SaaStr Europa Slides: The Top 5 Mistakes in Scale-Up

Just a quick post to publish the slides from the talk I gave today at SaaStr Europa in Barcelona on the top 5 mistakes in scale-up.  Thanks so much to everyone who attended, stuck around for the AMA session afterwards, and gave me feedback or asked me questions at the conference.

If you have trouble accessing these, please let me know and I can try to switch file sharing platforms.  I like Slideshare for the embed capability, but I’m told they now paywall off my stuff and I haven’t fully researched how and if I can fix that.  Leave a comment if you have troubles so I’ll know to go look.

Here are the slides:


“You Don’t Want That!” — A Rant from Lance Walter on Product Management Communications

While I don’t normally entertain guest posts, once in a rare while I hear an old friend ranting about something and the rant’s so good that I offer up Kellblog to help share it.  Today’s rant comes from Lance Walter, who recently finished up a four-year gig as CMO of high-flying Neo4j, and who I know from previous stints working together at Host Analytics and Business Objects. Lance has run marketing at six startups (Pentaho, Aria, Host, Datameer, Capriza, and Neo4j) and led product (and/or product line) marketing at three before that (Hyperion, Siebel, Business Objects).  Trivia point:  like me, Lance started what would be a successful marketing career not in sales or marketing, but in technical support.  This might also explain why he, as we’ll see, gets so excited about a product FAQ.  

One day, not long ago, Lance was trying to send a scheduled email (i.e., send-later) from his preferred email service — which we’ll call CoolMail  — and he couldn’t do it.  Ever the former product manager, he endeavored to figure out why.  He found this in a FAQ. 

Q: Why Doesn’t CoolMail Offer Send-Later / Email Scheduling?

PM Answer:  A client-side Send-Later implementation does not work reliably since the device may not be powered on or have connectivity at the scheduled time, or the app may have been force-quit by the user.

As a result, most apps that offer Send-Later / Email Scheduling opt for a server-side implementation where the scheduled email is stored on a 3rd party server till it is sent at the scheduled time.

Obviously this has privacy / security implications since not only do scheduled emails need to be stored on the 3rd party server, but said server also needs to be able to access the user’s email server via SMTP in order to send the emails.

While similar security / privacy considerations also apply to Push vs Fetch notifications, in our view the need to be informed of new incoming emails promptly and reliably justifies a server-side implementation in that case, while email scheduling, although nice to have, is not as critical.

Let’s say this, for lack of a better word, triggered Lance.  Keep reading to learn why and learn how to avoid some undesirable patterns in technical, product-related communications.

Over to you, Lance → 

When I saw this in the FAQ, I had to stop and read it twice.  How did I, as a user, feel when I read this?

  • I’ve annoyed them by asking for a feature.
  • I don’t deserve a real explanation, or maybe they think I’m too dumb to understand it.
  • I should be thankful they’re adding other features.

Basically, they’re telling me I’m wrong to want this feature because the scarlet widgetator can only do schmumble muck.  Not only did they tell me that I’m not getting the feature I wanted, but that I really shouldn’t have asked for it.

So do I think this is good product-oriented communications?  No.  In this post, we’ll analyze why and, more importantly, try to provide some tips for what to do instead.  

Let’s start with some empathy for the Product Managers (PMs) out there. It’s a hard, cross-functional job and situations like this, where you can’t give every user what they want are the norm, not the exception. Whether birthing new products or shepherding established ones, PMs never have enough time or resources to deliver what companies and customers ask of them.

A good PM has to be able to say “no” to their stakeholders while maintaining relationships.  That’s never easy, and sometimes PMs fall into one of three patterns that they really should avoid:

1) “Yeah, but if we implement this feature terribly, you won’t be happy.” The CoolMail PM makes this argument, in this case about implementing email scheduling as a client-side feature. Except that people don’t ask for client-side scheduling, which would be a dumb way to do it, as the PM explains. Note that the PM is also communicating like they’re in an internal meeting, presuming the requestor has an understanding of the meaning and implications of “client-side” and “server-side.”

