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Lee Kirkpatrick is no stranger to downturns. During the dotcom crash in 2001, the Global Financial Crisis of 2008, and the SaaS corrections in 2014, 2016, and 2018, Lee was either COO/CFO or CFO at Twilio, SAY Media, and Ofoto.

In addition to his experience navigating financial markets, Lee oversaw the finance function at one of the most successful usage-based billing companies. Usage-based billing - the practice of charging customers by consumption rather than subscription - has become top of mind for many startups seeking to align their success with customer needs.

The web3 market’s collapse in the last few weeks will reverberate across the ecosystem, especially for marketing teams.

Blind airdrops, multi-million dollar ecosystem funds, sports team sponsorships - predominant marketing techniques redolent of the bull market - won’t last.

A tighter fundraising market and competition will catalyze web3 marketers to adopt a new discipline. Why? Marketing efficiency is a vital competitive advantage.

While this is just as true in web2 as in web3, crypto brings new complexities that create opportunity. Token efficiency accounting isn’t widespread. For example, most web3 companies don’t consider tokens as a cost-of-customer acquisition, but they ought to be. We need to invent new marketing math.

Should a 10% reduction in staff be considered a layoff? In one sense, yes, because on a particular day, a collection of employees no longer work at a startup. But a 10% layoff shouldn’t confer messages of a financially strapped business.

Consider the average annual employee attrition in a startup ranges between 13% and 25%. A 10% reduction-in-force (RIF) is less than the quantum of employees the business would have expected to lose throughout the year.

Over the past week, I’ve analyzed the nearly 500 responses from founders who responded to the 2022 Market Conditions Survey. Thank you to all who participated and those who attended last week’s Office Hours to review them.

The survey results review the trends in the public market, in founders’ minds, and the private market.

As we navigate this bear market, I’m keeping my eye on broader market data points. A broad software buyer index would be the best metric to understand how buyer preferences are changing across the market. Fortunately, it exists.

Large SaaS and IaaS vendors are precisely that: indexes of software buyers. Amazon Web Services and Azure, the business units inside Amazon and Microsoft serve and sell to small, medium, and large companies in every major geography. So do Salesforce. ServiceNow. Adobe. Palo Alto Networks.

This Friday, June 3rd at 10:30am Pacific/1:30pm Eastern, I’ll be hosting Office Hours to review the 2022 Market Conditions Market Survey results. If you’d like to attend, please register here.

The session will review the top 10 learnings from the data across the hundreds of respondents and answer questions including:

• how does the typical founder feel about the market?
• how often are founders considering layoffs, inside rounds, and venture debt?
• how will fundraising prices change, according to founders?
• which segments of the market are witnessing changes to their sales cycles?
• what does all this data imply for the market in the next 1-2 quarters for founders?

Attendees can submit questions ahead of time via the registration form or ask questions live during Office Hours.

Yesterday, Broadcom announced it will acquire VMWare for $70b, the largest software acquisition in history.

Remarkably, this goliath union transpires during the deepest bear market of the last ten years. This merger also suggests a wave of acquisitions may punctuate 2022, in particular, take-privates.

Public companies can’t hide from the 70% collapse in multiples the way startups can. Publics are marked to market daily. Big acquirers walking through the aisles of the stock exchanges are staring at buy-one-get-one-free specials.

Today, I’m kicking off the 2022 Startup Market Conditions Survey to assess how startups are feeling about the market given all the volatility.

If you’re interested to participate, click here.

The survey has 16 questions. I’m looking to understand how startups are feeling about their financial outlook, fundraising, new employee hiring, and strategic options (sale, inside rounds, venture debt).

I’ll close the survey in a week and publish the results shortly thereafter. If you have questions, just email me.

From every startup I work with, I learn about the different ways of building a company. It’s one of the best parts of the job. By their nature, founders hold strong world views about how to craft their companies.

Though it’s early in the company’s life still, Barr Moses, the founder and CEO of Monte Carlo, is an extraordinary leader.

Many startups face a strategic question early on of whether to create a new category. It’s a heavy lift. A former executive at Gainsight which created customer success, Barr jumped in. Monte Carlo is creating the data observability space.

With all the talk of recession, changing market dynamics, and the importance of efficient growth, many teams will be looking to boost their sales efficiency. How can the company drive more sales with less expense?

Let’s start with the formula for sales efficiency.

Sales efficiency = New_Bookings x Gross_Margin / Sales_and_Marketing_Cost

Three paths emerge from the equation:

1. Increase bookings: increase pricing without sacrificing sales velocity.
2. Improve gross margins: reduce infrastructure spending, eliminate software bills, and/or reduce customer success costs.
3. Decrease sales & marketing cost: increase quotas, focus on marketing channels with superior ROI (at the expense of exploration), and improve sales training/support.

Each strategy is viable. Teams should select the path or combination that suits their business best. But these strategies won’t impact the sales efficiency number the same way. Why? Convexity.