Fresh Insights

Analyses, Musings & Observations

Streaming Music Trends

When a company files to go public, they do so by submitting a document called an S1 to the SEC.  An S1 is like a prospectus, and sometimes it’s loaded with really interesting industry information.  Sonos, which recently went public, is a great example of such an S1.  Below are some facts and trends about…
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You wont be a success from day 1

You probably won’t be a success from day 1.  You’re going to struggle and may even come close to failure (more than once).  The good news: there are plenty of examples of companies that had setbacks and bumps along the way, but were still a great success.  Docusign is one such success story.   Docusign…
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Net dollar retention of 107% will take you public

One SaaS metric we monitor closely is net dollar retention.  It measures what percent of revenue you retained from the prior year after accounting for upgrades, downgrades, and churn.  Formulaically it’s beginning of period revenue + upgrades – downgrades – churn all divided by beginning of period revenue.   If that formula yields a number greater…
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Startups arent just for the young

Are startups a young man’s/woman’s game? No. We have 19 portfolio companies today of which 4 of them have CEO’s who are over 45 and has a family.  To me, that’s enough proof to indicate you don’t have to be fresh out of college to launch a startup.  That said, being young is definitely an…
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Sales & Marketing spend doesnt scale in SaaS

Do big companies benefit from economies of scale? While the default answer may seem like ‘yes’, we wanted to see if that was really true.   We looked at the sales and marketing spend of SaaS companies at the time they went public and compared that figure to revenue growth.  Formulaicly, it’s revenue growth / sales…
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CAC doesnt have to rise as you grow

One of the most important metrics for B2C companies is customer acquisition cost or “CAC”.  One debate is whether the cost rises or falls over time.  The argument for rising CAC is the next marginal customer is generally harder to acquire than your last customer.  The argument for falling/stable CAC is that as companies get…
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How to sell code and patents

In 2017, we had a death in the portfolio.  Once all the employees left, the only remaining assets were some patents, servers, domains, and a lot of code.  Recently, we managed to sell that intellectual property (“IP”).  Here is what we learned.   Set expectations.  The value of IP is a small fraction of what…
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The best metric in SaaS – Contribution Margin

Contribution margin is one of the most important metrics in SaaS.  It’s revenue from a certain set of customers (a cohort) less the cost of acquiring and servicing the customers over time.   Customers are generally grouped into annual cohorts – in other words, customers acquired in 2011 are the 2011 cohort, those acquired in 2012…
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How to build pipeline – part 5

I read Trish Bertuzzi’s book ‘The Sales Development Playbook’ and it was by far one of the best sales books I’ve read in a while.  The book focuses heavily on building pipeline with SDR teams.  This is the fifth post I’ve wrote about this book: there was so much good information that putting it all…
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Measuring customer health in SaaS

In software, there are a few ways to measure the health of the customer base and stickiness of the product.  Zuora does a nice job of showing four measures of customer health in their S1.   Processed Transaction Volume   Zuora’s first measure of the overall health of the business is processed transaction volume.  According…
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