Inc - A low burn multiple is great, but..

David Sacks’ classic post on Burn Rate Multiple is A+ and a key metric for every venture-backed startup.  It simplifies a lot of complexity into one metric.

That if you’re venture-backed, yes, then yes you do have money to spend (and burn) — up to a point.  But the best startups burn less each month than they bring in from new bookings and revenue (a Burn Multiple of 1x or less).

And especially these days, having a Burn Multiple of 1x or less will certainly make you more attractive to VCs — if the growth is also there.  If.

However, I’ve seen this metric now misused by many venture-backed startups as a magical health meter for a “good enough” burn rate. Why?  Well, at a practical level, it assumes the next round is coming.

So Elastic is the somewhat under-the-radar SaaS and Cloud leader that still almost everyone uses, at least for search. Go ask your developer 

It’s somewhat quietly crossed $1.2 Billion in ARR now, but like many, its growth has slowed substantially in the past year, to just 17%. That’s down from 44% growth at $700m in ARR. But it’s also gotten much more efficient.  Again, like many.

Still, Wall Street seems to like its slower but efficient growth. It sent the stock price up 112% over the past 12 months!

In the latest episode of our What’s New series, Founder and CEO at Secureframe, Shrav Mehta, sits down with SaaStr CEO and Founder Jason Lemkin to share what’s new at Secureframe, a rising SOC-2 and compliance software company breaking out in SaaS.

In this episode, they’ll discuss:

• When and why you need SOC-2 and ISO ISO 27001 compliance as a SaaS company
• The Intersection of AI and Security
• Compliance in Year Two and Beyond in SaaS
• Differences in Servicing SMBs and Enterprises
• Re-bundling of Software Services

Want to partner with SaaStr? Click here to Sponsor our events, podcasts, newsletters and more.

If you aren’t sure you want to go into sales — don’t do it.  Maybe in 2021, when many SaaS leaders were growing at simply unprecedented rates, could succeed in sales if you weren’t sure you wanted to sell. Not today.

A career in sales can take you far:

• You can make the most cash, and later maybe even equity, of any position in a start-up.
• You will build amazing people, management and recruiting skills.
• There’s usually a clear promotion path in a growing sales team.
• It’s really, really fun to be part of a great sales team. You win together and play hard together.
• It’s hard, but it’s a proven path to the CEO’s office. Marc Benioff led sales (in part) at Oracle. Etc. etc.

But sales is also hard:

• You’ll hear “no” so often.
• You’ll be graded every month and every quarter.
• You’ll get fired if you miss the plan.
• You can’t hide.
• Your comp will be poor if you don’t crush it.
• Some people won’t respect you as much as the “tech” guys.

If you don’t really want to do sales, you won’t be great at it.

For years, I hadn’t lost any money on VC investments. But lemons ripened after the Great Boom of 2021, and now I have 4 investments of > $1m where I’ve lost almost all the money. There may be a few others.

The common threads: ethical lapses, lack of 200% commitment in the founders, and/or similar issues in the CEO.

If the CEO is 1000% committed and treats everyone fairly and well, and is truly great — those ones I haven’t lost money on yet. Sometimes, the gain has been modest. But I’ve never lost money there.

At 16 years and $1.6B ARR, Zendesk today gets 14% of new business from startups. That’s a pretty significant part of the growth of their company. On top of that, if you look at their top accounts globally, 33 of the top 50 customers by ARR are startups. 

During SaaStr Annual, Zendesk Sr. Director Brad Bowery and Andy Zhuhai, Director of Business Development at Crosslink Capital, shared how to: 

• Craft an offer
• Establish your GTM strategy
• Build your VC channel

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