Metrics that Measure Up

It's hard to imagine being a key part of three industry-defining product categories, which is exactly what Bruce Cleveland has experienced in his Silicon Valley software career.  First, Bruce was an early executive leader at Oracle (first 100+ employees) as they re-defined relational databases, then on to Apple where he led the object-oriented engineering division, next he led the business development and alliances team at Siebel Systems before he took over products as they defined Customer Relationship Management (CRM), and then again at C3.ai in defining Enterprise AI. Three of those experiences resulted in IPOs.  Bruce then became a VC, first at InterWest Partners where he invested in early-stage B2B SaaS startups such as Marketo (acquired by Adobe), and then he started Wildcat Venture Partners with two other people, again focused on early-stage startups such as Vlocity (acquired by Salesforce).  Based uponthe above experiences, Bruce wanted to create an easy-to-understand and prescriptive framework to help entrepreneurs move through each stage of a start-up's journey. The result was the Traction Gap Framework.  The different stages of the Traction Gap Framework include:  Minimum Viable Category (MVC): Does the market segment already exist or is there an opportunity to create and lead a new product category - creating your own category (e.g., Gainsight) presents more risk but the returns are much higher.  Initial Product Release (IPR): The first version of the product beyond prototypes and wireframes that serves as the feedback mechanism to refine and evolve the product to present to multiple new customers.  Minimum Viable Product (MVP): The product state that is required to acquire several new customers and provide tangible value while using early customers feedback to prioritize feature/function refinement and enhancement  Minimum Viable Repeatability (MVR): This is the point where external investors (VCs) are most interested in investing in an early-stage SaaS/Cloud company and become seriously interested as the initial referenceable customers are in place, and the ability to leverage the learnings from early customers can now be used to rinse and repeat the customer acquisition process  Minimum Viable Traction(MVT): This is after a company has “crossed the chasm” and is ready to materially scale a business to $20M - $50M while establishing market leadership.  I asked Bruce about the secrets to creating a new product category.  Bruce highlighted that not everyone wants to be the spokesperson leading the creation of a new category. He used the example of Marketo, where the founders decided that Jon Miller, a co-founder, would be positioned as "the father of marketing automation" while the other co-founder and CEO, Phil Fernandez chose to primarily focus on leading strategy and operations.  Bruce coined the term "Market Engineering" to help frame the content in his book. The basic concept is developing the positioning and messaging of the company to a few innovative and provocative concepts that everyone can easily understand and clearly differentiates the company from others. Steve Jobs at Apple is a great example of a category creator. Bruce shared the four pillars the Traction Gap Framework including: 1) Team; 2) Product; 3) Revenue; 4) Systems.  Each pillar takes a point of prominence at various stages when traversing the Traction Gap - though TEAM is the common foundation at each stage across the journey  If you are a student of Silicon Valley and the SaaS start-up world, starting or already on your own entrepreneurial journey, this discussion with Bruce Cleveland, who has been there and done that is a must listen. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

You may have heard the acronym FP&A many times, but always wondered what it stood for?  Financial Planning and Analysis is the function, typically present in more mature companies responsible that is responsible for financial planning, modeling and analysis.Paul has a summarized view of what FP&A professionals are responsible for which is: "FP&A  is responsible to maximize shareholder return by helping businesses to best deploy and allocate future dollars".Where does FP&A start and end, versus the Revenue Operations function?  Well, the answer was clear as mud. Paul shared that each company defines FP&A and RevOps differently,  Some companies have "operations" report to the CFO and some to the Chief Revenue Officer.  The primary answer was "planning and modeling" goes into FP&A, and the rest of operations depends on the culture and competency within a company.Forecasting was another topic that is sometimes responsible for forecasting and others FP&A simply validates the Sales provided forecast, but not to create and share the forecast.  Basically, can FP&A use historical financial data toreview and validate the forecast.I drilled down into how FP&A departments become involved with "SaaS Metrics" in the SaaS industry.  Paul likes to see CFOs as the primary owner of the data that drives SaaS Metrics to ensure that the input data and the enterprise value creating metrics are standardized. Basically, not having the Go-to-Market functions own the SaaS Metrics formula definition, but can collaborate with FP&A in the calculation of the metrics using the "Finance" approved definition and calculation formula.If you are involved in the financial planning, modeling and reporting process in your SaaS company, and already have or are evaluating introducing a FP&A function that will work closely with the GTM operations teams (Sales Ops, Marketing Ops, CS Ops and/or RevOps) this conversation is a great listen!See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

