Zibbie Nwokah

SaaS Operators…can you pass the Nathan Latka podcast test❓ I’ve spoken with a lot of SaaS founders, CFO's, etc. from $3M ARR to $200M ARR who cannot pass his test. What is Nathan’s test? Asking you on the spot about specific SaaS metrics. Seems simple. Don’t find yourself not being able to answer financial and metrics questions when talking to your Board, investors, and potential investors. Or on a podcast! Can you pass the Latka test? I had a student in one class who specifically wanted to avoid “embarrassing Board questions.” 😯 To help you on your SaaS metrics journey, download my 5 Pillar SaaS Metrics Framework below. It's an instant download…no email asks or paywalls. I teach my 5 Pillar SaaS Metrics Framework to my students at The SaaS Academy. And I implement this metrics framework for my SaaS clients. Why is this framework important? 1)    Use this as your roadmap to implement your metrics 2)    Right metrics at the right stage 3)    Data-driven decisions 4)    Better capital allocation 5)    Understand what is working, what is not working 6) Answer Board and investor questions 7) Implement a repeatable metrics process; no fire drills! Download the framework here: https://lnkd.in/gApMuh2Z Learn more about my SaaS metrics course here: https://lnkd.in/gV8e_Awq Please like this post if you find value in my framework. And tag a friend 🙋 who might find this useful. #saas #metrics #cfo #founder

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I learned the hard way in previous companies. When you’re a SaaS company that has offered a payment product to your customer, they don’t care that your downstream providers, not you, broke down. A year and a half ago Moov was struggling with uptime. I reached out to Ben Horowitz for advice, and he told me. “The Moov payment code path is Mars shit - not like you will die in space but your company will. Infrastructure companies just need to work.” We took “Mars Shit” to heart and killed the entire roadmap to focus on availability and then scalability. Too many payment heads at Vertical SaaS companies delude themselves into thinking the customer understands that legacy infrastructure is what it is. When something goes wrong, the reputational hit is to the company sitting right in front of the customer. You are the endorser of the underpinning tech. Once you understand this dynamic, you’ll truly understand the importance of modern payment infrastructure. To the customer, that’s not their problem. They buy payments from you, full stop, no excuses. It’s Mars shit - it just has to work!

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Vertical SaaS CEOs are constantly told they need to be a Payfacs to monetize payments. This is a terrible idea. Here is what that person on the other end of that advice isn’t telling you. 1️⃣ It will kill your SaaS multiple. Being a Payfac means you recognize payments revenue on your top line and clear 8 bps after expenses. What happens when payments revenue becomes 50% or more of your previously 90% gross margin business? 2️⃣ You will be in a tri-party agreement with a single sponsor bank, giving you zero negotiating leverage and control of your economic destiny. 3️⃣ There are big upfront costs that are hard to overcome without tremendous scale. Instead, you want to partner with Payfac on a rev share. A partner can give you 20% of top line as straight revenue, you take zero expense (legally you're a distribution partner), and you add 10 bps of 100% margin to your P&L. Being a PayFac without being a payments specialist literally makes no sense. Open invitation to prove me wrong.

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THE PE OPTION Private company growth CEOs: if you're at ~$100M ARR and growing ~20% YoY, going public might not be an option. I'd suggest considering the option of partnering with a PE firm such as Thoma Bravo, Vista, etc (they will clean up your cap table and take a meaningful stake in your company). They will give you the dry powder to buy adjacent companies in your space, build scale, and eventually go public. Being the CEO of a PE-owned company is not for everyone, esp CEOs who are used to very little accountabilty from mostly fawning investors. That said, don't think of PE as the Gordon Gekko types - it's an outdated perception. These are exceptionally smart, savvy investors, whose goal is to build shareholder value. They are not going to strip down the company and sell it for parts. They will hold you to a higher standard of discipline (like public markets would!) but also be supportive (with capital) if you pursue high-ROI investment opportunities, including buying other companies. Also, either you become the acquirer and consolidator in your industry, or someone else consolidates you. Which do you prefer? Sitting still and hoping for a public market turnaround, is not a good strategy. Anaplan, which of course actually went public, is pursuing the first strategy after being acquired in a take-private by Thoma Bravo. --- Anaplan, an SF portfolio company of Thoma Bravo, agreed to acquire Fluence Technologies, a Canadian provider of financial close software. Fluence had raised around $17m from firms like Banneker Partners, MaRS Investment Accelerator Fund and Graphite Ventures.

