Tom Tunguz

NOVEMBER 5, 2023

Six quarters ago, profitability became the most important factor to public software valuations. 14 public software companies have reported earnings in this quarter so far. These companies’ earnings surprise has been prodigious. Earnings surprise is the difference between how much the market expected in earnings compared to actuals.

Software 304

Software Management Revenue Marketing 304

SaaStr

MAY 22, 2023

Not easy, but easier and easier: There was a bump in 2016, a Flash Crash in SaaS, when budgets were slashed, but it didn’t last long enough to really impact renewal cycles. SaaS markets had fully recovered later that year. Even the 2008-2009 downturn, while truly brutal, didn’t hit SaaS as hard as the rest of the economy. It’s still growing.

SaaS 236

SaaS Churn Sales Software 236

SaaStr

APRIL 17, 2024

So it’s been a long IPO drought since HashiCorp was the last IPO of the Boom Times in December 2021. Since then, we’ve had just one — Klaviyo. But now a second SaaS security leader has filed to IPO, Rubrik. They’re still transitioning from onprem / appliciance model to cloud, which makes some of the metrics a touch confusing.

Scale 220

Scale Pricing Scaling Cloud 220

Tom Tunguz

JANUARY 28, 2024

The fastest growing software category in the public markets is security. Data follows. Security companies as a group average 29% expected revenue growth in 2024, compared to 23% for Data (or DaaS which stands for data-as-a-service). Fintech & SaaS (horizontal) average ten percentage points fewer expected growth.

Software Review 288

Software Review Software Finance Acquisition 288

Tom Tunguz

MARCH 11, 2024

A lot of big customers want to have open file formats to give them the options…So data interoperability is very much a thing and our AI products can generally act on data that is sitting in cloud storage as well. But it also simplifies architectures. Data warehouse vendors have marketed the separation of storage & compute in the past.

AI 298

AI Engineering Cloud Trends 298

Tom Tunguz

APRIL 2, 2023

Burn multiple calculated like this : net burn divided by net new ARR. Startup burn multiples have changed markedly in 2023. Companies with more efficient burn multiples between 1-2 plan to increase their net burn per new dollar of bookings by between 14-40%. The average startup with a burn multiple of 5 plans to reduce to 1.5.

Startup 286

Startup Marketing Business 286

Tom Tunguz

FEBRUARY 8, 2024

We’re entering a new pricing environment for software: AI vs non-AI. It’s only happened in the last few weeks. Recent earnings have pushed some of the most important companies to all-time highs. Company Performance Confluent 34% Cloudflare 21% ServiceNow 20% Microsoft 14% This dynamic doesn’t favor everyone.

Startup 300

Startup AI Software Pricing 300

Tom Tunguz

MARCH 27, 2023

Sales cycles shifted dramatically in 2023. Slower sales cycles create pipeline shocks & startups are feeling the impacts. The average startup saw a 24% increase in sales cycle from early 2022 to 2023. 60 day sales cycles are now 75 days. But the latency isn’t evenly distributed.

Startup 336

Startup SMB Headcount Sales 336

Tom Tunguz

JUNE 7, 2023

In the mid-2010s, every web1 company became a web2 company. This time it’s different. Many web3 companies will become web2 companies, too. Why will web3 companies dress like SaaS mutton? If the current pace continues, web3 startup fundraising will fall by 73% in 2023. But web3-to-web2 sales must be the future for companies to scale.

Blockchain 285

Blockchain SaaS Scale Cloud 285

Tom Tunguz

APRIL 23, 2024

Snowflake announced Artic , their open 17b model. The LLM perfomance chart is replete with new offerings in just a few weeks. Overall knowledge performance is asymptoting as expected. It’s hard to discern the most recent dots. One thing stands out from the announcement - the positioning of the model.

