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.
Cloud Stocks May Be Down. But the Cloud Remains on Fire. That Matters More.
by Jason Lemkin
So there’s a lot of stress today in venture and in public SaaS stocks. As perhaps there should be, given the insane run we had during the peak Covid era. But what really matters is if folks are buying even more Cloud products than ever. That’s the engine we’re all building on. And Gartner is still predicting SaaS purchase rates will accelerate in 2023…
Thinking Outside the Box to Engage Financial Advisors and Grow AUM
by Synthesis Technology
Focus on thoughtful, valuable communication. One thing is clear – advisors do not appreciate the thousands of mass emails they receive from investment marketers each year. One panelist shared some current stats from Wells Fargo Advisors indicating that, on average, advisors receive 81 marketing emails per day (over 10,000 per year!) from asset management firms. It’s too much and a nuisance. Instead, advisors want 1-1 personalized email communications that are thoughtful and provide value. This means doing your research before reaching out, as you only get one shot to make a first impression. As for content, advisors want asset managers to ditch the long whitepapers in favor of short, value-packed content that can be consumed quickly.
Hypergrowth is Great, but Don’t Die While Trying
by Christoph Janz
▪️ Always keep a close eye on net new ARR.
▪️ Keep in mind that at a low scale, seemingly minor underperformance may signal something more serious, especially if it gets bigger every month for a few months in a row.
▪️ Consider flattening out your growth projections in terms of net new ARR, i.e. consider projecting a declining % growth rate over time.
▪️ If you do plan to grow at a constant % growth rate m/m, be super aware that you have to add more net new ARR every single month.
▪️ Estimate your runway based on more conservative revenue growth.
▪️ Be aware that until very, very late in a startup’s life, you don’t really know how your CACs will develop as you scale until you try it.
The 4 Startup States During a Recession
by Tomasz Tunguz
An essential ingredient to deciding 2022 strategy is the answer to: will our business be impacted by a US recession? Will buyers slow processes, exert greater pressure on pricing, or look to opt out of contracts? I haven’t seen a broad shift in purchasing behavior in the market yet, which is encouraging, but keep a vigil. Markets reverse in a moment…Some startups may find themselves in between this neat quartet of states. Take the more conservative view. If the markets roar back, you’ll have an efficient business that can grow faster with more capital.
Bessemer: $1 Trillion in Cloud Market Cap Lost Year-to-Date
by Jason Lemkin
Public SaaS and Cloud companies lost $1 Trillion in market cap so far in 2022…At the same time, the leaders in Cloud (AWS, Azure, Google Cloud) are growing a stunning 40%…That’s got to be the most visceral juxtaposition in my time in SaaS. Cloud leaders lose $1 Trillion in market cap, at least for now … in the Best of Times for SaaS and Cloud.
Peter McKay (Snyk): On Hypergrowth, Hard Decisions, and Hidden Challenges
by OpenView Partners
This makes it psychologically difficult to push for change; because why would you, when things are clearly working? But Peter points out that even strong numbers only reflect past performance, and don’t necessarily predict the future. They may be leading you down the wrong path. If you follow it blindly, you may end up making decisions that will be hard to reverse.
Talking Burn: Appearance on the Metric Stack Podcast on Cash Conversion Score and Related Metrics
by Dave Kellogg
Using my formula (= 1/CCS) for aggregate burn, here are some benchmarks.
▪️ < 1 is amazing (i.e., burning <$50M to get to $50M in ARR)
▪️ 1-2 is good (i.e., burning $50M to $100M to get to $50M)
▪️ 2-4 is questionable (i.e., burning $100M to $200M to get to $50M)
▪️ 4+ is bad (i.e., burning $200M+ to get to $50M)
Cash is Going to Be King Again, Soon
by David Frankel
Does your startup have an impressive cash stockpile? If so, the following will soon be plentiful:
▪️ Talent
▪️ Competitors looking for soft landings
▪️ Affordable customer acquisition
Are you ready to take advantage of this moment?
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