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How do you reduce costs while accelerating growth? That was the crux of the question posed in a post recently by Michelle Benfer after a dinner she attended with other Revenue Leaders. While Executive Leadership too often favors reducing " sales support staff" (aka RevOps/Enablement) over reducing sales headcount, Michelle argues that, when done right, RevOps makes revenue orgs less reliant on headcount not more. What do you think? This topic was tailor-made for The GOATS of Growth podcast, so I asked her to join me. In this clip you'll hear her describe what she thinks best-in-class RevOps looks like.  Michelle, you are what best-in-class GTM leadership looks like, and I thank you for joining me! Please follow Michelle for more great content and reach out if you have more questions--ONLY after listening to the episode. Here is the link to the full episode. https://buff.ly/3Cjhr6Q. Please subscribe to the show if you like what you hear!

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Whether you're dipping your toes into SaaS acquisitions or looking to expand, understanding the diverse buyer profiles is key. Here's a quick rundown of SaaS acquirers by purchase price to identify where you fit and how to strategize: // <$250k: Side Hustlers: Look for low-maintenance, simple products. Ideal businesses demand <20 hours weekly and minimal support. // <$500k: First-Time Acquirers: With a technical/GTM background, focus on businesses matching your skills, requiring less than $500k capital. // $500k-$1M: Professional Portfolio Acquirers: Experienced? Aim for stable, recurring revenue businesses, managing 5-10 companies with 15-30% EBITDA margins. Serial Acquirers & Niche Specialists: Quick scalability or niche alignment is key, targeting businesses for growth and a perfect fit. // Over $1M: Corporate Integrators & Small Financial Sponsors: Major players seek strategic alignment, investing $3M-$10M for a 20-30% ROI. /Industry Consolidators & Strategic Diversifiers: Focus on efficiencies, market dominance, or diversifying through innovative models. A Reminder: Micro SaaS is a unique field — untouched by Institutional Private Equity and Strategics below $5M ARR, presenting a lucrative avenue for those ready to play smart. Which profile resonates with you? Whether you're aiming to buy, grow, or sell, positioning yourself correctly in the Micro SaaS universe is crucial. 👉 For a deeper dive into each buyer profile and strategic insights tailored to your journey, connect with us at Skaling Ventures. Link to substance in bio... #MicroSaaS #SaaSAcquisitions #StartupGrowth #SkalingVentures

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Want to be a Venture Capital Scout? Scout for Syndicate leads. I’m biased, but I think SPV/Syndicate leads are some of the best connections for VC scouts. As a syndicate lead, I’ve leaned into working with VC scouts the past 3-4 years. It's been a great way to gain unique access to deal flow and many of my most exciting portfolio companies have come from various “scouts”. Given the deal by deal investing strategy and ability to share carry with those who support sourcing & diligence, it’s become increasingly common for syndicate leads to actively partner with scouts and share carry or upside in the SPV. What’s in it for the scout? Deal x deal carry. While there are multiple traditional VC scout models that exist, the syndicate scout model is pretty straightforward. If you source a deal and support diligence, the syndicate lead is going to share some of the carry with the scout, and likely a more meaningful amount than a traditional venture fund. This is of course an SPV, so you are getting carry for the specific deal you sourced and not fund-level carry. A little more background on why the SPV model aligns with VC scout deal sourcing… Syndicate leads are structured (and many times set up) to invest in more companies than a traditional venture fund. In order to consistently bring LPs high quality deals, it makes sense to partner with folks in your network who have strong deal flow. Most times the carry split from syndicates will be more generous than that of a traditional venture fund. Syndicates do not necessarily have a certain number of portfolio companies they can invest in, meaning as long as they are getting access to quality deals that LPs want to participate in, then they will: 1) Be more likely to say yes and run the SPV into that investment and 2) Be more willing to provide a higher carry split, especially if you as a scout show you can repeat this with more future access In summary, if you are going to scout for venture funds, you might as well explore doing so with syndicates and capitalize on deal by deal carry/upside. Disclaimer: If you are scouting deals because you want to get into VC, working with traditional VCs is likely better from a networking standpoint, but if you are scouting to capitalize on carried interest/upside, I think the SPV lead route can be more attractive, and more frequently. -- Interested to see if you are a fit for our new Deal Sheet accredited investor product? Explore Deal Sheet to access 100-200+ of the best SPV startup (pre-seed to pre-IPO) investment opportunities per year. Deals are curated by Zachary Ginsburg & Alex Pattis (deployed > $200M across 750+ SPVs) across 50+ syndicate leads.

