Hi, I'm a partner at Redpoint
. I invest in Series A and B SaaS companies. I write daily, data-driven blog posts about key questions facing startups. I co-authored the
book, Winning with Data
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Sales teams are the tip of the spear for SaaS companies. They close accounts and book the revenue. Many sales teams often find themselves confronting the same issues. Mike Anello and Kane Hochster, two HBS students, researched this topic by surveying more than 30 VPs of Sales. Mike and Kane aimed to find the areas where sales teams underinvest across seven key responsibilities - hiring, onboarding, pricing, process, structure, training & development and upsell.
They operated from a clandestine apartment in Harlem, a block from Columbia University at 401 West 118th Street. A cell comprising 18 of the most respected American mathematicians and statisticians spirited datasets up the stairs, analyzed them, and stole to Washington DC on military aircraft to present the results of their rumination to the admirals of the Navy and the Marines, the generals of the Army, Marines, and Air Force during the Second World War. Allen Wallis, Director of SRG said of his team, “This was surely the most extraordinary group of statisticians ever organized.”
Average Series A valuations have hovered around $15M for the last 9 quarters. Series B rounds have settled into $50M, while Series C rounds have rebounded to $100M. Later stage rounds, however, have fallen by 50% from their high of $400M to just under $200M.
When you're selling a SaaS product to a potential customer, you have to convince them switching is worth the effort. And once you've sold the product, you have to do the opposite - convince the customer that switching to anything else isn't worth it.
Channel distribution represents one of the biggest and most important changes in customers acquisition for SMB SaaS startups in quite a while. Historically, channel distribution has been reserved for the most expensive software and hardware. IBM, Intel, Cisco and their kin generate more than 80% of their revenues through a universe of resellers and distributors.
There are three pricing strategies for startups. Maximization dominates SaaS products in the mid-market and enterprise markets; penetration is synonymous with freemium in the SMB market. Once you've decided on the right strategy for your company, what is the best way to price? By seat? By minute? With or without a platform fee?
Through the end of July in 2016, $70B worth of SaaS companies sold. Their size follows a power law with LinkedIn at $26B and Netsuite at $9.3B. The more than $600B in cash on the balance sheets of large public tech companies combined with a recent pricing correction in SaaS companies presaged a flurry of acquisition activity. But it hasn't unfolded as expected in three different ways.
If a software company grows at 20% annually, it has a 92 percent chance of ceasing to exist within a few years.
Where is the budget to pay for your SaaS startup's software coming from? There are three possible pockets. First, they are dollars the competitor you displaced used to collect. Second, the company enlarges the current budget to finance the purchase. Third, the company creates a new budget.
What is the smallest price point at which a SaaS startup can justify building an inside sales team? This is a natural question that many SaaS startups raise as they begin to complement bottoms-up, product-led adoption with assisting customers through the sales process.