2) That would only work with an asynchronous widgetator and ours is synchronous.” The PM, going technical-ish, uses a few acronyms a user may or may not understand, but doesn’t provide a real technical explanation other than “this raises security issues.” The requestor likely hears something akin to, “this is complex, you wouldn’t understand it, and I don’t feel like actually explaining it.”  Dismissed.

3) We didn’t put in a steering wheel because we care about safety and we view brakes as more important.”  Notice the not-so-subtle false choice here and at the end of the FAQ answer.  The PM explains why push notifications are more important, but the requester didn’t argue that email scheduling was more important.   All the requestor did was ask for something else.  And mentioning “other server-side features” isn’t relevant to this request.

So how can PMs communicate better than this, especially when dealing with skeptical prospects, stressed-out presales engineers, eager and urgent community leaders, or even angry customers?

1) Don’t just let them talk, listen. Nobody accepts a “no” when they don’t feel heard. Being fully-present, and paraphrasing back a feature request (in the requestor’s language, not your company’s feature-speak), will start to build trust and confidence before you’ve had to commit to anything. Bonus points if you can add/playback the context as well. “So Lance, you’re saying you want email scheduling so you can do emails at any time of day, but not bother your coworkers off-hours?” “YES!” says the I-just-felt-HEARD user!

2) Stay intellectually honest. The PM explains how a poor implementation of the feature would be bad. You’re the product manager.  You’re right, I wouldn’t be happy with a bad implementation — how about you make me a good one then?  PMs don’t have to unpack all their thinking for the audience, but they will lose the confidence of the audience (regarding potentially both their transparency and technical skills) if they throw out rhetorical strawmen like this.  The false dichotomy at the end is another example.  The user just asked for a feature, they didn’t argue its relative importance.  (Nor should the PM cherrypick sacred features against which to compare.)  A feature request can simultaneously be valid, valuable, and low-priority relative to others — all at the same time. 

3) Be transparent, even when it hurts. Just don’t surprise your partners or salespeople. Honesty is essential for trust in all relationships, and if you’re a PM and want stakeholders to trust you, be transparent about your constraints and high-level prioritization. Not, “they stole half my engineering team in Q2 to fix bugs in another product” transparent, but clear about having constraints. The answer to your customer is most-typically “not yet” at best, and “not ever” at worst, so make sure you’ve talked to whomever owns the relationship with that partner, customer, or prospect and is aligned (not just informed) on what you’re going to say. But once that’s done, it’s actually liberating to say things like:

  • We’re planning multiple upgrades to the Shmumble Console expected next Fall, so you won’t get this yet, but it’s on the list, targeted for late this year.” You’re telling the stakeholder that their request fits the strategy but isn’t coming yet.
  • Our strategy is horizontal for now, so I understand why this matters to regulated process manufacturers in Germany like you and I’ve documented it well, but for now it’s not making the cut for the next two releases and I can’t promise it will after that.”
  • This likely won’t be in our product roadmap because for now, this is a rare use-case, and rather than string you along waiting for this feature, I’d recommend you work with our services team, partner, open source community to create a manageable workaround.” In this and the prior comment, you’re telling your stakeholder that the request doesn’t fit the current, and likely future, strategy and that they need to take another approach. Granted, telling a customer “we’re not going to deliver that feature,” isn’t pleasant, but it’s more pleasant than if they feel like you’re telling them they shouldn’t want the feature in the first place. And it gives them productive options and a feeling of control since they now know that “saying nightly roadmap prayers” for another year won’t solve their problem.

4) Under-promise, over-deliver. If you didn’t already know this one, turn in your PM badge because you may not make it to the next GA.  ;-)

 Of course, there are also ways to be a much more collaborative and effective feature requestor. Maybe I’ll explore that in another post.

 What do other product leaders out there see that doesn’t and does work?

 # # #


  • Thanks again to Lance for contributing this rant!
  • I made a few edits to Lance’s portion of the post.  Mistakes are likely mine.

