Tom Tunguz

OCTOBER 13, 2014

The startup acquisition market is poised to have its best year in nearly a decade. I’ve observed four: The total number of startup acquisitions has remained relatively constant over the past 14 years. But, the amount of large, disclosed startup acquisitions has decreased by about 25% in the past 14 years.

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Acquisition Trends Startup Marketing 109

Tom Tunguz

APRIL 1, 2019

In 2014, I published a post called Do Startup Require Less Capital to Succeed than 10 Years Ago ? In 2014 we saw increasing efficiencies over time, which was very exciting because it reaffirmed the efficiency of SaaS go-to-market. It’s been five years and time to see how things have changed. The chart above updates that analysis.

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Startup Software Review SaaS Acquisition 267

Tom Tunguz

JULY 9, 2014

See an updated version of this post: Trends in the Startup Acquisition Market in 2015. I was curious how the strength of the IPO market has impacted the acquisition market. In particular, how the number and value of startup acquisitions has changed, and more specifically, whether there are any trends in the sizes of acquisitions.

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Acquisition Trends Startup Marketing 100

SaaStr

MARCH 30, 2023

Having backed more than 115 companies and facilitated over 420 add-on acquisitions, we bring extensive investment experience, deep expertise in software and technology, and a firm commitment to collaborating with management teams.

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Outsourced Development Acquisition Pricing B2B 206

Stax

FEBRUARY 20, 2024

These leadership changes follow a number of new executives joining Stax’s team, including Rowe as CEO, as well as Stax’s acquisition of Atlantic-Pacific Processing Systems. Since 2014, Stax has grown to process over $30 billion in payments and serve more than 30,000 businesses and software platforms across the U.S. and Canada.

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CTO Stax Payments Merchant Services 88

SaaStr

APRIL 2, 2023

Later on, when we thought a new acquisition of raw technology was ready to scale (it wasn’t – it is now) In 2022 (like many companies), when we misread the “COVID bump” of 2021 for a secular change in software In each case, the mistake wasn’t being aggressive. So at Pulse 2014, I became a “grown-up CEO.” I wore a boring suit.

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Sales Hiring Scale Scaling Customer Success 261

SaaStr

JULY 14, 2022

This led to our first meet-ups in 2013 and 2014, the first SaaStr Annual in 2015 , the industry’s leading podcast in 2016, the first SaaS founder coworking space in 2017, and SaaStr Pro , the first learning management system for SaaS founders in 2018. But all this was pretty novel back in 2014. It was awesome.

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Scale Sales Recruiting CTO Hire New CTO 276

Casey Accidental

NOVEMBER 28, 2023

Most companies have a primary acquisition loop that drives this scalable growth, and unfortunately, there aren’t that many acquisition loops that really scale. And you start being able to acquire more of them in a scalable way i.e. an acquisition loop. In fact, they complain more, because they like the product enough to care.

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Payments Scale Payment Methods Underperforming Technical Team 62

Tom Tunguz

NOVEMBER 8, 2015

In the last 22 months, there have been 4 $1B+ software IPOs and 3 $1B+ software acquisitions. But compared to 2014, 2015 was a meager year for startups looking to go public or be acquired. In 2014, $11B of disclosed M&A occurred. Why was the exit activity in 2015 starkly different than 2014? or about 7.7%.

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Startup Software Data Acquisition 100

Tom Tunguz

MARCH 4, 2015

To calculate the data, I filtered all the startups who had been acquired for undisclosed amounts and raised less than $6.5M (the sum of the average seed round in 2014 and the median series A ). Year 2010 2011 2012 2013 2014. 2014 saw a modest drop to 61. Or it could be caused by a delay in the announcement of these acquisitions.

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Startup Trends Marketing Technical Review 108

Tom Tunguz

FEBRUARY 28, 2017

The median forward revenue multiple for SaaS business reached its peak in February 2014, fell to its nadir two years later, and has since recovered, hovering at around five times forward revenue – where it has remained with little variance over the last six months. In 2014, forward revenue multiples ranged from 1× to more than 20x.

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SaaS Acquisition Trends Retention 100

Tom Tunguz

MAY 26, 2015

In 2000, the majority of tech acquisitions were primarily stock. In 2014, 90% of the tech M&A transactions consummated by companies, and excluding private equity firms, in the US with disclosed deal values were cash deals. The best return on capital then is acquisition or stock buy backs which hit a record high earlier this year.

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Startup Acquisition Pricing Trends 100

Tom Tunguz

JUNE 20, 2016

In 2014, that figure fell to 1186 and in 2015, we count 481. But if we assume the 2014 cohort is accurate, then the data suggests an 18% drop in software company formation. Subverting those incumbents is going to require a meaningfully better product or substantially more effective customer acquisition channel.

