Hey SaaStr Community,

A lot has changed in SaaS. 

And there's a few things that are just much harder now than before.

First, you have to go twice as far on each dollar of venture capital as in 2021.

With public market valuations down 70%+ from their peaks, for startups, that means going twice as far on each dollar. 

And Gross margins matter again. 

In the peak of 2021, no one cared if your gross margins were 20% or 80%. Now, they care again. So pseudo-SaaS products and other products with lower gross margins are commanding much lower valuations.

Plus, it’s 3x-5x harder to raise a Series A, and 4x-10x harder to raise a Series B, C or D, than it was at the peak.

With public decacorns now mostly unicorns, that means it’s just harder and harder to raise rounds after the seed stage.

So folks in venture are back to business. 2022 was a year of dealing with the fallout of fallen unicorns, terrible deals, and slashed valuations. It was tough in venture for many, but it is behind us.

And as a result, venture is back to work.

This seed markets remain vibrant, and later stage investors are looking at more deals.

But … but … here’s the thing.

A reality has set in.

It’s Year 2 of the Venture Downturn in SaaS.

That’s OK, everyone has adjusted.  But it also means optimism has seeped out of the market.

So few Cloud software companies have had a more interesting history than UiPath. It took them a full 10 years to get to $1m in ARR (!).

And then after that, explosion.  

Robotic Process Automation took off, and they rocketed toward $1 Billion in ARR. Growth then slower after a take-off like we’ve almost never seen before.

So now it’s a new world, where profitable growth is what’s valued.

And UiPath?

It’s kept up, and evolved.  After its last quarter, it traded up, unlike so many of its peers.  

Why?  

Solid 12% currency growth at $1.2 Billion in ARR, and most importantly, 30% growth its recurring revenue business — and now, 22% non-GAAP operating margins.

UiPath has now generated $100 million in free cash flow last quarter. Wall Street is happy to trade somewhat slower growth if it’s paired with even non-GAAP profits and material free cash flow.

If you haven’t done enterprise sales before, the biggest thing to understand: you can do it.

But, you’re going to have to hustle.

Really, really hustle.

Many founders want the customers and leads and users to come to them.

They want to focus on the product, then on the funnel, A/B testing, optimization, SEO, SEM, etc. etc.

That’s all great, and for self-service business, that’s most of it.

But for enterprise sales, you’re going to have to get your arse out of your home office and go close some real live human beings.

Listen — often in person. That often includes flying somewhere. It may include flying a lot of places, in fact, that you don’t really want to go.

Learn your prospects’ business processes in detail, and how your product enhances them. If this is boring to you, you will fail.

Learn how your potential customers will excel in their companies through your product. How can you help the career of the person buying your product? It’s not just about your fabulous UI/UX.

Yes, it did seem like in the old days, VCs replaced founder CEOs pretty often.  It happened at Apple, Google, Cisco, and more. 

But it’s rare these days.

In fact, ~90% of SaaS companies that IPO still have their founder as CEO!

And when founders do step down as CEO these days, most often I see it as voluntary, when the company really hits scale and the founders know they’ve personally hit a wall they can’t scale past.

But is still does happen sometimes. 

Founders get replaced as CEO by their VCs.  But it’s rare in SaaS these days.

For at least 4 reasons.

We never know how many people exactly will come to our events, but we do have a decade of data now.  But the world is different now, and folk seem to be waiting more to the last minute to buy event tickets.

Whatever we end up at SaaStr Europa 2023 in London 6-7 June … it will be even bigger than last year in Barcelona!

Protect your business against lost revenue, compromised customer confidence, and reduced competitive advantage.

Sign up for hCaptcha Enterprise’s complimentary traffic analysis to uncover the fraud and abuse that is targeting your company. 

Back in the early 2000s, people didn’t entirely accept that a virtual machine could be as good as a physical one. Of course, we all know how that turned out. 

Ed Lenta, the SVP and GM of Databricks, had the rare opportunity of scaling three hypergrowth companies — VMware, AWS, and Databricks. All of which were disruptors when they first came on the scene.

Is there a recipe or formula that will predict the success of a pre-growth, high-potential company? Lenta shares his lessons learned through scaling these early-stage companies, so you can too. 

Drata is looking for a Sales Development Manager who will be responsible with leading a team of SDRs to create qualified opportunities for the sales-team. You will inspire individuals and motivate a team to exceed objectives through regular coaching, feedback, and mentorship.

Domo is seeking an Account Executive to create and drive revenue within a specific region or a list of accounts, as well as create consultative partnerships with customers.

• SaaStr 645: Why GUIDEcx is Betting Big on In-Person Events with SaaStr Head of Partnerships Poya Osgouei and GUIDEcx Co-Founder and VP of Sales Todd White

• SaaStr 644: Lessons Learned in Scaling Early-Stage to Hyper-Growth Companies with Databricks SVP and GM Ed Lenta

• SaaStr 643: What's Holding Up Buyers with G2's VP - Asia Pacific, Chris Perrine

Listen on Apple Podcast, Google Podcasts or Spotify

If you have less than 7-8 sales reps and your VP of Sales is spending a ton of time on their dashboards,

You made a mis-hire.

Generally, I think venture in SaaS will continue to slow down the next few months

Stability is back in venture

But optimism isn't

Folks have mostly given up hope that SaaS multiples will reflate

If you think something “doesn’t work” at your startup, e.g.:

- outbound

- webinars

- a traditional VP of Sales

- SEO - events

- going upmarket

- pilots

- RFPs

- partnerships

- etc.

It’s because you haven’t hired someone great at it

© SaaStr 2023

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