Posts

The five most popular posts of 2018 were:

The Strategic Shift in Revenue for SaaS Startups as They Scale - or popular by any other post by a factor of 10, this post discusses the importance of focusing on renewals as a business reaches $10M, $20M and beyond in ARR. The dynamics of retention meaningfully change the way the business ought to be managed.

Ten Year’s Worth of Learnings About Pricing - This post is a summary of a presentation I gave to the executive team at Twilio. The presentation and the post summarize everything I know about pricing, which remains today one of the most befuddling questions for founders, and one of the most frequent questions I’m asked.

These are my ten favorite books from 2018.

The (Mis)Behavior of Markets - Written by Benoit Mandelbrot, the Belgian mathematician who pioneered fractals, this book and theory inspired Naseem Taleb. It’s a powerful book on the uncertain nature of financial turbulence.

Creative Selection - Ken Kocienda, a former Apple engineer who co-authored Safari and the iPhone keyboard, writes about culture at Apple. Among other insights, he discusses the most effective ways to brainstorm with teams - it’s not with ideas.

Over the last month, I’ve been modernizing this site with one goal in mind: speed. The net result from that effort is a 90% reduction in page load time from 5 seconds to about 500 milliseconds. At Google, I learned page load time is highly correlated to engagement metrics including bounce rate and time on site. I’ve been focused on it ever since.

This is how I did it.

Hugo: I moved to a static site generator in 2014. Static site generators create webpages that load immediately. There are no database calls. Just fast load times. Initially, I used Jekyll, but now I’m Hugo, which runs faster because it’s written in go instead of ruby.

If you have one marketing dollar to spend on your startup’s growth, should you spend it on acquiring a new customer or on expanding an existing customer?

Mining the existing customer base for customer expansion seems very logical. Customers know your product and your sales team, so increasing the account value should be easier.

Plus, the strategy is successful in practice. The PacCrest survey suggests upsell drives somewhere between 8-26% of new bookings for SaaS companies, depending on the scale of the business. The larger the business, the greater the fraction of new bookings from upsell.

I’ve wondered what it’s like to work at Apple. I’ve read books and articles about Steve Jobs and the turbulence the company experienced. Ken Kocienda co-wrote the Safari browser and developed the first iPhone keyboard. His book, Creative Selection, is the first book that provides a view of the day to day environment at Apple. It’s full of wisdom. These are my learnings from the book.

Customers will pay you to build your SaaS product. It’s one of the great advantages of a SaaS model. Annual prepay contracts - wherein customers pay for a year’s cost on day - is a free loan from customers. And every startup can benefit from this advance. There’s only one requirement: you must be able to sell your product while you’re building it.

There many ways of measuring a SaaS company’s efficiency: magic number, payback period on cost of customer acquisition, lifetime value to cost customer acquisition ratio, quick ratio. These metrics primarily focus on measuring efficiency in customer acquisition. But, a software company’s true efficiency also have to include the cost to service contracts. A SaaS company’s revenues are a collection of annuities, contracts that pay fees on an ongoing basis. And the goal of a subscription businesses is more than to acquire those streams, but to nurture and sustain them.

Your startup is just getting off the ground. You might have a few account executives and a sales leader in place; maybe some revenue and a handful of customers. The sales team costs real money, and the question before the company is: how do you know what quota plan to assign to the account executives?

I’ve seen four stages in early stage software companies. Some businesses employ all four, others just use one or two. Knowing about the options ahead of time may help you figure out the right sales plan for your startup.

Another week, another blockbuster software acquisition! This time SAP has agreed to purchase Qualtrics for $8B. Qualtrics is a Utah based provider of experience management software. Qualtrics writes and sells software to ask questions of employees and customers to help businesses improve customer experience, employee satisfaction products, and brand. Qualtrics had intended to go public this week. The company generated $342M in the last twelve months and had grown 27% annually.

Over the weekend, IBM announced the largest software acquisition of Red Hat, an open-source software company, for $35B. It is the largest software acquisition in history, and the third largest technology acquisition (Dell/EMC at $67B and JDS/SDL for $41B were both larger hardware mergers). IBM will spend 31% of their current market cap for Red Hat and pay a 70% premium to Red Hat’s closing price on Friday.