The mainstream VC of the United States analyzes the qualitative and quantitative analysis of the “stable SAAS company in the middle and late stages of healthy growth”.
Editor’s note: This article is from WeChat public account Jingwei Ventures (ID:matrixpartnerschina). is authorized to publish.
In the past 11 years, the market value/valuation of more than 100 cloud computing companies has exceeded $1 billion. Amazon, Microsoft, and Google are also involved in the wave of cloud computing. ToB services usually go through a standard process of product-standard-scale, but how do you quantify, locate, and analyze the data from the early stages of polishing to the middle and late stages?
The value of the article shared today is precisely to provide a qualitative and quantitative analysis of the mainstream VC in the United States for the “successful growth of the mid-to-late SAAS company.” Such as “how to measure products and competition situation”, “early spending money while doing income, what kind of cost efficiency is healthy”, “what data is a company to be considered in the development process, and what frequency to assess “and many more.
Avenue to Jane, for the entrepreneurs who are involved in this, we think maybe as a clue, thinking about the long-term strategy as early as possible is a good starting point.
In addition, even if you are not an entrepreneur in the field of cloud computing, even if the indicators are different, but often the essence is unchanged, so this perspective may be equally instructive. Today we compile the article from bvp.com, originally titled “The new 10 laws of cloud.” Below, Enjoy:
Introduction: In 2008, several early founders wrote the “Version 1.0” cloud computing ten law, which summarizes the industry’s deep thinking and is extremely valuable. After 11 years, the time has changed. The market value/valuation of more than 100 cloud computing companies has exceeded $1 billion, and Amazon, Microsoft, and Google are also engaged in the wave of cloud computing.
Today we share the 11th Anniversary Edition of the Ten Laws of Cloud Computing. I hope to help you.
01 size first
From a valuation perspective, market leaders account for more than 50% of the quota, the second is less than 30%, and the third is only very lucky to capture the remaining 20%. In the market pricing power and talent gathering, the scale effect will form a positive cycle, further opening up the market gap and consolidating the advantages of the leader. Investors are also often willing to give the leader a certain level of advancement in valuation, reducing the cost of capital.
In this way, it is very necessary for the founders to have a methodology to expand their core market size through the second growth curve. Building and expanding scale advantages requires constant innovation, such as launching new products, enhancing synergistic capabilities, or providing deeper value to existing customers.
In the practice of cloud computing companies, we can see that providing payment layer solutions, mobilizing, and commercializing existing data is an effective way. Of course, every company has its own characteristics, but market leaders need to paint a broad blueprint for the market, and gradually turn it into reality on their own platforms.
02 cost first
Efficient growth means that every dollar spent can be exchanged for effective revenue growth. If you are already in a large potential market, and the customer and income growth are very fast, it is worth the high cost. But for startups in the education market stage, when customers and incomes have not matured quickly, they must maintain a relatively low rate of money.
How do you view revenue growth in the early stages of the company? — Effective growth is more important than profitability.
With the establishment of market leadership, growth rates and burn rates will be more efficient. At this time, the company’s strategy should shift to finding the right balance between growth rates and burn rates.
For long-term startups with ARR (average accounting yield, after deducting income tax and depreciation of average project income divided by average book investment for the entire project period) of less than $30 million, effective growth is defined as ARR exceeds net burn (net cash consumption rate), and the best data is about 1.5.
In the long run, the focus of cloud computing companies should be on maximizing efficiency. A few words are ARR growth plus FCF margin of ARR.
From the BVP Nasdaq Emerging Cloud Index (formerly known as the Bessemer Cloud Index, which tracks companies such as Salesforce, Adobe, Dropbox, DocuSign, and Okta), the cloud company’s average efficiency score is about 45%.
03 Verify the sales marketing model before enrollment expansion
The first priority of operating a sales organization is to do only effective things. In traditional outbound sales, out-of-the-box sales, if you have two or three account managers who can complete sales on their own, you don’t need to hire more sales. . For inbound sales (inbound sales, such as selling products through content marketing to get customers to take the initiative), the pace of recruitment should be adjusted according to the company’s leading speed.
Companies that start sales and marketing jobs too early will find that the increase in the number of employees does not lead to corresponding sales growth. The quality of sales personnel will also affect sales revenue and morale because the company cannot repeatedly meet budget targets. And then fall.
Test your sales and marketing models. Before expanding the scale of recruitment, first demonstrate whether the model matches the company stage.
Try early to find effective ways, such as new lead sources; new customer demand targeting; expand test channels; try different expert team combinations in the sales team, including business development representatives, sales development representatives, customer executives, Service engineer and so on.
In short, just investing in startups with the best marginal productivity, that is, the maximum marginal productivity per dollar invested. At the same time, such productivity should be repeatable in sales execution, such as the potential market is large enough; there are more mature sales training systems; products with customer reputation.
04 Products are a competitive advantage
The best products can be laughed at the end.
In the past, good sales can cover product defects, and marketing activities can also influence the purchasing department to choose a software product, because the purchasing department is often not the real user of this product. But today, people buy homework before they buy or deploy software, such as communicating with peers, experiencing and evaluating your competing products.
Product Priority Today, a strong bottom-up distribution model has emerged, and many companies have taken this as the foundation to build a $1 billion business. Strongly sold companies may not be market leaders, but companies with good products can do so.
Improve the product as soon as possible to promote customer sales.
Focus on creating a great, proprietary product that is the number one factor in winning and retaining customers.
Overall, there are several good products that win market share.