How has Customer Success evolved over the past ten years? What better place to start than discussing the latest Customer Success Benchmarking Index with Kellie Capote, Chief Customer Officer at Gainsight.Kellie has invested the last five years developing her perspectives on Customer Success at Gainsight in a broad array of Customer Success leadership roles, including becoming the Chief Customer Officer in 2021.What were some of the top findings from the 2022 CS Benchmarking Index? Kellie first highlighted that 41% of companies recently invested in forming a Customer Success Operations function and is currently present in 61% of companies. This highlights the operational rigor and excellence being developed in Customer Success.63% of Customer Success organizations are tracking Net Revenue Retention (NRR), proving that CS is being viewed as a revenue growth engine, not just a churn reduction department. 45% of CS organizations have subscription renewal responsibilities and will continue to grow as CS departments mature.One interesting topic discussed was that only 20% of CS organizations have primary responsibilities for up-sells and cross-sells. Thus how does a CS organization assume responsibility for NRR? Kellie highlighted that even though CS may not own the opportunity management process, 49% of the time, they are responsible for identifying potential up-sell and cross-sell opportunities while also ensuring customer satisfaction and product engagement which will organically impact existing customer expansion ARR. Kellie also highlighted the Customer Success Qualified Lead (SQL) as a sign that CS is actively focused and engaged on existing customer revenue expansion.What tools are the leading CS organizations using to drive customer success? Customer Success plans are used by 63% of companies to facilitate the definition and attainment of customer-specific success. One area of opportunity is to use "customer value measurements," which are a key part of CS plans. The best companies use a "business value framework" during the sales process and then continue to inform how the CS organization engages with customers to continue measuring and reporting the customer value promised and delivered!Whether you are a customer success professional or a SaaS executive investing in Customer Success to drive customer satisfaction, customer value, and increase Net Revenue Retention Rates, this conversion with Kellie is highly informative and instructive.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

How vibrant is the SaaS industry in Canada? Who better to ask that question and discuss how the SaaS industry is trending in Canada other than Lauren Thibodeau, founder and CEO SaaSCan. Saadian is the leading market research and benchmarking company for the SaaS industry across Canada.There are 38 Million people in Canada. Leading SaaS companies like Shopify, OpenText, and Constellation Software are all headquartered in Canada.There is also a growing ecosystem in Canada with 3,170 VC-backed SaaS companies in Canada, and that does not include boot-strapped or angel-funded companies. One of the common challenges for Canadian SaaS companies is expanding distribution beyond Canada to scale the company. The first need is to find avenues to expand its network outside Canada. Secondly, one of the more interesting challenges is that moving into the U.S. can crush a Canadian company that has not prepared its infrastructure for the 10x increase in addressable market that the U.S. represents.I asked Lauren what a U.S. based SaaS company needs to know if they want to enter the Canadian marketplace. Understanding the Canadian business culture is critical to success for U.S. companies selling in Canada. Listen first and talk second, and displaying a sense of humility are crucial aspects of the Canadian business environment.Having a North Star metric specific to your product and your customer's value is a great metric. Lauren suggested the following metrics to help measure and validate Product-Market Fit. The first is customer on-boarding and activating early customers; the second is understanding product usage metrics such as Daily Active Users (DAU)and Monthly Active Users (MAU).Lauren shared a new metric I had not heard before; the Sean Ellis test is a survey-based metric asking, "how disappointed would you be if this product went away ."If 40% or more of companies say they would be disappointed, that is a good proxy for Product-Market Fit.Unit economics, such as CAC Payback Period, Gross and Net Dollar Retention, and CLTV:CAC are good metrics to understand. However, they do not provide much insight or value until a company prepares to scale its investment in Sales and Marketing once a repeatable and scalable customer acquisition motion is established.Lauren recommends prioritizing focus on churn and retention on a dollar basis are a priority. The growth rate is always a key metric, especially if a company is entertaining external investment. Lauren also mentioned the "Burn Multiple" which measures how much cash is burned compared to Contracted ARR (CARR).Lauren Thibodeau is a great listen if you are interested in learning more about the Canadian SaaS ecosystem, or just learning more about SaaS metrics for early-stage companies.