The Latest from SaaStr: $18 Billion of SaaS M&A During A Banking Crisis

So does SaaS take time off?

It sure doesn’t. The customers still buy, even during the toughest times.  Businesses still run.  And even Private Equity and buy-outs stay on track.

We had 3 big ones this week:

• Qualtrics is going private at a $12.5B valuation
• Cvent is going private again at a $4.5B valuation
• Momentive is going private at $1.5B valuation

There’s a lot to talk about in customer success about churn, and about upsells.  Together, they are one of the most critical topics in recurring revenue business models.

To all that, I wanted to add one very tactical insight:  of the 1000s of customers we closed when I was running Adobe Sign / EchoSign … while we lost a few over time for many reasons, indeed we lost some great customers …

we never lost a single one I actually visited.

At least not on my watch.  Not one.

Why is that? Was it my scintillating conversation?  My electric personality?  No, and no.

It’s because we generally, naturally, misunderstand why we lose customers, and where to spend our time.

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A rough structure from 1–25 sales reps:

Early days:

• CEO acts as VP of Sales.
• CEO hires 2 reps, in the beginning, each barely pays for themselves, but by months 4–6 they are able to close 3x or more of their total compensation.
• Once 2+ reps can do 3x-5x their comp, the model gets pretty efficient.
• Sometimes, a CEO enjoys outbound (or at least is decent at it) and hires 1-2 or more SDRs themself and directly manages them.  But most founder CEOs don’t have the background or patience to do this.

Then:

• Have to scale from reps 3–8 or so. CEO often struggles to manage so many directly, trains them poorly.
• CEO starts looking for true VP of Sales by $1m ARR, ideally hires one by $1m-$2m in ARR.
• VP of Sales hires next 5–10 reps herself.
• If VP of Sales is good, most of reps 5-10 perform.  If VP of Sales is weak, these later reps all fail compared to the first 2 reps that hit quota that the CEO hired.
• If the VP of Sales is good at outbound, they also start to build an SDR team here.  You really can’t start too early if you are good at outbound.  It almost always works — done right.

Buying software has changed significantly over the past 27 years. Despite the economic headwinds we’ve seen, buyers still buy a lot. The average mid-size company has 111 SaaS applications.

By next quarter, that’s estimated to rise to 119.

Of course, companies are experiencing some economic impact, and average spend is coming down slightly. Chris Perrine, the Vice President of G2, Asia Pacific, shares what’s holding up buyers in today’s economy and how you can meet them where they are.

This edition of the SaaStr Daily is sponsored in part by MERGE

Merge’s Unified API allows you to access 150+ integrations across HR, payroll, ATS, accounting, CRM, and ticketing systems.

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