In 1977, a British polymath named Christopher Alexander, who studied Math and Architecture at Cambridge and was awarded Harvard's first PhD in architecture, published a book titled A Pattern Language - Towns, Buildings, Construction. This book would transform the architecture world, and more surprisingly, forever influence the way computer scientists write software.
One of the most powerful levers for SaaS companies to master is payback period. Payback period is the number of months a company requires to payback its cost of customer acquisition. The median SaaS startup has a payback period of 15 months. A short payback period confers two massive advantage to a startups - smaller working capital requirements and a consequent ability to grow much faster.
When writing the post Vertical SaaS Startups Require Different Go To Market Than Horizontal SaaS Companies, I realized that there is a perception on my part and perhaps more broadly that vertical SaaS companies enjoy greater sales efficiencies than horizontal SaaS companies.After all, vertical SaaS companies target a smaller number of potential buyers. The marketing team concentrates their media buys to target this audience, the sales team focuses on a smaller lead list. Does the data support this notion?
Vertical SaaS requires a different go-to-market than horizontal SaaS companies. Vertical software companies, a recent important trend in SaaS startups, pursue customers only in a particular industry. They trade a more narrow customer base and consequent reduction in market size for a competitive advantage in that market segment.
During fundraising process, founders often tell me "I'd really like to get back to building the business." I'm certain it's true. Every founder surely would certainly rather be building their product and company than fundraising. Nevertheless, a founder skilled in fundraising can create enormous leverage for their business and develop unassailable competitive advantages. This is why it's critical for early stage founders to invest time to perfect their pitches.
Much has been written about the consumerization of IT, the movement fueling many SaaS startup's growth by targeting individuals in a target customer called B2C2B, rather than selling top down. But until yesterday, I hadn't found anyone who had quantified the size of the movement.
The SaaS ecosystem has been evolving incredibly quickly. Most of the time, the changes in the ecosystem are embodied in one particular company which grows exceptionally quickly. Focusing on these fast-growers, the macro shifts can be hard to discern. Last week, Okta released a report Business at Work sweeps across SaaS to reveal these recent evolutions. These are the points that I found most interesting.
Over dinner, a veteran product manager argued most SaaS products' onboarding practices miss a crucial step: create value for the user in the first session. After that conversation, I signed up for many brand-name SaaS products pretending it was for the first time, and I couldn't help but agree with him.
The public markets are down more than 10% from their highs in the last few months. Public SaaS companies have been particularly hard hit. The chart above shows the enterprise value of publicly traded SaaS companies. Many of them are down substantially more than 10%. Let's dig in a bit more.
I've been to many YC Demo Days and I always look forward to them. This year was no exception. There are so many wonderful ideas and companies founded by terrific entrepreneurs. In addition to the pitches themselves, the types of companies presenting forbear trends in the startup world more broadly.