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Many SaaS solutions resonate most with directors/VPs/department heads. For the past 5+ years the approach for selling to these folks was to get them very excited about your solution and price in such a way that they could get a deal done with minimal sign off. In enterprise this could run as high as 500k. Now, there is scrutiny on 25k deals. Smart sellers realize this and are running a totally different play. A little different flavor of the traditional top down model. These folks are still doing well. Folks running the old playbook? In struggleville. P.S. - when times are hard it’s actually easier to do big deals…if you know how to sell transformations.

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Crypto ETFs by themselves are unlikely to make money as a business. Fund size and complexity dictates that ETFs need large AUMs to be profitable. In the meanwhile, they should partner to manage their investor onboarding, accounting, payments and compliances.

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Are Revenue Multiples a Thing of the Past? -- (How Private Equity thinks about SaaS valuations and how that impacts you.)   If you are looking to sell your SaaS business, it’s highly likely that a PE firm or a PE-backed firm will be the buyer. And even if you are fundraising from VCs, PE firms influence the valuation process. When I was fundraising for SaaS Capital in 2006, PE firms were dismissive of SaaS. They thought the model only worked for SMBs and questioned its profitability. All that changed around 2010, and now, PE firms dominate the SaaS landscape. PE thinking shifted again in 2021. They are still active in SaaS but are now valuing businesses based on future cash flow, not revenue. For many, the shift to cash flow multiples is long overdue. Revenue is not a great measure of valuation. Some revenue is profitable; some is not; some is sticky, and some is less so. However, in the early days of SaaS, revenue was the only input that worked. I recently chatted with dozens of PE firms, and while not monolithic, the following statement holds for all of them. *  Future cash flow is the basis of SaaS valuations * This is not groundbreaking but a subtle shift with many implications. Because PE firms shifted their thinking, VCs had to follow suit. It’s hard for VCs to make money if they buy based on revenue multiples and sell based on EBITDA multiples. Given this valuation shift, what are the implications for SaaS business? Below, and in a much longer post linked in the comments, I describe how this framework applies to all stages of  SaaS companies that are fundraising or are for sale. Early-stage -- Fundraise: I would define early-stage as companies with less than $3 to $5 million of ARR. If you are raising an earlier-stage round, you must demonstrate the building blocks of future cash flows rather than actual profits. Battery Ventures has a clean framework to describe these building blocks: a growth engine and a cash engine. The growth engine is your capacity to turn sales and marketing dollars into new revenue. Efficiency is measured by the CAC ratio and burn ratio. The more efficiently your business can capture new revenue, the better. The cash engine is your capacity to generate cash from the revenue acquired by the growth engine. The metrics here are gross margin and net retention. It’s acceptable for an early-stage business to lose money as long as it efficiently converts losses into new revenue and the revenue is sticky and profitable. In the current environment, however, VCs will also want their capital to drive the business to a point where profits are on the near-term horizon (one to two years) because that is what later-stage investors will be looking for. Run your business and build your projections accordingly. Early-Stage -- Company Sale: How do things differ if you are selling the whole company? In the linked post below, I cover this topic and PE thinking on later-stage businesses they are investing in directly.