Artificial Intelligence 217

Artificial Intelligence B2B Marketing AI 217

SaaStr

DECEMBER 15, 2023

So over the past few weeks I’m doing a lot of end-of-the-year catch-ups and I’ve heard this one story again and again: “I replaced my entire management team this year” I push founders and the reason in the end is basically always the same. The existing team just wasn’t happy or motivated in the tougher environment of 2023. When I see disloyalty.

SaaS 226

SaaS Management 226

SaaStr

APRIL 24, 2024

It raised less than $10m before it IPO’d, and fast forward to day, it’s at $2.5 Billion in ARR, and is very profitable (almost $1B in non-GAAP net income), but growth has slowed to a mature 12%. Still, Wall Street is good with the combo. It trades at a stunning $32 Billion market cap. 5 Interesting Learnings: #1.

Scale 171

Scale AI Cloud Scaling 171

Tom Tunguz

NOVEMBER 9, 2023

The average sales cycle has lengthened from 32 to 44 days for net new software, a 37% increase. Slower cycles & fewer new purchases : 19% of software purchases are net new in 2023 ; just 17% in Q3. Still about 1-in-5, but down from 30% last year. In a challenging market where new customers are a challenge, how does a company grow?

Software 296

Software Trends Pricing Data 296

User Pilot

APRIL 21, 2024

Are you using in-app customer support to resolve your users’ issues faster and streamline the support process? By integrating customer support directly into your software app or website, you can: Boost user retention. Improve customer satisfaction. Reduce support costs by minimizing the need for human intervention.

Customer Support 96

Customer Support Software Review Systems Review Mobile 96

SaaStr

MARCH 23, 2024

Are we thought the endless price increases we saw in 2023? Apparently not. A stunning 76% of you are raising prices in 2024. That’s up from 54% in 2023. Personally, I’m a fan of only raising prices if you’ve earned it, and focusing on raising prices on new customers, not just the base.

Pricing 215

Pricing SaaS 215

SaaStr

APRIL 20, 2024

." @searchbrat @zapier @kippbodnar @HubSpot @jasonlk pic.twitter.com/dUudpe9s2Q — SaaStr (@saastr) April 16, 2024 HubSpot and Zapier’s CMO had us on their “Marketing Against the Grain” pod / videocast. We went pretty deep on: The real role of AI in marketing today Does everyone just want to be a strategist now?

Sales Hiring 247

Sales Hiring Startup Marketing Technical Review 247

SaaStr

APRIL 10, 2024

So I’ve been doing SaaS long enough to remember when Dropbox was a super hot SaaS startup. Fast forward to today, it’s settled into a very mature leader, with slow growth but impressive efficiency … at a stunning $2.4 Billion in ARR. It trades at just 3x ARR. And that includes $1.4B Net of cash, it trades at just over 2x ARR.

Scale 215

Scale Churn Scaling Pricing 215

SaaStr

APRIL 3, 2024

So we’ve covered Klaviyo several times at SaaStr , and we’re super excited CEO Andrew Bialecki is coming to 2024 SaaStr Annual Sep 10-12 in SF Bay to share his learnings!! (We We also have a great deep dive we did a little ways back with Andrew below). The only one. That’s. One SaaS IPO in 2.25+ years. NRR Holding Up at 117%.

SMB 206

SMB Scaling Revenue Engineering 206

SaaStr

SEPTEMBER 5, 2023

So ever since I started in SaaS, I’ve been trying to answer a basic question: how quickly do the best take off and get to $10m ARR? It took us about 5.5 years back in the day, but SaaS was much smaller then. And I worried when I compared us to Dropbox, Yammer, Box and others that were our peers that got there faster.

SaaS 221

SaaS Benchmarks Startup Investment 221

Tom Tunguz

DECEMBER 5, 2023

Second, each of these businesses has scaled, doubling or more in the last three years. A 30% growth on twice as large a revenue base signifies many buyers are ready to spend. Third, many of these businesses like Mongo & DataDog are raising guidance suggesting their teams’ confidence in the software market in 2024.

