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David Skok is a General Partner at the early stage VC firm Matrix Partners, and has been building and growing companies since starting his first at age 22. He has years of experience and expertise in the area of cloud computing, with a particular focus on SaaS, Open Source software, virtualization and utility computing products. Having founded four companies and taken three of those public, David offers a unique perspective on growing companies through the ups and downs of various market cycles.

Since joining Matrix Partners in 2001, David has invested in companies such as HubSpot, Namely, JBoss, Netezza, GrabCad, Meteor, and many others, collaborating with founders to help them grow their companies better and faster.

Through his experience as a founder and now an investor, David has become one of the leading thinkers on growth and building a business, specifically in the areas of sales and marketing. He shares his advice, and resources for founders and their companies on his blog, forEntrepreneurs.com. forEntrepreneurs is highly regarded as one of the top ranked blogs for startups and entrepreneurs, and his post on SaaS Metrics 2.0 - A Guide to Measuring and Improving What Matters is often cited by entrepreneurs as a critical tool in the growth and management of their companies. You can find David’s full profile here and follow him on Twitter @BostonVC.

David's Wrap Up Note:

Thanks to everyone for joining my AMA. I appreciate all of your questions and really enjoyed the two hours I was able to spend with you. I hope the thoughts I shared answered some key questions for you and sparked some new ideas. I'm very sorry I won't be able to get to all of the remaining questions. My team at Matrix Partners has posted some links to my blog posts where applicable, and I look forward to connecting with many of you on my blog in the future! 

Warm regards,

David 

  • AC

    Alex Chaidaroglou

    over 3 years ago #

    Hi David, thanks for doing this AMA, your blog forEntrepreneurs has been (and still is) very helpful.

    I would like to ask you 2 questions:

    1) What's your thoughts on making software (SaaS or enterprise/deployed) open source? Isn't it a risky move, as it might invite more competition?

    Sure it might give some exposure, but later on the software might be branded as "free" or cheap.

    2) Although it depends per business, what are some effective tactics or strategies you have seen or done to get a B2B SaaS from $1-2 millions ARR to $10 millions?

    Thanks in advance, looking forward to this and the rest of the community's questions!

    • DS

      David Skok

      over 3 years ago #

      I first put this reply in the wrong place, so copying it here:

      Hi Alex, answers below:

      1. There are both risks and rewards of making your software Open Source. The primary reason that I see for going Open Source are to generate a ton of customers that can then be up-sold to something that isn't free. This works particularly well if you are selling to developers, who only like to use Open Source products, and tend to be very vocal about what tools they are using, which helps get the word spread.

      To make this strategy succeed, you have to have two great products: one that you give away free, and a second product (or set of additional features) that you use to upsell the users of your free product. This is often quite challenging, as it is hard enough to come up with one good idea.

      However, so long as you keep iterating fast to satisfy the market's needs, I see less risk that you'd create more competition.

      2. This is a very broad question, so I think that the best way that I can answer this is to give you a link to my slide deck on The Art and Science of Growth Hacking:

      http://www.slideshare.net/DavidSkok/the-art-science-of-growth-hacking

      In this deck, I talk about the key elements of both strategy and tactics that I believe help you create the sales and marketing machine to get that growth. I hope that helps, but if you want to dive into any particular area, throw me another question!

      Thanks for joining the conversation. David

      3 Share
    • KA

      karim Abd El Kader

      over 3 years ago #

      Hello David,

      Thanks a lot for Conducting this AMA and for your continuous Value that you are adding to our community:

      I am growth hacker and entrepreneur from Egypt; i am a partner in one of the horizontal classifieds marketplaces; we are doing well but we are being a competitor with OLX which is the market leader here in Egypt.

      Please find hereby this brief as a needed intro. on our situation and to be able to answer my questions:

      * we have 150K unique user per month and OLX has 1.5 Million Unique user per month, so we are 10% of them.

      * They spent millions on marketing and we spent like the budget of one billboard they used for a week on our marketing.

      * Our main revenue stream is online advertising then we will introduce featured ads for users.

      * Our infrastructure is based on geocore classifieds engine; which is the one firstly used by OLX when started.

      * Our differentiation is a better usability and better look and feel which will be featured in our revamp a month from now; i know that you will think that we need to go vertical and but i think that is very relevant to your western markets but here we have many competing products in different categories and they are generating money.

