The growing dissonance between two business models (SaaS and VC)

In our weekly investment team call earlier this week we decided to pass on two early-stage SaaS startups that were both on track to grow from zero to $100k in MRR in their first 12 months of going live. Both companies clearly had impressive traction, but in both cases we weren’t convinced of the market size and the opportunity to build a large, sustainable company. (We of course might be wrong, and maybe we’ll have to add both companies to our growing anti-portfolio list in a couple of years. I’ll keep you posted.)

Had I seen a SaaS startup with this growth curve in my first 2-3 years of SaaS investing (in 2008-2010) I probably would have asked “where do I have to sign?”. And chances are that it would have been a good investment. The reason is that at that time, growing from zero to $100k in MRR within 12 months was extremely rare and an indication of not only a great product and excellent execution but also a great market opportunity.

One could argue that I saw much fewer deals in general at that time and that, being an angel investor, I had lower ambitions than a VC. That’s true. But it’s only part of the picture. The other part is that even as recently as 6-24 months ago, we’d consider a SaaS startup with this growth pattern exceptional. Passing on fast-growing SaaS companies that are clearly successful and on to something is a pretty new and somewhat scary experience for us.

The driver behind this development is what my colleague Clément Vouillon has described as “The Rise of Non ‘VC compatible’ SaaS Companies”, that is the fact that compared to some years ago there are now many more SaaS companies that get to $1M, $5M, maybe even $10M in ARR. Arguably, there’s never been a better time to start a SaaS company. A much larger and more educated market, combined with vastly lower costs to create software, means that your chances of building a viable SaaS company have never been higher. 

For VCs, the question is how many of these companies can become large enough to make the (admittedly somewhat weird) business model of venture capitalists work. Large VCs need multiple unicorns just to survive. In SaaS, that means companies that get to $100M in ARR and keep growing fast beyond that mark. With a ~$60M fund, we at Point Nine may not need unicorns to survive, but we won’t generate a great return if we don’t have exits north of $100M either. And as much as I agree with this post on TechCrunch today when it says that starting and selling a company for $100 million dollars is an outlier event in terms of pure entrepreneurial probability, a big part of my daily motivation is to find some of these truly iconic companies that become much larger. I guess once you’ve seen it once (in my case with Zendesk) you get addicted and want to do it again. :-)

We've come too far

To give up who we are

So let's raise the bar

And our cups to the stars

Daft Punk, Get Lucky

(I’m not sure if I understand the meaning of these lines in the context of the song, but I love the song and had to think of these lines while writing this post.)

Coming back to our observation regarding the rise of bootstrapped SaaS companies, assuming our theory is right, it means two things:

1) We’ll have to raise the bar even further

There will be more and more SaaS companies that, based on the “pattern recognition” that we’ve developed in the last years, we’d like to invest in but will have to pass on. We can only make 10-15 new investments per year and we’re obviously trying to find the very best ones - the outliers among the outliers, if you will.

2) Picking might become even harder

If it’s true that there are indeed more SaaS companies that quickly grow to $1-2M in ARR but that increase is not matched by a similar increase of companies that become very large, picking the right investments will become even harder. To keep up with that challenge we’ll have to constantly ask ourselves if we’re still asking the right questions when we assess a potential investment.

What does it mean for SaaS founders? First of all, as mentioned above, we might live in the best time to start a new SaaS company that ever existed. Second, founders should ask themselves what kind of company they aspire to build and should only try to raise venture capital if they are convinced that they want to build what Clément called the “VC compatible” startup (check out his post for a little checklist). As Clément said, this is not about good or bad. The VC path is not better than the bootstrapping path. In fact, for the majority of SaaS startups it’s probably not the right one.

Not yet convinced that you shouldn’t raise venture capital? :) Let us know!

Revisiting Point Nine’s tech stack. Plus: 7 little hacks that help me keep (some of my) sanity

[This post first appeared on Point Nine Land, our Medium channel.]

A few years ago I wrote about some of the tools that we’re using to run a VC fund in the Cloud. Nicolas later followed up with more details about our tech stack. Today I’d like to provide a quick update on how our SaaS stack has evolved, as well as share a couple of little tools and hacks that help me (sort of) keep (a little bit of) my sanity.

Part 1: The Basics

Zendesk continues to be our lifeblood. Since we started using Zendesk to manage our deal-flow about six years ago, we’ve logged more than 18,000 potential investments, and every month, several hundred new ones are being added. Processing so many new deals in a timely fashion is no easy feat (kudos to Savina, Louis and Robin who are doing the bulk of that work!) and wouldn’t be possible without Zendesk. Zendesk obviously hasn’t been built for this use case, but the ability to customize the software with triggers, automations, macros and other features has turned Zendesk into the perfect deal-flow management system for us.

