Every Venture Backed Startup is Now Competing for Reserves; Plus Weekly SaaS News and Updates

Hey SaaStr Community,

So much has changed in venture capital since the start of the year, and many founders don’t fully understand it.  It’s just a radically different business than it was in January.  And founders don’t really need to understand all the changes in venture capital.  But they should understand some.

One is the concept of “reserves”, which is super important to VCs, but not something founders usually need to understand in The Best of Times.

Because in the Best of Times, there’s always more money to invest in top performers — and even mid-pack performers.  Money almost always comes from somewhere to write second and third checks into the winners.

But in tougher times, really in more stressful times in venture (like right now) … that money for second and third checks almost disappears.

Few SaaS leaders have gone through more post-pandemic change than Shopify and Zoom. Zoom came out of 2020-2021 with SMBs no longer growing, but a huge boost in the enterprise.  

And Shopify came out of all this still growing, but not nearly as much as any of us expected at peak Covid. Not due to lack of execution, but due to a rapid return to on-site and IRL shopping.

And with that, some of the most torrid growth we’ve ever seen … when Shopify went from $1.6B ARR to $3.2B ARR in just one (!) year … returned to a bumpy normal at $5B in ARR.

So, recently, I’ve had a few somewhat frustrating experiences with a few apps we use, or at least, have tried to use. I used them as a case study to learn from.

Now, none of these products were so expensive that the fact that we “overpaid” was going to break the bank.  I dug in as much to learn about how customer success and other teams deal with these issues nowadays than anything.  And looking back, as a SaaS CEO, I didn’t really dig in enough on these issues myself.  I should have.

This edition of the SaaStr weekly is sponsored in part by DuploCloud

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Don't miss the #1 place to be this year in SaaS.

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So are we in a downturn in SaaS?  Certainly, segments are.  eCommerce, video, and more are having post-crazy growth hangovers.  And inflation is awful.  And startups that had planned on a big up round this year are in many cases, really struggling.

But where is SaaS really today?  Plenty of folks are doing quite well.  Let’s take a look at a few great examples just from this week.

Businesses can use many methods to improve their profitability—all of which require tracking operational performance rigorously. The fact is that increasing profit does not happen without paying attention to business metrics.

The right business metrics not only help you accomplish your business objectives but will also help you know what areas are exceeding expectations and the areas that are falling short.

This edition of the SaaStr weekly is sponsored in part by Laika

• Whatfix is looking for a Director, Customer Marketing to be responsible for strategic customer advocacy marketing, retention, and cross-sell programs to drive adoption, loyalty, advocacy, and growth - and oversee the team that runs the programs end-to-end, from ideation to execution.

• Secureframe is seeking a Senior Growth Marketing Manager to drive the acquisition of prospects through all our inbound channels. You will be responsible for constantly testing and optimizing all our conversion-oriented landing pages, web programs, lead handoffs, and new initiatives around acquisition.

• SaaStr 577: Scaling Faster, An AMA with SaaStr Founder & CEO Jason Lemkin
• SaaStr 578: The Metrics that Matter, Whether You Are Raising $1 Million or $100 Million with Index Ventures Partner Molly Alter
• SaaStr 579: Why Event Marketing Matters Even More Than Before & The Future Of Events with SaaStr CEO Jason Lemkin

Listen on Apple Podcast, Google Podcasts or Spotify

Most startups will spend more on 4 great offsites a year than 1 office would cost

But you gotta do it

Distributed isn't about saving money

Investments I've made that didn't work out:

- Momentum investment

- CEO a bit of bulls**t artist

- CEO good at sales but weak product team / CTO

Investments I've made that had so-so outcomes:

- CEO not better than me

- CEO couldn't control burn rate

- Not really SaaS

Downturns last a fraction of the time of upturns

You just have to power through them

Feels to me:

1/ Venture downturn worse than I expected

2/ Multiples feel like could remain lower than I expected

But ... but

3/ Interest rates + inflation likely falling

4/ Many in SaaS growing at insane rates

So

5/ Venture likely to roar back in next 6-9 months

© SaaStr 2022

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