      In the below; i am listing my questions:

      * How we can scale our product with a minimum budget?

      * How we can start creating demand on our online advertising?

      * How we can generated addiction for the product (implementing Hooked model)

      Warm Regards,
      karim.

    • DS

      David Skok

      over 3 years ago #

      Hi Alex, answers below:

      1. There are both risks and rewards of making your software Open Source. The primary reason that I see for going Open Source are to generate a ton of customers that can then be up-sold to something that isn't free. This works particularly well if you are selling to developers, who only like to use Open Source products, and tend to be very vocal about what tools they are using, which helps get the word spread.

      To make this strategy succeed, you have to have two great products: one that you give away free, and a second product (or set of additional features) that you use to upsell the users of your free product. This is often quite challenging, as it is hard enough to come up with one good idea.

      However, so long as you keep iterating fast to satisfy the market's needs, I see less risk that you'd create more competition.

      2. This is a very broad question, so I think that the best way that I can answer this is to give you a link to my slide deck on The Art and Science of Growth Hacking:

      http://www.slideshare.net/DavidSkok/the-art-science-of-growth-hacking

      In this deck, I talk about the key elements of both strategy and tactics that I believe help you create the sales and marketing machine to get that growth. I hope that helps, but if you want to dive into any particular area, throw me another question!

      Thanks for joining the conversation. David

      1 Share
      • AR

        Alun Rafique

        over 3 years ago #

        Nice presentation. Especially like slide 75, registration process design and also the website grader.

      • FH

        f h

        over 3 years ago #

        thanks for the slideshare link. I agree its very nice

  • PP

    Piotr Płachta

    over 3 years ago #

    Hi David. Thanks for joining.

    My question is:
    If you had to choose one marketing channel for B2B Saas product , what would it be and why?

    • DS

      David Skok

      over 3 years ago #

      Hi Piotr, over the long run, I think that Inbound Marketing (http://www.forentrepreneurs.com/sales-marketing-machine/inbound-marketing/) is the best channel to build, as it creates a loyal audience that you don't have to keep paying for.

      The two problems with Inbound Marketing are 1) that it takes time to build up your traffic, and 2) that you cannot guarantee that the leads coming from it are in your most desired target segments.

      So because of those limitations, I typically would use Sales Development Reps (http://www.forentrepreneurs.com/outbound-prospecting/) in the early days of a B2B startup to make sure that I had a guaranteed lead flow that was in exactly the target market that I wanted to reach. This is expensive, compared to Inbound Marketing, so over time, I'd like to see this become less and less needed as Inbound Marketing ramped up.

      • AR

        Alun Rafique

        over 3 years ago #

        How does the terms Inbound marketing differ from Indirect marketing?

        • NV

          Nicolas Vandenberghe

          over 3 years ago #

          Alun they have nothing to do with each other, indirect marketing simply means that there's a 3rd party between the vendor and the customer; inbound marketing is actually as direct as it gets. I suggest you read David's blog (link is above, but here it is again http://www.forentrepreneurs.com/sales-marketing-machine/inbound-marketing/

          • AR

            Alun Rafique

            over 3 years ago #

            Hi Nicholas. Many thanks for that. My prior experience, which admittedly is most likely out of date, is that Indirect marketing is when you dont directly approach the customer (e.g. Direct mail shots, seminars, conferences, cold calling, trade shows which I would class as direct marketing) and it involves processes where you increase your profile/ the brand to have people approach you (e.g. Content marketing, SEO, Social media, improved backlinking, Adwords etc..)

            I was wondering on the subtle difference between the inbound marketing phrase (coined by Hubspot) and Indirect marketing

  • AG

    Alex Gu

    over 3 years ago #

    Hi David, love your forEntrepreneurs blog!

    One quick question:
    What is the most annoying question on growth you get asked over and over again? :)

    • DS

      David Skok

      over 3 years ago #

      Hi Alex, I struggled to think of a repeated question on this topic that had ever been annoying. The truth of the matter is that I can't remember one.

