Saas Math
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Saas Math

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My presentation on SaaS Math given at MaRS in Toronto

My presentation on SaaS Math given at MaRS in Toronto

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Transcript

  • 1. SaaS Math Mark MacLeod Real Ventures© Mark MacLeod 2011
  • 2. Introduction CFO Advisor Investor© Mark MacLeod 2011
  • 3. Agenda Why I love SaaS Metrics 101 Pricing Magic Valuation Q &A© Mark MacLeod 2011
  • 4. Why I love SaaS and by “I”, I mean Investors $ 21B Market 20% Growth Certainty Premium© Mark MacLeod 2011
  • 5. SaaS Metrics 101 “In God we trust, all others bring data” W. Edwards Deming© Mark MacLeod 2011
  • 6. Metrics for Pirates Source: Metrics for Pirates - 500 Hats© Mark MacLeod 2011
  • 7. Metrics 101: Where to focus, when... 1st battle - Acquisition Release early, even if it sucks Talk to users! Test messaging, channels Measure every action© Mark MacLeod 2011
  • 8. Metrics 101: Where to focus, when... Ultimate battle: Retention Churn Rate is the most important metric for SaaS businesses© Mark MacLeod 2011
  • 9. What to measure Part 1 - The Funnel Source: http://www.forentrepreneurs.com/saas-metrics/© Mark MacLeod 2011
  • 10. What to measure Acquisition Week over week Growth in: New Unique Visitors (Absolute) New Users Conversion Rates: UV to Sign-Up Changes in conversion rates New vs. Returning Which traffic sources work? Performance vs. Target© Mark MacLeod 2011
  • 11. What to measure Activation Week over week Growth in: New Activated Users Conversion Rates: New User to Active User Changes in conversion rates Which sources work best? Performance vs Target© Mark MacLeod 2011
  • 12. What to measure Retention - Active Cohort Analyses: 30 / 60 / 90 days Churn - 30 / 60 / 90 Change in churn Stratify Users Profile “Power” Users Specific engagement metrics (comments, likes, etc.)© Mark MacLeod 2011
  • 13. What to measure Referral K Factor - Viral Coefficient Understand change in each key driver© Mark MacLeod 2011
  • 14. What to measure Revenue Conversion to Paid ARPU & Changes in ARPU Cohort Analyses: 30 / 60 / 90 days Churn - 30 / 60 / 90 Change in churn Reasons for cancellation Exit interview? Upgrade % Source of paid users© Mark MacLeod 2011
  • 15. What to measure Part 1I - Per User Economics© Mark MacLeod 2011
  • 16. Per User Economics Elements: Revenue Per Month (ARPU) * Life of a User * Margin % Less Cost of Acquisition (CAC) = Customer Lifetime Value (CLTV)© Mark MacLeod 2011
  • 17. Impact of Churn At $5/ month Lifetime Revenue Low - $100 High - $500 Source: http://www.forentrepreneurs.com/saas-metrics/© Mark MacLeod 2011
  • 18. Customer Acquisition Costs (CAC) Elements: Staff Costs (salaries) SEM, paid programs PR Travel, conferences, etc. Calculation Methods: Basic: No salaries Loaded: With Salaries Gross: Before churn Net: After churn© Mark MacLeod 2011
  • 19. CAC How Much should you spend? Depends on churn Target 6 months’ revenue or less Be willing to spend up to marginal CLTV© Mark MacLeod 2011
  • 20. How To Measure Custom Built© Mark MacLeod 2011
  • 21. How To Measure Off the Shelf© Mark MacLeod 2011
  • 22. How To Bill© Mark MacLeod 2011
  • 23. Example© Mark MacLeod 2011
  • 24. Example© Mark MacLeod 2011
  • 25. Pricing© Mark MacLeod 2011
  • 26. Elements of Your Pricing Decision Value Proposition - Hard ($) vs. Soft (time) Positioning Target customer - Consumer, Business Comparables How you sell? Acquisition Cost© Mark MacLeod 2011
  • 27. Pricing Examples $ 10 $ 20 $ 24 $ 49 $ 20 $ 30 $ 250 $ 25 ++© Mark MacLeod 2011
  • 28. Freemium© Mark MacLeod 2011
  • 29. Freemium Necessary Conditions: Large market Incremental Cost to serve = $0 Clear upgrade Path Funding $© Mark MacLeod 2011
  • 30. Freemium Why freemium? Reduce barriers to try Disrupt the market Network effects© Mark MacLeod 2011
  • 31. Freemium Freemium Types Direct: Premium version Indirect: Access the user base (ads, subscriptions)© Mark MacLeod 2011
  • 32. Case Study: Freshbooks© Mark MacLeod 2011
  • 33. Case Study: Mint.com© Mark MacLeod 2011
  • 34. Annual Prepay Offer Discounts for Prepayment© Mark MacLeod 2011
  • 35. SaaS Valuations© Mark MacLeod 2011
  • 36. Early Stage Valuations Not Numbers Driven Factors: Team Track Record Traction Opportunity Size Deal Competition© Mark MacLeod 2011
  • 37. Late Stage Valuations Source: Software Equity Group, L.L.C© Mark MacLeod 2011
  • 38. Winning at SaaS Keep it Simple - Focus on a single benefit Talk to users Measure everything Don’t be afraid to charge Service, service, service© Mark MacLeod 2011
  • 39. q&a Questions?© Mark MacLeod 2011
  • 40. thank you mark macleod twitter: @startupcfo blog: startupcfo.ca web: realventures.com about.me/markmacleod© Mark MacLeod 2011