Monday 7 June 2021

SaaStr

SaaStr

Top 10 SaaStr Videos of the Week: YCombinator, G2, Atlassian, Salesloft, Salesforce and More!

Posted: 06 Jun 2021 07:31 AM PDT

There’s so much incredible new content on the SaaStr YouTube Channel and podcast — check it all out here!  And with 20+ sessions from the recent SaaStr Enterprise to dig into alone, as well as an incredible new session with the CEO of Klaviyo.

OK — now on to The Top 10.  The 10 most watched videos of the week.

Let’s dive in!

#1. “The 5 things that kill startups after their seed rounds with Michael Seibel, CEO of Y Combinator”.  A SaaStr Classic and we are super excited Michael is joining us again for a Masterclass at 2021 SaaStr Annual Sep 27-29 in SF Bay Area!!  More here.

#2. “Navigating the CRO and CMO Relationship with G2 and SalesLoft”.  A great new session from SaaStr Annual on how the CRO and CMO really should work together.

#3. “12 Key Levers of SaaS Success with David Skok”.  Another SaaStr Classic, and David is also coming back for a brand new MasterClass at SaaStr Annual!!  Grab tickets here.

#4. “Top 10 Learnings Architecting a High Throughput Critical API with RevenueCat’s CTO”.  Just before closing RevenueCat’s $40m Series B, CTO Miguel Carranza joined us to share how they process more API calls than Stripe.  With a tiny 1/100th the size (or likely less):

#6. “Flywheelin': 10 Learnings from Atlassian's Unique GTM Model”.  A terrific new session with Atlassian’s CRO.  A must watch.

#7.  “How the Future of Workplace Learning Will Increase Employee Productivity by 50% with Spekit’s CEO.”  Spekit is one of the hottest SaaS companies right now and take a look at how employees will learn post-Covid here:

#8. “How Product & Marketing Should Work Together with PagerDuty”.  Another critical topic, PagerDuty’s CMO and CPO share how they work together.

#9. “Bottom Up vs. Top Down Selling in the Enterprise with ThoughtSpot’s CEO”.  Ok this one is also a must watch.  ThoughtSpot’s CEO was previously the CRO at Nutanix, and scaling revenue is his passion.  Bottoms up or Top Down selling?  Here’s how to do better, and when to pick which.

 

#10 How Customer Service Became Strategic Overnight with Salesforce’s CEO for Service Cloud”.  We were incredibly lucky to have Salesforce’s new CEO of Service Cloud join us to share top learnings on Customer Service here.  Clara was also a startup CEO as well so she’s lived it and seen it from all sides and at every stage:

 

The post Top 10 SaaStr Videos of the Week: YCombinator, G2, Atlassian, Salesloft, Salesforce and More! appeared first on SaaStr.

5 Interesting Learnings with ServiceNow, Palantir, and Snowflake

Posted: 06 Jun 2021 07:12 AM PDT

Making it as a SaaS company is difficult, and successfully selling at the enterprise level seems incredibly daunting. But achieving a billion-dollar ARR with a thriving enterprise customer base isn't as unattainable as you may imagine. SaaStr CEO Jason Lemkin shares 5 interesting learnings from  ServiceNow, Palantir, and Snowflake, and explores their secrets to success in the Enterprise.

ServiceNow

Learning 1: There is No Ceiling to Growth. Contrary to long-held beliefs in the SaaS space, growth can be infinite, as evidenced by companies like Shopify and ServiceNow. Says Lemkin, "Even at $5 billion ARR, they [ServiceNow] are still growing at 32%…If nothing else, it's a challenge: The best companies, the best founders always find a way to grow."

Learning 2: There are More Enterprise Customers Out There Than You Think. If you are primarily selling to large enterprise customers, won't you eventually run out of those million-dollar deals? After all, there are only so many behemoth corporations in the world. ServiceNow proves that enterprise lives beyond the Fortune 500. Currently, they have about 1,100 customers at $1 million ACV, and that count is growing by 23%. "It's hard to close big deals. The sales cycles are long; you need to button down security, you need to sell to multiple stakeholders. It's a long slug for a while. But don't let anybody tell you there's not enough of them," Lemkin says. "ServiceNow proves you can get over 1,000 $1 million per year customers if you do something that really matters in the enterprise."