      I have to say that one of the things that I love doing is going into companies and asking them to draw out their funnel for me. What I discover is that merely getting them to go through this process causes them to immediately recognize areas where they have problems (which they were not telling me about before they did the exercise). And it also has a powerful effect of stimulating great brainstorming. So not surprisingly, one of my top recommendations to readers of this forum is to get on the white board and draw out your funnel. At first do this at a high level, but then drop down a level for important phases like your free trial, and diagram out all the steps that it takes for your customer to get to the Wow! moment. (See this blog post for more details:

      http://www.forentrepreneurs.com/time-to-wow/

      While not a perfect answer to your question, I appreciated the question, and hope I gave something interesting back as a reply!

      4 Share
  • GC

    Gabriel Costa

    over 3 years ago #

    Hey David, amazing having you here.

    Two quick questions:

    1) What is the main difference in Growth strategy from a 'new born' startup (developing its product, trying to find the product-market fit and get early traction) to a fast-growing startup (growing fast, got funded, has customers and needs to keep growing)?

    2) What is the single piece of advice would you give to companies that are starting in this 'world' of Growth?

    • DS

      David Skok

      over 3 years ago #

      Hi Gabriel, Thanks for your questions.

      1) I believe that a startup's lifecycle can be broken into three phases:

      a) the search for product/market fit
      b) the search for a repeatable and scaleable sales process
      c) the expansion phase

      In phase a) the focus should be on getting to enough customers to have lots of conversations about what they would buy, and who is the best initial target segment, and what messaging will work best, etc. I recommend keeping costs very low, and having the founders doing as many meetings with customers as possible to hear the feedback directly, as many times it will require a change in company strategy to address it Perhaps use one sales person and an SDR to help find these customers.

      Then in phase b) as you start to get more confidence that the product is right, you begin to look for ways to fill the top of the funnel, and process prospects efficiently through the funnel in a way that can be scaled repeatably. A common mistake I see in this phase is hiring to many sales reps too early before the process has been figured out. This makes it harder to change the process, and to hear the feedback of what needs to change. And of course it burns through capital, shortening the runway. My recommendation is keep the burn really low, to give you time to run lots of experiments. Then when you see something working, expand it slowly to test that it is repeatable.

      Then when you have found something repeatable, scalable and profitable (reasonable time to recover CAC), you enter phase c) where you hit the gas hard, and scale what is working.

      2) Can I please change your question, and give out more than one piece of advice:

      a) recognize that growth requires you to take actions across the traditionally silo-ed areas of sales, marketing, and product design and development. Find a way to bring these groups together and create a regular brainstorming session, using a detailed diagram of the funnel as the tool to get everyone on the same page. Start the discussion by looking at conversion rates in different parts of the funnel, and talking about how to remove these blockage points. (See this presentation for more details: http://www.slideshare.net/DavidSkok/the-art-science-of-growth-hacking

      b) Recognize that there is both an art and a science to growth.

      - The science piece requires you to have great data for the flow/quantity of prospects, conversion rates, and costs, at each stage.

      - The art of Growth in my personal experience is all about becoming an expert in seeing how your funnel process feels like from a customer's standpoint, and removing all the friction in each step, reducing the number of steps, addressing their concerns, and providing great motivations and incentives for them to keep moving through your funnel.

      2 Share
      • AA

        Anuj Adhiya

        over 3 years ago #

        So much gold!

      • GC

        Gabriel Costa

        over 3 years ago #

        thanks a lot for the rich answer @bostondave !

        I am writing the first Growth Hacking ebook in Brazil (in Portuguese). Would you mind if I translate these answers and quote you in our ebook?

        I am sure our readers will love it.

  • AB

    Aleksandar Bibovski

    over 3 years ago #

    Hey David, can you tell me is it better (by your opinion) to cold email and call first ten customers or to try with content marketing in B2B sales?

    • DS

      David Skok

      over 3 years ago #

      Hi Aleksandar, after not wanting to give this answer for many years because I don't like the cost and brute force of cold calling, I now believe that the most effective way to get your first ten customers is probably to use outbound calling ( see this article for more of my thoughts http://www.forentrepreneurs.com/outbound-prospecting/).

      This should come after you have used up your initial set of leads from the launch press, and from friends and investor referrals.

      I wish I was wrong here, and that content marketing would do it. but my experience with content marketing (also known as Inbound Marketing) is that it takes time to build up a readership, and the leads you get may not come from the right target market. However in the long run, I am a very big believer in Inbound Marketing. It is more scalable, far cheaper, and typically results in leads that close at a higher rate.