The Qualified Sales Leader: A Must-Read Book for Product-Oriented Founders

There’s something in the Boston water that’s great for enterprise sales.

A decade ago the phenoms were the Murphy Brothers, the Flying Wallendas of enterprise sales, not two, three, four, or five — but six brothers (Tom, Frank, Dan, Jeff, Joe and Bob) all of whom ended up with big careers in enterprise sales.

Today’s phenom is John McMahon, widely recognized as the only person ever to have been the CRO at five public, enterprise software companies (PTC, Geo-Tel, Ariba, BladeLogic, and BMC).

Yes, you saw PTC in there.  Back in the day it was the Xerox sales mafia that commanded great respect in enterprise sales.  For the past two decades, it’s been the PTC mafia in that esteemed position.  Even A16z tapped into that mafia via operating partner Mark Cranney, who brought the PTC wisdom and magic to interested portfolio companies.

I’ve always felt the sales greats, the people who invent and build new methodologies, rarely come out of the always-clear market leaders like Salesforce or Oracle.  They come out of places like Xerox, PTC, and Knowledgeware.  (Remember, the subtitle of Solution Selling is “creating buyers in difficult selling markets.”)  Adversity, in the form of competitive markets or complex products, makes the sales methodology stronger.

People aside, PTC is famous in sales circles for being the birthplace of MEDDICC, what some would call a “sales methodology,” and others simply “an acronym,” and which is officially called a “sales qualification framework.”  The somewhat counter-intuitive acronym stands for Metrics, Economic buyer, Decision criteria, Decision process, Implicate pain, Champion, and Competition.

So this is where John McMahon, the author of The Qualified Sales Leader, comes from and in this post I’ll do a brief review of his book.  I’ll start with the conclusion:  this is a must-read book for the product-oriented founder of any enterprise software startup.  Better yet, you don’t even have to read the whole book.  The book is broken into a series of short chapters and I think every product-oriented founder should ideally read chapters 1 through 28 (about half the book) and at absolute bare minimum chapters 1 through 17.

Why do I say this?

  • It’s an easy read.  Like many business books these days, it teaches a lot through storytelling.
  • It paints a super clear picture.  My neck almost literally started to hurt from nodding so many times as I read parts I and II of the book.
  • It paints a bit that will be all too familiar to many startup founder/CEOs.  Thin pipeline.  Missing forecasts.  Slipping deals.  Grumpy salespeople.   Lack of standard vocabulary and process.
  • It explains what’s going on and how to fix it.  Frankly, I never read something that so clearly describes the world of many startups, explains what’s going and why it’s happening and then walks through a way to fix it.

If you’re in sales or sales management, then by all means, read the whole book.  To me, somewhere chapter 28 it flips from what I’d say it the high-level and conceptual to the heavily applied — e.g., how to find a champion, how to test a champion, etc.

I’m not in love with the forecasting strategy part of the book near the end — it felt a bit out of place — because I greatly prefer triangulation forecasts and probabilistic forecasting to anything else I’ve tried.

But overall this is a great book, for the sales practitioner, the sales manager and, for my purposes and more importantly, for the product-oriented founder and general startup executive who wants a ringside seat to understand what typically goes wrong in an enterprise sales organization and how to fix it.


How and Where To Answer Three Basic Questions on Your Website

Startups need to make it easy to find great answers to three basic questions on their websites.

  • What is it?
  • What do people do with it?
  • Who is the company behind it?

Sure, there are other important questions.  How does it work?  Why is it different?  Who uses it?  What benefits have they achieved?  All important stuff, no doubt.  But today, we’re going to focus on first things first — does your website make it easy to find really good answers to these three core questions?  If yes, great.  If not, what’s more important than fixing that?

What Is It?
This is the product tab.  If you sell a product, you should have a product tab.  Don’t call the product tab the solutions tab (for those who think they’re selling solutions because they do a global replace of the word “product” with “solution.”)

In general, while everyone likes to think their product is a platform, avoid labeling the product tab as “platform,” which many companies do [1].  After all, your product can be a platform.  It’s still your product.  Product is not a four-letter word.