Learning 3: The Key to Growth After $1 Billion ARR is Multiple Products. Your core product will get you very far, but at some point, you must consider offering more product lines to keep enterprise customers invested. ServiceNow began with its core product of IT workflows. But after adding additional workflows and products, they expanded their revenue so that now, that original IT workflow product makes up only 62%. 

Learning 4: Wait to Monetize Your Platform. Sometimes it's best to avoid over-monetization early in the life of your business. ServiceNow waited to monetize partners for years. Become the number one, well-loved product in your space. Eventually, all the customers in your ecosystem will want to build on your platform.  At some point, you will need to monetize, but don't be afraid to give your customers breathing room beforehand.

Learning 5: Shoot For the Highest Logo Retention Possible. ServiceNow has an incredible 99% logo retention rate. Yes, this is extraordinarily uncommon, but take it as a challenge to keep pushing!

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Palantir

Learning 1: Don't Let Concentrated Revenue Worry You. Palantir had quite a journey to a whopping $1 billion ARR. Their secret to success? A core group of customers. 66% of their revenue came from their top 20 clients.  Many SaaS founders might panic at this, but it is ok to have concentrated revenue. As long as you continue to make your customers happy and you work on closing more deals, you can find great success.

Learning 2: You Can Continue to Grow Your Deal Sizes Indefinitely.  After the monumental effort of closing a large contract, you may automatically subscribe to the mentality that the size of the deal has hit its maximum. That is not necessarily the case. Even smaller sales can expand to be massive ones several years down the road. Says Lemkin, "It seems more often that the best cloud companies find a way to keep selling more to the same customers."

Learning 3: The TAM Can Grow Faster After $1 Billion. Defying expectations, Palantir accelerated to 49% growth after $1 billion in ARR in its IPO. For most companies, the initial TAM (Total Addressable Market) is small, but if you build a brand, provide value and leverage a top-notch management team, you can grow your market, as Palantir did. 

Learning 4: Existing Customers Can Fuel the Bulk of Your Growth. The majority of Palantir's growth comes from its existing accounts. Their largest customers have grown 5x since 2012.

Learning 5: Be Who You Are As a Business. Palantir wasn't afraid to take a unique path to their IPO. For many years, they operated as more of a services firm than as a software company. But this approach worked for them. Don't be afraid to lean on services. The lesson here is to be who you are as a company, and success will follow. 

Snowflake

Learning One: Allow Customers to Influence Your Pricing Structure. 93% of Snowflake's revenue is consumption-based, but it still has a SaaS multiple. That means only seven percent was under a fixed contract. This is highly unusual in SaaS: Many companies adopt the Salesforce locked-in, per-seat pricing model. Snowflake's model is totally opposite, but at $600 million ARR and an impressive 115% YOY product revenue growth, it obviously works for them. Lemkin advises, "Do pricing the way customers want to pay. Make them feel comfortable."

Learning 2: Pay Attention to Gross Margins Over Time. Snowflake grapples with high computing and storage costs. Historically, their gross margins were not very high, but now they are growing: Next year, they are projected to be 70%. Get your house in order early. Even if you start out as an outlier, make sure you have similar margins to other companies as you grow.

Learning 3: World-Class NRR Does Not Have to Come Down. Snowflake's NRR is at 162%. Remember that if it comes down, then you need to pay some attention. 

Learning 4: Go Where Your Customers Are. Going global is a critical part of the growth strategy for many SaaS companies. For example, ServiceNow has 36% of customers outside of North America. However, Snowflake takes the opposite approach. It has been slow to grow internationally, with 90% of its 2020 revenue coming from North America.  There is no right or wrong here, as long as you lean into selling where your customers are.

Learning 5: Don't Be Afraid to Sell Beyond Enterprise. On the surface, Snowflake appears to be highly enterprise-oriented. However, they have a long tail of around 3500 smaller-sized clients that also fuel their growth. Don't be afraid to sell to a wide variety of customers to fuel your company's growth.

