Ian Denning
Sell high: your monthly subscription product, compounding, and revenue growth
Subscription models bring a new level of complexity—deferred revenue, monthly recurring revenue churn, customer churn—but it also brings benefits: sticky revenue streams that one-and-done business models can’t achieve, low cost of goods, and gross margins that increase with scale. One of the easiest levers to pull is the cost of your monthly subscription model.
4 milestones to reach before raising your Series A
While seed funding is more abundant than ever (the number of seed-funded companies has quadrupled in the last four years), Series A funding is actually harder to get than it used to be. With a super-abundance of competent seed-funded companies, investors can afford to get choosy about their Series A bets.
Many companies want to raise their Series A before they're ready, but coming unprepared to such a competitive space can be detrimental to your company's future funding prospects or even harmful to your reputation. Investors who might have taken your business seriously six months down the road will write you off as someone who doesn’t take being prepared seriously. While there are few hard and fast rules about when to raise a Series A, there are milestones that will help you demonstrate to your future investors that you have traction and a road to profitability. Let’s take a look at four of the biggest indicators that your company is ready to seek its Series A.
6 bootstrapping strategies from CEOs who made it to $100M ARR
In the world of tech startups, bootstrapping has a special cachet. Bootstrapped companies that make it big—say, to $100M ARR—without relying on venture capital or angel investors are looked on with something like awe. (Note that relying is the key word here--some boostrappers may take VC money, but only after they don’t truly need it.)
The founders of such companies are the Yodas of the tech startup world, full of hard-won wisdom and quotable advice. They know what it takes to grow a company to profitability the hard way. Here are some concrete strategies the founders of MailChimp, Atlassian, and Tableau have used to maximize their margins and grow without VC.
Webinar takeaways: the business metrics that drive investors
On Tuesday, we hosted a webinar about important metrics to track when fundraising. Lighter Capital CEO BJ Lackland offered an investor’s perspective on why these are the main metrics a fundraising startup should track, and Grow CEO Rob Nelson took a deep dive into data sources and best practices around analyzing them. Check out the video here.
Below are five interesting takeaways from the webinar.
Lighter Capital client Signal Vine raises $2M Series A round
As reported by their press release, Signal Vine, provider of a text messaging platform used by higher education institutions to improve student retention and comprehension, has raised a $2M Series A. New Markets Venture Partners led the round. New Markets invests in early- and growth-stage edtech, IT, and business services startups, and their companies have been acquired by industry leaders like Blackboard and ETS.
How to tell if an investor is a bad fit
Pitching investors and knocking on doors for growth capital is an all-consuming process. Not only does it require countless coffee meetings, tedious pitch deck revisions, and many hours away from running your business, but you’re in a vulnerable and emotional position. You need capital, and your business can only survive for so long without it.
While it’s tempting to want to partner with the first investors who says “Yes,” it’s critical to partner with the right investor. After all, these are people who you’ll be working with for at least the next five to seven years.
Customer success metrics: NPS and CSAT
If there is a single, essential factor for predicting the long-term survival rate of a SaaS company, it's the churn rate. Even companies with truly explosive growth aren't immune from the dangers of a steadily increasing churn rate. The greater the percentage of customers who decide jump ship every month or quarter, the bleaker the outlook becomes.
For SaaS companies seeking investment, a high churn rate can present a serious problem. Why should a VC firm take the risk on a business that can't even keep its own customers around? Is this a startup with a fixable problem, or is it a sinking ship?
Q&A: SaaS accounting struggles holding your startup back from funding
On Wednesday, we hosted a webinar about the critical accounting challenges SaaS companies face with inDinero. Investment Director Zach Hoene represented Lighter Capital, and inDinero brought Carter Hawke, Accounting Manager.
The webinar covered many bookkeeping woes, from the new revenue recognition rules (effective 2019 for private companies) to accounting stock-based compensation to capitalizing CAC for new customer contracts. It ended with a Q&A where listeners asked for advice solving their businesses’ accounting challenges. The whole video is available here, and here’s what our experts had to say about your questions.
Lighter Capital client Nuvolo raises $10M in VC
As reported by VentureBeat, Nuvolo, a provider of asset management software to life sciences organizations and pharmaceutical companies, just raised a $10M Series A. New investor GE Ventures led the round. Existing investors NEA and ServiceNow Ventures also participated. Nuvolo plans to use the capital to scale up sales and marketing and hire new employees.
Using cohort analysis to make your SaaS metrics actionable
As a SaaS entrepreneur, you have a lot of data coming at you. The volume and complexity of the metrics you collect can make your head spin. How to make sense of it all? One great answer is using cohorts. This means grouping your customers by their characteristics to break your data into manageable, actionable slices.
Once you see the patterns in how different demographics use—or don’t use—your product, you can:
- Determine when and how to best communicate
- Identify flaws in your messaging or promotions
- Find out who is best served by your product
- Design incentives to keep customers engaged when they’re most likely to stop using your product
A good place to start is looking at cohorts grouped by time, segment, and size.