What should be on the product tab?

  • A short description of the product.
  • That description usually includes a category name.  Some early-stage startups excessively agonize over the category name, believing that the ideal name will propel the creation of the category.  Get a good-enough category name instead.  Remember, the best way to create a category is to go sell some software.  Do that.
  • A positioning of the product.  This is short high-level differentiation.  Inexpensive sportscar (Miata).  Icelandic yogurt (Siggi’s).  Document database (MongoDB).  Cloud CRM (Salesforce).  Cheap & cheerful Salesforce (Freshworks).  Also effective are metaphors:  the DoorDash of cannabis (Eaze), the AppDynamics of data (Monte Carlo).  Uncola positioning also works:  ELT, not ETL (dbt).
  • An overview of the top three to five key features, done in feature, function, advantage, benefit (FFAB) form.  I could write a whole post messaging, and in fact I did.  See the section near the end, The Green Spots in Cheer, for a walk-through of how to do FFAB messaging.

The enemy for an early-stage company is not your competition.  It’s confusion.  If people don’t understand what you do, they’re not going to buy from you.  And they’re only going to give you a limited amount of time to explain it.  So keep it short, sweet, and simple.

If your product is technical and requires an in-depth explanation, then you should include links to your seminal white paper [2], an 8-12 page, high-quality paper that tells your story to your ideal technical buyer.  For a great example, get Skyflow’s here [3].

What Do People Do With It?
This is the solutions tab.  Because the word “solutions” is hackneyed, so frequently and mercilessly abused by marketers that it has almost lost meaning, I am reluctant to use it in the primary navigation, but I can think of no good alternative.  Maybe use-case, but I’m not sure that’s any better [4].

This page is likely to get the least traffic of the three because users have fatigue with the word solution [5].  So support the page with inbound links from your product and company pages.  Why?  Because this page is incredibly important.  It doesn’t talk about what it is or who you are.  This page talks about what people do with it.  To the extent people buy solutions to problems and not products, what could be more important than that?

This page is also important because it tells the reader which applications of your product are important to you — for example, if you’re Alation and you sell a data catalog, is it just for self-service analytics or does the company also care about other use-cases like data governance, privacy, or dataops?  With deep content on each of those topics, it’s quite clear that they do.

The solutions tab is also important for search engine optimization.  While the product tab is typically written more vendor-out (e.g., we invented the schmumble and here are its benefits), the solutions tab needs to be written customer-in, describing problems in the language that customers use to describe them — i.e., the words they might type into a search engine.  For this reason, it’s probably better to think of the solutions tab as the problems tab.  What problems are people looking to solve that we are strategically focused on solving?

Here are quick examples of customer-in vs. vendor-out language

  • Baldness cure vs. minoxidil
  • Self-service analytics vs. data search & discovery
  • Forecasting accuracy vs. AI/ML forecasting system
  • Excel replacement vs. EPM application
  • Zoominfo alternatives vs. revenue operating system
  • Product analytics vs. digital optimization system

When you sell a platform (e.g., AirTable) you may have literally hundreds of use-cases and no single one of them is strategically important.  Sometimes you can overgeneralize and think you have just one generic use-case. For example, I literally once heard a BI executive say, “What do people do with it?  It’s a reporting tool.  They make reports.”  This misses the spirit of use-cases and certainly precludes finding any strategic ones.

Magic can happen when you discover broad new classes of use-cases.  At Business Objects we did indeed “make reports,” but we also discovered — by talking to our customers — that while most of those reports were internal, that increasingly (in the early days of the web), customers were making external reports, ones to be shared with their customers.  Thus was born the “extranet BI” use-case and what became a booming line of business along with it.

One could argue that Alation entered data governance the same way.  Sometimes you lead your customers; sometimes they lead you.  That’s why you need to be in constant communication with them to understand what they’re doing with your product.

