Hey SaaStr Community,

So 2023 was a strange year, with many of the biggest, public Cloud and SaaS leaders on a tear, from Microsoft to Cloudflare to Palantir — but at the same time, so many startups and especially those in traditional B2B struggled to grow.

The best of the best pulled away in many cases, but so many apps were also cut when they weren’t viewed, for now at least, as mission-critical.  For now at least.

So what’s the overall vibe check?

We did a survey with 2,000+ respondents.

The learnings?  For some, sales is easier these days, at least a bit.  But for just about the exact same number of folks, it’s harder.  And the biggest category said things were … about the same.

There’s a fun — and very lucrative and rewarding — exercise I like to go through with most of the startups I work with.

It’s goes like this:

• First, who’s your largest customer?  OK.
• Now, do you have a prospect in the pipeline that’s somewhat similar?
• You do?  Great.   Now …
• On that deal … go quote twice your highest price ever. Go try to do that.

This is a terrific exercise to drive your deal size up.

It does >not< mean rip off your customer.

This edition of the SaaStr Daily is sponsored in part by Stripe

Stripe Sessions brings together business leaders and builders to discuss the most important internet economy trends. In 2024, we’re focusing on what’s possible—and what’s inevitable—as technological advancements change the world and the global economy with it.

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Are layoffs now just institutionalized in Silicon Valley? And if so, what does that mean?

Instacart was one of the 3 Tech IPOs to go out late last year, along with Klaviyo and ARM.

And then crushed the last quarter, with $800m of revenue and a stunning $200m of EBTIDA!

At the same time — they announced 7% layoffs to get more efficient.

Now, 24+ months ago, this would have been a shocker. Today, it’s the New Normal.

Everyone has to get more efficient. The average SaaS public company is now at $300k in revenue per employee, up from less than $200k in 2021. ServiceNow is over $400,000. Canva is at $500,000 in revenue per employee!

So Braze is one of the quiet winners in today’s SaaS and Cloud world. At $500m in ARR, they’re growing a strong 33% and trading at about $6 Billion, so they’re in the 10x ARR Club.

When the average public SaaS company is still stuck at 6x.

Braze is a top leader in enterprise mobile marketing and communications.  The logos are strong, and the NRR is good. They sent a stunning 37 Billion messages between Black Friday and Cyber Monday!

So I remember years ago I went to hire my first VP — ever.  To make it even tougher, I’d never hired anyone for this role at all (a VP of Ops).  I went to reach out to the best candidate I could find by a cold email.

I went to my ex-boss and mentor and asked him how I’d know if he was interested.

“Oh you’ll know. He’ll respond ASAP.”

Now as the years have gone by, I’ve learned that’s not 100% true when you outbound to candidates. Many of them aren’t in market, or may take 3-4 reach outs to take a meeting.

But for in-bound candidates? Or folks that have reached out to you?

So Michael Ho did an analysis here of Carta valuation data in a way that IMHO visualizes in a way so many founders miss.  And misunderstand.

At the end of the day, the top SaaS companies IPO and end up trading at “standard” ARR multiples.  Today, on average that’s about 6x.  Not great, but it is what it is. But they don’t start there.  

Pre-seed and Seed rounds can’t really be done at 6x ARR typically.  A startup doing $300k in ARR is rarely valued at $1.8m post-money these days.  If they raised $2m, that would be a – $200k pre-money valuation!

So ARR multiples are in a sense inflated in the earlier stages.  This is justified both by the fact they are higher growing (or should be) than public SaaS companies.  And also by the fact they are really a bet on the future, and not the present.

But many founders sort of thing those high ARR multiples will play out into all the future rounds.

OK, but how does this look in practice?  Here’s the chart, and it really visualized the point (and issue) well.

MARCH 6, 2024 / WYNWOOD

SaaStr is coming (back) to Miami for an epic evening of networking and community to kick-off a year of events. Join 300 SaaS execs, founders + VCs. 
Grab your ticket to join us on Wednesday, March 6, and get ready to meet some incredible SaaStr speakers and talk about all things SaaS!

Featuring Amazing content! with:

• Jason Lemkin, CEO and Founder of SaaStr
• Sam Blond, Partner at Founders Fund and Host of CRO Confidential,
• and Adam Gross, CEO of Vimeo

Go-to-market (GTM) design and efficiency are sometimes overlooked, but they’re a critical driver of any SaaS business. Rajeev Dham and Karan Singh, Partners at Sapphire Ventures, and Jane Lee, Vice President at Sapphire walk us through how to double your “Magic Number,” a shorthand for your sales and marketing efficiency.

Magic Number is your growth in ARR over a quarter divided by the sales and marketing spend in the prior quarter. Previously in SaaS, it was widely seen that anything > 1 was healthy if you were venture-backed, and anything > 1.5 is was seen as perhaps too capital-efficient.  If you were well-funded, 0.7 was fine.

But as Rajeev, Karan, and Jane point out to set the stage for this discussion, Go-to-market efficiency in recent years has suffered a significant drop across both public and private SaaS companies.

• SaaStr 727: High-Velocity Techniques to Maximize Sales with Gusto’s CRO and Head of Go-to-Market

• SaaStr 726: How to Build Out Your SDR Function in 2024 with Sam Blond, Partner at Founders Fund

• SaaStr 725: Mastering High-Volume, Low-CAC Marketing: Strategies from Gorgias, Vercel, and Hypergrowth Partners

Listen on Apple Podcast, Spotify or Google Podcasts

When you stop sending monthly investor updates,

Everyone sort of assumes the worst

As a founder, very few will actually tell you the truth

These are the ones that will ultimately help you grow the most

But with that will come some advice you don't want to hear

And it will often be delivered sharply

So many exciting IPOs coming, from Stripe to Databricks and more

But I think Canva may be the one that gets folks excited again

$2B+ ARR

30%+ Growth

Very efficient

Brand everyone knows

© SaaStr 2024

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