We continue to use Basecamp to keep track of our portfolio companies — we have one dedicated Basecamp project for each portfolio company that we use internally at Point Nine to store updates and meeting notes — but have migrated to Honey and Slack for most other use cases that we previously used Basecamp for. Honey (a Point Nine portfolio company) offers a beautiful, modern intranet and is great for storing long-lived content. Slack has allowed us to heavily reduce internal email communication. I was initially sceptical about Slack (yet another inbox?) but have meanwhile become a big fan because the time we spend on Slack is more than offset by the time we save on email. In my experience, the two biggest advantages of Slack over email are (a) the ability to quickly discuss issues with a group of people in real-time and (b) organizing conversations by channel, which makes it easier to ignore (or process in batches) less urgent messages.

We continue to use Google Docs and Google Sheets for almost all documents and spreadsheets, and after some initial resistance, I think even our COO Aleks (who spent her previous life with Word and Excel), is starting to like it. :) For documents that still come in Word, Excel or PDF form, we’re (of course) using Dropbox to ensure that everybody always has the latest version.

We’re still using Skype for external calls on a daily basis, but have switched to Zoom for internal video conferences. I’m still a fan of Skype, but Zoom seems to be more reliable and to offer a slightly better audio/video quality, and offers call-in numbers for people who have to call in while on the go. The only downside is that Zoom eats up a lot of CPU, and for some reason that is completely beyond me doesn’t allow you to show a large screen-sharing window and a large video at the same time.

Our website is now powered by Contentful, and we use Unbounce for landing pages, and Typeform for all kinds of things. Speaking of dogfooding, we love it when a SaaS company uses ChartMogul as that gives us easy access to all relevant SaaS metrics; we’re using 15Five for team feedback; Mention for media monitoring; Contactually for contact management; and (more recently) Qwilr for occasional sales pitches.

Finally, we recently got started with Recruitee to manage the growing talent pool for the #P9Family. We’re using Medium as our blogging platform (although this blog still runs on Blogger, which tells you something about my age); TinyLetter for our “Content Newsletter” (subscribe here); and Buffer to schedule social media posts. Last but not least, we still use MailChimp to publish our (in)famous newsletter (sign up here if you haven’t yet).

Part 2: The little tools and hacks

1. TextExpander

TextExpander lets you insert snippets of text using shortcuts. I remember using a similar application with the same functionality on Windows 3.11 (which tells you even more about my age), when in the first couple of months after launching Acses, my main job was to write personalized emails, suggesting a link exchange, to as many website owners as possible. Since then, text expanders have become one of my favorite productivity helpers. To give you an idea of how I’m using it, here are a few examples of some of my favorite shortcuts:

Shortcut: calendly30

Text snippet:

Want to pick a time from my calendar?

https://calendly.com/XXX

Alternatively, please feel free let me know a few options that would work well on your end.

Looking forward to it!

Shortcut: iiwfy

Text snippet:

If it works for you we can use Skype, my user name is XXX. Alternatively you can reach me at XXX.

Looking forward to talking to you soon!

Shortcut: m-a-c

Text snippet:

Thank you for your interest!

You can get an editable copy of the spreadsheet by going to „File > Make a copy“.

Let me know if you have any questions.

Best regards

Christoph

I hope you won’t find it rude that if you receive an email from me, not each and every word may be carefully typed in by hand. But there are only 24 hours in the day, and if I didn’t save time this way I could answer fewer emails, which would be worse.

2. Calendly

Did you notice the calendly.com link in the first snippet above? Calendly is another favorite of mine. It’s a scheduling tool that can greatly reduce the back-and-forth emails that are so often required to schedule a meeting or call. Here’s how it works:

• Let Calendly know your availability by connecting it with your calendar and by setting up slots for calls and meetings.
• If you want to schedule a call or meeting with someone, send him/her your Calendly link.
• The other person picks a time, and the event is added to your calendar (and the other person gets a calendar invite for his/her calendar).

Compared to solutions like x.ai, which try to solve the problem using AI, Calendly is a rather “dumb” tool. It won’t solve all of your scheduling issues: If, for example, you need to coordinate a meeting with a bigger group of people or if you need to take into account travel times and traffic, Calendly won’t do the job. But my experience is that it works perfectly well for 90% of my Skype/phone calls, so I can highly recommend it.

Initially I was worried if the UX for the person you’re scheduling with was good enough or if people don’t want to click on a link in an email in order to schedule a meeting with me. However, I’ve gotten only good feedback so far, and just in case, I always include the “Alternatively, please feel free to let me know a few options … “ note when I send around the Calendly URL. Another great solution is MixMax’ “instant scheduling” feature, which arguably offers an even better experience for the person on the receiving end.

3. 1Password

1Password is one of those apps that, once you’ve used it for a little while, makes you wonder how you ever survived without it. If you’re not using a password manager, chances are that:

• you use the same passwords everywhere (pretty risky — if one site gets hacked, the hacker gets access to all your online accounts); or
• you keep a list of all your passwords (not much safer and not very convenient); or
• you try to memorize a lot of different passwords (which probably means you’re resetting passwords all the time)

1Password creates a unique and safe password for each of your online accounts and takes care of the synchronization across all your devices. You only have to memorize one master password in order to unlock your password vault. Just make sure you don’t lose that password!

