Social+Capital reveals secrets behind its enterprise investments, incl Slack
slideshare.net
slideshare.net
1/ The quick ratio is handy, but it merges new sales & upsell. The underlying issues are very different between the two. Wonder what the motivation is behind combining the two, as it mashes two issues together.
2/ Lifecycle of the company (years since it was founded) probably matters quite a bit to how you compare / evaluate the ratios. Any thoughts on that, given your examples?
3/ No mention of logo churn. With SaaS, new sales effort goes into landing into accounts, and therefore, losing accounts is painful, relative to losing revenue to contraction.
4/ While revenue is the rubber-meets the road indicator, I felt that our user engagement (often a business specific metric as opposed to the canned DAU or MAU) was the leading indicator. Revenue growth (new or expansion) could mask issues. Any commentary on this?
2/ Totally matters. In year 1 a company doesn't experience much in terms of both contractions or cancellations, especially if it's a product that is sold on an annual deal basis. That means that month 13 is really the first month for cancellations or expansions. In year 1 a quick ratio will be abnormally high, even infinite, so the quick ratio really starts to make sense in Year 2 and beyond.
3/ Logo churn is captured within the ratio as mentioned above.
4/ This is where you have to have solid top of the funnel lead qualification process that leads to MQL -> SAL -> SQL -> Sales rep engaged to make a sale. This funnel is indeed the leading indicator of what's top happen.
Edit: I should add -- this is what makes SaaS companies such a lucrative yet risky investment. It takes a lot of inside knowledge, and reading tea-leaves if a SaaS co will take off or not.