SaaStr Podcast #211: The Ultimate Guide To SaaS Pricing From Investors @ Benchmark, Matrix, Upfront Ventures & Operators @ Figma, Snyk and Kustomer

SaaStr

In Today’s Episode: * David Skok , General Partner @ Matrix Partners: Why does David believe that all good products have at least one variable pricing axis? Chetan Puttagunta , General Partner @ Benchmark: Why does Chetan believe we have seen a strong decline in the per seat pricing model? Mark Suster , General Partner @ Upfront Ventures: What were Mark’s two biggest lessons on pricing from seeing the hyper-growth of Salesforce first hand? What a pricing extravaganza!

Why Seed Investing Is Kind of a Sucker Bet (Relatively Speaking)

SaaStr

Q: What are the Pros and Cons of Seed Investing? Seed investing is a bit of a sucker bet. At least on a relative basis to other types of venture investing. Well, the “good news” for seed investing is you should have a much lower entry price than a Series A-B-C investor. I.e., the earlier you invest, the lower the price. That’s where seed investing comes up short compared to Series A-B-C+ investing. of each investment on average.

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2020 Expansion SaaS Benchmarks: Getting Back to Hyper-Growth

OpenView Labs

When we were preparing the 2020 expansion SaaS benchmarking survey, our biggest question was: “How did COVID-19 and the economic downturn affect private SaaS companies?” Bring back your pricing and packaging initiative. Gather the data on pricing.

What’s an effective price? Price effective strategies & subscriptions

ProfitWell

There’s a question that every startup founder, subscription service provider, and ecommerce store owner, needs to ask themselves on a regular basis: Is this the most effective price for my product or service? Finding an effective price helps you solidify your position, build trust with your customers, and achieve your business goals. In this article, we’ll walk through what makes up an effective price and how to conceptualize the most effective price for your business.

Nothing simple about SaaS benchmark metrics

Practical Advice on SaaS marketing

There are certainly plenty of surveys and published benchmarks on SaaS metrics that try to provide guidance. Use caution with rules of thumb But you should be careful not to take these SaaS benchmarks as gospel. You cannot invest $1 in sales and marketing expenses and get 75 cents in return. A company with a high subscription price and long subscriptions can afford a high customer acquisition cost.

Benchmarking DataDog's S-1: How 7 Key Metrics Stack up

Tomasz Tunguz

Here’s why: For every dollar of sales and marketing investment, DataDog generates $1.68 DataDog is playing across price points. One last chart: revenue dollars at IPO per venture dollar invested. This is a measure of turning investment dollars into revenue, a sort of return on equity metric. Recently, we’ve seen a series of product-driven companies building huge customer bases with tremendous account expansion and terrific sales efficiency.

Benchmarking PagerDuty's S-1:How 7 Key Metrics Stack Up

Tomasz Tunguz

Sales efficiency is a measure of the marginal gross profit generated by a dollar invested in sales and marketing. In terms of price point, PagerDuty is right around the $10,000 revenue per customer per year. PagerDuty was founded in 2009 by 3 former Amazon engineers who were often on-call. To engineers, being on call means carrying a pager to respond to crises when software breaks or services go down. In the 10 years since that day, PagerDuty has built an exceptional business.

Introducing OpenView’s Expansion SaaS Benchmarks Data Explorer

OpenView Labs

We’re living in a remarkable era for investing. Enduring business (think Cisco, GE, Walmart) must demonstrate the ability to repeatedly generate predictable earnings – turning the massive revenue scale they’ve achieved into shareholder returns (via share price expansion and dividends). Benchmarks are the only check on whether or not a business is generating efficient growth. How Do I Know What My Benchmarks Are? You have your peer benchmark set.

SaaS Pricing Guide: When & How to Raise Prices Without Losing Customers

OpenView Labs

Segment CEO and Co-founder Peter Reinhardt was recently reflecting on what were his top lessons learned from changing packages and pricing. Without batting an eye, the unicorn founder said, “The first is to raise prices and that we discovered we could raise prices by probably ten thousand times from what we were initially charging and people were happy to pay for that.”. Successful price increases drive a far higher profit improvement than any other initiative.

1 Key SaaS Sales Metric to Fine-Tune Sales Productivity

InsightSquared

When scaling the business, sales typically averages roughly 30% of revenue, so therefore sales spend is one of the biggest investments a company can make. For these reasons, accurately tracking key sales metrics and benchmarking your performance against peers and market leaders is critical to getting the most out of your sales resources. These processes are important to track accurately and benchmark to achieve the SaaS performance expected in the market.

