According to a report from Capchase comparing more than 400 SaaS startups to unicorns that have hit the public markets in the past two years, the top performers “beat the 40-hands rule,” reports Kyle Wiggers.
For those of us who haven’t memorized economic frameworks, the rule of 40 is a metric that investors have developed to measure the health and growth potential of SaaS startups. If a company’s combined growth and profit rates are over 40%, that’s a good bet.
Capchase’s report looked at startups bringing in between $1 million and $15 million in annual recurring revenue. According to the findings, SaaS founders should target at least 80% and strive to exceed 110%.
“Financial discipline is key here,” said Capchase CEO and co-founder Miguel Fernández.
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“This includes reducing underperforming products, reducing R&D and general and administrative costs, and doubling down on creative strategies to immediately recoup customer acquisition costs to reduce the burnout associated with growth.”
Helpful news for investors and founders, but a worrying signal for employees at software companies: Aggregator Layoffs.fyi tracked 75 layoffs in May 2022 and currently 152 in June.
I remember the fear I felt as a start-up worker during recessions when I read about mass layoffs at tech companies that were previously considered ascendant. My best advice: Strengthen your network. Find five colleagues to recommend on LinkedIn, reach out to someone you haven’t spoken to in a while, and do your best to keep your mind on the present moment.
And if you’ve ever discussed an idea to start a business with a friend, think about working on a pitch deck. You never know…
Thanks for reading londonbusinessblog.com+ this week and best wishes for a Happy Independence Day to our readers in the US
Senior Editor, londonbusinessblog.com+
Today’s start-up layoffs have nothing to do with the 2020 correction
While the rate of layoffs at start-ups has increased in recent months, it is still well below the rate at which companies reduced their workforce at the start of the pandemic, Alex Wilhelm reports in The Exchange.
“The correction for 2022 is different. It has been slower to arrive, giving startups more time to adapt to changing market conditions. And it was predicted by declining public markets that, we assume, allowed some private companies to save cash in anticipation of, say, a more conservative financing market.
When it comes to sanctions, PE companies should be extremely cautious
Banks and other financial institutions must follow KYC (know your customer) guidelines, but private equity funds have a loophole: They’re not required by law to tell regulators who their investors are — or if they’re acting suspiciously.
However, the Russian invasion of Ukraine changed that.
The increasingly isolated country now faces international sanctions, and “PEs are investing in closely managing compliance programs, policies and procedures at each of their portfolio companies,” writes Snežana Gebauer, a StoneTurn partner.
5 ways to seize the opportunities created by the recent chaos in advertising technology
This year, TikTok’s ad sales are expected to triple to more than $11 billion, causing the combined ad revenue of Twitter and Snapchat to fall.
According to Alex Song, CEO and co-founder of data science company Proxima, this upheaval in media technology stocks creates benefits for early stage startups, “because forced innovation creates a more competitive environment.”
In a guest post from TC+, he shares five strategies “to take advantage of the turbulent advertising environment.”
Dear Sophie: Does a doctor get a green card faster than an engineer?
My wife and I are from India. I am a software engineer and have an H-1B visa. My wife has a dependent H-4 visa. The company that sponsored me for the H-1B also sponsored me for an EB-3 green card, which was approved about three years ago, but I’m still waiting for a green card number. My wife got her work permit and has been working as a doctor ever since.
Can she apply for a green card? Is she more likely to get a green card because of her profession? If she applies for a green card, what will happen to my green card?
— Humble Hubby
One to Watch: Debut Capital’s Pilar Johnson Working to Increase Funding for Overlooked Founders
For Pilar Johnson, co-founder and managing partner at Debut Capital, the road to investment began after she responded to a Craigslist job posting in a co-working space.
“That job exposed her to the concept of entrepreneurship, and she soon began studying how founders scaled their businesses,” writes Dominic-Madori Davis in her new set of investor profiles.
Johnson, who is based in Houston, shared her investment thesis and strategies and spoke about her efforts to increase diversity in venture capital.
“If someone is interested in becoming an investor and thinks they don’t have the skills, I’d say don’t believe that,” she said. “You can become a full-fledged investor, and it is necessary.”
What should you pay attention to when hiring a growth marketing agency?
As startups of all sizes look for ways to reduce costs and expand their customer base, the term “burn rate” takes on a new emotional aspect, especially in regards to hiring consultants.
Growth marketing agencies charge hundreds of dollars per hour, which greatly increases the stakes if you find one that fits the specific needs of your business.
In a detailed introduction, growth marketing expert Jonathan Martinez shares his criteria for the selection process, presents common fee structures, and includes some of the key questions to ask during the assessment process.
Pitch Deck Teardown: Wilco’s $7 Million Seed Deck
Founders with a tech background would do well to heed one of the biggest takeaways from Wilco’s $7 million seed-pitch deck: Avoid the trap of focusing too much on a product’s features rather than its benefits of it, writes Haje Jan Kamps.
“The ‘how’ will be important, but risk the temptation to go into more detail than what is important for a pitch deck. The ‘what’ is too tactical; for this part of the story, it doesn’t really matter what users have to do to take advantage of these benefits. Focusing on the ‘why’ is why this slide is so powerful; it opens the door to more in-depth conversations if needed, but the basics are there. I wish more startups understood this!”
How to keep your development team aligned with the company’s product vision?
As a business grows, it’s common for teams to prioritize changing goals as they expand the scope of their operations.
However, there is one team that cannot afford to lose sight of your vision of the product: development.
“Having a development team aligned with the product vision makes communication easier and reduces reliance on key stakeholders as it empowers team members to make decisions,” writes Sanjoy Singh, VP Engineering at Talentica Software.
“Such teams are thinking more about improving feature adoption, customer engagement, and delivering product-centric outcomes, which reduce iterations and production costs, refine time to market, and help achieve business milestones.”
Singh explains his four rules for keeping product teams aligned with the product vision:
- Map individual ambitions with product needs
- Follow the principles of product mindset
- Align business results with team KRAs
- Ensure seamless communication
- 1 Today’s start-up layoffs have nothing to do with the 2020 correction
- 2 When it comes to sanctions, PE companies should be extremely cautious
- 3 5 ways to seize the opportunities created by the recent chaos in advertising technology
- 4 Dear Sophie: Does a doctor get a green card faster than an engineer?
- 5 One to Watch: Debut Capital’s Pilar Johnson Working to Increase Funding for Overlooked Founders
- 6 What should you pay attention to when hiring a growth marketing agency?
- 7 Pitch Deck Teardown: Wilco’s $7 Million Seed Deck
- 8 How to keep your development team aligned with the company’s product vision?