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.
At Google, Product Reviews were held on Fridays at 130pm in a big room with a long table, two projection screens at one end and red couches along the walls called Marrakesh in Building 42. Each week, Eric, Larry and Sergey invited three product and engineering teams to present their progress each for about 30 minutes. On several occasions, I updated the executive team on the status of our team's project, social network monetization. Needless to say, especially the first time but really every time, I was nervous about the presentation.
How much should your startup budget for its employee stock option pool? One way of answering this question is a blanket addition per year, say a 2% renewal. Another way is to look at the cash based cost of the stock based compensation. We're going to examine the second one today by looking at the basket of 50+ SaaS companies.
Content marketing is one of the most powerful marketing tools startups can employ. Blogs are powerful drivers of awareness and creators of purchasing intent which ultimately lead to new customers, new employees or other new opportunities. This is doubly true as buyers are educating themselves before contacting sales teams to a far greater extent than ever. Below are the five things I wish I would have known when I first started writing this blog. I hope they are useful for anyone designing or redesigning a content marketing strategy.
Salesforce went public more than 10 years ago. This harbinger of subscription, internet delivered software created one of the most exciting waves in software and the single most valuable SaaS company today, worth $37B as of this writing.