SaaS, Subscription, and On-Premises Software – Don’t Confuse Subscription with SaaS

OPEXEngine

At OPEXEngine, we pull apart the different nuances of each business model to make sure we are benchmarking companies correctly. However, many SaaS companies charge for a “premium” version, which in effect, is charging extra for additional services but those services are part of the product pricing. These investments by the vendor may fall into COGs (and affect gross margin) or into R&D or be allocated between the two.

Benchmarking Exceptional Series A SaaS Companies

Tomasz Tunguz

In particular, I benchmarked the revenue, growth rates and round size characteristics of these businesses at their Series A. Benchmarking Exceptional Series A SaaS Companies from Tomasz Tunguz. That figure has grown each year by 80%, and for the investments that closed in early 2016, that figure reached $163k. Unlike later rounds, Series A pricing has no correlation to MRR or next-twelve-months (NTM) revenue, which is a proxy for growth rate.

The 14 best SaaS tools: analytics, accounting, pricing, and retention

ProfitWell

So I’ll unpack some of our favorite tools that cater to certain needs—analytics, accounting, retention, pricing, and more. From optimizing your pricing to CRM—there’s a tool tailored for all your SaaS needs. If the tool can track and discover metrics you would have never considered, it’s worth your investment. Now, I’ll walk you through some of the top SaaS products for analytics, accounting, pricing, and retention. Pricing. Price Intelligently/ProfitWell.

SaaStr Podcast #398 with Salsify Co-Founder & CMO Rob Gonzalez

SaaStr

How does Rob think through pricing today in a way that encourages land and expand? How does Rob think about usage vs seat-based pricing in SaaS? How should sales and marketing work together on pricing? Marketing Podcasts SaaS Product Pricing rob gonzalez salsify

5 Key Psychological Biases That You Can Leverage to Drive Sales

InsightSquared

Highlighting one pricing tier as the most popular. Ecommerce sites often use the bandwagon effect by showing shoppers what other people have bought: We’ve seen the bandwagon effect work wonders for account executives using SalesRight to highlight one pricing tier over another. The price point labeled as the “Most Popular” or a “Top Choice” consistently generates more engagement than the others. Utilize High Price and Low Price Anchors. That’s price anchoring.

Sales 226

Decacorns & Unicorns in 2020: Founders Fund Keith Rabois and SaaStr’s Jason Lemkin (Video + Transcript)

SaaStr

Some of these businesses, maybe even many of these businesses have started investing more and more in selling online to their preexisting in store customers. But I think that was when everybody had the proverbial partner meeting discussions about what are we funding, why are we funding, what price are we funding. I mean, including IAA and now four investments over the last month, let’s say. Everybody wants to invest in it or most funds are looking into those.

Six Key Benchmarks for Your SaaS Startup

Tomasz Tunguz

Benchmarking is a great tool, if you can get access to representative data. Pacific Crest and David Skok have released a fantastic survey benchmarking SaaS metrics for early and growth stage companies. Below is my list of the six most important benchmarks and observations from that report. Price the Product Between $1k to $25k Annually to Optimize Growth. Benchmarking is a great first order evaluation tool.

Benchmarking Mulesoft S-1 - How 7 Key SaaS Metrics Stack Up

Tomasz Tunguz

Mulesoft prices is a function of the amount of computation power charged by customers and this doubling of average contract size suggests the sales team is able to convince customers to buy more of the software at the outset. Cash flow from operations breakeven means the business generates as much cash as it consumes setting aside financing and investing activities. Founded in 2006, Mulesoft is an 850 person company based in San Francisco that builds data integration tools.

RevOps and Pricing with Robert Cortese of SolarWinds

ProfitWell

In this episode of RevOps and Hops, Robert Cortese , Director of Pricing and Product Strategy at SolarWinds joins us to chat about the similarities between RevOps and pricing. Prioritization is key when it comes to pricing. It’s crucial to understand what levers you’re going to pull with pricing, even if it’s just one product. The idea of a chief diplomat, and bringing everyone to the table when it comes to pricing and the impact it has on the organization.

