Which Customer Segments are Healthiest During the Downturn?
Tomasz TunguzVenture Capitalist If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here. Which Customer Segments are Healthiest During the Downturn?
In CloudFlare’s latest earnings report, the management team highlighted the strength of enterprise buyers within their customer base. I wondered if this were broadly true. Do public software companies with largely enterprise customer bases benefit from superior growth to their peers with mid-market or SMB focuses?
Enterprise & Mid-Market public companies have seen a relatively constant decline in growth rates through the last six years. SMB businesses benefited from a post-Covid surge when the US re-opened - a phenomenon that seems to abate with time.
Product-Led companies continue to outpace Sales-Led Companies in growth. However, PLG suffered a 9 percentage point drop in growth rate in Q2. Segmenting the population by growth rate yields the same conclusion. Low growth is < 15%, Medium growth is 15 - 30%, High growth is 30%+. The behavior across buyer sizes parallels each other. The data so far suggests the economic slowdown has struck across the industry similarly. Variations will surely emerge between competitors as a result of differences in product, execution, or strategy. But no one is immune. Something to consider for 2023 planning. |
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