Yesterday, I spoke on a panel at the Gainsight Pulse conference with Aaron Ross, the author of Predictable Revenue, Jason Lemkin of Storm Ventures who authors SaaStr, and Brian Stafford, a customer success expert from McKinsey. It was great fun to be on the panel and discuss how customer success is transforming SaaS companies by increasing revenue growth, decreasing capital needs, building better products and consequently retaining more customers. Many customer success leaders were present and I had a great time chatting with a few to understand the state of the market. To summarize the zeitgeist, customer success leaders in the session and throughout the conference voiced four challenges/problem/questions they face today: education, justification, attribution, and team structure.
Startups are in a state of perpetual change. During a startup's first few years of establishing product market and winning the first set of customers, this state of change is obvious. But as a startup scales, the company must adapt by learning and reinventing. Whether it's building the processes to grow the team, creating new sales and marketing initiatives to pursue adjacent customers, developing customer success teams or handling an unforseen crisis, this process of reacting to the market and evolving the company happens at every level in each function. How does a startup team steel itself to persevere through the ups and downs?
Is there an optimal time of year to raise a seed round? The chart above shows the number of seed rounds by quarter of the year from 2009-2013. At first blush, it would seem that the first quarter of the year is the most attractive period to raise a seed round. But that's a faulty conclusion.
Some of the best content to be found about startups is locked in books. Thomas Kjemperud asked me yesterday for a 140 character recommendation of one book for founders. Reducing my list to just one and condensing an argument for why founders ought to read it in just 117 characters was just too great a challenge for me. Instead I've written a blog post about the nine favorite books I've read over the last five years have helped me understand startups and the processes that make them successful. They range from written 70 years ago to written in the past 3 years. They have been written by salespeople, CTOs, speechwriters, consultants and magnates. These are the books I go back to, time and again, when I have a question or I'm looking for an insight. If they weren't all e-books, they would be dog-eared and foxed.
Last week, we reviewed the state of the public SaaS market and observed the average company had lost 33% of its value from their highs. How have newly public consumer companies fared in the same environment and what does that mean for the tech industry broadly?
At a board meeting last week, one of the VPs of Marketing I'm lucky to work with presented a brilliantly simple way of explaining the evolution of a startup's marketing tactics. I've drawn a diagram of the idea above, which borrows heavily from McKinsey's 3 horizons. Startups have many different marketing options at their disposal: SEO/SEM, print, radio, TV, mail, affiliate, content marketing...The list goes on and on. Faced with this litany of options, how does a startup maximize their marketing effectiveness?
Earlier this week, I wrote about the increase in cash compensation and decline in equity grants to VPs of Engineering and Product in startups]. I received a lot of comments about the analysis, and in particular hypotheses to explain the data. I dug a bit deeper into the data set to find an explanation. Founding employees keep more equity today than ever through the Series A and Series B.
What a difference three weeks make! Since I wrote "The Correction in SaaS Company Valuations", SaaS company valuations have continued to fall. As a basket, SaaS companies have fallen 33% from their highs (median), wiping all the gains for the last year. To make that point more explicit, below I've charted the total value of public SaaS companies over the last ten months. In that time period, the aggreggate enterprise value has fallen from greater than $150B to $117B today.
Since 2008, there has been a secular trend to increase cash compensation and decrease equity to startup management teams. Tho two tables above tell the story for VPs of Engineering (VPE) and VPs of Product (VPP) across the US broadly and in the SF Bay Area. In the past 5 years, VPEs have benefitted from a 10 to 16% increase in their cash compensation, but have seen their equity grants fall by 17-19%. The same pattern holds true for VPPs: an 8-26% increas in cash and a 25-30% drop in equity grants.