Top 10 in Tech - What to know for Week ending October 11, 2024

SaaS METRIC OF THE WEEK: Churn.

See #2 for more on Churn. According to CatchJS, though, we're all calculating churn rates wrong. If you love Statistics, the article is well worth reading. It even gives some Python code to perform the more complicated probability-based equation they recommend. You can then check this tool(as a handy Google Sheet) from Newfund to analyze the strength of revenue streams for any B2B startup. A complimentary article outlining the methodology behind the tool is here (and you should read it first).

CHURN

See #1 above; it's the ultimate leaky bucket. BVP's guide on tackling customer churn explains how to identify root causes and implement strategies to reduce attrition (that can be terminal). Analyzing churn data, improving customer onboarding, and enhancing product value to retain users are all in there. The guide also provides actionable steps for creating a comprehensive churn action plan to plug those leaks.

VENTURE

CBInsights has just released its Q3'24 State of Venture Report. They see more drops in funding, declining to $54.7B globally from $68.1B last Q (and the lowest amount on the chart), with Deal activity also down to 6,056 (from 6,736). Mega-Rounds prop things up (39% of total funding), and this will 100% bleed into this Q thanks to OpenAI's monster round last week as it plans not to be a non-profit - for much longer. The U.S. still leads regionally with over 50% share with $29.8B (across 2,176 deals, so the average deal size is also bigger).

PUBLIC CLOUD

Jamin Ball from Clouded Judgment gives the end of Q2 '24 public cloud software earnings analysis in this post and it's mixed results. While net new ARR improved from Q1, it's still down from Q2 '23. About 90% of companies beat Q2 estimates, (median + 1.6%) but only 55% of companies raised their Q3 guidance.

HYPERFUNCTIONAL SAAS

This is a new concept for me this week (but pulled from a talk at last year's SaaStr); traditional SaaS models are evolving, and "hyperfunctional SaaS" is representative of that. Jason Lemkin expands on this via this year's SaaStr, and it is where customers now expect multiple capabilities rolled into one seamless experience that helps them do specific tasks better. Examples are Figma, Notion, and Slack, which prove that some of the future of SaaS (outside of AI and Verticalization) may lie in specialization over broad horizontal solutions.

AI 1/2

Adding this footnote from above. Patrick Collison from Stripe looked at their customer data and noted that (well at least currently anyway) not only are AI-native businesses being built in large numbers, but that they're actually growing meaningfully faster than the fastest-growing SaaS cousins.

AI 2/2

According to Tomasz Tunguz, the AI Native companies mentioned above are spending more (on AI-driven innovation - duh!), and he argues that to remain competitive, other companies must follow suit. He notes that companies are significantly increasing their AI budgets as the technology is set to deliver huge ROI across all kinds of industries and niches.

GROWTH 1/2

Testing new tactics for marketing growth takes a lot of resources, and most of us often don't have much time for running experiments? So check this Google Doc from Dashly, where they collected 100 growth marketing hypotheses tested by a bunch of their experts. (includes advert retargeting, wait list for product launches, niche glossaries, etc.)

GROWTH 2/2

According to Mostly Metrics, companies and deals with ACV in the $50K to $100K deal range are feeling the heat right now as they are caught in the crosshairs of CFOs being tasked with cutting budgets. I'm feeling judged. The data shows that enterprise purchases are stickier due to their complex implementation and high switching costs, while SMB purchases fly under the radar.

CASE STUDY

HubSpot and Shopify have deep SMB roots but have also moved up into Enterprise. Both companies continue to cater to SMBs (critical to their growth engines). But the balancing act is diversifying revenue streams (and ACVs) while maintaining product and service flexibility to serve both ends of the customer spectrum.