that don’t know, Pacific Crest Securities puts together one of the most robust SaaS surveys and reports in the industry. Last…
Listicles + SaaS Surveys = the best blog post ever.
For those of you that don’t know, Pacific Crest Securities puts together one of the most robust SaaS surveys and reports in the industry. Last week we were fortunate to attend The State of SaaS in Indianapolis that was put on by High Alpha and Pacific Crest Securities.
The evening then continued with an experienced panel of seasoned SaaS investors & entrepreneurs moderated by Scott Dorsey of High Alpha and included Devon McDonald of Openview Ventures, Guy Turner of Hyde Park Venture Partners, Matt Blumberg of Return Path and Scott Burns of Gov Delivery.
1. The model is truly working.
The question around why SaaS companies command such strong valuations when so many are losing money comes down to 3 important points.
- High growth rates
- SaaS is where the world is going
- Current-period profits don’t capture the true economics.
David pointed out that the underlying economics truly work and that this is proof the model is working.
2. SaaS Trades at Premium
Multiples for SaaS (7.0x) are 50% higher than Software (4.6x excluding SaaS) making it an issuer friendly environment.
3. LTV > CAC
Incredibly important but seems like every company calculates CAC differently.
4. Land & Expand
Inside sales averages accounts for the highest gross dollar churn as a function of distribution (11%) creates highest churn as function of distribution yet largest channel for upsell. Land & expand those deals!!!!!! Bringing us to…
5. Upsells RULE
The fastest growing companies rely on upsells. Selling to existing companies is much cheaper than selling to new customer.
We knew AWS is huge and Amazon recently gave us some more insight. However, my jaw dropped after seeing it in this pie chart.
7. Put CEOs on your board
Matt Blumberg gave the advice that having Current & Former CEOs as part of the independent directors of your board can make a huge difference. You should also read his book Startup CEO.
8. New MRR / Cash Burn > 5% = SaaS Nirvana.
Guy Turner dropped a knowledge bomb that people were definitely talking about. This simple cash efficiency test is Your New MRR divided by Net Cash Burn should be greater than 5% for your SaaS business to work. You can read his full post and explanation here
9. Scott Burns has 2 centuries of SaaS experience
GovDelivery was started in the late 90s. Scott also claimed that raising less cash ultimately made GovDelivery successful. You may remember GovWork from the Startup.com documentary, they raised a bunch of cash in the boom and ended up failing.
Also interesting, the GovWorks CEO was recently jailed in Columbia.