Key Takeaways

  • Don't accept limits to growth. There are always new ways to make more money from existing customers and new deals to close.
  • To expand revenue, build on your core platform and offer more products for your enterprise customers.
  • Listen to your customers to influence your pricing structure and business model. 
  • Be who you are as a business, and don't let the status quo dictate your decisions.

The post 5 Interesting Learnings with ServiceNow, Palantir, and Snowflake appeared first on SaaStr.

The 5 Simple Reasons So Many Companies Are Leaving the SF Bay Area

Posted: 06 Jun 2021 05:47 AM PDT

Q:  Why are so many companies leaving Silicon Valley?

It's a combination of factors:

  • We've all learned to work as distributed teams now. All of us. And what we're learning is that not only do many employees want to work and live in cheaper parts of the U.S. (and the world), but a lot of them want to work somewhere warm. Many tech employees have moved somewhere warmer than the SF Bay Area.
  • Corporate taxes. Many mature tech companies are moving to Austin or other parts of Texas. Why? State corporate tax there is 0%. Versus 9% in California. That's a quick way to be much more profitable — if you are profitable and can move.
  • Employee taxes. California taxes on employees are up to over 13% at the very high end, and about 10% on average for a tech employee. Versus 0% in Miami or Austin or Seattle.
  • State capital gains taxes. A subtler point, but many states do not tax capital gains at all.  California taxes them at the maximum amount, as ordinary income.  Leave California for the “right” state well before you sell your startup and you make 13.3% more.  That’s a lot.
  • Cheaper to be almost anywhere else.  Not only is housing extremely expensive in the Bay Area, so is office space, even now.  SF proper has come down a little bit, but the rest of the Bay Area really hasn’t.
  • They never really wanted to be in SF Bay Area anyway. This is common with many startups where the founders didn't really want to be in SF Bay Area — they just felt they had to to be competitive. They often don't feel that way anymore, post-Covid.
  • The CEO has left. For tax reasons or otherwise, many CEOs have now left. The CEOs of Snowflake, Dropbox, Oracle, Tesla etc. no longer reside in California. So why should the company? More here.

Most importantly, you now can.  You now can move.  We aren’t chained to the SF Bay Area.  We all know how to work from anywhere after all this.  Should you move?  That’s more complicated.

The SF Bay Area is still the HQ of SaaS. It's just, things are a lot more distributed now.

A related post here.

The post The 5 Simple Reasons So Many Companies Are Leaving the SF Bay Area appeared first on SaaStr.

Layoffs Are Less Common Today After Acquisitions. But Here’s When They Happen.

Posted: 06 Jun 2021 05:25 AM PDT

Q:  After an acquisition, how long before severance packages are offered due to layoffs/downsizing?

Layoffs and downsizing are less common in most tech acquisitions today. Why? Generally, most acquirers have decided its best to commit to mostly leaving teams be, and thus letting them continue mostly as is.

Having said that, even if they are less common, layoffs and other downsizing still happens all the time after acquisitions. There are roughly 3 phases:

  • Right after the acquistion. Oftentimes, it's determined many marketing, finance and sometimes sales professionals are redundant. They're often let go right after an acquisition, sometimes with a severance package.
  • Sometime around Year 1 after the deal or so: after the initial integration is complete. The next time "redundancy" (i hate that term but …) is reviewed is once integration of the acquired company really begins. It often takes about a year to implement an integration plan. This often triggers a review of just who outside engineering is part of the go-forward team.
  • A third review around Year 2 or so: when the acquirer decides how much to invest going forward. Around Year 2, a BigCo typically has to measure the experiment in the acquisition and see how it's performed. This can result in shrinking the team down if it's underperformed, or investing more if it's performed well. Even if the decision is made to invest more, future headcount is often sourced from internal team members and processes. Either way can lead to some original team members being asked to leave in some fashion due either to not meeting expectations, or wanting to further integrate future investment within existing managers and orgs.

After the third review, the acquired product usually isn't seen as acquired anymore. Now it's an organic part of the acquirer. After that, any layoffs are generally just part of standard processes across all parts of the company.

The post Layoffs Are Less Common Today After Acquisitions. But Here’s When They Happen. appeared first on SaaStr.
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