This presentation uncovers a common misconception in fast growing SaaS businesses. Revenue reigns over everything. We talk about what really matters in building a sustainable SaaS company.
10. Not-so-Fictional SaaS Co. – Year 1 Recap
• From almost zero to $1.1M in ARR
• Mostly organic MRR growth
• Quick Ratio hovering around 4
• Negative Churn
👍
👍
👍
👍
Series A Likelihood > 90%
18. Not-so-Fictional SaaS Co. – Year 1 to 3 Recap
• From $1.1M to $9.4M
• But it took 20 sales people
• Expansion revenue offset by churned revenue
• Quick Ratio hovering around 2
• High Gross Churn & Positive Net Churn
• $1M/month of burn!
👍
Vanity Metrics Suggest Series B Likelihood > 90%
Underlying Metrics Suggest
👎
👎
👎
👎
🆘
👎 👎
19.
20. How do we make sense of this?
• Product-market fit happens one customer at a time one
month at a time.
• Mostly ignored any product-market fit metrics
• Churn/Expansion/Contraction MRR is a lagging indicator
of product-market fit
• How could you have seen it? By focusing on a leading
indicator of the MRR decision...
21.
22. Find your North Star
• MRR is the price that the customer pays, the North Star is the
value that they get.
• Your North Star measures the value you deliver!
23. North Star Metric: For example - DAU/MAU
What Company is this?
25%
30%
35%
40%
45%
50%
55%
60%
65%
M1 M2 M3 M4 M5 M6 M7 M8 M9 M10M11M12M13M14M15M16M17M18M19M20M21M22M23M24M25M26M27M28M29M30M31M32M33M34M35
28. What’s a good or bad North Star?
• Bad: Mostly measuring price paid as opposed to value
delivered
• MRR, paid seats
• Good: Measures value delivered in bulk
• MAU, DAU, messages sent
• Better: Unquestionably indicates Product Market fit has
been reached with the customer
• Number of users with L28>=16
• Messages sent w/in 30 days of signup
29. # of file actions
DAU/MAU
# of Customer Interactions
WAU/MAU
Pitches Viewed
DAU/MAU
Hires made
WAU/MAU
User App - Pairs
Apps signed onto per DAU
Apps monitored per user
MAUs
Other North Star Metrics
30. Value Delivered > Price Paid (MRR)
• Understand your MRR growth accounting
• Even though it’s likely a lagging indicator
• Focus on value delivered, not price paid or the
efficiency of the sales machine that got them to pay
• Find your North Star
38. What does this mean?
• New Revenue barely makes up for your churned revenue
• Lack of new funding require sacrifices - product development
gets starved
• Less competitive product means it becomes harder to add new
customers and more churn
• Hard to retain talent
• And you enter a vicious cycle…