      3 Share
      • AB

        Aleksandar Bibovski

        over 3 years ago #

        Thank you David, this is one of the most useful advice I get from VC. I hope you don't mind if I share with startup community in Serbia. Have a nice day.

  • TS

    Terence Strong

    over 3 years ago #

    Hi David: Thanks for doing this!
    From your own experience investing in startups...what is the estimated percentage of startups that fail who reach product market fit, have good unit economics and are @ $10K in revenue per month? Also what caused their failure?

    • DS

      David Skok

      over 3 years ago #

      I don't have good data on what that percentage might be, and could only give you a really wild guess. My guess would be somewhere around 80% of startups don't reach product/market fit.

      In my experience (which is in the B2B world), I would say that the greatest cause of failure is that their idea did not address an important enough pain point to get high enough on the priority list of their buyer. (Or possibly the solution didn't address the problem well enough.)

      The startup idea might well have been valid, but when you look at how many companies are trying to sell into the same buyer, only a small number of purchases will get made. So your problem/solution has to rate very highly to make it through. We often talk about the idea that customer's hair should be on fire.

      6 Share
      • LB

        Lili Balfour

        over 3 years ago #

        Great answer!

      • AA

        Anuj Adhiya

        over 3 years ago #

        " Your problem/solution has to rate very highly to make it through"
        @SeanEllis Do you believe this maps well to the "40%" rule for product/market fit?

  • DC

    Diego Cordovez

    over 3 years ago #

    Hi David,

    We did a Q&A's on SaaS and would love if you participate.
    Thank you in advance !!

    1. Around 28% of startups die because they run out of money, and that’s cruel. What would be your main advices on how to reach Product Market Fit before that happens? Is there any singularity for SaaS businesses?

    2. One of the main problems that haunts a young SaaS is to balance value and pricing, in order to close more deals. What are your thoughts about pricing your product in a smart way?

    3. Another challenge of an early born SaaS is to keep users active and focus on stickiness. How to define an active user (in a practical way) and master product stickiness? Any special tools to use?

    4. Despite all odds, some SaaS break the inertia and succeed. And then comes the time to control Churn, CAC and LTV to let the cavalry come, as Jason Lemkin says. How to decide which of these metrics is the most important and when to focus on each one of them?

    5. OK, let’s say the cavalry did come and it’s time to scale. What are the qualities that SaaS founders should look up on VCs?

    6. If you want to leave a final message for Brazilian SaaS, what would it be?

    Thanks!

    • DS

      David Skok

      over 3 years ago #

      Wow Diego - that's a ton of good questions. I may not have time to answer them all as well as I'd like, but here goes:

      1) do tons of customer validation meetings before you start building the product. If you start development too early, and you have the wrong idea, you will very likely run out of money before you get to build the right product.

      2) My thoughts are not to worry about optimal pricing in the early days, and to focus instead on getting as many of the right kind of customers on board as fast as possible. Often the latter means offering a lower price to remove friction in your sales process. You can always raise price later.

      3) great question. One way to think of this: a Facebook user who simply looks at other people's posts is not very engaged. But if that user then makes a comment on someone's post, they are slightly more engaged. But if they create their own post they are very strongly engaged. To create stickiness, look for the following:

      - Ways to capture data that are important to the customer that they have to come back to you to access

      - Ways to embed your product into their daily workflows so that they can't easily get their jobs done any longer without your product

      - Get more users to cross the threshold and participate in activities that increase engagement (as described in my Facebook example.)

      4) This isn't a hard and fast rule, but my gut tells me that this is the order I would look to focus on those metrics:

      a) Growth
      b) Churn
      c) LTV and CAC

      6) Ideally look for a VC that has been a CEO of a startup, not some lesser operating role. They will have the greatest understanding of your situation and how to advise you. Then it is also very helpful if they have a lot of SaaS expertise.

      6) Go Brazil! You guys have a great market, and I have spoken to many great Brazilian entrepreneurs. I'm excited to see what you guys can accomplish!

      • DC

        Diego Cordovez

        over 3 years ago #

        Hi David! Sorry fot the number of questions!

