Once a startup has found an initial product market fit, the business must evolve the way it models its growth. Before product market fit, a startup's financial projections focus on costs. The company has no visibility into their revenue growth. So, the management team should minimize costs, maximize cash and lengthen runway to provide as much time as possible to find that product market fit. As we've seen, staff are both the greatest asset of a business and also the greatest cost, at least initially, and modeling those is straightforward. But when a repeatable sales process seems to have been discovered, it's time to develop the startup's revenue forecast.
In The Shape of Things to Come, the New Yorker profiles Jony Ive, the man they call Apple's greatest product. Ive is iconic. His products have been sold 1.5 billion times. For all of his success, Ive's personality isn't well known. Neither is his personal history. Or how he manages the Apple Design Lab. The New Yorker article reveals some of these three things. Here are some of my favorite quotes.
If I were asked to create a content marketing strategy for a person or a business from scratch, I would craft a strategy with three dimensions: customer segments, customer lifecycle stage and content type.
In 2009, the Corporate Executive Board, a consultancy providing expertise to some of the world's largest companies, studied the distinguishing characteristics of great sales people and well-run sales processes. They surveyed more than 6,000 sales reps across 90+ businesses. The analysis revealed three interesting things.
In "The Rule of 40% for a Healthy SaaS Company," Brad Feld shared a simple rule of thumb growth investors often apply to judge the attractiveness of a $50M business. "The 40% rule is that your growth rate + your profit should add up to 40%." I was curious if this theory were broadly true, applicable for growth stage companies, but also early stage companies. So, I calculated this metric, which I'll call the GP metric in this post, for all the publicly traded SaaS companies over their lifetimes.
It's becoming more and more expensive to scale a startup in San Francisco. In fact, it's twice as costly to operate a startup in 2014 as it was in 2009.
After a SaaS startup has achieved some degree of product market fit, the business will likely ramp the go-to-market teams, and in particular the sales team. Measuring and tracking the performance of a growing sales team is critical to the growth and financial health of a business. The report above is the most effective view of the performance of a sales team I've found for SaaS startups.
In 2011, a team of researchers from Stanford and Harvard led by Teresa Amabile collected daily work journals from more than 250 people at large and small companies in a variety of roles. In each journal entry, an employee described one work event that stood out that day. Over the course of a few months, the study received more than 12,000 responses. From all this data, the team revealed a critical ingredient to be a great manager: managing for progress.
SaaS companies are marvelous businesses. They are more predictable than most other kinds of companies and in addition they demonstrate leverage from technology. The best SaaS companies are able to build strong brands, develop scalable products and hire teams to bring those products to market effectively. To show the power of the convergence of these forces, I've analyzed the employee productivity patterns of the 50+ publicly traded SaaS companies.
Each quarter, Zendesk releases a Customer Satisfaction Benchmark to help companies build more effective customer support teams. The Q4 2014 differs from the previous in an important way. Instead of comparing companies in the same industry, for example, Education, Zendesk clustered companies with similar customer support characteristics, including ticket volumes, product support complexity and a few others, which revealed some important conclusions.