4. My email signature

Some time ago I made a slightly weird self-observation: I noticed that when I checked my email on my iPhone while I was traveling and e.g. sitting in a cab, I’d often be faster to reply to emails than when I was sitting at my desk. You’d expect the opposite, because typing on a real keyword is obviously much more convenient and much faster. The reason for this behavior is that the “Sent from my iPhone” signature gave me the excuse for writing very brief replies, whereas when I was at my desk I felt obliged to write longer, more well-written answers — which often led to procrastination. When I noticed this behavior I changed my desktop email signature to this:

—
Christoph Janz | www.pointninecap.com | Christoph Janz
Not sent from my iPhone. Please excuse brevity nonetheless.
I can’t claim that this little hack made me a great emailer. I never achieve inbox zero and regularly have to declare email bankruptcy. But it definitely helped to get somewhat better.


5. Typeform => Zapier => Zendesk

About 18 months ago we replaced the “submit” email address on our website by a Typeform. The Typeform lets founders upload a pitch deck and allows us to collect a few bits of information such as the startup’s sector, launch date and funding ask. You can check out the pitch submission Typeform here. We use Zapier to push the data from Typeform to our Zendesk. If you submit the Typeform, here’s what we see:

The impact of this seemingly small hack, which simply ensures that we get all of the information that we need for our initial assessment at a glance , turned out to be staggering. Previously we often felt like we were drowning in incoming inquiries and would often accumulate a large backlog of submissions; thanks to the improved process, we’re usually able to get back to founders within 1–2 weeks.

When we were considering removing the “submit” email address and replacing it by a Typeform, we weren’t sure how people would react. We were somewhat worried that asking founders to complete a form could look unfriendly or unapproachable and were wondering if we’d increase the barrier to submit a pitch too much. Fortunately, we got lots of positive feedback, not least because Typeforms look and feel less like boring web forms and more like a conversational interface. Also, our impression is that the submissions that we’re no longer getting are mostly the ones that we’re happy to miss (like random mass emails about projects that are completely out of our areas of interest).


6. SizeUp

SizeUp is a Mac app that allows you to quickly resize and position windows with keyboard shortcuts. It’s a simple app, but another one of these handy little tools that I don’t want to miss. I frequently want to see two windows on my screen side-by-side, and with SizeUp it just takes one hotkey to move and resize a window to the left or right half of the screen. Occasionally I want to see more than two windows at once. In that case there’s another set of hotkeys that allows me to arrange the screen into four quadrants. Apple added a “Split View” feature to OS X two years ago or so, but I still prefer SizeUp for its extra features and customizability.

7. SaneBox

SaneBox was highly recommended to me by Pawel, who’s been swearing by the product’s ability to help him keep his sanity for some years already. After using SaneBox for a little while it has become an essential part of my tool stack as well. SaneBox comes with a whole bunch of features, but for me the key feature is that it moves all emails that don’t look important into a couple of special folders such as “Social”, “News” and “SaneLater”, leaving only a much smaller amount of emails in my main inbox. This way you can check out newsletters, social network notifications and everything else that SaneBox’s algorithm determines to be unimportant in batches, which saves you lots of interruptions.

I also use SaneBox’s ability to detect emails from people, who I haven’t communicated with before, to send them this auto-responder:

Hi there,

This is an automated reply to thank you for your message. You’re receiving it because my AI-based assistant thinks that we don’t know each other well yet. :)

I’m trying to read and answer all emails in a timely manner, but due to the large volume of emails that I’m getting it doesn’t always work. If you don’t get a personal email soon I apologize in advance.

In the meantime …

* If you’d like to submit a pitch, please use this Typeform:

https://pointninecap.typeform.com/to/gZKJUl?referrer=christoph

* To get a copy of one of the Google spreadsheets that I’ve published on my blog, you can get an editable copy of any spreadsheet by going to „File > Make a copy“.

* If you’re interested in working for one of our amazing portfolio companies, please reach out to jenny@pointninecap.com.

* For other inquiries, please email us at info@pointninecap.com.

* If you’re a SaaS company and you want to get your metrics right, check out ChartMogul (www.chartmogul.com)

* I unfortunately don’t have the time to answer individual questions in regards to financial planning. Sorry.

Best regards

Christoph

—
Christoph Janz
www: pointninecap.com | Blog: www.theangelvc.net | Twitter: @chrija


I still take a look at all of these emails and try to reply to most of them, but it’s not always possible (and also not always necessary) and in these cases I think this auto-reply is better than no reply at all. What’s great about this setup (which uses SaneBox and Zapier) is that none of my regular contacts get this auto-responder. Once I’ve sent you an email, SaneBox classifies you as “important” and removes you from the “SaneLater” label.

This is by no means an exhaustive list of all the tools and little hacks that we’re using at Point Nine, but I hope you found some of them useful.

What are your favorite productivity hacks?