Cloud 290

Cloud Software Scaling Revenue 290

SaaStr

MARCH 20, 2024

So of the beloved leaders in Cloud and SaaS, few have been hit harder than Hashicorp by the “downturn” At $400m ARR, they were growing 50%. Now at $600m, ARR, growth has radically slowed to 17%. Some of it may well be some of the challenges in commercializing open source. There’s room for optimism, too. Good stuff is happening.

Scale 224

Scale Cloud Scaling Revenue 224

Tom Tunguz

MARCH 30, 2023

Incumbents have seized the moment with Microsoft, Adobe, & others integrating generative AI into their products quickest. In response, startups must develop moats to stake out their market. What are these moats? At the moment, capital & technical expertise create competitive advantage. But in the long-term, usage will be the enduring moat.

Artificial Intelligence 325

Artificial Intelligence AI Machine Learning Generative AI 325

SaaStr

MARCH 27, 2024

So HubSpot is doing as well as it ever has. But it’s now doing it differently. 5 Interesting Learnings: #1. New customers are still growing 23% a year, even at 200,000+ Customers and $2.4 Billion in ARR. To me, this is just the impressive metric of all. So many SaaS companies just run out of new customers by $100m ARR or so. 7,770 Employees.

Scale 232

Scale Cloud Pricing Scaling 232

Tom Tunguz

FEBRUARY 15, 2024

The Bitcoin exchange-traded funds (ETFs) launched on January 12, about a month ago. On the first day, investors bought $655m & nearly $2b in the first three days. Since then, the figure has swelled to $4.6b. It’s not a fair comparison but for fun, we can compare the Bitcoin interest to the largest technology IPOs for a sense of scale.

Finance 262

Finance Technology Scaling 262

Tom Tunguz

APRIL 1, 2024

Rubrik, a Palo Alto-based data security company, filed their S-1 yesterday. At $784m in ARR, growing 47% with 130% net revenue retention across 6100 customers, the company should be one of top 10 fastest growing software companies alongside Klaviyo, ZScaler, & Crowdstrike - in ARR terms. 41% of new bookings derives from those new customers. &

Data 209

Data Subscription Payment Features Cloud 209

Tom Tunguz

JANUARY 8, 2024

Code Review Response Time : how long code awaits a peer-review Each of these metrics optimizes throughput or work-velocity by preventing bottlenecks in the development process. They aren’t about individual production metrics but overall process latency metrics. Lines of code or number of commits focus on components of the engineering process.

Software Engineering 196

Software Engineering Software Review Engineering Software 196

SaaStr

DECEMBER 13, 2023

So if you are outside of fintech and banking, you may not have heard of nCino. But if you’re in the space, it’s a big player. They’re at almost $500m in ARR, with 1,850 customers, now growing a modest but steady 19% and they have gotten pretty efficient, like most other public SaaS and Cloud leaders. Let’s dig in.

Scale 295

Scale Banking Acquisition Cloud 295

Andreessen Horowitz

MARCH 26, 2024

Software and robotics, for example, have always presented immense potential to automate repetitive mundane tasks that humans perform, freeing them up to do more valuable work. Yet, we never made it past the most simple tasks. We can’t help but think solving the next layer in complexity would create even bigger companies!

Investment 126

Investment Healthcare AI Business Model 126

Tom Tunguz

SEPTEMBER 6, 2023

Historically, software-as-a-service (SaaS) has been built on databases with structured data, as you might find in an Excel spreadsheet. But the ability of large language models to extract insights from unstructured information changes this architecture : data repositories like data lakes are becoming essential parts of modern SaaS stacks.

Artificial Intelligence 309

Artificial Intelligence Software Data Scale 309

Tom Tunguz

APRIL 17, 2024

Ethereum generated $370m in profit on $825m in revenue for about a 45% net income margin. The chart above shows both the historical performance & also explains how web3 blockchains like Ethereum generate revenue & profits. How does Ethereum compare to other software companies? Note the profit scale in the chart above is logarithmic.

Blockchain 133

Blockchain Software Revenue Scaling 133