Fresh Insights

Analyses, Musings & Observations

The LTV of SaaS

We did research showing the typical SaaS company generates $0.57 of revenue per $1.00 of investment at the time they go public. At that level of annual revenue and assuming net dollar retention of 111% (in line with the median for public SaaS), the lifetime value of a SaaS customer is anywhere between $7 and…
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Cash efficiency in SaaS

Cash efficiency is one of our favorite metrics in SaaS. Measured as recurring revenue in the latest year / equity + debt invested, it is every bit as important as growth. We did an analysis looking at the revenue, equity, and debt of 94 publicly traded SaaS companies at the time they went public. Using…
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EBITDA margins in SaaS are terrible

It’s common to hear “SaaS has great margins,” but that’s just not true. The margins in SaaS are terrible as the data below show. The table has 81 publicly traded SaaS companies with median revenue of $422mm meaning they’re well past the startup stage and margins should benefit from their scale and maturity. However, even…
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The 12 commandments of customer success

We’ve had the good fortune of learning from and investing in SaaS businesses with excellent customer retention and upsells. Below are some of the key learnings we’ve gathered over time.   The Customer Success Team is not the only group in charge of customer success.  Preventing churn is everybody’s job, so your engineers should talk…
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Learnings from great founders

The book ‘Founders at Work’ interviews well known tech founders about their earliest days. It’s well worth the full read, but below I summarized portions that really stood out to me.   Introduction “Perseverance is important because, in a startup, nothing goes according to plan. Founders live day to day with a sense of uncertainty,…
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Strategic investors dont matter

Entrepreneurs are always looking for “Strategic Investors” — corporate VC such as Intel, Verizon, SAP, Microsoft, Salesforce, Cisco, InQTel, etc. The view is that these investors provide not only capital, but also guidance on the product roadmap, engineering/dev resources, critical introductions, and they’re often customers themselves. Demand for strategic investors lead us to ask: how important are…
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Don’t give shares to advisors

A startup founder recently asked “so what’s the right amount of equity to give to advisors and board members?” The answer is none.   Here’s why.   No one cares who your advisors are. We’re a Series A investor and never have I asked “so who are your advisors?” It’s just not important.  What investors care…
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Lessons from the tech boom

Recently I read “Once You’re Lucky, Twice You’re Good” by Sarah Lacy. It’s a fantastic book about the re-emergence of Silicon Valley after the tech bubble in 2001. The book is well worth a full read and I highly recommend it. Below are snippets of the book we found most informative.   MySpace was sold…
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Don’t be like Yahoo

Nicholas Carlson wrote a fantastic book about Yahoo entitled “Marissa Mayer and The Fight to Save Yahoo.” Below I have paraphrased what I found to be valuable sections, verbatim; the full book is definitely worth the read.   Allow employs to give feedback, anonymously. The questions were submitted during the week leading up to the…
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Median ACV’s of SaaS companies

Average Contract Value is important, but don’t obsess over it. Maximizing ACV shouldn’t be the goal and as you’ll see below, SaaS companies that do IPO had a modest median ACV of $24k. A few observations: Bigger software companies have smaller ACV’s. Below is a data set of 77 publicly traded SaaS companies and their…
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