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Numbers That Actually Matter
SaaStr 2017
Numbers That Actually Matter
Mamoon Hamid
Co-Founder + General Partner
02.08.17
The Dream
Not-So-Fictional SaaS Company
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
MRR Growth Accounting in Year 1
-$10,000
-$5,000
$0
$5,000
$10,000
$15,000
$20,000
$25,000
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
New Expansion Contraction Churned
0.4
4.0
40.0
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
Quick Ratio in Year 1
0.5
5.0
50.0
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
New MRR + Expansion MRR
Churned MRR + Contraction MRR
Quick Ratio (QR) =
QR > 4 👍
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
Gross Churn Net Churn
Churn – Year 1
Not-so-Fictional SaaS Co. – Year 1 Recap
• From almost zero to $1.1M in ARR
• Mostly organic MRR growth
• Quick Ratio hovering around 4
• Negative Churn
👍
👍
👍
👍
Series A Likelihood > 90%
Not-So-Fictional SaaS Company – Year 1 to 3
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Not-So-Fictional SaaS Company – Year 1 to 3
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Not-So-Fictional SaaS Company – Year 1 to 3
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
🔥
Not-So-Fictional SaaS Company – Year 1 to 3
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
💰💰💰
MRR Growth Accounting – Year 1-3
-$60,000
-$40,000
-$20,000
$0
$20,000
$40,000
$60,000
$80,000
$100,000
New Expansion Contraction Churned
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13
Quick Ratio in Year 1 to 3
🆘
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13
Gross Churn Net Churn
Churn – Year 1 to 3
Not-so-Fictional SaaS Co. – Year 1 to 3 Recap
• From $1.1M to $9.4M
• But it took 20 sales people
• Expansion revenue offset by churned revenue
• Quick Ratio hovering around 2
• High Gross Churn & Positive Net Churn
• $1M/month of burn!
👍
Vanity Metrics Suggest Series B Likelihood > 90%
Underlying Metrics Suggest
👎
👎
👎
👎
🆘
👎 👎
How do we make sense of this?
• Product-market fit happens one customer at a time one
month at a time.
• Mostly ignored any product-market fit metrics
• Churn/Expansion/Contraction MRR is a lagging indicator
of product-market fit
• How could you have seen it? By focusing on a leading
indicator of the MRR decision...
Find your North Star
• MRR	is	the	price that	the	customer	pays,	the	North	Star	is	the	
value that	they	get.
• Your	North	Star	measures	the	value	you	deliver!
North Star Metric: For example - DAU/MAU
What Company is this?
25%
30%
35%
40%
45%
50%
55%
60%
65%
M1 M2 M3 M4 M5 M6 M7 M8 M9 M10M11M12M13M14M15M16M17M18M19M20M21M22M23M24M25M26M27M28M29M30M31M32M33M34M35
North Star Metric:
Facebook DAU/MAU = 55% (until 2012)
25%
30%
35%
40%
45%
50%
55%
60%
65%
M1 M2 M3 M4 M5 M6 M7 M8 M9 M10M11M12M13M14M15M16M17M18M19M20M21M22M23M24M25M26M27M28M29M30M31M32M33M34M35
North Star Metric: DAU/MAU for Slack
25%
30%
35%
40%
45%
50%
55%
60%
65%
M1 M2 M3 M4 M5 M6 M7 M8 M9 M10M11M12M13M14M15M16M17M18M19M20M21M22M23M24M25M26M27M28M29M30M31M32M33M34M35
! !
North Star Metric – Wait a Second…
What’s the Orange Line?
25%
30%
35%
40%
45%
50%
55%
60%
65%
M1 M2 M3 M4 M5 M6 M7 M8 M9 M10M11M12M13M14M15M16M17M18M19M20M21M22M23M24M25M26M27M28M29M30M31M32M33M34M35
! !
North Star Metric – DAU/MAU
Front: The Shared Inbox App
25%
30%
35%
40%
45%
50%
55%
60%
65%
M1 M2 M3 M4 M5 M6 M7 M8 M9 M10M11M12M13M14M15M16M17M18M19M20M21M22M23M24M25M26M27M28M29M30M31M32M33M34M35
! !
