9 Takeaways from the SaaStr Conference

Mark Suster being interviewed by Jason Lemkin

Two years ago I attended the SaaStr Spring Soiree at a small function center on Sand Hill Rd. It was a two-hour panel followed by cocktails and networking. It’s amazing to see how far SaaStr has come since then. This year’s Annual Conference saw about 5,000 attendees bursting at the seams in the Nob Hill Masonic Center in San Francisco for 3 Days and with 2 tracks of sessions — one track was strategically focussed, the other had a tactical focus. Only 30% of attendees were local, with SaaS companies piling in from around the globe, predominantly (from what I saw) Europe, India, Australia and New Zealand.

Overall the event was produced very professionally, with a great networking app, lots of staff on board to provide guidance, a band to play in between sessions, some awesome video production courtesy of my friend Sian Simpson and her team and lots of peripheral networking events. Next time I would make an effort to have more open space for people to sit and chill and even detach if need be, because we’re not all extroverts :)

Anyway, here are some of the nuggets I gleaned from the sessions I attended:

Fundraising

There was a lot of talk (especially by Mark Suster) about the current fundraising environment. In short, 2016 is going to be a lot tougher for startups to raise money; both seed stage and previously well-funded Series A startups will be more challenged this year. Here’s why:

1. IPOs are taking much longer to arrive. This means the VCs who have invested in these startups are still tied up on the boards of these companies. On average, a VC doesn’t have time for more than 8 board seats, so once they’ve filled up their dance card, they’re not too keen to add another company to their roster.
2. Investors are no longer operating in FOMO mode which means they’re happy to wait a bit longer before making a decision. Personally, I think this is also a result of some of the darling startups of the Valley shutting down last year, like Homejoy, Zirtual and Secret. It seems like the fundraising scene has entered into it’s own trough of disillusionment.
3. As predicted by many in the Valley, there is and will be much more interest in “real” businesses with real revenue, real profits and real business models. I doubt you will hear many investors encouraging their portfolio companies to focus on sign-ups and traction instead of revenue this year. The shiny glean on Unicorn companies like Instacart is waring off and more people are starting to realize that life in San Francisco is being heavily subsidized by VCs helping companies like Uber and Sprig offer prices below cost to “own” the market.
4. Startups with funding are looking to extend their runway by cutting costs, including downsizing their teams. This is already happening with companies like Mixpanel, Zenefits and GoPro.

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Customer Success

Customer Success is rising in prominence in SaaS startups.

1. In a SaaS company, the lion’s share of revenue does not come from the initial Sale to a customer. It comes from the ongoing renewals and upsells over the lifecycle of a customer. In fact, typically the first sale doesn’t even cover the cost of acquisition. So once you have the customer, the key to making that customer profitable is keeping them happy with your product, educating them on how best to use it, and encouraging them to expand or up-sell to higher plans or cross sell to complimentary products. So who owns this function? The Customer Success team, led by a new executive role that is gaining traction — the Chief Customer Officer.
2. The most important metrics in a SaaS business are Churn, Retention and Engagement. Once again, all these metrics should be owned by the Customer Success team.
3. The way you structure your pricing model is key to your success. The best models are those that grow with the growth of usage of your product, such as plans focused on the number of Users (seats) or the number of transactions.

Selling to Developers

1. Typical Sales Strategies have involved selling to Businesses (B2B) or Selling to Consumers (B2C). A new model is emerging. This model has been proven extremely successful by companies such as Atlassian, Slack and Digital Ocean. And that is selling to Developers (Dare I coin the term B2D??). This strategy aims at selling to Developers in a touchless, low-cost sale by letting Developers discover your tool and learn how to use it. As these Developers love your products and want to adopt it more widely, they will be your advocates to Senior Management. With this strategy, Atlassian had boasted about not having had to deploy a sales force. Watch this space, this approach will start to become more mainstream.
2. As the tech ecosystem becomes more interconnected, your tools won’t have much value unless they can integrate with other tools that can help you with your metrics, your management and your productivity. The tools your software can integrate with is becoming much more important in determining adoption. Most companies have somewhere between 5–12 main tools they use to run their business. If you’re not a part of the ecosystem and you don’t offer an open API, you’re going to lag behind. That’s going to make it that much more important for your team to have a local presence here in SF to build those relationships with partners, get in their app stores and work together on co-marketing strategies.

That’s the end of my observations from the SaaStr conference. I‘d love to hear your thoughts. Please recommend this story and share if you enjoyed reading.

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