When you sell an application, there’s also a tendency to think you have one use-case.  Think:  “uh, it’s a forecasting system; people make forecasts.”  If you listen to your customers, you might learn that they see things differently.  For example, at Host Analytics, finance departments used our EPM product to solve several different problems:

  • Building an annual operating plan
  • Creating a long-term financial model
  • Planning headcount
  • Actual vs. budget reporting
  • Board reporting

It doesn’t matter that we were running one software application executing the same code to solve these different problems.  In the customer’s mind — the only one that matters — they were using us to solve different problems.

That’s why you have a solutions tab.  Pick 3-5 strategic solutions (i.e., problems) and put them on yours.

Who Is The Company Behind It?
Some marketers dislike talking about themselves so they basically hide the about-us or company tab, de-emphasizing it in the navigation. This is a mistake and you’ll realize that when you look at a heatmap.  Even if you’ve tucked about-us into small text in the upper right corner or buried it in the page footer, people will find it.  Look and see.

Why do visitors want go to the about-us page?  If you are a new company that sells a new thing that solves a problem I have, I will start to care very much about who you are in deciding if I want to do business with you.  Are the founders two Stanford PhDs on their second startup after taking the first one public, backed by Sequoia, and solving a problem they’ve studied for 10 years?  Or are they two self-taught programmers, trying to solve a difficult infrastructure problem they seem to lack the depth to tackle, and backed by their parents?

With whom would you rather do business?  On whom would you rather bet your next promotion?  People care about the company story.  So tell it.

What should be on your company page?

  • Origin story.  Why the founders created the company.  What they were doing when they did.  Where they got the idea.  You don’t need a full origin-story page like Hashicorp, but I’ve always liked their approach as a friendly, open example of how to tell an origin story.
  • Vision.  The product page talks about what you built.  The solution page talks about what people do with it.  The company page needs to talk about your vision.  Why you’re doing it.  What gets you out of bed in the morning.  What you’re excited about.  For example, Kili Technology makes a training data platform.  What it does should be covered on the product page. Their raison d’etre should be on the company page:  AI is failing due to a lack of quality training data and they want to enable companies to successfully deploy AI-based systems.
  • Values.  If your company is value-driven or trying to build a specific culture, talk about it.  Potential customers are interested as are investors.  Potential employees are very interested.  If you feel passionate not just about what you build and where you’re going, but how you roll along the way, then say it.
  • Timeline and/or facts & figures.  Put one or both of these.  The former shows key accomplishments along the way and the latter provides a snapshot of where you’re at today.  Both are generally of interest.
  • Leadership.  Names and bios of the executive team.  It’s increasingly popular to list the whole company, but I’m not sure what value it has for the reader unless they’re a recruiter trying to steal them.  I’d add the board, too, especially if you have impressive people on it.
  • Investors.  Name-brand investors reduce the risk associated with your company.  If you have them, talk about them.  Don’t make people go to Crunchbase to figure out who’s backing you.

What About The Hero?
Wait, if you’ve answered the top three questions with the product, company, and solutions pages, then what do you do with the so-called hero, i.e., the main above-the-fold content of the homepage?

While many people have many opinions about this question, I’ll tell you my simple way of looking at it for an early-stage startup.

Given that you’ve got the basics covered on the product, solution, company pages, you strictly don’t need this space to answer those questions.  What do you do instead?

Imagine the ideal buyer, not the CDO who only visits your website in fantasyland, but the director of analytics who actually visits it in real life.  Imagine that person is on your homepage.  You have 30 seconds of their time.  What do you want to say to them?

Say that.

I’ll go back to Kili as an example.  Their vision is to enable the success of AI projects.  Their product helps with data labeling and annotation.  Here’s where the magic can happen if you know your buyer well.  They know that telling their buyer that AI requires good training data is selling motherhood and apple pie.  Non-compelling.  They know their buyer knows that quality data is important.  But — and here’s the magic — they know their buyer thinks that data labeling is laborious and expensive.  So what do you say?

Data labeling made easy
Find out how.

Or, more cheekily:

Data labeling doesn’t have to be misery.
Find out why.