What’s a good or bad North Star?
• Bad: Mostly measuring price paid as opposed to value
delivered
• MRR, paid seats
• Good: Measures value delivered in bulk
• MAU, DAU, messages sent
• Better: Unquestionably indicates Product Market fit has
been reached with the customer
• Number of users with L28>=16
• Messages sent w/in 30 days of signup
# of file actions
DAU/MAU
# of Customer Interactions
WAU/MAU
Pitches Viewed
DAU/MAU
Hires made
WAU/MAU
User App - Pairs
Apps signed onto per DAU
Apps monitored per user
MAUs
Other North Star Metrics
Value Delivered > Price Paid (MRR)
• Understand your MRR growth accounting
• Even though it’s likely a lagging indicator
• Focus on value delivered, not price paid or the
efficiency of the sales machine that got them to pay
• Find your North Star
So What Happened to Not-So-
Fictional SaaS Co. Over Time?
ARR – Over 6 Years
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
ARR – Over 6 Years
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
ARR – Over 6 Years
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
MRR Growth Accounting – Over 6 Years
-$200,000
-$100,000
$0
$100,000
$200,000
$300,000
$400,000
New Expansion Contraction Churned
-7%
-5%
-3%
-1%
1%
3%
5%
7%
Date Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16
Gross Churn Net Churn
Churn – Over 6 Years
0.4
4.0
40.0
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16
Quick Ratio– Over 6 Years
What does this mean?
• New Revenue barely makes up for your churned revenue
• Lack of new funding require sacrifices - product development
gets starved
• Less competitive product means it becomes harder to add new
customers and more churn
• Hard to retain talent
• And you enter a vicious cycle…
Numbers that Actually Matter. Finding Your North Star
Numbers that Actually Matter. Finding Your North Star
Numbers that Actually Matter. Finding Your North Star

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Numbers that Actually Matter. Finding Your North Star

  • 2. SaaStr 2017 Numbers That Actually Matter Mamoon Hamid Co-Founder + General Partner 02.08.17
  • 4.
  • 5. Not-So-Fictional SaaS Company $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11
  • 6. MRR Growth Accounting in Year 1 -$10,000 -$5,000 $0 $5,000 $10,000 $15,000 $20,000 $25,000 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 New Expansion Contraction Churned
  • 7. 0.4 4.0 40.0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Quick Ratio in Year 1
  • 8. 0.5 5.0 50.0 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 New MRR + Expansion MRR Churned MRR + Contraction MRR Quick Ratio (QR) = QR > 4 👍
  • 9. -8% -6% -4% -2% 0% 2% 4% 6% 8% Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Gross Churn Net Churn Churn – Year 1
  • 10. Not-so-Fictional SaaS Co. – Year 1 Recap • From almost zero to $1.1M in ARR • Mostly organic MRR growth • Quick Ratio hovering around 4 • Negative Churn 👍 👍 👍 👍 Series A Likelihood > 90%
  • 11. Not-So-Fictional SaaS Company – Year 1 to 3 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13
  • 12. Not-So-Fictional SaaS Company – Year 1 to 3 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13
  • 13. Not-So-Fictional SaaS Company – Year 1 to 3 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 🔥
  • 14. Not-So-Fictional SaaS Company – Year 1 to 3 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 💰💰💰
  • 15. MRR Growth Accounting – Year 1-3 -$60,000 -$40,000 -$20,000 $0 $20,000 $40,000 $60,000 $80,000 $100,000 New Expansion Contraction Churned
  • 16. 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Quick Ratio in Year 1 to 3 🆘
  • 17. -8% -6% -4% -2% 0% 2% 4% 6% 8% Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Gross Churn Net Churn Churn – Year 1 to 3
  • 18. Not-so-Fictional SaaS Co. – Year 1 to 3 Recap • From $1.1M to $9.4M • But it took 20 sales people • Expansion revenue offset by churned revenue • Quick Ratio hovering around 2 • High Gross Churn & Positive Net Churn • $1M/month of burn! 👍 Vanity Metrics Suggest Series B Likelihood > 90% Underlying Metrics Suggest 👎 👎 👎 👎 🆘 👎 👎
  • 19.