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Venture Capital SaaS Machine Learning Artificial Intelligence 100

Incredo

JUNE 25, 2019

Some experts claim that it’s extremely harmful to the company’s ROI and increases customer acquisition cost (CAC). But Slack’s free-to-paid conversion rate in 2014 reached 30%. Freemium plans decrease customer acquisition cost (CAC) as you spend fewer resources to attract people to free access. So freemium SaaS works: 1.

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SaaS Pricing Software Review Acquisition 236

Tom Tunguz

AUGUST 6, 2015

In 2014, the median startup grew at 85% CAGR before going public. In 2014, a startup needed $54M. First, the acquisition channels startups use to acquire customers address many more potential customers and enable far more cost effective marketing than twenty years ago. In 1998, the median IPO-bound startup reported $11.8M

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Startup Acquisition Trends Enterprise 100

SaaStr

JUNE 5, 2020

With the Salesforce IPO in 2004, we saw the first sign that institutional investors were comfortable with a standard set of SaaS metrics: Churn, sales efficiency , ARPU, LTV, customer acquisition cost , and so on. . Digital Ocean took $40m in debt from Fortress in 2014 after doing a Series A with Andreesen Horowitz.

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Venture Capital Technical Review SaaS Banking 216

Tom Tunguz

MARCH 31, 2015

In 2014, there were 251 working days and 211 $40M+ growth rounds - just about one per day. In contrast to the frenetic private market, there were 15 US IT venture-backed IPOs with offerings greater than $40M last year, slightly more one IPO per month in 2014. 231 companies raised $40M+ growth rounds in 2014.

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Finance Startup Pricing Acquisition 100

Tom Tunguz

MARCH 1, 2015

But what of 2014? 2014 1265 1272 1006. 2014 saw 18% fewer investments, but an equal amount of investment at $1.3B. Round sizes have increased in most fundraising stages , likely because 2014 was a decade high year for VC fundraising. I adjusted February 2015 Crunchbase data in this way to create the 2014 analysis.

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Investment Marketing Finance Acquisition 100

Tom Tunguz

APRIL 14, 2014

In fact, the 2014 cohort of public SaaS companies spend more on sales & marketing and engineering than previous IPO cohorts. Looking at the Median Sales Costs, which shows gross sales dollars in $M, the 2014 cohort does show accelerated spending compared to older cohorts. There’s no clear difference, then, in sales spending.

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Engineering Investment Sales SaaS 100

Tom Tunguz

APRIL 27, 2015

Thirteen years later, the company generated more than $600M in annual revenue in 2014 and sold to SAP for $8.3B in the largest ever SaaS acquisition , and it is one of the very few SaaS companies ever to achieve both positive revenue and cash flow break-even. Then the company’s revenue skyrocketed to more than $700M in 2014.

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SaaS Cloud Travel Business Model 108

Sales Hacker

MARCH 15, 2022

Join us for an entrepreneurial conversation about how to modernize your talent acquisition approach for both high growth and long-term growth. 4 ways to modernize talent acquisition. 4 ways to modernize talent acquisition [22:26]. Asad joined in 2014 as an account executive. 4 ways to modernize talent acquisition [22:26].

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Sales Hiring Underperforming Technical Team Acquisition Development 93

Tom Tunguz

NOVEMBER 29, 2016

The combination of recognizing revenue sooner with the ability to amortize/spread out the costs of customer acquisition over the life of the contract may increase the company’s net income/profitability. As the industry moves to these new standards, public company reporting and benchmarks will change.

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SaaS Consulting Benchmarks Startup 100

Tom Tunguz

AUGUST 17, 2014

Six-months through 2014, another $3B has been invested. Second, median institutional seed fund sizes have increased by 66% to about $50M, likely driven by the great acquisition environment. At this pace, seed dollars may grow by 8x compared to 2011. Just a few years ago, it was 5%.

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Trends Marketing Acquisition Investment 100

Tom Tunguz

JANUARY 19, 2014

If the trend continues, in 2014 the average material startup acquisition will reach $178M and the average startup IPO will raise $146M. Let me explain the phrase material startup acquisition. The data set is skewed this way because publicly traded companies are only required to disclose these acquisitions by the SEC.

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Trends Startup Venture Capital Marketing 100

Tom Tunguz

NOVEMBER 24, 2014

Below are the ranges I’ve seen for these ratios, but keep in mind, there’s lots of variability for different types of businesses (SMB vs Enterprise, Word of Mouth vs Outbound customer acquisition, etc): Marketing : quite variable; it depends on the main customer acquisition channels of the business.

