The Arguments For Not Raising at a Unicorn Valuation

So for a while, unicorns took a bit of a breather. With the stock market for tech stocks and cloud stocks in a big decline in 2022, unicorn production slowed down. And what had become a rite of passage in 2018-2021 … “Becoming a Unicorn” … seemed to recede as a critical milestone.

But we’re back. AI has refueled unicorns, and 100x, 200x+ deals for the very hottest, fastest growing AI B2B companies.

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.

GitHub, founded in 2008, is a leading platform for software development and version control that has made waves since 2018 with its AI Copilot. Microsoft acquired GitHub also in 2018 and it has since grown to over 100 million developers and more than 420 million repositories, including at least 28 million public repositories, making it the world’s largest source code host.

At this year’s SaaStr AI Summit, GitHub CRO Elizabeth Pemmerl shared how to bring AI products to market at scale successfully. With 90% of the Fortune 100 on GitHub and 40% of its $2B revenue coming from AI products, these real-world examples will also help you launch an AI-powered product at scale.

So ServiceTitan has filed to IPO, and will be just the 4th SaaS IPO since 2021, after Klaviyo, Rubrik and OneStream.

It’s another very, very good one. And all four are IPO’ing / IPO’d at well above $500,000,000 in ARR. A high bar indeed.

ServiceTItan is SaaS for plumbing, HVAC and now many other trades.  It’s true ERP / operating system for the, handling everything from orders to CRM to marketing to payments. It’s a good one :)

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

Your customers expect built-in integrations. See how planning, scaling, and
visibility help meet those needs.

Most startup companies in earlier stages don’t have the most mature product. While differentiating your product against the competition is important, you have to differentiate yourself elsewhere as you build your company. This is where customer success comes in.

Drata VP of Customer Success Management, Wen Yao, and VP of Customer Experience, Ashley Hyman, share how to scale customer success from 0 to 5,000 customers. They believe CS is a fundamental building block to the success of your organization.

First, don’t hide. Don’t run away from where they are. You have to be where your competitors are. You have to show up.

Many startups try to avoid the places their larger competitors are. They avoid the same tradeshows. They don’t sponsor the same newsletters and services.

They try to stake out their own marketing white space.

While that’s a good idea, you also usually want to be exactly where your competitors are as well. Why?

• 80%+ of customers will buy the top brand. But not 100%. Others will look for what else is out. What’s more innovative. What has a new solution to an old problem. And they will look where the top brand is. At the same events, the same podcasts, the same websites.
• You often get another chance at the deals you lose — but you have to be remembered and present. When the competition screws up, you probably will get another chance at the renewal. Or at least, the next renewal. It’s enough to be the Clear #2 to get invited to a chance to steal a competitor’s customer during an unhappy renewal cycle.
• Market (carefully) to all lost deals — not just current prospects. Drop them into a low-key drip (e.g., once a month) letting them know you are still doing well. That you just closed Google as a customer. Etc. If they end up looking for a new vendor, they will reach out to you.
• Be the more enterprise choice. If you’re more secure, if you integrate with more enterprise solutions, if you do more enterprise “stuff” … let your competitor’s bigger customers know. Many want a more enterprise solution.
• Offer a partial transition, and/or start with one group or department. If there’s one awesome feature you have the competition doesn’t, maybe encourage them to use both vendors for a while. And let the best app win over time.
• Offer buy-out deals. Offer to buy out the remaining term of a competitor’s contract with a customer. This removes some friction from moving vendors.

The best tactic I’ve ever seen is a simple combination of 3 things:

• Measure it,
• Segment it,
• and Drive it Down — Irrespective of Where It is Today.

Churn is a bummer, and high churn is bad. But I’ve yet to work with a SaaS company that can’t improve.

First, measure Churn. For real. Be ruthlessly honest here.

Know exactly what your churn is, and don’t judge it (too much). Set a goal each quarter to improve some amount (say 20% better). And make driving down churn each quarter a Top 5 goal of the company. And then magic will happen. Because churn is the one thing everyone in the company can impact, on some level.

Second, segment churn.

Big customers should churn less on a net revenue basis (including upsells) than small customers. I see too few SaaS start-up and scale-ups truly segment churn.  If you don’t, you’ll likely take the wrong actions. Because the bigger customers need a different approach here than the smallest ones.

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