I'm a partner at Redpoint. I write daily, data-driven blog posts about key questions facing startups. I co-authored the book, Winning with Data. Join more than 20,000 others receiving these blog posts by email.

Quantifying the Cost of a Bad Hire

The chart above compares the contribution of two hypothetical inside sales people with $400,000 quotas to an early-stage startup's finances. In this case, contribution is the 18 month revenue of sold customers tallied cumulatively minus the salary costs of $100k annualized of the sales person. I've modeled a six month linear ramp for the sales person to reach 100% of quota. w

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Quantifying a SaaS Startup's Revenue at Risk

One of the key metrics that I don't think gets enough notice when reviewing the health of a SaaS business is revenue-at-risk or RaR. For SaaS businesses with quarterly or annual contracts, each month some subset of the customer base's contracts must be renewed. The RaR is the sum of the revenue from these customers in a given month or quarter. RaR is a useful measure because it captures the company's opportunity to minimize lost customer revenue. Identifying customers at risk and proactively engaging them, cultivating a relationship and providing them account support can meaningfully improve a SaaS company's churn rates.

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How to Determine Which Price is Best for Your SaaS Startup's Product

Pricing is one of the hardest things for startups to get right because there is no universal and constant price optimum. As a SaaS startup's product evolves and offers more features, the product's price points should increase. As a sales team or marketing team engages different customer segments, price points may vary wildly. The contract for a F500 should have very different pricing than a startup, because of the stark contrast in the different companies' willingness to pay and value associated with buying the product. When competitors influence the market place, price points may change. Conferences, seasonality, news events, business development relationships, sales promotions all may impact pricing.

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The Challenges SaaS Businesses Face Communicating their Financial Health

Tien Tzuo, the founder and CEO of Zuora and former CSO/CMO at Salesforce, knows SaaS businesses better than most. So when he pens an opinion about the subscription economy, a term which I believe he coined, I read it with great interest. Yesterday, Tien wrote "These Numbers Show That Box CEO Aaron Levie Is A Genius", explaining Box's business and growth in great detail.

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The Power of an Unbiased, Agenda-less Observer

When the meeting first appeared on my calendar, I incredulous at the idea of a management coach. "A business shrink who would sap another hour from my frenetic day," I thought. I was a few months into being a product manager at Google and stressed because I was in over my head. Most difficult of all, I lacked any type of formal authority. Google structured its product teams to have authority through influence, not direct management of engineering teams or marketing teams or sales teams. The brilliance of the engineers, marketers and salespeople I worked with amplified this challenge. We were all holding each other to very high standards. I walked into my first meeting with my management coach frazzled with the demands of the PM job and frustrated to be allocating an hour to the meeting.

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The Investment Patterns of SaaS Companies in Sales and Engineering Over Time

Last week, we proved SaaS startups are raising more than they have in the past and newer SaaS companies seem to be generating more revenue per dollar invested. But do newer SaaS companies actually spend less on sales and engineering than their older counterparts?

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The Correction in SaaS Company Valuations

If you visit Yahoo Finance today, type in the ticker of every SaaS stock, copy and paste the image into a document, you might create a chart that looks like the one above. A cursory glance at the plunging lines in most of these names might send you into a panic, only to tweet in alarm that the bottom is falling out of the SaaS market. Chicken little. Chicken little.

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The Great Keyboard Layout Debate

I've been following Casey Johnston's journey on Ars Technica to switch keyboard layouts from the ubiquitous Qwerty layout to the Dvorak layout with great interest and empathy. About six years ago, I went through the same process. It took me five tries to succeed.

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Do Startups Require Less Capital to Succeed than 10 Years Ago?

Last week, we analyzed the fund raising history of billion dollar SaaS companies and determined SaaS startups are raising nearly twice as much capital as 16 years ago before going public. Given that trend, I wondered if there is there any truth to the idea that startups today require less capital than before to succeed. To answer that question, I've taken the same basket of public SaaS companies and computed a revenue-on-invested-capital (ROIC) across the four 4-year IPO cohorts from 1998-2014.

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The Financing Trends of Billion Dollar SaaS Companies

One of the cloud's great promise has been cost-reduction and for a while, we've chanted a mantra that startups require less capital than before to get started and ultimately succeed. As the number of publicly traded SaaS companies has grown with time, it's possible today to examine whether those statements are proven in the data, at least for those 41 publicly traded companies.

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