Blue Horizon’s reading list is a curated collection of articles for SaaS founders and management teams. We are entrepreneurs and operators who have lived through the process of founding and scaling software companies. Here are the articles and resources we found useful this week.
Back to the Rule of 40 for Startups
by David Cummings
With the Great Exuberance behind us and more restructuring pain ahead of us, it’s clear that we’re back to the standard Rule of 40 in startup land. For several years, it was growth at all costs. Want to raise exceptional amounts of money? Show strong growth. Now that those days are done…
For most SaaS businesses, after month 24 or 30 or so, Renewals + Upgrades/Upsell combined will account for the majority of your cash flow. So the real key, to boil it all down to one factor, is to Take Care of Your Customers. Extremely Well. Cash flows straight from that, as this is your highest margin activity in Years 2+. Then apply people and processes to that, add in a few whales, prepayments, an upgrade engine, and maybe some debt … and you’ll be in good shape.
Bezos’ Shareholder Letter in 2000
by Tomasz Tunguz
All this took patience: Amazon’s share price exceeded the dot-com high Oct 23, 2009, a decade later. Ten years after that, the company’s value had compounded 20x. Of late, the share price again has fallen 40%. Bezo’s advice 22 years ago holds true today: patience and prudence throughout booms and busts.
There are no shortcuts in software implementation. It’s hard work but it’s work that’s every bit worth doing. To walk away with a CS platform that seamlessly integrates into your team’s operations—so you’re no longer bogged down by workarounds, spreadsheets, and multiple systems—is what CS dreams are made of. You’ll never regret the time you invest to clean up and map your data. You’ll be stronger for it in the end as will your team’s insights and value to the organization.
How to Increase Your Return on Luck as a Business Leader
by Predictable Revenue
Map out the entire process of the customer journey and identify where things might go wrong. Once you’ve identified where the issues are, you can work to solve them proactively. Over time this will result in a more scalable business model.
by Fred Wilson
The great thing about working in tech is that there are always new problems to solve, new markets to create, new products to ship. The macro events don’t change that. So focus yourself and your team on building and shipping those things, get some wins, and move forward with optimism and positive energy. It will be infectious.
The SEC’s New Modern Marketing Rule: Are You Prepared to Comply?
by Synthesis Technology
Complying with the new SEC advertising rules is going to create a burden for many asset managers. Even firms whose sales and marketing materials already comply with the SEC’s “fair and balanced” standards will still need to implement procedures and policies for documenting how these materials are created, validated and distributed. Investing in technologies that make it easier for firms to fulfill these requirements may seem like a hefty investment at first but save money over the long run if it reduces the costs and risks of requiring human effort to fulfill them.
The End of The Era of Indifferent Capital
by Founder Collective
Indifferent VCs just don’t care about anything except startups that show traction toward becoming a home run. They are happy to trash the rest. The bull market hid the weaknesses of this model, and indifferent investors became popular with founders. But with the macro downturn, I think the weakness of this kind of capricious capital is about to become apparent.
Financial Reporting and Forecasting in a Multidimensional World
by David Appel, Sage Intacct
Some people fall into the mistaken belief that financial reporting is purely about rehashing numbers. Nothing could be further from the truth. Effective, fast, and accurate financial reporting gives your entire company an incredibly valuable real-time snapshot of how you stack up in the competitive SaaS ecosystem.
Your Guide to Reverse Trials
by Kyle Poyar, OpenView Partners
In a reverse trial, new users start with a time-limited trial of your paid features. At the end of the trial, they can either buy or downgrade to a fully free tier…These would seem to be the best of both worlds. You don’t need to choose between acquisition or conversion goals; you can pursue both! And you put your best foot forward with new users, giving them access to your most advanced features for a limited time. From a behavioral psychology standpoint, you start to benefit from loss aversion where the pain of losing something is twice as powerful of a motivator as the pleasure of gaining.
Be Single-Minded Long Enough to Get Lucky
by David Cummings
Single-mindedness is a critical trait of entrepreneurs…Then, combine single-mindedness with longevity — persistence over a long period of time, makes for an even more remarkable, and rare, combination…Timing, people, geography, etc. plays a role in the size and scale of success — components outside the control of the entrepreneur…be single-minded long enough to get lucky.
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