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Venture Capital - a hallmark of the B2B SaaS start-up industry has evolved over the past twenty years - but how have the primary value and responsibilities evolved?Marcelino Pantoja has had a front-row seat in many positions, starting as an analyst at the investment office at Stanford University. Then Marcelino worked with Greg Sands to help stand-up Costanoa Ventures. These views provided insights over six years from over 500 start-ups founded by Stanford alumni.The most surprising component of our conversation was that Marcelino believes that attaining Product Market Fit is a VC firm's first and primary role. What is Product Market Fit - Marcelino defines it using Andy Rachleff's (Co-Founder Benchmark Ventures) definition, as when you build a product that people desperately want and organic word of mouth is the primary source of new customers.VCs need the skill and experience to help a company during the Customer Development Phase of the journey to find Product Market Fit. Finding Product Market Fit is the most challenging and risky phase of the entrepreneurial journey. I pushed Marcelino on why "VCs" primary role is to help founders find Product Market Fit. He responded that capital has become a commodity and that the best VCs deliver company-building experience and expertise to complement the founder's efforts. Other than that, VCs are like any other capital source and should be viewed as such - HOT TAKE!One fundamental change today versus 10-15 years ago is the amount of accessible information on company building from successful founders. Another fundamental change in the technology start-up ecosystem is the number of start-ups that have scaled to become large enterprises. A by-product of this success is the number of people with the experience to help today's founders build and scale their idea and business...experiential advice is much easier to leverage than conference room theory.Another fundamental difference to starting a B2B SaaS start-up today is the low cost of building and delivering the product. Thus "experience" from proven founders and operators who have been there, done that, and possess their own capital from previous successes are a great source of CAPITAL and KNOWLEDGE at the early stages of a founder's journey.Marcelino's experience and perspectives motivated him to create a Venture Capital Index Fund, which simply stated is applying the concepts of traditional asset management to allow institutional investors access to a portfolio of VC funds. A VC Index fund is especially applicable to "early stage funds" which are harder to access for a traditional Limited Partner (LP), such as a University endowment or family office.The value of a VC Index Fund to the entrepreneur? The primary benefit is to reduce the amount of time a founder needs to invest in fundraising by working with a fund comprised primarily of previous founders, who have the capital and operational experience that many traditional VCs cannot provide.If you are a student of, or founder in the B2B SaaS industry, Marcelino provides a unique perspective on gaining access to two of the primary assets every first-time founder requires - capital and experience...in a single source.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Cash Management is not one of the top subjects B2B SaaS founders want to discuss, but critical to start-up survival and success.Brandon Metcalf learned the in's and out's of Cash Management as a multiple-time founder and CEO. As a result, he recently founded Place Technology to help early-stage CEOs and CFOs use automation and technology to better manage cash across every stage of growth and every function in a company."Cautious Capital" is a reality of any capital market that has experienced the momentum and euphoria of the B2B SaaS and Cloud industry over the last five years. Brandon learned the importance of Cash Management and Cash forecasting at Talent Rover, where they had independent P&Ls in eight countries. Cash is always a consideration for strategic decisions in any company. In 2022, growth at any cost is a relic of the past, and today the question is how to optimize every dollar investment to build a sustainable, growth company.An investor's relationship with a founder is built upon confidence and trust, as such, Brandon errors in telling his investors everything and even oversharing what is going on in the company - especially around cash usage, cash burn, and cash forecasts. Brandon prefers to raise capital in smaller tranches to ensure he and the investors feel comfortable with the previous capital invested and used to grow the business.Brandon uses an investment analysis firm to gain independent, externally validated company valuation outside the current investors. Then Brandon prefers to raise money at "lower valuations," which provides more comfort to investors and reduces the risks associated with down-round valuations.Cash Burn is a metric that every CEO, CFO, and investor understands. Cash Burn equals the money brought into a company versus the money spent to run the company. In venture-backed companies, the Cash Burn is almost always negative as a company invests in acquiring and growing customers at a rate much higher than possible in a self-funded, bootstrapped model.One of Brandon's favorite metrics is the "Burn Multiple" The Burn Multiple measures net cash burned divided by net new ARR. David Sacks, Craft Ventures first popularized this metric. A burn multiple less than 1x is amazing, greater than 3x is bad, and targeting 1x - 2x is good to great.I asked Brandon, what are the best metrics to track to manage cash management and cash efficiency. Beyond Burn Multiple, # months to cash flow break-even, operating cash burn to forecast/plan, cash to qualified lead - by source, variance analysis on customer payments (contract to actual), cash impact via discounting, cash impact via hiring.If you are a B2B SaaS founder, CEO, or CFO or considering launching a start-up in the future, understanding the importance and techniques to optimize cash management is a concept that Brandon provides excellent ideas and insights throughout our conversation.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Incentive Compensation and Sales Performance Management - two key ingredients to scaling a successful B2B SaaS company.  