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In the public stock market, share repurchases/buybacks have reached more than $1 trillion in 2018, a historic high. As the amount of private capital increases, share repurchases in startups are popping up. Typically, they are a very inefficient use of capital.

A share repurchase occurs when the company uses cash on its balance sheet to buy shares from an existing shareholder, typically an employee or an early investor.

For public companies, buying shares is a way of using excess capital to increase the earnings per share (EPS) and other metrics that investors care about.

How far along was the typical SaaS Series A in 2018? The median business was at $1.8M in ARR and growing at 250%. The chart below shows a representative sample of SaaS Series As’ ARR and projected ARR growth rate for 2018.

Breaking this down a bit more into quartiles, the ARR quartiles were:

And the ARR growth rate quartiles were:

Reading the news in the past week made me wonder. Just where are we pricing SaaS companies today? The Nasdaq and the S&P have toyed with a bear market. Many stocks are down 10 to 50%. Absolute valuations are one consideration, but let’s understand it at a deeper level. Have multiples compressed?

The answer is yes, they have, but enterprise value to forward revenue multiples are still at some of the highest levels for SaaS companies in the past eight years.

Here are some predictions for 2019 and a review of my thoughts for 2018, many of which were wrong.

The M&A market slows meaningfully, especially at the multi-billion dollar level. The recent seasickness in the public markets forces most CEOs adopt a more conservative approach to acquisitions. Facing large swings in valuation, these leaders may struggle to advocate and articulate that large acquisitions are accretive and will be immediately rewarded by share appreciation after an acquisition.

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.