

Social+Capital reveals secrets behind its enterprise investments, incl Slack - mamoon
http://www.slideshare.net/03133938319/saastr

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varunjuice
This is great. Having helped create a SaaS business, and seen it through 5
years of struggle and growth, a few questions come to mind (especially for
investors)

1/ The quick ratio is handy, but it merges new sales & upsell. The underlying
issues are very different between the two. Wonder what the motivation is
behind combining the two, as it mashes two issues together.

2/ Lifecycle of the company (years since it was founded) probably matters
quite a bit to how you compare / evaluate the ratios. Any thoughts on that,
given your examples?

3/ No mention of logo churn. With SaaS, new sales effort goes into landing
into accounts, and therefore, losing accounts is painful, relative to losing
revenue to contraction.

4/ While revenue is the rubber-meets the road indicator, I felt that our user
engagement (often a business specific metric as opposed to the canned DAU or
MAU) was the leading indicator. Revenue growth (new or expansion) could mask
issues. Any commentary on this?

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mamoon
1/ It's what the name suggests, just a quick and dirty way of assessing
whether a company is adding MRR faster than they are losing it. You're right
is mashes together (new mrr + expansion) / (contracted mrr + canceled mrr)

2/ Totally matters. In year 1 a company doesn't experience much in terms of
both contractions or cancellations, especially if it's a product that is sold
on an annual deal basis. That means that month 13 is really the first month
for cancellations or expansions. In year 1 a quick ratio will be abnormally
high, even infinite, so the quick ratio really starts to make sense in Year 2
and beyond.

3/ Logo churn is captured within the ratio as mentioned above.

4/ This is where you have to have solid top of the funnel lead qualification
process that leads to MQL -> SAL -> SQL -> Sales rep engaged to make a sale.
This funnel is indeed the leading indicator of what's top happen.

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hariskh
Its amazing how fast SaaS companies or at-least good ones are growing..

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varunjuice
It's that sweet sweet recurring + expansion revenue.

Edit: I should add -- this is what makes SaaS companies such a lucrative yet
risky investment. It takes a lot of inside knowledge, and reading tea-leaves
if a SaaS co will take off or not.

