Hey SaaStr Community,

I can be slow sometimes, but it’s taken me a while to understand what’s >different< in SaaS in 2023.

Budgets are tighter, but SaaS is still growing, folks are still buying more software than ever.

Here’s what’s different: 2023 is the first time SaaS itself got harder since 2005.

SaaS has never been truly easy outside of a window from mid-2020 to late 2021 But every year, it got easier and easier. Not easy, but easier and easier.

There was a bump in 2016, a Flash Crash in SaaS, when budgets were slashed, but it didn’t last long enough to really impact renewal cycles.  SaaS markets had fully recovered later that year.

Even the 2008-2009 downturn, while truly brutal, didn’t hit SaaS as hard as the rest of the economy. The best of us kept growing, albeit with elevated churn through 2010.

So it’s tougher out there for many of us, but many Cloud and SaaS leaders are still growing at epic rates, even if not quite at the torrid rates of 2021.

SaaStr favorite Monday.com is one of them. 

It’s crossed $640,000,000 in ARR, growing a stunning 50%!  Wow.

5 Interesting Learnings:

#1.  $50k+ Customers (Their “Enterprise” Customers) Are Growing the Fastest, at 75%.  Like Asana, Monday’s biggest customers are its fastest-growing segment.  That doesn’t mean huge enterprise customers, but here it’s their $50k+ ACV ones, which now represent 28% of revenue, up from 22% just a year ago.  That’s a fast tilt to being more upmarket.

This edition of the SaaStr Weekly is sponsored in part by Secureframe

Secureframe makes it easy to get SOC 2 compliant. With guided workflows and one-click integrations, the entire process is automated.

There are two great SaaS companies I’m working with right now. 

Both have a sales-driven process, selling to SMBs.  Both have a CAC payback that is very short — around 90 days.  Both have roughly the same number of employees (roughly 50).

One is cash-flow positive.  The other is burning a ton of cash.  A ton.

How can that be?  What are the differences between these 2 seemingly similar SaaS startups selling to SMBs?

Churn.  The higher the churn, the lower your CAC needs to be to survive.

NRR.  The cash-flow positive one has 130% NRR from SMBs and has several years of existing customers to renew.  Renewals and 130%+ NRR are very cost-effective drivers of cash flow.  It just takes a few years for the power of renewals and a high NRR to really kick in.

CLTV Measurement.  Each of these two startups measures CLTV value differently.  Do you include upsells in Year 1?  Projected revenue?  This can flatter your CAC metrics.

Including — or not including — customers also acquired for free, in your CAC measurement.  If you include customers acquired outside of paid spend, the blended CAC goes way down!

So leading growth stage VC Iconiq has published its latest and very detailed Definitive Guide to Sales Compensation.

It’s very detailed and oriented more toward growth-stage scale-ups — but it’s excellent.  Everyone should have a read.

My top take-aways:

#1.   Yes, 50/50 Base/Variable for AEs remains the standard, and 4x-5x+ Quota:OTE ratio remains the standard.  Corners were cut in the boom times of 2021, but we are back to sane sales models.  Enterprise Quota:OTE ratios are higher (5x+), SMB is a bit lower, but at the end of the day, you need to close 4x-5x what you take home.

#2.  Renewals, if they are done by sales, are paid out at about 40% of an initial commission.  A complex topic here of when it makes sense to have sales involved in renewals, but helpful to see they get about 40% of the commission of a new deal.

This edition of the SaaStr Weekly is sponsored in part by Hubilo

So what makes B2B content stand out and make people slow their scroll? Raj Sarkar, startup advisor at Sequoia Capital and a long-time CMO, shares tried & true steps on how to create viral and growth-producing content.

Sign up and learn how to create B2B content that drives growth for your business.

So ChartMogul pulled together some nice data and statistics across its 2,100 SaaS customers and users for its 2023 Benchmarks report.

My favorite Part is this one, that tracks how Top Quartile SaaS companies have grown the past few years.

What it shows it what we all sort of know, but puts specifics on it. 

The crazy growth of the 2020-2021 period peaked in Q1’21, and then just started falling right after that.

Like a rock.

Today, top quartile SaaS companies are still growing 65% annually on the way to $30m ARR, but that’s far from the 97% at the peak in Q1’21.

And realistically, that also means most of them may no longer be venture-fundable.  100% growth from $1m-$30m or so ARR is sort of the bar for venture funding.  If you are doing OK, but have fallen to 65% growth like above, you may still be a top quartile SaaS company … but are fundable no longer. At least, not for now.

At nine figures in revenue and 550 people, the CEO of Lattice, Jack Altman, has seen every stage of building a startup. 

In last week’s Workshop Wednesday — held every Wednesday at 10 a.m. PST — Altman talks more in-depth about his viral tweet storm, sharing the eight things you think as a first-time founder that usually aren’t true. 

Jason Lemkin says he hasn’t yet invested in a pure-play AI startup. “I’m not sure there is a rush, but I could be wrong,” he said. Most of the investor’s portfolio companies are adding an AI component to their businesses. 

• SaaStr 663: 9 Things I Wish I Would Have Told My 2013 Self: Lessons Learned from 9 Years with Heap's Former CTO, Dan Robinson
• SaaStr 662: Things You Think as a First-Time Founder That Just Ain’t So With Lattice Co-Founder & CEO Jack Altman and Saastr Founder & CEO Jason Lemkin

• SaaStr 661: VC AMA with SaaStr CEO Jason Lemkin and Black Mangroves MD Arnaud Bonzom at SaaStr APAC 2023

Listen on Apple Podcast, Google Podcasts or Spotify

AI is perhaps the hottest topic in the Enterprise — but why?

In my corner of the world — the reason is Efficiency.

If AI can cut costs and deliver more efficiency, that’s exactly where budget is available in 2023.

Not everyone on the team really needs to be on your mission

But almost all the first 50 employees do

Hire pirates and romantics at least until you are truly ready to scale

If you’re reluctant to ask someone to do part of their job

If it’s just easier to do it yourself

If you don’t want to argue when you ask

100% clear sign it’s time for someone new in that role

© SaaStr 2023

644 Emerson St. Suite 200, Palo Alto, CA 94301

If you'd like to stop receiving the SaaStr Weekly, click here