Lifestyle Business vs Startup

When we were building Pardot someone commented to me that it was a lifestyle business since we didn’t raise venture capital. Immediately, I respectfully disagreed. A startup, by its very definition, is a scalable, growth-oriented company.

Much like differentiating innovative vs replicative companies, lifestyle businesses differ from startups:

  • Lifestyle businesses balance company profitability for owner income with growth targets, while startups put all the emphasis on growth
  • Lifestyle businesses rarely raise outside money while startups commonly raise money
  • Lifestyle businesses are often comfortable with the status quo while startups are constantly looking for ways to grow faster
  • Lifestyle businesses are about control and freedom while startups are about innovation and growth

Lifestyle businesses and startups have more in common than not, but the main difference is one provides for a lifestyle and the other focuses on growth.

What else? What are some more differences between a lifestyle business and a startup?

The Energy in a Values-Oriented Company

Earlier today I was in the SalesLoft office catching up and the first thing I noticed was the energy of the company. Energetic employees were everywhere — at a table in the middle of the office having lunch, on a bean bag chair doing a sales call, and walking by on their way out the door.

The energy was amazing.

An energetic environment always starts with the people and their values. Here are SalesLoft’s core values:

  • Put Customers First – Of the three stakeholders — employees, customers and investors — only one pays the bills. We win by staying close to them and adding value to their day.
  • Team Over Self – We’re committed to each other. We’re always collaborative, but put the interests of the team above our personal agendas.
  • Glass Half Full – We always move forward. We work to understand the reality of the situation, then we make the decision to focus on the opportunities.
  • Focus on Results – We understand what we’re here to do and make decisions with purpose to achieve our goals.
  • Bias Towards Action – We’re motivated. We go out of our way to figure things out and present solutions, rather than problems.

Customer-oriented people that are positive, focused, and team players sounds nice, but only works when the entire company is committed to the values. Many companies talk about values but few truly buy into them. Values set the tone and aligned cultures have a magnetic energy.

What else? What are some more thoughts on the energy in a values-oriented company?

Daily Active Users in B2B SaaS

Continuing with assessing product/market fit, one of my favorite metrics is daily active users (DAUs). Now, DAUs are more commonly associated with B2C products like Twitter and Facebook, but they’re directly applicable to B2B SaaS products as well.

Why are they so important for B2B SaaS? The best indicator of success for most SaaS products is the fact that the customer continually uses the application. In most applications, this is signing in and using the platform. In a limited number of applications, this is using the API programmatically on a regular basis (e.g. integrating it into another application or workflow). Regardless, product usage equals product value. And, product value is a key element of product market fit.

Entrepreneurs should monitor their daily active users and understand the correlation between product usage and startup success.

What else? What are some more thoughts on daily active users in B2B SaaS?

The Best Time to Raise Money

There’s an old saying in the startup world: the best time to raise money is when you don’t need it. Too often, entrepreneurs, being ever optimistic, wait too long before starting the fundraising process. Only, a limited timeline often results in limited funding options, which results in a poor situation for the entrepreneurs. No options, no leverage.

When things are going well with a startup, other investors take note. At Pardot, we had tremendous in-bound interest from investors for a number of reasons. One major reason is that many VC portfolio companies started using Pardot such that it’d come up in board meetings as part of the marketing presentation. When executives shared how much value they received from Pardot, investors took note. And, since we bootstrapped and didn’t need money, investors were even more eager to invest (simpler situation, clean cap table, no baggage).

Another common occurrence is as soon as a startup announces they’ve closed a round, other investors reach out asking if they can put in some money. Clearly, the startup doesn’t need to raise money since they’ve just closed the round, but opportunistically they often take it. Raising money is much easier when things are going well and the money isn’t needed.

The best time to raise money is when you don’t need it.

What else? What are some more thoughts on the idea that the best time to raise money is when you don’t need it?

A Bumpy Ride for the First 10 Customers

Continuing with the post Assessing Product/Market Fit, there’s a related point that the first 10 customers of a startup often have a bumpy ride. As part of assessing product/market fit, if numerous customer requests and product issues are signs that product/market fit isn’t in place yet, it follows that it’s common for early customers to have problems as product/market fit is so hard to attain.

Here are a few thoughts on the challenges of the initial customer experience:

  • Work to be overly accessible and available as customer feedback and quick resolution of issues are critical
  • Know that problems and bugs are common as it’s nearly impossible to test every use case (it’s more important to move fast and iterate than try and be perfect)
  • Understand how the customer interacts with the app using a product like FullStory or Hotjar
  • Proactively reach out to the customer on a regular basis (e.g. weekly), eventually using a cadence system like SalesLoft or Trustfuel

The first batch of customers almost always have a bumpy ride. Entrepreneurs should recognize that this is normal and work hard to still provide the best experience possible.

What else? What are some more thoughts initial customers having a bumpy ride?

Video of the Week: Blitzscaling 19: Jeff Weiner on Establishing a Plan and Culture for Scaling

For our video of the week, watch Blitzscaling 19: Jeff Weiner on Establishing a Plan and Culture for Scaling. Enjoy!

From YouTube:
This is session 19 of Technology-enabled Blitzscaling, a Stanford University class taught by Reid Hoffman, John Lilly, Allen Blue, and Chris Yeh. This class features Reid Hoffman interviewing Jeff Weiner, the CEO of LinkedIn.

Software 2017

Battery Ventures put out a great slide deck on the state of the software industry in 2017 as part of the recent CloudNY event.

Here are a few notes from the slide deck:

  • 18.3% expected compounded annual growth for SaaS companies over the next four years (compared to 6.9% for general software)
  • Software industry in the United States supports 10 million jobs
  • The Five Forces of Software’s Accelerating Growth
    • Existing software markets are growing over time
    • Software is infiltrating what were once niche markets
    • Software is displacing hardware
    • Every company is becoming a software company
  • 60% of organizations to increase spending on cloud applications
  • The global software industry is $500 billion per year
  • Continuing at a 5% compounded annual growth rate, software will be $1 trillion/year by 2030
  • Category kings consistently captured more than 70% market share
  • Tactical considerations:
    • Software innovation is now global
    • There are competitors in all segments of the market
    • Product now drives software sales
    • Network effects and ecosystems build moats and drive stickiness
    • AI and machine learning are enabling applications
    • Microservices architectures and rapid product delivery are now must haves
    • Culture is paramount and employee feedback is public
    • Find a wedge and change the market dynamic
    • Grow fast or die slow

Check out the slide deck on the state of the software industry in 2017.