What is revenue optimization? Using pricing to optimize revenue

ProfitWell

Revenue optimization is a combination of pricing, demand, and marketing strategies used to maximize revenue growth. It involves taking a tactical, analytical approach to your pricing—requiring analysis of your price points, sales channels, and various other areas of your business—in order to maximize it. Pricing is just the start. Pricing decisions. It thinks of trying to optimize its revenue by dropping the price on its new smartphone accessory line.

Benchmarking MobileIron's S-1 - How 7 Key SaaS Metrics Stack Up

Tomasz Tunguz

This post is part of a continuing series evaluating the S-1s of publicly traded SaaS companies in order to better understand the core business and build a library of benchmarks that might be useful to founders. The company has grown faster than the median SaaS business in our benchmark data set, recording a 176% CAGR over this three year period compared. meaning one dollar invested in sales and marketing returns $1.30

Benchmarking ServiceNow's S-1 - How 7 Key SaaS Metrics Stack Up

Tomasz Tunguz

ServiceNow commands 30%+ annual price increases from its customers, an impressive figure. Impressively, the company is investing more and more into engineering - exceeding 20% of revenues last year - likely developing broader feature set to enable additional up and cross sells. ServiceNow has mostly operated unprofitably, investing as much capital as it can into growth. Worth $11.5B, ServiceNow is the third public SaaS company, after Salesforce and LinkedIn.

Is Strategy Dead in Tech? The Winners Don’t Think So

OPEXEngine

Creative software is still Adobe’s core, but the company is now a leader in market analytics and web development technology, and it is currently investing in artificial intelligence and machine learning. Since 2008, its revenue has tripled and its stock price has soared 14-fold in response.

Benchmarking Hubspot's S-1 - How 7 Key SaaS Metrics Stack Up

Tomasz Tunguz

HubSpot’s target customer base are SMBs and with this price point, it’s possible to support a profitable inside sales model if the team is very efficient. To grow at that pace, HubSpot has been investing aggressively in sales and the company is widely respected for its content marketing prowess. For the moment, HubSpot is among the least profitable companies in the set, but I suspect this is because the company is investing in growth.

Benchmarking Tableau's S-1 - How 7 Key SaaS Metrics Stack Up

Tomasz Tunguz

This post is part of a continuing series evaluating the S-1s of publicly traded SaaS companies in order to better understand the core business and build a library of benchmarks that might be useful to founders. The company went public in 2013 and we’ll use data from their S-1 through 2013 to benchmark the business. For every sales and marketing dollar Tableau invests, the business returns more than $1.54.

Benchmarks for Employee Stock Based Compensation in SaaS Startups

Tomasz Tunguz

The SBC investment pattern varies substantially by company. Many factors skew the investments. I’ve plotted the growth in share price by round for nine public companies in this post. In some cases, share prices increased by more than 50x in just a few years. How much should your startup budget for its employee stock option pool? One way of answering this question is a blanket addition per year, say a 2% renewal.

Our New Pricing Is All About What You Care About Most: Converting More Traffic

Unbounce

The problem is the software that makes them possible is usually priced for huge companies with deep pockets. And so you hope that companies price their software in a way that both makes it accessible and reflects the actual value you’re getting back. For example, there’s cost-plus pricing, which is when a SaaS brand adds up all the expenses that go into supplying a product then slaps a margin on top. Our New Conversion-Based Pricing Plans Support Your Growth.

A Deep Dive Into e-Commerce Gross Margin

OPEXEngine

Finally, as I’ll explain in a more detail below – having a higher gross margin gives you space to invest. That investment could be in marketing to acquiring new customers, but also in product development, improving your existing products or developing new ones to further strengthen your position in the market. Gross Margin Benchmark. It’s hard to establish an absolute gross margin benchmark since markets for each product can be so different.

Benchmarking New Relic's S-1 - How 7 Key SaaS Metrics Stack Up

Tomasz Tunguz

This post is part of a continuing series evaluating the S-1s of publicly traded SaaS companies in order to better understand the core business and build a library of benchmarks that might be useful to founders. This will surely increase as the company penetrates engineering teams more deeply and the investments in sales and marketing begin to reward the company with larger contracts. This substantially higher relative burn rate is driven by massive investment in sales and marketing.

SaaS 2020: Will an Avalanche of VC & PE Capital Change 2020 Budgets?

OPEXEngine

More capital invested, more SaaS offerings, continued expectations of rapid growth are running smack into limits on the availability of qualified employees and a potential economic slow-down which may or may not happen. was invested in the US alone by VCs in 2019. The latest reports show US manufacturing trends diverging from stocks – manufacturing activity is down while the stock prices are reaching record heights. 2020 Benchmarking.

