Acquisition, retention, expansion: Why SaaS founders must understand GDR and NDR

Welcome to TechCrunch+ Friday

Investors have raised expectations around SaaS profitability and growth since the downturn began.

As a result, it’s even more important for founders to have a firm handle on the key metrics VCs are likely to consider before saying “yes” or “no.”

In his latest TC+ article, Paris Heymann (partner, Index Ventures), shares formulas for calculating Gross Dollar Retention and Net Dollar Retention, two KPIs that provide deep insights into the health of your business. For context, he also included GDR and NDR benchmarks for enterprise and SMB.

“Predictable businesses are more durable, easier to manage, and typically rewarded with higher valuations than unpredictable ones,” writes Heymann.

Depending on the market, landing a new customer can be 5-25 times more expensive than retaining an existing one.

Bearing that in mind, listing more logos on your customer page isn’t just good for morale: it also creates “increased conviction around investing to fuel future growth.”

Thanks for reading,

Walter Thompson
Editorial Manager, TechCrunch+
@yourprotagonist

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Down rounds are a 'ticket to try again,' says founder who raised 3 in a row

Just as a rising tide lifts all boats, a sustained drought is an exercise in humility for yacht owners and kayakers alike.

According to Carta, “the number of down rounds had nearly quadrupled in Q1 2023 compared to the same time last year,” writes Rebecca Szkutak.

With valuations falling, founders who accept down rounds no longer have the taint of failure, said Russ Wilcox, a partner at Pillar VC.

“When you set a $700 million valuation, it looks like you’re winning somehow and you’re not being diluted, but actually, you just raised the bar so high,” he said.

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TechCrunch Disrupt 2023

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Come to San Francisco from September 19 - 21 to learn something new and network with other founders and investors.

Early Bird sale ends May 12

Four investors explain why AI ethics can't be an afterthought

Because AI requires human input, it is inherently susceptible to bias.

Given its potential to transform so many aspects of how we work and live, “some onus lies on investors to make sure these new technologies are being built by founders with ethics in mind,” writes Dominic Madori-Davis.

She interviewed four investors to get their thoughts on empathy, building equitable systems and “how founders can be encouraged to think more about… doing the right thing.”

• Alexis Alston, principal, Lightship Capital
• Justyn Hornor, angel investor and serial founder
• Deep Nishar, managing director, General Catalyst
• Henri Pierre-Jacques, co-founder and managing partner, Harlem Capital

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Pitch Deck Teardown: The Perfect Pitch Deck

In his latest outing, Haje Jan Kamps revisited a seed deck he covered last year by Supliful to see how it might be improved.

“Okay, we didn’t quite get it 100% perfect,” he writes. “There are still some issues, and in this post, we will take them apart to learn what could be improved and how we’d do that.”

Slides 1-5 are in front of the paywall:

• Cover
• Traction
• Summary
• Problem
• What makes a great CPG brand
• Solution
• Product
• Case study
• Business model
• Market
• Predicate businesses
• Competitor
• Testimonial
• Team
• Ask
• Operating plan
• Closing

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Ask Sophie: Will I be allowed into the U.S. if my passport expires in 5 months?

Dear Sophie,

I founded a startup in Zimbabwe a few years ago. I planned to visit the United States for the first time next month to check out the market and applied for a visitor visa.

I’m planning to stay in the U.S. for a couple of months, but I just realized that my passport expires in September. I understand that I need to have at least six months left on my passport in order to travel to the United States.

Is that (still) true? Do I need to delay my trip?

— Hopeful in Harare

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Have seed deals come back down to earth? It's hard to tell.

There’s statistical data, and then there’s anecdotal evidence.

According to PitchBook and Carta, median seed-stage pre-money valuations and deal sizes grew between Q4 2022 and Q1 2023, even though it “was the slowest period for seed deals in 10 quarters,” reports Rebecca Szkutak.

At the same time, “several seed investors have told TechCrunch+ they’ve seen a drop in outreach for seed deals and have seen valuations soften.”

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This week on Equity

Natasha Mascarenhas interviewed ClassDojo founder Sam Chaudhary and Chris Farmer, the founder and CEO of SignalFire, a venture firm that recently announced a $900 million fund.

Topics they discussed include:

• What an outsider advantage looks like in startups
• Why ClassDojo doesn’t see itself as an edtech company
• How Sam landed early traction with a difficult-to-capture consumer

New episodes drop at 7:00 a.m. PT every Monday, Wednesday and Friday: subscribe on Apple Podcasts, Overcast, or Spotify.

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Down rounds are prevailing as power shifts to VCs again

My hot take on down rounds: when you consider the alternative, they’re just fine.

Reasonable people can agree that startup valuations have been overvalued for years. I’m not an economist, but this seems more like a market correction than the start of a bleak winter.

Even so, Alex Wilhelm reports that down rounds “accounted for nearly one-fifth of all venture investments Carta saw in the first quarter.”

“I don’t see any reason for this trend to suddenly arrest, let alone reverse,” he writes.

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