There’s a new class of company that wield data to create long-term competitive advantage. TheRealReal uses this morning’s sales data to inform this afternoon’s marketing campaigns. Hubspot motivates its sales teams not just with a target quota, but a blend of key sales metrics that reflect the strategic priorities of the company. Zendesk’s data team educates and trains its employees to use data in meetings to prioritize key product management and marketing efforts.
A senior executive described her management philosophy as heavily influenced by Daniel Pink’s book Drive. In his 20 minute TED talk, Pink argues traditional incentive structures like bonuses and raises don’t work for knowledge workers. Instead, autonomy, mastery and purpose motivate them best.
Autonomy grants employees the flexibility to achieve their goals as they see fit. Purpose means serving a goal larger than the self. Mastery provides employees the opportunities to continuously improve their skills. Sometimes, these three principles are called APM.
Sales velocity is the equation that governs the effectiveness of your SaaS startup’s sales team. Often, sales teams use the word sales velocity to refer to the number of signed contracts in a given month or quarter. But sales velocity classically defined is a different concept.
Sales velocity originates from operations research, field of study pioneered by Charles Babbage, one of the fathers of computing, and Georges Doriot, the patriarch of the venture capital industry. Sales velocity measures the output of the sales team in dollars per day or month.
A user has maximum intent. She has watched the humorous demo video, chuckled when reading through the clever marketing copy, and filled out the abbreviated, optimized user registration form. She wants to give the product a spin. How long does the account verification link take to appear in her email box? Is it long enough for her to switch tabs, change contexts and lose interest?
The half-life for new product trials brief. How many seconds with a user does a product have? The typical web-browser spends 15 seconds on each webpage. When researching new software, those sessions are likely to be a bit longer, but even at a minute, that’s not much time to deliver the email and keep the user moving through the conversion funnel.
There are two common ways to model the growth of a SaaS business I’ve seen in pitches. the first one helps founders develop a sense for the trajectory of the business, while the second one helps teams plan for different scenarios and model the trade-offs with each strategic decision.
The Percent Growth technique averages the company’s growth rate over the last quarter or so and projects it forward. For example, if a SaaS company has sustained 15% monthly growth over the last three months and is currently at $10k in MRR, the projections might look like the table below. Frequently in these models, costs are also modeled growing at a fixed monthly rate. In our example, I’ve assumed about 10 employees with a 10% increase in costs.
What are your top three priorities in your job right now? If I asked you that question, I suspect within a minute or two you could articulate them. Is the software you are selling at your SaaS startup solving one of those three needs for your target customer? And, if it is, does your software meaningfully differentiate along one of the key competitive axes that your customer cares about?
No one has enough time in their jobs to attend to the fifth or sixth most important thing today. So, one of the questions I typically ask potential customers during diligence calls is, “Where on your list of priorities does this problem fall: top 3, top 5, or top 10?” If the answer is not top three, then the software is not important enough for a buyer to prioritize and champion budget. The startup will observe slower sales cycles because the sales team will be challenged to create urgency within the buyer’s company.
Clay Christensen, a Harvard Business School professor, asserted in a recent interview that we understand only half of the marketing puzzle: the marketing science involved in a competitive ecosystem, when consumers are buying millions of products. In these markets, concepts like Westendorp Price Sensitivity and conjoint analyses work. But to incite disruption requires a different set of marketing skills.
In the Innovator’s Solution, Christensen proposes the idea of competing against non-consumption. He says, “A new-market disruption is an innovation that enables a larger population of people, who previously lacked the money or skill, now to begin buying and using a product and doing the job for themselves.”
Questions interlace conversations. Where is Priceline stock trading? Where do the San Francisco Giants stand in this year’s pennant race? When hiring a litigation attorney, what are the key questions to ask? Are there any grammatically sound sentences in English where every word starts with the same letter? All of these questions are instantly answerable. These are the types of questions we ask at the dinner table, when sharing a drink with a friend at a bar, and answer in a few seconds a mobile phone with a Google search.
Numi is a little calculator with a twist. Unlike most calculators, it understands English and other languages. I’ve used many different types of calculators: from the Texas Instruments TI-89 graphing calculator to a HP 12C with its Polish notation, to software calculators Excel and R. All of them employ similar user interfaces. There’s a syntax to translate the user’s desires into something the calculator can understand.
The value of all public technology companies exceeds $10.7T. At the beginning of 2016, that figure touched an all time high of $11T. It’s taken more than a decade for public technology companies to replicate/recreate the market cap observed in the dot-com era, even when adjusting for inflation.
The preponderance of that increase has occurred in the last four years. In 2012, global technology companies combined in value to $6.7T, an annual growth rate of about 12.5%.