So Battery Ventures has a new detailed report on The Open Cloud you can dig into.

There’s a lot of great data in the report, but one analysis helped answered a question I’ve been wondering the past 12-18 months: 

Are start-up actually more overvalued today than at the peak of Cloud mania in 2021?

The answer in my experience is actually 

Yes.

Because valuations are as high as ever, and yet … public software multiples are far, far, far lower than 2021.

The world's largest SaaS conference returns in May!!

So will AI replace humans, make them more effective, or create a need for even more knowledge works?

Maybe it’s not that clear.

Salesforce says it’s seeing such high demand for AgentForce … which replaces humans for agents … that it’s hiring an additional 1,000 folks in sales and product to sell it.

The latest data from Carta confirms what I’ve seen, felt and experienced … the SF Bay isn’t just back, it’s accelerating for VC and founders.  This isn’t to say other ecosystems aren’t strong, too.

It’s just between AI, YC, and VCs just plain coming back to the SF Bay … momentum continues to concentrate there.  At least for founders, senior execs and funding. 

For the average SDR or AE? 

Maybe less so.

Carta shows for VC overall, 35.0% of dollars are deployed in the Bay Area now, and importantly, 43.6% of SaaS VC investments are in the SF Bay.

So leading late stage investor Iconiq Capital has its latest report out on SaaS metrics, you can review the whole report here.

There’s a lot on growth vs. effciency, and how growth is still 2x as important as efficiency, etc. But both matter.

Most useful to me what this great chart across their entire portfolio of SaaS leaders:

These are useful yardsticks for folks scaling:

• At less than $25m ARR, actually SaaS start-ups aren’t any more efficient than in 2017-2019, at $130,000 per employee / FTE.  Although that’s still more efficient than the Boom Times.
• At $25m-$100m ARR, SaaS scale-ups are about 25% more efficient than they used to be, at $172,000 in revenue per employee / FTE.  Time to get real at $25m ARR, apparently 
• And at $100m+ ARR, they are 20% more efficient then they used to be, at $249,000 in revenue per employee.  On the path to the $300k+ we see in public SaaS leaders.
• These metrics shouldn’t surprise you, but it’s helpful to see them this way.  You need to skate to $175,000 in revenue per employee by $25m ARR, and then $250,000 after that.

Can you do it?

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

Dave Gerhardt from Exit Five joins Nick Shackelford to give B2B marketers a glimpse into the DTC advertising world to stay ahead of the game.

So a lot of scale-ups and startups have fallen off the venture track. They aren’t growing at venture-scale rates anymore. Triple Triple Double Double is now firmly in the rear-view mirror.

That can be tough.

It quickly becomes impossible to raise any capital other than from insiders.  Folks leave. It’s a big transition.

Still … still … if you can’t get all the way back to venture-scale growth, at least stay or get to Private Equity levels of growth. There are still some pretty good acquisitions and “exits” to happen at that level of growth, too.

A lot of SaaS companies have been experimenting with generative AI and LLMs over the last 12-18 months. And increasingly they’re asking, how are companies doing this in production at scale? Are they seeing the kind of ROI that we all feel could be there?

As the leader of the Applied AI team at Google Cloud, Duncan Lennox sets out to answer these questions and shares six ways businesses are currently transforming their businesses at scale and with real ROI.

Duncan’s team at Google Cloud recently ran a survey with around ~2.5k businesses around the world, asking how they are using Generative AI today. The data is clear.

So the latest SaaS leader to cross $1B ARR is Klaviyo. Klaviyo dominates marketing in the Shopify ecosystem and in ecommerce, and just keeps on scaling. It was the only SaaS IPO on 2023. The only one!

The brutal truths are:

• Everyone wants to fund the same thing. The earlier stage you are, the more different folks will come to different conclusions based on very limited data. E.g., just the team. Or just a few customers. But almost everyone is still looking for the same thing. Unicorns. They just may roll the dice differently in the early days based on whatever tiny signs of pre-success you may have. 
• Pattern matching is rampant. If you are really going to “meet” with 1,000+ founders a year, that’s really too much to process. There are good types of pattern matching, and bad types. Bad types create huge hurdles to founders that do not look, act and talk like privileged founders.  “Stripe for _____”  or “3 great young engineers from Stanford.”
• You are just a product. And so are VCs themselves. You may just 1 shot at it, but investors need to make 20–40 per fund. So each start-up they invest in is a bet, and really, a product. And their own investors (the LPs) literally view VC firms as different financial products to potential pick from. Like Vanguard funds, almost.

Raj Datta, the Global VP for Software and AI Partnerships at IBM, shares the trends he’s seeing in the industry of AI adoption in the Enterprise, and how you can help accelerate AI adoption for small and large Enterprises across various industries.

So who’s doing well in SaaS today? Well, one of those hero companies is Samsara.

Few companies have achieved the level of impact and growth as Samsara.

Powered by the overall strength of the U.S. economy, by shipping, by trucking, by industrial applications, and more … there’s no downturn at Samsara. It’s currently at $1.26B in ARR and growing 36%! It hasn’t missed a beat.

SaaStr CEO and Founder Jason Lemkin sat down with Samsara CEO and Co-Founder, Sanjit Biswas to delve into the inner workings of a company that’s not only transforming its industry but is also a case study in brilliant strategy and execution.

• SaaStr 775: If You Fall Off the Venture Track, At Least Stay on The PE Track with Andy Wilson CEO Logikcull and SaaStr CEO Jason Lemkin

• SaaStr 774: The Vertical SaaS Rocketship: Samsara's CEO and Co-Founder Sanjit Biswas and SaaStr CEO and Founder Jason Lemkin on Samsara's Journey to $1.26 Billion in ARR!

• SaaStr 773: CRO Confidential: Moving Beyond Traditional Sales, Clay CEO & Co-Founder Kareem Amin on the Future of AI-Driven Growth

Listen on Apple Podcast, Spotify or Google Podcasts

Before you sell,

Before you quit,

Before you step down

At best, we have 3 >real< start-ups in us as founders.

Often just 1 or maybe 2.

If you have any traction at all -- maybe find a way to make this one work.

One of the special things about being a founder is making

someone on your team a millionaire

Sometimes they appreciate it, sometimes they don't

Maybe they don't need to.

The best ones put in a lot more than they took out.

Either way, a special moment

© SaaStr 2024

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