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The Most Important SaaS Metric Nobody Talks About: Time-to-Value (‘TtV’)

RRE

In a world where applications are delivered via cloud and distributed across billions of Internet-connected end-points, we’ve seen barriers to entry, adoption and innovation compress by an order of magnitude or two, if not crushed altogether. Compound this by advances in application and data portability and the implication for technology vendors competing in this global, all-you-can-eat software buffet is that customers’ switching costs are rapidly approaching zero. In this environment it’s all about the best product, with the fastest time-to-value and near zero TCO. And it’s this second point – time-to-value (TtV) – that I want to dig in on a bit because it tends to be the one glossed over most often.

I’ll start with an anecdote …

A portfolio company of ours delivers a SaaS platform that competes with legacy, on-prem offerings from large infrastructure software vendors. In its early days the company had fallen into the enterprise sales trap: spending weeks, if not months, with individual customers doing bespoke integration and support work. About a year in when we finally decided to open up the beta to everyone, sign-ups shot up, but activity in new accounts was effectively nil. What was going on?

Simply, customers didn’t know what to do with the software once in their hands. Spending months with large accounts did inform some fundamental product choices, but at the cost of self-service. Our product was feature-bloated, on-boarding flow was clunky and the integration API was neglected and poorly documented.

In a move that, I believe, ultimately saved the company, we decided to create a dedicated on-boarding automation team within product. Sure enough, in the months that followed, usage spiked and the company was off to the races.

The takeaway was that highest priority should be given to building software that just works, and that means focusing relentlessly on reducing or eliminating altogether the time investment to fully deploy your solution in production. Ideally, you want customers to derive full value from your offering in mere minutes, if not seconds. To do so, treat on-boarding as a wholesale product within your offering and devote engineering resources to it. Find religion about optimizing TtV!

Below is by no means a complete list, but instead a few lessons that I’ve taken away from my experience with our portfolio that many SaaS companies should internalize in their product and go-to-market strategies to help optimize TtV:

Simplicity wins…be feature-complete, not feature-rich: This is a fairly obvious but subtle point that often evades even the most talented product teams: the defining characteristic of a simple (read: good) product is not the abundance of features but rather the relevance of those features to its users. This stands in stark contrast to the old paradigm of CIO-inspired products that were over-engineered and feature-bloated. The challenge in the new paradigm is what might be relevant to one customer may be entirely worthless to another. The solution is focus, either in product or in market.

The always-better option in my mind is to narrow your product focus. Do one thing incredibly well. Tackle the single, most acute – but universal – pain point and ingrain yourself in your customers’ workflow…then expand horizontally. Value needs to be delivered from day one, but features can be revealed over time. Ultimately, it’s about understanding your unique unit of valueand exploiting that with your customers. Slackis the single best company embodiment of the focus/simplicity paradigm. Others take note.

Hack the onboarding flow:  It doesn’t matter how beautiful or utilitarian your product is if no one ever gets around to using it. Developers are a fickle bunch with seemingly infinite alternatives to your offering of paid tools, open source projects and self-built hacks. You generally have one chance with them, and that chance lasts about 20 minutes (based on conversations with some of the least ADHD-ridden devs I know).

On-boarding should emphasize and reinforce the value prop that drove the user to your product in the first place. Sign-up should be frictionless and deployment should be self-service to the point where the customer is up and running in minutes and, most importantly, getting value from your product a few moments right after. Avoid the empty room problem at all costs – even if the data or insight you provide early on has less direct customer value, it’s better than a customer looking at a blank screen.

Suggestion: read New Relic’s early blogposts. The company was fanatical about delivering value to devs from their APM solution within 5 minutes of signing up.

Documentation, Documentation, Documentation: There’s nothing sexy or glamorous about documentation, but great docs can be a source of competitive differentiation. Look no further than Stripe, whose documentation is the stuff of legends (and a big reason why the company has grown as quickly as it has). Great documentation shows devs you care and it’s increasingly becoming table stakes, particularly if your product is technical or has an upfront integration burden. Given that, take the time to document from day 1 and don’t neglect those docs as your product offering expands.

An obvious corollary to the documentation point is around API cleanliness. Your API is a not adjunct to your product, it is an extension of the core; treat it as such.

Content, Content, Content:Embrace content – it’s your opportunity to connect with users. Content doesn’t just mean static blog posts, but includes webinars, tutorials, analyst publications and reference architectures. Leverage content to showcase the integrations, use cases and features of your product. Digital Ocean does this masterfully. Just go check out theirblog.

Finally, make sure to quanitfy. Set a goal for TtV and benchmark against it. TtV’s vary widely across product segments and end-markets but study your comps and make sure you’re at least beating the pants off them.