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How should startups structure compensation for their first GTM hires? I recently discussed GTM hiring with Taylor Wells, and we touched on an aspect that many founders overlook: 𝐂𝐨𝐦𝐩𝐞𝐧𝐬𝐚𝐭𝐢𝐨𝐧 𝐢𝐧𝐜𝐞𝐧𝐭𝐢𝐯𝐞𝐬 𝐟𝐨𝐫 *early* 𝐆𝐓𝐌 𝐭𝐚𝐥𝐞𝐧𝐭. Many startups default to the 50-50 salary & commission split for frontline sellers. This is the norm for established companies, viewing it as the market standard. BUT… Established companies face fewer risks and have robust frameworks in place and GTM maturity. And so, sellers get paid to meet a number. Period. Your early-stage startup might be in a different league. GTM roles, including sales and marketing in very early stages, Need to do more than just drive revenue. They define and refine the sales process, They close the product/customer feedback loop, They help you find PMF/GTMF, creating invaluable institutional knowledge that shapes the company's operational blueprint. (or you can say, they help you figure out the best way to do their job). Therefore, their compensation should reflect this expansive impact. a16z has this concept of the *renaissance rep* A rep that is responsible for many things outside of just revenue growth. I’ve written about early hires at Hubspot spending up to 40% of their time doing customer interviews. These are very important initiatives for your org. And incentives should align. If you're in a position to make these decisions, consider a customized compensation structure, like a 70-30 or 60-40 split favoring salary. OR build in soft targets/objectives that help an early hire hit their OTE. ‘Show me the incentives, and I’ll show you the outcome’ Make sure to prioritize these early activities that will help lay the foundation of your GTM program. P.S. Need help hiring GTM talent for Data, AI/ML, Compute, and Cloud Infra? DM me. We've assisted successful early-stage startups (backed by Insight Partners, Sequoia Capital, Andreessen Horowitz, Index Ventures, GV, Accel, and more) in finding A+ hires.

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The #1 Factor to Determine Max Valuation in Micro SaaS...is debt financing. Here's why, plus a free valuation calculator... Most buyers in the $500,000 to $2 million valuation range use SBA loans, which come with specific requirements. The SBA requires a Debt Service Coverage Ratio (DSCR) of 1.25, meaning the company needs $1.25 of income for every $1 of debt payments. In simpler terms, the key question is: Can the business afford itself? Does the Micro SaaS firm generate enough income to cover the loan needed to buy the business? As the valuation rises, so do the loan and debt payments. At some point, the valuation requires a loan that breaks the DSCR requirements. The upper limit of a Micro SaaS valuation is ultimately determined by the maximum loan a buyer can secure based on the company's income. Here's a simple calculator to illustrate this concept, helping us all determine valuation more accurately based on the real world 👇 #microsaas #acquisitionentrepreneur #saasgrowth

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This speaks to our world this week... - $183B in new debt being sold by Treasury - 1st Q GDP to show 1.3% (yes, somewhat backward looking) - The Fed's favored reading on inflation is expected to come in at 0.2% (nice number annualized) If things don't fall our way... 👇🏻 Mortgage Market Guide is watching key levels - a move above 4.50% would be no bueno #interestrates #fedpolicy #debt #financialliteracy #mortgage #economy #housing

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We are excited to back EnFi, Inc in their first round of financing. They just came out of stealth and announced a $7.5 million raise from our good friends at Unusual Ventures, Boston Seed Capital, Argon Ventures and us at Impellent Ventures. Scott Weller spoke with me about his new idea around revolutionizing credit risk analysis through AI, begrudgingly bemoaning getting pulled back into yet another startup :) He and Josh knew there had to be a better way to get risk analyzed fast at the level of the enterprise after the great SVB failing occurred and left thousands of founders scrambling away from their multi-covenant loans. They needed to move their money but couldn't because other financial institutions still relied on a clunky, long process of assessing loan-worthiness. Enter Enfi. I asked him to invest. Scott was another one of those entrepreneurs we'd back no matter what they were doing. It took a while to get him and the indomitable Joshua Summers to make room for us. But they finally relented, because I'm annoying. Very, very annoying. Like a chihuahua with a kazoo, except worse. Ask anyone... EnFi’s platform is revolutionizing credit risk analysis, underwriting and portfolio management through advanced AI and real-time monitoring for complex credit instruments. Their innovative approach to Continual Risk Analysis provides institutional and private lenders with deeper insights and automation, enhancing decision-making and risk management. Congratulations to co-founders Joshua Summers and Scott Weller, and the entire EnFi team. We are proud to be part of your journey and look forward to your continued success! #Fintech #AI #Lending #CreditRiskManagement #Innovation

