SaaSletter - Now On Substack

Back from a hiatus and the collapse of Revue (thanks Twitter!), here is your sea of curated content

Some Posts

“We Don't Have Nearly Enough Startups” - A great quantitative study from Nnamdi Iregbulem (Partner at Lightspeed) suggests a structural supply/demand imbalance. This aligned with my own priors on a scarcity of ~Series C+ / growth equity-grade assets in SaaS (the ARR funnel narrows fast!) relative to AUM… but seeing this at the earliest stages was a surprise.

As a “lazy long” (aka someone who uses EV/Revenue/Growth a bit too much!), I translated CJ’s excellent SaaS Napkin into this Google Sheet (public multiples as of 01/23/2023). But go read the true source material here:

The 2022 SaaS Fundraising Napkin

and a write-up from a new Substack:

Matt Harney @SaaSletter

👀 via @ArdaCapital: open.substack.com/pub/tidalwave/…

open.substack.comDeclining Returns in Software & DefensibilityAnd what’s next?

Indicators I’m Watching Most

The Repvue (think Glassdoor for sales) data continues to look grim with a very bad December across SMB, Middle Market, and Enterprise:

Matt Harney @SaaSletter

Checking in on @repvue data as a real-time indicator for the state of SaaS sales: 🆘December 2022 data update = 🔻down across *all* segments, esp SMB (🔻9% MoM) ENTERPRISE REPS - 42% quota attainment Down 7% YoY Down 3.5% MoM

Discounting is on the rise:

Matt Harney @SaaSletter

👀 fairly significant uptick in *vendor discounting* in Q4 (via MS CIO Survey; n=100 CIO's of largely $1b+ revenue orgs)

Lastly, my SaaS Demand Index (high intent software buyer searches) continues to be slower than I want (continuing delays in the Google API → the SEO tool that drives this). The next issue is coming soon.

The “flash” data for November/December 2022 continues to indicate a flat top of the funnel. Better TOFU than real-time sales… but underwhelming versus sector growth expectations.

Some Tweets

Nick Mehta @nrmehta

Customer Success roles are among the LEAST affected by layoffs. CS joined Finance, Professional Services, Support, and Legal as an essential line of business— with an average of only 2% of their headcount affected.

Matt Harney @SaaSletter

🧵interesting top-down analysis on IPO market from latest MS Venture Vision My read = the implied Q1 2024 (maybe 2H 2023) IPO are-opening is a pretty damn good outcome for founders and VCs all things considered. Is this another soft landing???

Staysassy doesn’t get enough attention - tons of blog posts like this. Follow + read the archives:

staysaasy @staysaasy

Management debt is the organizational analog to tech debt - a series of short term optimizations that carry long-term consequences which need to be unwound over time (or kicked down the road)

staysaasy.comManagement DebtTeams naturally start to incur management debt as they grow and become more complex, just as codebases incur tech debt. The combined weight of past decisions creates a web of precedents and exceptions that can cause problems of varying size over time. Here are a few of the main types of management d…

Matt Harney @SaaSletter

Some excerpts from the latest Software Equity Group (great boutique!) M&A report M&A multiples at 5.6x revenue or 1.7x below 2021 high point /1

Matt Harney @SaaSletter

Good working capital math from @BreakingSaaS Annual billing reinvested creates 17% more ARR vs monthly billing in *one* year alone breakingsaas.substack.com/p/customer-eco…

Matt Harney @SaaSletter

Is PLG structurally less profitable? Data from @ttunguz tomtunguz.com/plg-less-profi…

Tomasz Tunguz @ttunguz

Round sizes ballooned. So, did headcount at the Series A. In 11 years, the median headcount at Series A swelled from 15 to 28. [1]