Well, Q1 definitely closed with a proverbial “bang”, didn’t it? As we head into Q2, Spring capital efficiency along with customer retention remain key areas of focus if you are a SaaS start-up. From a focus on how to secure funding and why inbound marketing is critical to growth, to ongoing sagas with TikTok and Twitter, in this month’s Leaps Ahead for April we’ve got you covered.
Instead of reiterating the scary finance stuff happening right now. Here are several steps B2B SaaS companies can take to secure funding during a pending economic recession
- Focus on profitability: No surprise here, during a recession investors, prioritize companies that can demonstrate profitability or a clear path to it (see AI below). With that in mind, SaaS businesses should focus on their unit economics and demonstrate their path to profitability.
- Reduce Cash Burn: SaaS start-ups need to focus on reducing their cash burn rate. This can be achieved with capital efficiency and a focus on revenue-generating initiatives.
- Diversify funding sources: Start-ups need to look beyond traditional sources of funding such as VC firms. They should explore alternative funding resources such as crowdfunding, revenue-based financing, and government grants to extend their runways.
- Leverage existing relationships: During this economic environment, small businesses should leverage their existing relationships with partners, existing investors, and customers to secure funding. Why? These stakeholders have a vested interest in their success.
- Focus on customer retention: it goes without saying that retaining customers is critical to sustainability, so ensure relationships are strong and focus on customer experience and support to further retain customers.
It’s not easy right now, but with a clear focus and strategy start-ups can extend their runways and secure funding by focusing on their customer retention and relationships, being capital efficient, profitability, and diversification.
The Street Five
- Japanese entrepreneur, Masatoshi Ito passed away. If you’ve ever been to a 7-Eleven, Ito is who you should thank for changing the convenience market.
- Ryan “Midas Man” Reynolds proves again that acting is his hobby. T-Mobile announced it was buying Reynold’s Mint Mobile for 1.35B.
- The TikTok ban expands to the UK government devices while the app goes under a “review” – are wider bans around the corner?
- One Billionaire is out of the Space Force games. Sir Richard Branson’s Virgin Orbit paused operations due to a lack of funds leaving us with Bezos & Musk. HELP!
- Funding for AI continues to grow with VCs already investing $3.6B into 269 AI companies in the US this year. And that doesn’t include the 50 companies that are part of Y Combinator.
The Rise of The Four Day Work Week
The UK just did a four-day workweek pilot program with 61 companies and the results are in.
Four-Day Work Week Increases Revenue & Reduces Resignations
92% of the participating companies planned to continue implementing the four-day workweek arrangement, with 30% making the shift permanent.
In the pilot, nearly 3,000 employees worked 32 hours weekly while receiving the same pay. Besides lowering stress levels and improvements in overall mental health, the companies saw their revenue increase by 35% on average compared to the same period of the previous year.
Resignations also decreased with 15% of employees stating that no amount of money would convince them to return to a five-day workweek.
The Fall of Centralized Social Platforms
Elon Musk’s changes to Twitter’s content policies have resulted in decentralization taking center stage and it makes sense. Decentralized social networks function slightly differently. They rely on sets of independent servers which allows for different communities to enact different rules and lets users retain their information without a company acquiring all the data and dictating rules or policies.
In theory, decentralization makes sense, but in practice is extremely complicated putting more responsibility on the user to create and understand different processes of the platform.
For example, Mastodon has been under fire from its users because decentralization means users have to switch servers to follow others or have a deep understanding of rules and parameters. Added friction just creates a bad user experience and that makes for a tough sell (outside of those folks in tech). This is why even post Musk’s takeover, Mastodon has been able to sustain its usage.
Just when you are thinking decentralization is DOA, enter Meta. With more people interacting via DMs versus posting on their feeds, Meta has decided to explore decentralization. They’ve dipped their toes into it with new functions such as Instagram’s “channels”. This new feature allows creators to announce updates in chat threads vs. a traditional post.
Meta announced in late March a commitment to build a new standalone decentralized product, similar to Twitter. It’s a timely decision given the chaos of Twitter and that Facebook is struggling to attract the attention of a younger audience. Only time will tell If decentralization will play well in the metaverse, but what we do know is that decentralization is here to stay.
Leaps Ahead April: What you Need to Know to Scale
2023 is not disappointing when it comes to keeping us on our toes. While financial concerns abound, SaaS businesses are still growing, but if they want to continue their pace they need to focus on inbound marketing strategies to keep the pipeline full.
Diversification is key – to tools and strategies. Inbound starts with understanding your Buyer Persona. First, ensure that you’ve built an accurate buyer persona. Without an accurate buyer persona, your inbound marketing strategies will be costly and most likely have a low conversion rate. Once you’ve established your ideal customer profile (ICP) and buyer persona here are some quick and effective ways to improve your inbound marketing results.
.001% of SaaS businesses will become $50M ARR let alone $10M ARR companies. Take a listen to this compelling conversation between Ton Dobbe, Founder of Value Inspiration, and SaaStock’s Alex Thuma. Four key takeaways from this podcast:
- Why segmentation and positioning are wrongly undervalued
- What signals to look for from customers to know you’re on the right track
- Why each B2B SaaS Founder should build a personal brand
- What to do and avoid doing to prevent ending up in the valleys of death
The Lean Startup by author Eric Ries is the one book that every startup founder and anyone at the director level for that matter needs to read right now.
As its title implies, “Lean” is about sticking to the basics to maximize efficiency. This means leveraging your capital more efficiently to stretch every dollar as far as it can go as well as your creativity.
Ries’ philosophy is that by keeping your business lean, you will be agile, and with agility, you can shift easily to create or sustain your growth.
This book is about the pivot and focusing on real progress— not vanity metrics— It’s about finding out what your product’s market wants so you can deliver on it. And in 2023, it’s more the horse we believe in and not the unicorn.