The weekly top 10 for B2B tech operators · Every Friday
MRR: Subscription revenue is powerful. It accumulates and compounds over time, and MRR, or Monthly Recurring Revenue, is a predictable (..get it?) SaaS Metric Classic - so this is a deep dive article into everything you ever wanted to know (and much, much more) about these standard metrics, covering different MRR types, differences between MRR and ARR, etc.
As mentioned in last week's report - only41% of SaaS Companies price their product by seat in 2021. TechCrunch also notices that more and more SaaS companies are shifting to usage-based, not seat-based, pricing. They reference OpenView's annual Financial and Operating Benchmarks survey noting that startups that adopt product-led growth and UBP outperform their peers. With the more recent additional complexity introduced by B2D (D for Developers) models and Data/AI/Intelligence-based products, traditional pricing no longer works for many of us - and how do you even price intelligence as a product per seat?. Tomasz Tunguz breaks down pricing in Per-seat vs. Usage-based scenarios. Bessemer Ventures also reports that UBP sees best-in-class net-dollar retention results.
Speaking of that OpenView report - you can download that here. It's a survey of almost 600 SaaS companies, and it's fantastic, measuring a 2x adoption of usage-based pricing in companies surveyed since they started the study back in 2018. There is also a great slide (#16) with a decision tree to decide if usage-based pricing is right for your business.
Here is a great question: How many employees should you have based on your ARR? David Sacks has a great slide from his SaaStr presentation on optimal SaaS Org Charts - Series A is 40-50 at 1m ARR. Yup, that's only $20-$25k ARR per employee - full report here, which expands into what roles you should hire and how the org chart looks.
We are currently somehow here. The Information wrote a great article almost a year ago on "The 100x Club," a group of SaaS startups raising money at 100x revenue multiples! This is not just a US valuation thing - India's Postman landed in the 100x club earlier this year, and according to Tomasz Tunguz, the 100x club might be the fundraising meme of 2021.
I highly recommend any founder read this three-part deep dive into the equity terms that matter to them - as not all startup equity is equal. 'Dilution' is one of the most feared words- so let's benchmark it - what is the average ownership percentage by SaaS Founders at the time of IPO? Sammy Abdullah takes a review, and the median level of founders ownership is 14% while the average is 23%, with VCs owning about 54% on the median. There is a significant difference in Bootstrapped vs. not in this dataset. As a bonus, take a read of this article from Heavybit that discusses Cap Table management in relation to growth and how to manage that Option Pool.
This is an excellent read on product design centered on discovery - what the author references as "Aha moments" - through a customer journey from first encounters through to deep adoption that focuses on the concept of long-term retention.
Add this doozy of a Portmanteauto your dictionaries and spell checker. You should read that whole article also, as I don't know about you, but the number of tech vendors we use to run our tech business stresses me out, with services flopping in and out all the time! This leads nicely into the article: How Many Technologies Can a Company Adopt at Once? Answer - there is always one more (JK, but not really).
No - this is not a reference to a droid in Star Wars. It's an update to the much referenced T2D3 metric that Neeraj Agarwal of Battery Ventures wrote about back in 2015. T2D3 is an acronym for "triple, triple, double, double, double." It refers not to In-N-Outs secret burger menu but to a company's annualized revenue growth performance path towards becoming a unicorn. T3D3 is the updated version of that acronym: "triple, triple, triple, double, double, double." Jason Lemkin argues that this change is the "cost" in the explosion of valuations and market caps.
Expensify is an overnight success over a decade in the making. It actually took Expensify 13 years to hit 140m ARR but is now growing at 60% year-on-year with only 140 employees (compare that to #4 above) - it's a lean + PLG story.
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