Is Intelligent Revenue the next key ingredient to growth?Chris Cabrera, founder, and CEO of Xactly, built a very successful company by helping companies to automate and optimize those two disciplines. The result was an Initial Public Offering (IPO) in 2015 and a $564M acquisition by Vista Equity in 2017...but Chris's and Xactly's story did not stop there and continues to evolve.Currently Xactly is evolving to provide an Intelligent Revenue Platform that enables companies to scale revenue predictably more effectively.Chris defines Intelligent Revenue as the combination of Revenue Planning, Incentive Compensation Management, Pipeline Management, and Revenue ForecastingRevenue Operations and Intelligence is an evolving category still yet to be defined. Why the world is waking up that "siloed" apps are not an efficient or effective way to optimize revenue performance. Moreover, to leverage real intelligence across the entire customer journey requires consistent data across every phase of the journey, and a fragmented revenue technology stack does not provide the core foundation required for Intelligent Revenue.Chris's experience suggests that designing an intelligent revenue plan and incentive compensation model will lead to more predictable and profitable revenue growth. Revenue Intelligence does not start with better forecasting; it begins with using the insights and signals from the past to design the right Go-To-Market structures and plans - ultimately leading to better and more intelligent forecasts.Ninety-seven percent of Xactly's customers opt-in to share their data in an anonymous and aggregated fashion to develop benchmarks enabling the entire Xactly customer community to leverage the shared intelligence to build better revenue plans and incentive compensation programs.Who most benefits from Intelligent Revenue? Revenue Operations, often the combination of Sales Ops, Marketing Ops, and Customer Success Ops, directly benefit by being able to develop better territory plans, design incentive compensation plans that drive the right behavior and now provide more intelligent insights into how current pipeline trends will result in more accurate revenue forecasts.An example that Chris shared was how Revenue Operations can use Intelligent Revenue to design a program to reduce the use of discounting in price negotiations. As an example, incentive compensation plans that pay different rates based upon the "discount" that a sales professional negotiates. One of the traditional barriers to paying this way is the challenge of paying different commission rates based upon discount rates which is a complex, multi-variate calculation challenge - but one that can significantly impact profitable revenue growth.If you are responsible for one of the most common challenges that every company leader faces - delivering profitable revenue growth and consistent revenue forecasts, this conversation with Chris is entertaining, enlightening, and makes for a great listen!See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

How should we price our new SaaS product?  How does our pricing model compare to our competitors?  Are there other pricing models that would increase revenue and margin for our SaaS product?These are all some of questions that can be answered by analyzing B2B SaaS industry pricing benchmarks.   This is the world that Bryan Belanger lives in everyday, so who better to ask.Bryan has been conducting pricing research for over 10 years at the Technology Business Research company.  One of the challenges Bryan identified, was there is no single spot for all size SaaS companies to view the different pricing model options currently being used in the industry.Pricing models in the SaaS industry have started to evolve dramatically over the last few years, and have been further impacted by the growing populating of Product-Led Growth and Usage-Based Pricing.  Pricing benchmarks need to cover several core areas of a pricing model including:- Subscription type- Product /Pricing Packaging- Price Levels- Discounting- Pricing Structure- Pricing Pages- Trial vs Freemium usage- Usage Metrics- Usage MeteringThe typical B2B SaaS company only invest 1-2 days per year in analyzing, enhancing and/or testing new pricing models.  Far too often, pricing is still more ad-hoc and not informed by statistically valid research and benchmarks.Subscription pricing - the secret sauce to the B2B SaaS industry is still the primary pricing model for over 80% of B2B SaaS companies. The structures of SaaS subscriptions is evolving, but subscription pricing is still the cornerstone of SaaS pricing models.Usage-Based Pricing is a trendy pricing model in the industry today, due to it's direct impact on Growth Rates and Net Dollar Retention. Based upon the latest XaaS Pricing research, it was identified that just under 50% of a top 125 high-growth PLG company cohort were using a more basic subscription model (seat based).  Usage is introduced as a "limiting function by pricing package tier" but not invoicing on usage specific variables. The pricing goal in this model was to convert accounts exceeding the "limit" into the next level pricing tier.If you are evaluating introducing or modifying your B2B SaaS pricing model, Bryan and XaaS Pricing are a great listen and follow.