The Simple Reason Startups That Just Raised Millions Are Doing Layoffs; Plus More Weekly News and Updates

Hey SaaStr Community,

What’s happening on Twitter and the internet these days is confusing on many levels.

And one of the most confusing thing is that:

• Many of the best SaaS and Cloud companies
• That are growing really quickly and
• Also just raised massive funding rounds are …
• doing layoffs.

This at first doesn’t sound like it makes sense.

Why would some of the best B2B companies that just recently raised $50m, $100m, $200m+ in just the last year do layoffs? 

The Simple Reason Startups That Just Raised $100s of Millions Are Doing Layoffs

So this year has been rough on SaaS and Cloud stocks, with multiples down 75% from a year ago and the markets overall down 50% or more.

But the impact hasn’t been even.  Leaders like ZoomInfo and Paycom that combine strong growth with strong profits have seen their stock prices stay relatively high, often at 15x ARR still.  And those without both have suffered the most.  

Wix is one.  

Despite crossing $1.4B ARR, it’s trading now at $4.7 Billion. A big number.

So this was an interesting week in terms of reading the tea leaves on what’s going on in SaaS, Cloud, the economy, and all that.  Pressure is definitely up, yet, unemployment remains at record lows and consumer spending remains strong.

eCommerce is Back. Shopify rocketed to 22% growth this quarter, from 16% the prior quarter. In the eComm world, everyone was wondering — when will we get back to normal?  It looks like we have, and we’re over the Covid Hangover in eCommerce. 

But it wasn’t all roses this week in the industry leaders.  The Cloud infra side grew nicely, but growth did slow.

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That they are (mostly) successful.  Most VC partners don’t return 1x in cash what they invest.  It’s hard!  Most VCs you will meet are not successes, at least, not yet.  And even if the VC firm is a success (and many firms aren’t), returns are often driven by just 1 or 2 of the partners in each firm.

That the VCs you know are all “great guys.” Many VCs are good people.  But they are in sales folks.  Grin fracking is very common in VC.  Don’t pick a VC based on who you like.  Pick a VC based on who can help the most, and who won’t throw you under a bus.

Grammarly CEO Brad Hoover shares the keys to unlocking product-led growth in the enterprise through learnings from the company’s 13+ year journey helping 50,000 teams and 30 million individuals refine their writing and accomplish their goals.

So times are tougher for some in SaaS, but not most, and certainly not all.  I’d roughly say 20% are growing even faster than earlier in the year, 20% are having a tough time, and 60% are somewhere in the middle.

But whether it’s not or later, you are eventually going to have tougher times.

Here’s one big mistake I see all the time, though.  Folks aggregate performance.

 In sales in particular, I usually see even more bifurcated performance in tougher times.

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• SaaStr 601: What It Takes to Forge Your Own Category with Braze Co-Founder and CEO Bill Magnuson

• SaaStr 602: Secrets To Combining PLG and Enterprise Sales with Grammarly CEO Brad Hoover
• SaaStr 603: SaaStr CRO Confidential Presents the Ultimate Guide to Sales Compensation, Quotas and Recruiting with SaaStr CEO and Founder, Jason Lemkin. Hosted by Sam Blond, Partner at Founders Fund

Listen on Apple Podcast, Google Podcasts or Spotify

I now have bandwidth to do 2 venture investments by Jan 31, $750k-$4m

If that’s you, just please email me as many details as possible

When I'm back in the Bay Area, I see how much more successful I could be. Could have been. Could still be. Smell it. It's all around.

When outside of Bay Area, pretty darn content.

This hasn't changed.

Raising VC money, it’s better to be growing 150% at $2m ARR than 50% at $20m ARR

Even though you’ve accomplished 1/10th as much

Hard to grok at first but it’s just a fact

I sort of hate the “vitamin vs. painkiller” distinction in SaaS

Yes, I get some apps are more must-have’s than others, but IMHE, the best apps often >evolve< into must-haves

But in today’s world, it seems like SaaS apps that are nice-to-haves are the ones struggling to grow

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