Whether you like the example or not, I still love the formula.  What would you say if your ideal buyer landed on that page and gave you 30 seconds?  Say that.

The Plannuh Case Study
I’ll conclude this post by analyzing one live website.  I work with a company called Plannuh who makes a marketing performance management platform and is run by some veteran marketers [6].  I checked with them and they gave me the OK to do an analysis of their site, applying the ideas in this post.

In exchange for letting me do this and remaining friends, I’ll do a quick plug for their book, The Next CMO: A Guide to Operational Marketing Excellence.  It’s very good.  I wrote the foreword to the first edition.

So here goes.  Let’s see how Plannuh deals with the early-stage startup website challenge.

  • The first three buttons in the navigation are product, solution, and company (i.e., about-us).  Easy to find.  Very good.  [7]
  • Clicking product doesn’t take you straight to the product overview, argh, but at least the first menu under product is product overview, which does.  Good.  [8]
  • The product page has its own hero that I don’t like:  on the homepage they called Plannuh a “marketing performance management” platform and then they’re calling it a “strategic marketing hub.”  [9]
  • Once you get past the first two warm-up blocks, the product page gets better [10].  The six broad back-and-forth blocks do a good job of describing the product in feature/benefit mode.
  • The detailed feature list is OK, but without comparisons it doesn’t position the product.  Personally, I’d add two columns for alternative categories (not products) and maybe make each feature description a link to a page (or pop-up) that says what the feature is and why it’s important.
  • Net:  the product page is good.  They tell me what the product is and the associated benefits, but only after a little bit of potentially confusing warm-up.  Still, good.
  • The solution button also forces me to further navigate, probably because that’s how the template works. There is no master solutions page, which I don’t like.
  • I was surprised to find both by-role and by-need in the navigation at an early-stage company.  That’s not bad, but I’d reverse the order as I believe by-need (i.e., the problem you’re solving) is more important than by-role (i.e., tell me who you are and I’ll try to guess your problem).  People know what problems they have.  Use solutions to list them, in their language, and let them click on the one that most concerns them.
  • The names of the solutions by-need are:  accuracy, marketing collaboration, efficiency, marketing ROI, and visibility.  Most of the time, when it comes to marketing copy, less is more.  This is not one of those times.  Remember, the solutions tab is really the problems tab, so the solutions listed need to sound like problems as expressed in the customer’s language.  These don’t always do that.  Perhaps:  staying on budget, coordinating teamwork, maximizing marketing efficiency, proving marketing ROI, and managing your marketing organization.
  • Net:  the solutions pages themselves are quite good.  To the extent possible, I might enrich them with a customer quote block testifying to how Plannuh helped deliver, but that’s the only addition I’d make.
  • The company page includes most of the requisite elements:  origin story (which here implicitly includes the vision), the leadership team [11], an advisory board which some companies use not only to get advice but to boost credibility, investors, beliefs, and values.  It’s all there and executed pretty well.
  • I particularly like the video on the company page where the founder, Peter, tells the origin story derived from his personal experience as a CMO.  While the production values could be higher, the video is authentic.  The thing Peter does really well is telling the story while demoing the product — seamlessly — describing only the business problems in the narrative, while literally showing the solution on the screen.  Proof that you don’t need to describe what people are seeing on the screen in a demo.  Few people narrate a demo so elegantly.
  • Finally, the hero, which has two parts.  The large text is clear and descriptive:  easily build, execute, and measure marketing plans and budgets [12].  I know what it does and if I have a problem with marketing plans and budgets, I’ll keep reading.  The small text seems perhaps a missed opportunity because it’s covering material that’s handled on the product page.  If I took a swing at it, I might say:

Mind Your Funnel
Build, execute, and measure marketing plans.
Prove the business value of your marketing

Thanks for reading a long post.  Thanks to Plannuh for allowing me to use them as a case study.  Hopefully, I’ve convinced you to make sure your website has great answers to the three core questions:  what is it, what do people do with it, and who is the company behind it?

And if you need a seminal white paper, add that one to the list as well.