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Scale Sales Hiring SaaS SMB 100

Tom Tunguz

AUGUST 10, 2014

The chart above compares the competition in the Play store in early 2013 and in mid-2014. In mid-2014, apps’ rank volatility is far more uniformly distributed, meaning mobile apps are moving up and down all the time, implying strong competition and a vibrant market. Second, the iOS store has also become more competitive.

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Mobile Trends Startup Acquisition 100

OpenView Labs

MAY 24, 2021

(This new way of thinking about R&D spend also requires companies to rethink the relevance of classic SaaS metrics like CAC payback, which only consider Sales and Marketing costs as part of customer acquisition.). PLG is more of an acquisition channel than a company-wide strategy. Atlassian has an R&D:S&M ratio of 2.9:1.

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Scale Headcount Sales Hiring Benchmarks 98

Intercom, Inc.

JUNE 20, 2018

We created our first sales function in 2014 and in the busyness of building out the team, we had little time to reflect on how our experiences on the frontline of sales could add value to our product roadmap. To fix it, we had to change how we worked with our product team. Where does sales fit in at a company driven by product strategy?

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Scale Sales Software Review Strategy 199

Tom Tunguz

FEBRUARY 6, 2016

Remember the heyday in March 2014? The go-to-market advantages of SaaS including faster sales cycles, beneficial cash cycles, online/mobile acquisition and bottoms up adoption are real, enduring , transformative changes. Since then, multiples have compressed markedly. We’re 57% below that high at 3.3x forward revenues.

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SaaS Startup Pricing Mobile 108

Tom Tunguz

JUNE 2, 2015

In a recent podcast , Ron Gill, the CFO of Netsuite - a $7B+ market cap company with about $600M in 2014 revenue, which provides ERP software to mid-market companies - articulated the importance of the Lifetime Value / Cost of Customer Acquisition (LTV/CAC) ratio for his company.

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Startup SaaS Churn Engineering 108

Tom Tunguz

JANUARY 14, 2016

Starting in 2014, and perhaps even a bit before, startups have been able to raise capital at better terms than at any time since 2000. In 2016, the question that will immediately follow, “What is your annual growth rate?” ” will be “What are your unit economics?” More money raised for less dilution.

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Startup Metrics Transportation Marketplace as a Service 100

Tom Tunguz

JUNE 24, 2014

2014 looks to be a bit of a stronger year. This efficiency is driven by lower cost-of-customer acquisition because of better acquisition channels and lower infrastructure costs. LPs are investing into venture capital at a steady, and likely increasing rate. Some outliers are substantially much more efficient than that.

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Marketing Venture Capital Acquisition Startup 100

Practical Advice on SaaS marketing

MAY 5, 2014

See "SaaS customer acquisition: Feed it or starve it?" ) Junk mail costs trust The bigger cost though is credibility and trust. If you're using poorly targeted email to market a SaaS solution, you're wasting time and money. And the SaaS business model doesn’t leave much room for that. And for SaaS businesses, that means a lot.

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Acquisition Business Model SaaS Subscription 100

Tom Tunguz

AUGUST 26, 2014

I've estimated $113M in revenue for 2014 by extrapolating their first six months of revenue this year and applying the 2013 growth rate to it. But that incremental revenue costs about 75% more in customer acquisition costs over the same period. In the short term, the increasing costs of customer acquisition decrease net income.

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Benchmarks SMB Metrics SaaS 108

Tom Tunguz

JUNE 15, 2015

In 2014, venture capitalists invested in 37 separate open-source financings. The chart above shows the top 10 open source acquisitions. Some open source companies have raised huge sums of money, well over $100 million. The chart above shows the top 10 open source companies in terms of dollars raised.

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Startup Finance Innovation Business Model 100

Tom Tunguz

JANUARY 14, 2015

In fact, below I’ve copied Xero’s P&L from its first year since founding all the way through 2014 - a data set I never thought I would be able to publish on any company for confidentiality reasons. Xero Income Statement 2007 2008 2009 2010 211 2012 2013 2014. Growth 109% 265% 206% 123% 107% 88%. Gross Profit -0.8 -2.0

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Benchmarks Metrics SMB Outsourced Development 100

OpenView Labs

MAY 27, 2020

Within eight years, HubSpot grew from zero to $100+ million revenue with an IPO in 2014. Then you can look at your acquisition to activation, to monetization, to retention, and think through who are the best people—regardless of functionally where they sit—that could actually make an impact against that metric.”.

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B2B Acquisition Metrics Engineering 52