THE SMARTER FINANCE BLOG

We’ve been closely following the emerging trends in the SaaS business model. Several of our customers businesses revolve around it and, as most other tech models, it is going through a transformative change. One of the most insightful articles we’ve read lately about this transformation  comes from Techcrunch. On November 13, our good friend and business school classmate, Sequoia partner Aaref Hilaly wrote a story smartly titled “Why the next great SaaS company will look nothing like Salesforce.” In it, Aaref points out that the newest crop of SaaS models turns the notion that to be sticky, a SaaS model has to become the “System of Record” (SoR) which used to be “the single source of truth, for customers’ most valuable information, such as customer records or employee data” like Salesforce. He adds that the emerging opportunity for SaaS is to become “Systems of Engagement” (SoE), meaning apps that employees actually use to get their work done” like Slack,  one of the most “sticky” business applications, now the most valuable private cloud company according to Forbes.

Check it out here. Aaref’s article is quite interesting and goes deep regarding how this new business model for SaaS not only makes sense, it solves the real problem of “creating systems of engagement that get users and revenue, by leveraging data in the systems of record.”

This Thanksgiving week, Series A startups can be thankful for your funding, but realize that the B Round is now the tougher round and the time to start preparing is now.  This presentation by Jed Katz (https://www.linkedin.com/in/jedkatz), who is the managing director at Javelin Venture Partners (https://javelinvp.com) explains how to do that. Jed posits that your next round of financing is much closer than you think, which catches some Founders by surprise. To prepare, he gives tips on setting 12-month goals, making cash last, managing & leveraging your Board, creating separate roadmaps for Sales & Engineering, and using the right metrics. Note how creating a brand serves recruits and investors in addition to customers. We especially like his final “words of wisdom,” that, unlike the perfunctory summary in some presentations, are useful and action-oriented.

These are valuable tips from a VC pro who’s seen everything. Check them out.

This curated selection of quotes from Marc Andreessen provides insight into how Venture Capital works.  Insights include:
– Almost all of a VC’s return comes from one or two disproportionate successes.
– The breakout successes are from areas that were against the grain of consensus.
– Success begets success as it attracts more capital, talent & word-of-mouth.  Also failure begets failure.
– VCs must go to meetings to learn rather than teach.
– Startup teams trump ideas because teams can adapt.
– Declining to invest in winners is a bigger VC mistake than investing in losers. Most VCs turned down most big successes.
– VCs spend most of their time trying to fix their losers and not on helping their winners [Should they change that? -Ed]
– The shift to software will accelerate innovation because it’s so easy to make & change.
And from the commentary:
– The benefit of disruptive technology is often in breakout value or dramatic cost decreases.  This is missed from measures like GDP (which may actually decline with cost reduction) because those measures only capture transaction value, not consumer value (consumer surplus).
Successful Founders of several marquee startups offered their historic pitch decks along with commentary.  Notice they span different stages & rounds.  Also, see how pitches have evolved reaching back to 2005.

Burkland Associates Principal Keith White conducted a series of two webinars on the basics of business funding & fundraising.  The webinars were produced & sponsored by Xero accounting software and the recordings can be found on their web site through the links below.

Peter Reinhardt, CEO and Co-Founder of Segment, recently wrote a blog post with some insightful tips for startup founders, including his selection of Jeff Burkland as part-time CFO.  Subjects covered:
– Customer Prepayment and its effect on cashflow
– Venture Debt uses
– How a “Shadow Budget” can aid planning without creating bureacracy