# # #

[1]  Exception:  when you sell both a platform and a set of applications and don’t want to lump them both under product, you can instead have a platform tab and an applications tab.

[2]  A concept about which I’ve spoken about in presentations but, surprisingly, not yet blogged.  Add one to the to-do list.

[3]  You should arguably write your seminal white paper before you even create your website.  Imagine it’s early days and an ideal (senior-level) technical buyer (e.g., CDO) answers your email and says, “send me an overview of what you do.”  What do you send them?  The seminal white paper is that document.

[4]  Where solutions are themselves grouped (e.g., by-industry, by-persona) you will find by-use-case as one of the groupings.  I prefer by-need or by-objective where possible.

[5]  There is a valid question as to whether this is even a page.  That is, if you press solutions, do you only get a menu from which you can pick one of several different solutions and see those one-at-a-time, or do you land on a capstone solutions page that provides an overview of them all.  Arguably such a page is of interest to no one because people are theoretically interested in the individual solutions themselves, but that said, my preference is still to provide an overview so in one page the user can get a quick sense for the kinds of problems you solve, even if no one of them instantly resonates in the navigation.

[6]  The company name is the word Planner, but pronounced with what is called a “wicked Southie accent.”

[7]  You’d be surprised how many websites don’t have all three of these elements.  Often they’ll feature “Why Us” or “How It Works” in the primary navigation, seemingly forgetting that I don’t care how it works or why I should buy one if I don’t know what it is and what it does.

[8]  A common design problem with many website templates IMHO.

[9]  You can argue that strategic marketing hub is clearly not intended as a software category, but I nevertheless think simplicity and consistency are paramount.  Why introduce the additional concept?  Are customers looking for a strategic marketing hub?  It strikes me as neither a category name nor a solution.

[10]  My grandmother was a high school English teacher who believed that 95% of high school English papers are improved by simply deleting their first paragraph.

[11]  They include the whole company in team which, depending on how you do it, can make it quite difficult to figure out who the leadership team is, which is not good.  Plannuh has the leaders in the top row or two and then includes everyone else below that.

[12]  I could quibble with saying both plans and budgets as they’re often used as synonyms.  Maybe it’s an SEO-acquired habit.

Talking Burn: Appearance on the Metric Stack Podcast on Cash Conversion Score and Related Metrics

It was a combination of luck and foresight that I started talking with Allan Wille and Lauren Thibodeau about capital efficiency as a potential topic for their Metric Stack podcast many months ago.  Because now, as the episode is coming out, capital efficiency is the hot topic of the day.  Good luck (if not for a bad reason), but I’ll take it.

Here are some of the things we discussed on the podcast:

  • If you think of startups as organisms that convert venture capital (VC) into ARR, then we need some metric for how efficiently they do that.
  • Bessemer’s cash conversion score (CCS) is one such metric
  • I believe Bessemer defines CCS upside-down; I find it more intuitive to use capital consumed as the numerator and ARR (to show for it) in the denominator — as you would do with a CAC ratio.
  • Using my formula (= 1/CCS) for aggregate burn, here are some benchmarks showing the correlation between investment IRR and CCS within Bessemer’s portfolio
  • < 1 is amazing (i.e., burning <$50M to get to $50M in ARR)
  • 1-2 is good (i.e., burning $50M to $100M to get to $50M)
  • 2-4 is questionable (i.e., burning $100M to $200M to get to $50M)
  • 4+ is bad (i.e., burning $200M+ to get to $50M)
  • On IRR, Bessemer companies with a ratio of <1x had an IRR of 120%, 1-2 had an IRR of 80%, and 2-4 had an IRR of 40%.
  • At some point, I’d somewhat tongue-in-cheekily defined a metric called hype factor on the theory that startup organisms actually produced two things:  ARR and hype.
  • The impact of strategy pivots on overall capital efficiency, what that can mean for future funding, and how that sometimes leads to recapitalizations and pay-to-play financing rounds

The episode is available on AppleSpotify, and YouTube.  Enjoy it!  And watch that burn!