As the temperment of the fundraising market shifts, particularly in the later stages, the question of how much a startup should burn will become increasingly important. We're living in a historic period of very inexpensive venture capital. These cheap dollars have fueled spectacular companies with record-setting growth rates. In such an environment, growth at almost any cost is handsomely rewarded. But we're observing the ecosystem starting a correction - particularly in the late stage of the market. And so burn rates will matter more and efficient growth will be prized again. What does that mean for founders when planning their 2016 budgets?
Founded in 2002, the Australian software maker Atlassian is an exceptional company in many regards. But foremost, Atlassian is one of the best examples of flywheel SaaS companiesyet. Atlassian counts 1600 employees and sells five products JIRA (bug tracking software), Confluence (project management), HipChat (internal chat/collaboration), BitBucket (code repository) and JIRA Service Desk (help desk software. Yesterday, Atlassian filed their F-1, a document preceding their IPO, and revealed how efficient a software company they have built. In 2015, the company will generate $320M in revenue.
In the last 22 months, there have been 4 $1B+ software IPOs and 3 $1B+ software acquisitions. But compared to 2014, 2015 was a meager year for startups looking to go public or be acquired. The chart above plots the M&A activity over this period.
On November 18, SaaS Office Hours at Redpoint will welcome Pete Koomen, Co-Founder and CTO of Optimizely, the incredibly fast growing AB testing and personalization company Pete founded with Dan Siroker. Numbering more than 400 people, Optimizely has built an amazing business since 2009, serving thousands of customers. Before Optimizely, Pete was a product manager at Google building Google App Engine which grew to support 150,000 developers and AdSense.
Last night, SaaS Office Hours hosted go-to-market guru Kenny van Zant. Kenny is a serial entrepreneur started his career as founder and COO at BroadJump, a broadband software company that grew to $100M in bookings. He was awarded the Ernst & Young Entrepreneur of the Year in 2002. As Kenny told us last night, that experience of selling enterprise software quarter by quarter pushed him to develop and discover businesses that have flywheel effect, that generate revenue even on weekends when no one is working because there is a huge amount of momentum in the customer acquisition strategies.
What is the optimal quick ratio for your SaaS startup? Is it 4? The quick ratio measures a SaaS company's growth efficiency. It's calculated by adding the the new monthly recurring revenue (MRR) in a month to the expansion MRR divided by the sum of the churned MRR and the contraction MRR. Churned MRR are customers who have not renewed contracts and contractions are those customers who have decreased their payments.
Last week, a friend asked me what I thought the future of software would be. At some point, all the workflow processes that still conducted on paper and pencil will be digitized, all of the tasks completed in Excel will be optimized, and the majority of limitations of traditional software will be overcome. It's not to say that software innovation in its current form will continue to exist for decades, but what is the fundamental shift that resets the ecosystem like the cloud did in the early 2000s?
Quota attainment is an incredibly powerful diagnostic tool when understanding your SaaS startup's go-to-market health. Quota attainment measures both the success of individual account executives and the performance of the team. To achieve best-in-class quota attainment, a startup must execute the go-to-market strategy well across five dimensions.
Taxis. Food. Cars. Mobile phones. Communications. Banking. Healthcare. Entertainment. In the past ten years, is there an industry startups haven't upheaved? Startups have been the most transformational force in US society over the past 20 years.
Last week, I interviewed Tien Tzuo, the former CMO & CSO at Salesforce, and founder/CEO of Zuora. During our conversation, he spoke about one of the major challenges facing fast growing startups. He called it recognizing the breaking points of management.