  • 20. How do we make sense of this? • Product-market fit happens one customer at a time one month at a time. • Mostly ignored any product-market fit metrics • Churn/Expansion/Contraction MRR is a lagging indicator of product-market fit • How could you have seen it? By focusing on a leading indicator of the MRR decision...
  • 21.
  • 22. Find your North Star • MRR is the price that the customer pays, the North Star is the value that they get. • Your North Star measures the value you deliver!
  • 23. North Star Metric: For example - DAU/MAU What Company is this? 25% 30% 35% 40% 45% 50% 55% 60% 65% M1 M2 M3 M4 M5 M6 M7 M8 M9 M10M11M12M13M14M15M16M17M18M19M20M21M22M23M24M25M26M27M28M29M30M31M32M33M34M35
  • 24. North Star Metric: Facebook DAU/MAU = 55% (until 2012) 25% 30% 35% 40% 45% 50% 55% 60% 65% M1 M2 M3 M4 M5 M6 M7 M8 M9 M10M11M12M13M14M15M16M17M18M19M20M21M22M23M24M25M26M27M28M29M30M31M32M33M34M35
  • 25. North Star Metric: DAU/MAU for Slack 25% 30% 35% 40% 45% 50% 55% 60% 65% M1 M2 M3 M4 M5 M6 M7 M8 M9 M10M11M12M13M14M15M16M17M18M19M20M21M22M23M24M25M26M27M28M29M30M31M32M33M34M35 ! !
  • 26. North Star Metric – Wait a Second… What’s the Orange Line? 25% 30% 35% 40% 45% 50% 55% 60% 65% M1 M2 M3 M4 M5 M6 M7 M8 M9 M10M11M12M13M14M15M16M17M18M19M20M21M22M23M24M25M26M27M28M29M30M31M32M33M34M35 ! !
  • 27. North Star Metric – DAU/MAU Front: The Shared Inbox App 25% 30% 35% 40% 45% 50% 55% 60% 65% M1 M2 M3 M4 M5 M6 M7 M8 M9 M10M11M12M13M14M15M16M17M18M19M20M21M22M23M24M25M26M27M28M29M30M31M32M33M34M35 ! !
  • 28. What’s a good or bad North Star? • Bad: Mostly measuring price paid as opposed to value delivered • MRR, paid seats • Good: Measures value delivered in bulk • MAU, DAU, messages sent • Better: Unquestionably indicates Product Market fit has been reached with the customer • Number of users with L28>=16 • Messages sent w/in 30 days of signup
  • 29. # of file actions DAU/MAU # of Customer Interactions WAU/MAU Pitches Viewed DAU/MAU Hires made WAU/MAU User App - Pairs Apps signed onto per DAU Apps monitored per user MAUs Other North Star Metrics
  • 30. Value Delivered > Price Paid (MRR) • Understand your MRR growth accounting • Even though it’s likely a lagging indicator • Focus on value delivered, not price paid or the efficiency of the sales machine that got them to pay • Find your North Star
  • 31. So What Happened to Not-So- Fictional SaaS Co. Over Time?
  • 32. ARR – Over 6 Years $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16
  • 33. ARR – Over 6 Years $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16
  • 34. ARR – Over 6 Years $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16
  • 35. MRR Growth Accounting – Over 6 Years -$200,000 -$100,000 $0 $100,000 $200,000 $300,000 $400,000 New Expansion Contraction Churned
  • 36. -7% -5% -3% -1% 1% 3% 5% 7% Date Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Gross Churn Net Churn Churn – Over 6 Years
  • 37. 0.4 4.0 40.0 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Quick Ratio– Over 6 Years
  • 38. What does this mean? • New Revenue barely makes up for your churned revenue • Lack of new funding require sacrifices - product development gets starved • Less competitive product means it becomes harder to add new customers and more churn • Hard to retain talent • And you enter a vicious cycle…