Managing your SaaS startup’s burn rate

Here’s the deal with raising growth capital for your startup: it will only last you so long, and you’ll spend it far faster than you ever imagined. Managing your burn rate, or the pace at which you spend your cash, requires a balanced approach to risk. There’s no getting around it; you need to spend money to make money. So, at certain times in your startup lifecycle, you’ll hit the gas pedal and blow through some money to make things happen. On the other side, you should be prepared to slow down (or pull the emergency brake) if you’re moving through your capital too fast.

The thought of finally obtaining the funds to take their business to the next level, and the possibility that it could all slip away (or burn up, if you will) keeps many founders up at night. Founders find themselves fixated on questions like how much runway is left? What’s the zero-cash date? Knowing how to calculate your burn rate, and keep it low, are fundamental to startup success. Read on to see how it’s done.

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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.

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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.

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When (and how) should your SaaS startup build a product marketing team?

Ah, the old “what is product marketing” debate. And then there’s the product management versus product marketing dilemma, with the all too common tug-of-war struggle to divvy up areas of responsibility properly. Any way you cut it, product marketing is most often seen as something of a gray area, living at the intersection of your product, sales, and marketing organizations. And while there are plenty of good frameworks to help you figure out who should own what within your own organization, I often hear two questions from SaaS businesses that have started to scale...

  • When should we hire for product marketing?
  • How should we go about building the product marketing function?

This post aims to answer both of those questions.

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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?

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How to share financials with your employees

At my first startup, the CEO would run through financials at every other company meeting. She would tell us our revenue, how it was tracking to our monthly and yearly goals. She would remind us of standard expenses and highlight any major one-offs, like a move to a new office space or a big push at SXSW. The company had a profit share, so understanding the financials meant understanding how we could work harder and smarter to put more money in our pockets.

I had never worked anywhere where leadership shared financials like that, and it was exciting. It was easy for me to place my current projects and the revenue they were driving into the big picture. I knew exactly how valuable I was to the company, and I knew exactly how well the company was doing.

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Four cash management tips for SaaS startups

Cash is king. In business, everything stems from the cash you have, the cash you earn, and the cash you raise. You need it to run every part of your business. How much cash you have determines your company’s runway, and how likely you will raise the next round.

At Lighter Capital, we sometimes see great companies with promising traction, but the entrepreneurs are presented with less than ideal funding options because they didn’t fully understand how to manage their cash. To help you operate better and be in a better position for fundraising, here are four cash management tips we find most useful for tech and SaaS businesses.

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4 service providers early-stage startups can’t live without

While most SaaS startups are focused on raising funds and optimizing growth, there’s an equally important area that many entrepreneurs often overlook: choosing key professional service providers. Choosing the right people and understanding the value they bring can make a huge difference to your company.

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The pros and cons of transitioning from a service to a product company

It’s a common trend in the software world today: service-based consulting companies transitioning to subscription-based SaaS product companies. Sometimes founders realize that they’re essentially solving the same problem over and over again for their customers and decide to capitalize on that demand by creating a product solution. Other times, founders have a SaaS product in mind from the start, but decide to fund the building and scaling of the product by generating a steady stream of substantial income from consulting.

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Startup founder and recruiter-in-chief: Top 3 takeaways

Over the past weeks, we’ve discussed the steps involved in recruiting and hiring key employees for a startup. In the first three posts, I walked readers through the processes I followed when I made the all-important first two hires for my startup RecruitLoop. The first post focused on how to find potential candidates. The second post detailed our process for selecting the best candidates. The third post discussed the often-overlooked details of what happens after you decide on a candidate: negotiating an offer, hiring, and on-boarding. In this final post, I sum up my top three lessons learned.

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