My SaaStr 2016 notes

Mykel Nahorniak
Feb 15, 2016 · 6 min read

A man walking around in stilts dressed in a Beetlejuice suit reminded me that I wasn’t at just any old conference. It’s not every day that an event after party has “CAC,” “MRR” and “LTV” projected on the walls above Mix Master Mike.

I ended the last day of SaaStr feeling validated about what we’re doing. I’m excited that companies like ours are what stand out; that manufactured growth is being seen for what it is by investors: superficial success.

What follows are the high-level takeaways I consolidated from all the sessions I attended. While the material covered was largely SaaS 101, I did manage to get some valuable tidbits; those are marked in bold.

DAY 1

  • End-user NPS is the leading indicator for long-term growth.
  • What “inning” are we in for the “SaaSification” of the world? First or second. Super early days.
  • Early on, don’t make the mistake of saying “yes” to everything. To borrow the Derek Sivers quote, it should be “hell yes, or no.”
  • A good product has features that focus on removing as many barriers as possible to get to the “delightful state” of the customer.
  • Test a [marketing/sales] campaign to its extreme limit to see how far you can push it manually to stay lean, then institute ops to automate when it’s proven.
  • In enterprise, marketing alone will not convert. Sales must do the final close.
  • “Growth at all costs” is a sentiment that is changing among software companies.
  • If competition punches you in the nose, you need to punch back, not fly under the radar as a “nice” company.
  • Let’s say competition raises money to clone you; how do you deal with that? There are times when you solve problems with lots of capital. There are times when you need smart thinking at a smaller scale to solve problems. Lots of competitors will think throwing money at the problem is what wins. They can spend a TON to acquire a customer, but it will be manufactured growth. If it’s not a good product, churn will prevent the company from ever becoming sustainable. It comes down to unit economics. If CAC, CAC payback, and LTV are all out of whack, the competition won’t stick around.
  • In short, focus on CAC at all costs.
  • Make individual products integrate so tightly that the user feels like it’s just one big product.
  • On McKinsey’s Three Horizons principle: HORIZON 1: Easy, lots of scaling capital. HORIZON 2: “Learning” projects, a developer’s idea with some capital to explore it. HORIZON 3: The smartest people in the company in a “think tank,” no capital dedicated to it. Dedicate 25% of development team to this.
  • A coding CEO should still code as a therapeutic release, but it should not necessarily be where innovation comes from. This is different than a VP of Product CEO, where innovation can come from.
  • Product goal: Make the product even better than the customer imagined.
  • 3–6 days per quarter: have in-person meetings with customers to check in.
  • Focus on revenue churn, not just customer count churn.
  • Try to align the incentives of the customer with the incentives of the company.
  • Having competition is good. Oracle didn’t take off until IBM said they had built a relational database system.
  • Other competitors with revenue. Did they buy it, or build it? If they only buy, they have no internal ability to create/innovate, and won’t hurt what we’re trying to do.
  • Book to read: Traction.
  • Book to read: Lean Customer Development.
  • “You don’t want the base layer of a cake [large, unfinished product]; you want a cupcake [small, finished product].”
  • What other tech do our customers use? How do we integrate with that?
  • 20 employees: your company transitions from a family to village.
  • Whenever new people get added to the village, convince the engineering team that it’s about aspirational truth, not actual truth. Actual truth can bog people down and lower morale. It’s about where we want to go, not where we are today.
  • Scale the big picture message in the team. Transition from 1:1 communication to a systemic approach. Product people care about what will be built. Business people care about why.
  • Executive accountability comes from visibility and communication. “Team, [executive] is responsible for [project] and will be keeping us up to date on its progress.”
  • Scale = consistent product delivery, not quality product delivery.
  • Use data to avoid politics from being introduced.
  • “Processizers” worry about what could go wrong, and strategize on process to avoid them. A good balance for those that are more opportunistic.
  • Asking customers to make a huge, ‘religious’ transformation is tough.
  • Creating your own category is expensive.
  • How close are you to categories that exist? If already very close, just align your company with that.
  • Lead generator: Make a small tool that addresses ANY small problem that the prospect has that gets them to need you, and create buy-in for what you’re doing.
  • Absence of cancellation does not equal customer delight.
  • Don’t ask people what they think. Measure what they do [using apps like Mixpanel, etc.].
  • You can track non-usage, you should also track “unhappy, but engaged” users.
  • In V2MOM, emphasize the last M.

DAY 2

  • The process is the “caddy,” it’s up to the sales rep to swing the club.
  • Inbound (marketing) doesn’t guarantee that the people coming in _should_ be our customers.
  • Prospects: measure their disposition: 1) potential customer now, 2) potential customer not now, 3) not a potential customer.
  • Good SaaS companies get bought, not sold.
  • RE: Any acquisition, you need to build a relationship with the acquirer years in advance.
  • M+A firms are useless. They are good when you are selling, because they help you track down a buyer. But if you’re selling, something is wrong with your company, and you will get pennies on the dollar.
  • With potential investors, acquirers, etc. If you’re not transparent about revenues, metrics, etc., you’ll just get taken off their list. Nobody cares.
  • Series A average deal size: 10.5mm.
  • 163K MRR: minimum to raise Series A.
  • Series B: Next 12 month rev * 15 = pre-money valuation.
  • Current SaaS valuation revenue multiple: 4.2x.
  • Investors are weighing sustainability over other factors in the future.
  • Customer acquisition strategies: 60/40 inbound/outbound. Content works for SMB only. Facebook retargeting. Channel partnerships.
  • Just being SaaS is no longer enough to be differentiated.
  • Eventually, lead forms will be replaced with chat (content downloads, etc.). To scale, you start with humans, catalog all the common Q&As, then automate with a chat bot.
  • 90mm blue collar workers in the US. Whoever figures out how to deliver/distribute to these people will win the space.
  • SaaS KPIs (metrics to optimize to keep a company healthy. “The Pillars”): growth, profitability, cash.
  • Useful chart: cumulative cashflow.
  • Negative customer revenue churn: focus on this to eliminate customer count churn.
  • Customer ACV = CAC maximum.
  • Primary unit of growth: adding a sales person.
  • Best in class sales team: (Per rep OTE) < 5X (Rep revenue quota).
  • Key drivers of SaaS success: reduce CAC, increase LTV.
  • 130% dollar retention rate = best-in-class negative revenue churn.
  • Customer on-boarding process is key for retention. The first impression is everything.
  • Gross margin: essentially the CAC formula AFTER they become customers.
  • At 10mm ARR — 300% YoY growth to be considered best-in-class SaaS company.
  • 5Cs of cloud computing (bvp.com/cloud): CARR, CAC payback, Churn, CLTV/CAC, Cashflow.

DAY 3

  • In areas where you’re inventing a category, you teach while selling.
  • Gainsight taught prospects what “customer success” actually was.
  • With teaching, use ROI mappings first, then early customer advocates.
  • Eventually: events (user conference, industry leader conference, etc.).
  • Create a community around your products.
  • Create a customer awards program, rewarding customers that are great examples of your product.
  • When interviewing execs, interview five before making a decision.
  • Interview candidates of a particular type until there’s “no new anything.” No new questions, no answers you haven’t heard before, etc.
  • Strive for 50% internal promotion, 50% external hiring. Ultimate message: if you do a good job, you will advance.

Mykel Nahorniak

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My blog moved away from Medium. It’s now at http://mykel.org/blog

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