An optimized TtV has positive ramifications throughout the organization ranging from freeing up support engineers to work on product to enabling a tightening of sales and marketing spend up and down the funnel. Ultimately, a short TtV drives all those other metrics folks seem to care so much about like MRR, LTV, CAC, Churn, etc.

Introducing Accion Systems: Revolutionary Propulsion for Satellites

Will Porteous

We are excited to announce our investment in Accion Systems this morning alongside a syndicate of some of our favorite co-investors. This is our 2nd investment in a New Space company after we led the Series A round for Spire last spring.

Accion is commercializing a new ion-based propulsion system for spacecraft. We were introduced to co-founder and CEO, Natalya Brikner by our friends at Undercurrent, who share our passion for new space technologies.

Electric propulsion is the next big thing in small satellites. In order for cubesat constellations to achieve their maximum useful life, operators need to be able to manipulate the spacecraft beyond what is possible with simple reaction wheels. Propulsion systems that use combustible fuels are not allowed on the ride shares that cubesats depend on, so a new type of propulsion system is needed. There is also a lot of discussion in the industry about regulatory standards that would require a deorbit mechanism on cubesats (in part to deal with the space junk problem). The Accion Systems products are a logical solution.

The core technology has been under development at MIT for 10 years. It produces a tiny unit of thrust, about the size of a penny. While I am not a physicist, my layman’s understanding is that these engines convert a cheap, non-volatile plasma into streams of ions that can impart thrust. The Gen 1 products are sufficient to move a 3Kg Cubesat and extend its useful life. The Gen 2 systems should be able to impart considerably more thrust and will be useful for larger satellites. The systems are already being manufactured reliably and they have had hundreds of hours of ground tests. With nearly 1,000 cubesats being launched every year and considerable demand for propulsion for both large and small satellites, we think Accion has a terrific addressable market opportunity.

As much as we love the technology here, it was the team’s pragmatism about the company building process and their strong commercial instincts that really persuaded us. Natalya and her co-founder, Louis Perna, have given a lot of thought to how to build a strong, high performance culture that can last for the long term.

We are delighted to welcome Natalya, Louis, and the team at Accion Systems to the RRE portfolio and we look forward to working with them in the years ahead.

OnDeck, a Lender to Small Businesses, Raises $230 Million in I.P.O.

RRE

Today, RRE Ventures portfolio company, OnDeck, completed their initial public offering on the NYSE. It is the largest venture backed tech IPO by market cap in NYC history. 

Congratulations to Noah Breslow and the entire OnDeck team. We’re incredibly proud of them!


Launched in 2007, OnDeck is the technology powered Main Street lender that has fundamentally changed how small businesses access capital.
OnDeck’s innovative technology platform leverages electronic information including online banking and merchant processing data to identify the creditworthiness of small businesses in minutes, while traditional lenders typically take days or even weeks.
To date, OnDeck has deployed more than $1.5 billion in capital to tens of thousands of businesses across 700 different industries. The company was recently named #11 on Forbes’ 100 Most Promising Companies in America list and was listed on the Inc. 500/5000 for a third year in a row. 

The Dangerous and Rewarding Path to Building Deep Value Relationships with Investors

RRE

I.

Here’s a simple, functional topology of entrepreneur-investor relationships: 

  • First — and worst: The Wasteful Relationship. Such a relationship is time-consuming, degrading, and distracting. 
  • Second: The Neutral Relationship. You get capital, and not much else.
  • Third: The Minor Value Relationship. You get capital and occasional help on specific issues.
  • Fourth: The Deep Value Relationship. The inspiring partnerships that truly move the lever for you as an entrepreneur and for your company.

As an entrepreneur, you should aggressively avoid Wasteful Relationships, turn Neutral Relationships into Minor Value Relationships, optimize your Minor Value Relationships, and use Deep Value Relationships to catapult you up and to the right. 

Optimizing your Minor Value Relationships means getting the help you actually need when you need it, without wasting anyone’s time. Every reasonable investor will happily provide specific support (recruiting, intros, strategy, UX reviews, etc) when asked. Skill-in-action here looks like diligence, shamelessness, and specificity in the asking. It also means (gently) holding your investors accountable for the things you ask of them and they promise to deliver. Pretty straightforward; do it. 

Building Deep Value Relationships with your investors is a more difficult and important attainment. Cultivating such a partnership means expanding Minor Value Relationships and also, counterintuitively, flirting with the dreaded Wasteful Relationship. A dangerous path. 

Why is this? Because deep value cannot be created without confronting the really hard, mission-critical questions; it’s in this confrontation that you arrive at your most ambitious visions, and solve your company’s most fundamental strategic dilemmas. And while working through those questions with an investor can be amazing, it can also easily degrade. To use a Buddhist metaphor: extreme waste is, ironically, the near enemy of extreme support.

