Hey SaaStr Community,

So I think 2023 may mark The End of Customer Success as We Knew It.

What happened? At least 3 core changes:

#1. The Massive Push to Efficiency

As almost every public SaaS company got cash-flow positive and radically more efficient, and most startups had to stretch their dollars much further — customer success took a lot of the brunt. SaaS companies are now simply willing to run a lot more leanly in CS, in many cases hoping to rely on automation, knowledge bases and community to pick up the slack.

The days of $1m per CSM may be long gone. For example, you can see it here in the latest data from Pilot. CS has taken the biggest brunt in layoffs, unfortunately.

#2. The Massive Push of CS into a Sales Function

This is an even bigger change. CS in many ways become “weaponized” by sales and SaaS companies to chasing tough renewals and supporting aggressive upgrades in tougher times.

So be it, but that left even fewer resources and attention on just plain … customer success. Aggressive price increases across the board consumed much CS energy as well.

So one thing that’s changed radically in SaaS over the past few years is everyone has realized to truly scale, you need to be multi-product.  Sometimes by as early as $20m ARR, sometimes by as late as $200m ARR, or later.

Net net, the average public SaaS company has 35,000 customers.  So once you cross 3,500, let alone 10,000 — you’re starting to saturate most B2B markets.  You’re hitting 10%-20% market share or more, especially of your core customer base, and growth almost always slows at that point in SaaS.

Now you can keep revenue growing even with slower new customer growth by driving up deal sizes, adding enterprise editions, going global, raising prices, and more.  That works time and time again.

But at some point, you can’t just raise prices and add enterprise editions to keep mixing it up and growing.  At some point, you have to sell your customers a true second product to truly scale big.

Just start with comps. With comparables.

Software is very expensive to build, but for the most part, costs almost nothing to ship. It might cost you $0.10 a month in hosting charges per user for an app that isn’t server or storage intensive.

So why is one app $5 a month and another $150 a month? 

The answer is value provided, yes (that’s why Salesforce and Workday can charge so much) … and also, comparables.

• If your app is about as valuable as Box, then price it like Box.
• If your app is about as valuable as Twilio, then price it like Twilio.
• etc., etc., etc.

At this point, every company has bought between 1 and 200 SaaS apps. You’re not the first. They are used to it, and used to certain organic price points.

Your prospects and customers are now veterans for the most part, and they “know” what an app should cost — based on the value they think it provides relative to other apps they pay for.

Is it the end of an era in SaaS customer success?

It seems like some of the biggest changes to the human side of SaaS are happening right now. What does the AI revolution and SaaS spending cuts mean for the future of Customer Success and support?

Join SaaStr CEO and Founder, Jason Lemkin, and SaaStr fan-favorite, Nick Mehta, CEO of Gainsight for a FREE, live webinar where they'll share their insights and predications on what the future of customer success will hold in 2024 and beyond. 

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 2023 was a weird year. 

2021 was nuts, with crazy growth and crazy multiples.

In 2022, revenue growth held up for many leaders, but share prices and multiples cratered.

And 2023?

It was mixed actually, even if startups didn’t seem to get a breather, it wasn’t so bad for most public SaaS leaders.

On the debit side:

• Growth at public SaaS companies fell to all-time lows, averaging just 16%
• Public ARR multiples remained low, at 6x, for the second straight year
• Late stage VC fell dramatically, outside of AI investments
• Start-ups failed, and/or saw much tougher times.  Many in impacted categories saw growth fall to 0%.

And yet … it wasn’t all bad, for the bigger guys:

• The median SaaS and Cloud stock was up 41% in 2023! per Jamin Ball’s great summary below
• The Top 10 in SaaS saw their stock price up 136% on average!
• And everyone got much, much more efficient.  Most SaaS leaders flipped to cash-flow positive, for many, for the first time.

So is it possible to be too efficient in SaaS and Cloud?

Maybe. And if so, maybe that’s Digital Ocean. If you haven’t heard of Digital Ocean, ask your developer. Many have used Digital Ocean at the cheaper, simpler version of AWS-Azure-Digital Ocean to get going fast and quickly.

Growth has slowed the past year, but profitability? It’s gotten crazy good.  Or at least, operating margins and free cash flow are.

Digital Ocean is only growing 16% now at $700m ARR, and churn is up and NRR down.  But it’s raining cash, and earnings per share is growing 22% — faster than revenue.

In the latest episode of CRO Confidential, host Sam Blond, partner at Founders Fund and former CRO at Brex, sits down with Ashley Kelly, VP of Global Sales Development at Rippling.

Together they discuss:

• Scaling outbound sales and SDRS (sales development representatives) from 0 to $100M and beyond
• How to hire the right outbound sales team
• The SDR interview checklist
• How to create an environment to set up outbound sales reps for success
• Which KPIs to measure and matter most in outbound SaaS sales
• Increasing the quality and closed-won revenue with your outbound sales team

Let’s dive in!

• SaaStr 714: From Zero to Hero: How to Dominate Outbound SaaS Sales with Rippling and Founders Fund on CRO Confidential                

• SaaStr 713: Why the Future of Customer Success, Sales and Marketing Has Changed: Ask-Me-Anything Part 2 with SaaStr CEO and Founder Jason Lemkin                                        

• SaaStr 712: Is AI the Only Thing in SaaS that Anyone Cares About Anymore? Ask-Me-Anything Part 1 with SaaStr CEO and Founder Jason Lemkin      

Listen on Apple Podcast, Spotify or Google Podcasts

Go multi-product too early, it’s a huge distraction

Go multi-product too late, growth stalls

Getting it right is a key part of the CEO’s job after $10m-$20m ARR

It's OK if only 50 people listen to your podcast 

If:

15 are prospects

15 are customers

20 are potential hires

In the end, your biggest risk is getting too tired

The only solution is hiring truly great VPs 

Been said before, but yet, so many of us fall into this trap

(Myself included)

Make this Priority #001 in 2024

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