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Does being data-driven result in better decision-making and performance results? That was a question we asked Allan Wille, co-founder and CEO of Klipfolio which is enabling thousands of companies to do just that through the dashboards they enable.What are the primary challenges with data-driven decision-making? It starts with the data quality going into the metrics used for decisions. Once the quality, integrity, and even amount of data can drive statistically significant insights, it's important not to go crazy and become the victim of "data overload".Next, we discussed who uses the source data from tools and processes to help analyze the data and then make decisions. At Klipfolio, that is the role of business operations. Other functional operational functions, such as Marketing Operations, manage the data that flows into/out of the marketing automation system and the logic utilized within the platform. Every functional operations team needs to become data quality stewards, but may not be the function that analyzes what the data is saying. Often, business operations or financial operations may be the penultimate operations function that uses the data to help form data-driven decisions and strategies.What metrics are most important for an early-stage SaaS company to capture? Product Market Fit is the first and ONLY goal early on. How to measure product market fit? One is to measure how often a user comes back to use your product; another is to have a proactive outreach strategy to speak directly with the customers. The second category is to introduce growth metrics such as CARR growth, Revenue Growth, and Gross/Net Dollar Retention. Then in the third category come the efficiency metrics that guide profitable growth, such as CAC Payback Period and Customer Lifetime Value to CAC Ratio.Curiosity is a central theme in fostering a data-driven culture. Almost every point solution has basic analytics and reporting capability, and when coupled with excel, most early-stage companies can become data-driven. This approach will limit visualization and the ability to scale but is a great start to a data-driven, metrics-informed decision-making journey.How to ensure the data and metrics being captured are being used to make decisions? Allan highlighted it is very common to introduce metrics that may not stick. Identify those that provide the most insights and have predictive capabilities, and think about getting rid of the less. To scale, having a strategic area of focus for a specific time period that the entire company rallies around is a great way to create a data-driven culture. As an example, maybe for a quarter or two the whole company focuses on a specific category, like Customer Acquisition and identify the top opportunities for improvement as highlighted by the associated metrics, and implement the enhancements (process and/or organizational) before moving to the next strategic area of data-driven, metrics-informed" opportunity.If you are in a business with less < $50M ARR, the discussion with Allan provides many thought-provoking ideas and insights into creating a data-driven culture that translates into accelerated company success.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Marketing as an AMPLIFIER to Sales productivity!!!The quote above was the primary focus of my discussion with Mark Stouse - the CEO of Proof Analytics.Mark self-identifies as a communicator turned marketer turned SaaS CEO. Over this journey, Mark has developed a strong perspective on how to prove ROI, especially for marketing investment.What are the metrics that matter to a Chief Marketing Officer? Mark says this is very straightforward: "Marketing's mission is to help Sales sell more product to more customers faster and more profitably than Sales could do by themselves". Simply stated, it is measured by more deals, bigger deals and faster deals - Deal Velocity! Calculating how marketing measures these should be the primary point of any metric that Marketing captures and reports.When pushed on the top three metrics, Mark responded that KPIs (data) by themselves are not enough. Data is the measurement of what happened in a particular time for a specific place - ALL in the past. Analytics, specifically regression analysis, enables a marketer to predict and forecast how future marketing investments will impact Sales productivity as measured by pipeline and revenue.The B2B SaaS industry is still young when measured against other industries such as manufacturing, retail, or consumer packaged goods. As such, the maturity of using sophisticated analytics to predict the future in the industry is still in its infancy - especially compared to larger, more data-intensive B2B online companies.An example of using data on a more granular level was Ideal Customer Profile (ICP) and Pipeline Coverage Ratio. By understanding how specific cohorts perform in top of funnel conversion, the marketing ROI can be increased materially through enhanced targeting.Next, we pivoted to Mark's concept of Marketing exponentially impacting Sales productivity. Mark has an interesting take on the concept: Marketing should invest more time helping Sales improve conversion rates in the middle and bottom of the opportunity funnel versus primarily being focused on top of funnel market engagement. Mark used a military analogy where the Air Force provides air cover to the ground troops. Why does Mark believe the above? Marketing has conditioned business leaders to think that Marketing is primarily a brand awareness and engagement function versus a selling process amplifier. Mark highlighted TRUST as a key ingredient to enhancing conversion rates and accelerating deal velocity. What drives a buyer's confidence - trust is a crucial ingredient to building buyer trust. The more confidence a buyer has that a company and their product will impact their buying process, measured by win rate and sales cycle time.As a marketer, a pivotal question is what are we doing to increase the buyer's confidence and trust, resulting in helping Sales close more deals faster!If you are interested in hearing thought-provoking ideas on how Marketing can use data and analytics to enable Marketing to become an exponential multiplier to Sales productivity - this conversation with Mark is fascinating.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.