Investors Guide to Scaling Your SaaS Startup

News, insights and updates from the team at Bloom Equity Partners

Founders & Friends, Happy Friday!

In this week’s newsletter, we wanted to share some insights on scaling SaaS startups. To all founders and operators reading this, enjoy!

Our team has shared insights on a ton of relevant topics in the past so make sure to check them out below:

How to drive growth for your SaaS business

Metrics That Matter: Sales Efficiency

Now let’s get into it 🔥

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Investors Guide to Scaling Your SaaS Startup 🚀

Founders, want to get a VCs take on how to scale your SaaS startup from $1M to $10M ARR? Well listen up, because Bessemer Ventures has one of the best deep dives on best practices for scaling to a Series B+ startup.

Here are some of the notable points from the report:

1. Product

   • Early-stage startups generally have shown PMF with a set of core users, but in order to scale you should aim to fulfill the product vision for your initial ideal customer profile (ICP).

   • As you begin to scale to $10M ARR, a focus should be placed on upsell triggers or expansion opportunities.

   • Product success metrics: gross retention, net retention, and, product north star.

   GTM Strategy

   • Early-stage startups generally rely on founder-led sales but as you scale it’s important to transition to a sales-led sales practice. Experiment rapidly and build a strong sales process and playbook.

   • GTM success metrics: ARR growth rate, CAC payback, CLTV/CAC, Gross margin.

2. Finance

   • As you scale plan your runway based on an 8-quarter plan. This includes; hiring, product expansion, and geographical expansion.

   • Growth endurance for private cloud companies is around 70%, so it’s important to start with a strong growth endurance in the very early stages.

   • Finance success metrics: growth endurance, efficiency score, FCF Margin.

   

3. Team

   • Scaling to $10M ARR requires prioritization of complementary hiring. Focusing on hiring leaders that have skill sets and experience that the founding team members lack.

   • Team benchmarks: R&D, sales and marketing, general and administrative costs.

   • Few rules of thumb for hiring functional experts:

     1. Sales expert by $1 million ARR

     2. Product expert by $2 million ARR

     3. Marketing expert by $4 million ARR

     4. Finance expert by $8 million ARR

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What We’re Reading and Listening To…

📚 Private Equity Pulse: five takeaways from 2Q 2022

📚 The 5 SaaS Metrics That Actually Matter

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Favorites from the Ecosystem

Investors👇…..

Brent Beshore @BrentBeshore

Tweets from Zach Weinberg™ @zachweinberg

The best part of higher interest rates is you actually have to use your brain to make money now (going forward). It's not "everything always goes up" anymore. Will be quite the shake out over the next decade.

Redpoint @Redpoint

VCs 6 month ago vs VCs now.

Founders👇…..

Jesse Pujji @jspujji

My mentor is a founder who you have never heard of. But he: • Built a $10B company • Acquired 12 MEGA brands • Gets home daily by 6pm • Built one of the most amazing cultures I've witnessed Here are the 12 most important lessons I learned from him🧵

Andrew Gazdecki @agazdecki

Save your startup a lot of pain and talk to customers before wasting time solving a problem that does not exist.

Tweets from Zach Weinberg™ @zachweinberg

There's a lot of noise about what makes a good junior or mid level startup hire but in reality it's basically 3 things: 1. Extreme competence 2. Willingness to work hard (weekends, nights) 3. Positive attitude in ambiguous and difficult situations, rises to the occasion

Operators👇….

Mitchell Baldridge @baldridgecpa

The number one question I get as a CPA: Should I open up an LLC? Choosing the right business entity costs a bit, but can save you millions over the life of your business. Time for a thread 👇🏼

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News from the Industry: deals, deals, and more deals 💰

Ping Identity to be Acquired by Thoma Bravo for $2.8 Billion

Goldman Sachs and Thoma Bravo lead Aisera's $90 Million Series D

ClearCourse acquires Pursuit Software

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End Note 🔚

As always, if you're enjoying The Weekly Bloom, we'd love it if you shared it with a friend or two. We try to make it one of the best emails you get each week, and I hope you're enjoying it.

And should you come across anything interesting this week, send it our way! We love finding new things to read through members of this newsletter.