My advice: Risk the danger. Find at least one or two investors who are up to the task of engaging with you on the most fundamental and most difficult questions. 

When you’re running a company—no matter how gutsy and transparent you are—you are often subtly sheltered from these questions or incentivized not to ask them head-on. This challenge is present for entrepreneurs fast-tracking to failure, catapulting over the Green Monster with runners on all bases, and everything in between. A person you can trust as a collaborator on these questions in ways that are actually helpful and not just pestering, egoically-charged, or strategically banal is pure gold. 

And for the investor, engaging with entrepreneurs around their mission-critical questions is not only the best way to make good on their investment but, I imagine (this is an entrepreneur’s conjecture), also the most fulfilling aspect of the work. It’s the tangible, grounding, hands-dirty antidote to the peculiarly passenger-nature of the job. 

So, entrepreneurs and investors alike should aspire to turn their relationship into a sort of on-demand resource for action-focused, 100% relevant, deeply respectful, relentlessly realistic dialogue.

II.

So, what—from an entrepreneur’s real-deal, in-it, let’s skip the bullshit perspective—do the fundamental questions that generate such dialogue look like? 

The short answer is: it completely depends on the company. So, in lieu of a thorough list, I’m going to share a series of questions that I’ve recently seen generating rich, fruitful dialogue in conversations with early-stage tech companies. These questions are largely extensible across company stage, industry, etc. 

Product

  • Do people really love your product or do they just like it a lot? Nearly every failed startup is liked by tons of people. If you are still in the “like” stage, are you 100% focused on relentlessly iterating towards something that so decisively solves a market need or human longing that your product becomes truly beloved? 
  • Is your product development process (ideation, design, data management and analysis, roadmapping, engineering, testing, etc.) humming? In a shocking number of companies, product development is a nest of dysfunction. This isn’t necessarily a deal breaker, but when you nail your processes you unlock huge productivity.

Market & Growth

  • Is the market that loves your product (not the market that just likes or is intrigued by it) really big enough to build a great business? 
  • Of your near-term and long-term growth strategies, which are real and proven, which are experimental and hopeful, and which are slightly (if excusably…we all need to dream) delusional? How are you determining and killing what’s delusional? Are you taking enough growth risks?
  • What are your true LTV / CAC dynamics? Unit economics so often seem straightforward on the pretty ROI slide, but become extremely complex when you drill a few layers down (actuals v projected // segmenting by channel and demo // two-sided marketplace and long-terms SaaS complexities // changes in viral dynamics over time // percentage-based v absolute growth metrics // churn prediction algorithms // cohort-based changes including seasonality and other variants // etc.)
  • Are you genuinely differentiated? Incremental improvements on an existing product, no matter how huge the market, usually mean that you are commoditizing something and fast tracking to price reduction, fiercely expensive competition, and a long slog. It can work, but it’s tough. (I bear this scar.) How are you cultivating in yourself hunger for radical differentiation (in product but also in growth strategy, company culture, etc.), despite the fears such independence and risk naturally inspire?

Execution & Team

  • Are you spending enough time on branding, story, and vision — both internally and externally? When you really understand your brand (which is usually just an emotionally and strategically intelligent articulation of your vision) you have added to your army a drummer boy, a flag bearer, a cartographer, and a fortune teller. Seems obvious, but even in really successful companies it can be very hard to really know, feel, and stay maniacally focused on the truly important single thing you are building.
  • Do you have a clear sense of where you have pure execution risk and where you face more fundamental creative risks? Examples of creative risks include having not yet found true product-market-fit, a scalable growth strategy, a scalable sales model, or effective monetization tactics. Almost every company has both types of risks, and each type calls for a very different approach; so understanding what’s what, tackling your risks accordingly, and not putting the cart before the horse is essential.
  • Do you have a complete, intuitive, nearly paranoid understanding of all critical data inside your company?
  • Do you have A+ talent where you need it? Are you properly prioritizing the task of finding the very best people? Are you ready to fire the people who are mediocre or detractive? Are you staying open (i.e. confident) enough to seek out the help you need to become a top 1% leader (yes, every leadership team needs help to fulfill their calling)? Are you doing what you need for yourself to sustain the drive it’s going to take to go all the way? And, perhaps most importantly, do you truly believe in what you are making?

…and so on, you get the idea. I imagine that as I spend more time on the investor side of the table (I just recently began at RRE) my questions will evolve. What I’m sure won’t change is my conviction that it is deeply valuable for every entrepreneur to consistently talk through the really hard, mission-critical questions with people who are rooting for but not beholden to them. 

Find me @schildkrout