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Public SaaS sales efficiency metrics continued to UNINSPIRE in Q1 Our focal point as always: How much Sales & Marketing dollars are spent to acquire $1 of Net New ARR This figure has exploded from ~$1.50 two years ago… to ~$2.30 last year. As for Q1?  More of the same!  Barely moved.. (The chart also shows the same metric removing Stock-Based Compensation from S&M – a better benchmark for privates, since SBC is ~0 for them.) Stay tuned for more Q1 benchmarks and a tally of winners and losers. #SaaS #Metrics #Benchmarks #GTM

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To win in the world of AI/ digital disruption, progressive startups are embracing structural change . #1. Right prioritise your planning model ( short vs long).The short game (i.e. short term planning and execution) is critically important until you get to $50 M ish, more important than the long game ( i.e. long term vision) #2. Right size-mix your organization model (i.e. hire special forces vs full time employees / build small teams vs large teams) #startup #scaling #winning #longtermvsshortterm #specialforces #growth

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Consolidation is all the rage in SaaS. Don't confuse "All in One" in a mature market (RevTech) with "Master of None" in an emerging market (AI). ^ Yes, I realize there's a LOT of overlap there, but imagine workflows as mature and AI as emerging When a space is emerging (this seems to be especially true with AI) mastering product is hard. Focus is a super power. *Buyers - it's NOT your fault that this is confusing.* 1) When everyone calls their thing a "copilot" and makes the same claims... it's a lot. 2) Some functions from products sound the same. ex. "We pass something to ChatGPT and it generates text" NOTE: quality of output will be VERY different vendor to vendor. Maturity in AI tech is NOT the same as it is in workflow tech. Models change, inputs change, recipients change... it's not the same as a workflow where the task is the task. This is the BIG reason why product focus matters. Magic in a demo is VERY different than the maturity of workflows behind the scenes. How long have they been doing "AI"? Is this one of several models they need to upkeep? We're constantly testing and training models. Swapping them out against use cases with numerous variables being plugged in and tested. The workflows that the AI is housed in are important, and CAN be the difference makers when you're trying to make a decision on tech. But it's important to remember that when you are talking about AI products - if you build it and move on performance will not keep up. (PS. this focus on email quality is why I can point to multiple Lavender case studies with 20%+ reply rates) 3) Some functions from products are very different. ex. Ocean is different than Clay and Copy and they're all different from Lavender (That is a mean AI stack tho 😎) They're built for different problems... they just all happen to use AI. NOTE: It's good to explore what's out there. But, be sure... - whatever you buy actually maps to the problems you're trying to solve - you understand if it actually works for you (trials >>>) - implementation is clearly understood (Talked to someone that was 5 months in and they haven't sent a single email yet because of hallucinations... yikes) 3) Industry Maps are... vague at best Gartner put us (Lavender) in a "Cool Vendor" group and only one of the companies is remotely similar. VCs just lump "AI" and "Sales" into one big bucket Given the confusion in the space - my proposal would be to organize tools by the job to be done. Has anyone done this already? Would love to highlight others work here & help out where I can.

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Revenue Leak is a $2 Trillion silent killer. Every year, revenue teams lose hard-earned dollars to hidden leaks. The source? - Inefficient processes - Errant forecasts - Misaligned teams To equip revenue leaders to shut down leaks, Clari launched the 2024 Revenue Leak Report. This report features input from 420 revenue professionals across IT/Technology, retail, financial services, and more. Find out: - Why 61% of companies missed their 2023 revenue target - Where revenue teams are investing their tech dollars - How 26% annual Revenue Leak impacts your bottom line - And much more Grab your copy of the Revenue Leak Report and start shutting down leaks today: https://lnkd.in/g9gnGrdz

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