SaaStr Podcast #213: Tom Tunguz, GP @ Redpoint Ventures On Why Scoring Leads May Actually Be Dangerous

SaaStr

As for Tom, he joined Redpoint in 2008 and has since led investments in Kustomer, Looker, Expensify, and Gremlin all prior guests on the show, I hasten to add. In Today’s Episode We Discuss: * How Tom made his way from creating software with his father in Brazil to being GP and forefront figure in the SaaS investment community as a GP at Redpoint today? Assisted vs unassisted: What does Tom believe are the leading benchmarks for both? Welcome to Episode 213!

8 Tough Lessons from Closing 12,000 Customers at WebPT (Video + Transcript)

SaaStr

It’s a global technology focused investment firm. In fact, we were below benchmarks for SaaS companies. Just as an example, at Battery we invested in a company called Bright Tree, which is outside of Atlanta, which makes software for the home health care market. We had invest in banker, it was we just kind of wanted to understand the landscape a lot more.

SMB 140

The Peloton Pivot

ProfitWell

Good Better Best is a weekly deep dive on pricing and packaging strategies written by Rob Litterst , who helps head up our pricing team. A price change and two new apps. Notably, the membership subscription is ~3x the price of Peloton Digital at $39 per month.

The Rules You Can Break, The Ones You Can’t With Tradeshift (Video + Transcript)

SaaStr

Because there is not benchmarks. Jos White : We were fortunate enough to lead a Series A investment into Tradeshift back in 2010, I think. Notion Capital was really the first fund to have the guts to invest in Tradeshift. Christian Lanng : What Jos is trying to say in a polite way is, we had almost no revenues the first four years after he invested and we were okay with that. Work smarter, not harder.

5 Strategies for Professional Service Organizations to Accelerate the Post COVID Recovery

OPEXEngine

Harvard Business Review recommends a model that has fewer ‘knee-jerk’ cost cutting tactics, blended with a few strategic investments. The HBR survey data shows businesses who make targeted investments during a crisis have a 37% better chance of pulling ahead of the competition when times get better versus only 21% chance for companies that focused only on cost cutting. Reactionary pricing changes were a common tactic to try and win more business as pipelines began drying up.

5 Reasons COVID-19 Changes SaaS Forever

OPEXEngine

Management teams are learning that revenue doesn’t just “recur” —they need to invest to make it so. Based on historical experience, we forecast large enterprise-focused vendors sustaining renewal rates significantly better than SMB focused models, and subscriptions priced on infrastructure/data levels sustaining better than seat-based models.”. Blog Benchmarking Changes to SaaS COVID-19 Looking at SaaS during Covid-19 saas

5 Financial Reports Every Business Should Be Running

OPEXEngine

There are three core sections to a cash flow statement – operating activities, investing activities, and financing activities. It can also highlight quantities sold and post-discount prices to provide the average selling price for the day or month-to-date. Blog balance sheet cash flow statements Financial Benchmarks financial reports income statement sales analysis reports Working capital reportsCan financial reporting analysis really help your business grow?

Four (more) things we look for in SaaS startups

The Angel VC

Since then we've looked at hundreds of SaaS startups and have gained additional insights through the work that we've been doing with the SaaS startups that we have invested in. Your pricing needs to be highly differentiated – make your product cheap or even free for a small number of users to maximize distribution and make money out of bigger accounts. Zendesk's benchmarking reports come to mind as an example. investing point nine saas software as a service venture capital

Ferreting out Suppliers’ “Dirty Little Secrets”

Software Platform Consulting

Private equity funds supply investment services to pension plans, endowments, and other investors: My favorite report from last week was the revelation that Whole Foods, whom we know already as “Whole Paycheck”, has been apparently “short weighting” us on some of our purchases. By the way, the list of retailers who have paid penalties when the shelf price did not match the checkout price is too long to detail here.).

Why InsightSquared is Going Platinum, Gold and Silver at Dreamforce 2017

InsightSquared

The price per square foot rivals Tribeca real estate — but at Dreamforce, the space is yours for only four days. And yet, despite the countless distractions and one-more-zero-than-expected prices, InsightSquared is going all-in at Dreamforce 2017. All from a marketing guy who comes from the “inbound” school that expels ephemeral investments like tradeshow sponsorships. After all, at some point I’ll have to justify the investment. .