        Really great you could participate with our Q&A's. I'm sure your answers will help our audience anyway.

        Best!

  • BB

    Buckley Barlow

    over 3 years ago #

    Dave, love your work. Growth Teams independent from "Marketing" depts. are rising in popularity, even outside of SaaS. Do you believe that Growth Teams should be an independent dept or fall under another dept? Why/Why Not?

    Thanks

    • DS

      David Skok

      over 3 years ago #

      Hi Buckley, that's a really great question. I think you have gotten to the heart of what is hard about Growth: it is a function that requires actions to be taken in product design, development, marketing, sales, on-boarding, customer support, etc.

      Ideally I'd like to see the CEO being deeply involved with Growth and coordinating discussions across these groups. Elsewhere in the forum, I talk about how I think those meetings can be driven around a diagram of the funnel, and discussions of where it is not working well.

      The problem of this function belonging in any one group, is that they may not have the power to drive cross-departmental actions.

      So the long and short of it is that I don't have a good answer for what the org structure is for this function, and think it will vary depending on the strengths of the particular individuals available to lead it.

      But this is a topic that is very important, so I'd really love to have others add their thoughts below.

      2 Share
      • NV

        Nicolas Vandenberghe

        over 3 years ago #

        Dave and Buckley,
        If there was a growth team in addition to the usual departments, what would that team do that the other departments don't already do?
        It seems to me that the growth hacks all naturally fall in one department or another, even if they require cross-department coordination, wouldn't you say?

  • SE

    Sean Ellis

    over 3 years ago #

    Hi David, thanks for doing this AMA. What was the most challenging part of going from entrepreneur to VC?

    • DS

      David Skok

      over 3 years ago #

      Hi Sean, great to reconnect! I hope all is well with you.

      The most challenging thing is learning a different tool set for getting things done. As an entrepreneur when you see something wrong, or something that needs to be done, you can jump in there and do it. As a VC when you see something wrong, you need to work hard to gain the trust of the entrepreneur, and then use that relationship to give input on what you think they should consider doing to address the issue. Most often, our most powerful tool is that we can see in advance when their team needs to be expanded or upgraded, and if we can convince the entrepreneur to make an executive hire, and bring in the right quality people, we can make a huge impact on the startup. That is a very indirect tool, and it is one that takes a fair amount of time to see results from. But in the long run, this is the best way that a VC can help a portfolio company.

      Since we do so much executive hiring, we can be very useful in spotting when an exec should be added to the team, and writing the spec for the job description and person description, then in finding, interviewing, reference checking and selling the best candidates.

      6 Share
  • SP

    Steven Pesavento

    over 3 years ago #

    Hi David, Thanks for joining us for this AMA. Excited to have you here.

    Two part question:
    1. When it comes to growing internet companies, what is the biggest mistake(s) you've made that looking back in retrospect you could have avoided?

    2. What has surprised you the most about the evolution of growth (as a practice) and where do you think the future is heading for growth professionals & companies?

    • DS

      David Skok

      over 3 years ago #

      Hi Steven,

      1. my experience is primarily with B2B internet companies, so I will answer from that perspective. The biggest mistake that I have made myself, and seen many other entrepreneurs make is not validating my idea well enough in the early days before committing heavily to pursuing it.

      By their nature, entrepreneurs are very passionate about their ideas, and can convince themselves that all will work well despite not having spoken to enough customers to get confirmation that they will buy the product if it existed. It can also take some hard work to find those customers to talk to, and doing less of that work upfront is the easy way out.

      The best entrepreneurs that I work with these days retain a healthy level of skepticism about their idea, and keep really listening hard (no happy ears) to what their prospects are telling them, and keep refining the product idea based on that input. This process should never really stop.

      2. While this is not a surprise to me personally, I think what's most surprising to a typical B2B company about what it takes to really create a great growth function is the recognition that growth is a cross-disciplinary function that requires companies to break down the traditional silos of marketing, sales, product design, and development. This works best where you have a senior individual who has skills across all those areas, that sees the big picture, and can make decisions and take actions across all silos. For many companies, that is hard, as these groups are more silo-ed than they'd like, and they don't yet have the recognition in the product design and development functions of how they can contribute to growth.

      Thanks for your questions!

      4 Share
      • SP

        Steven Pesavento

        over 3 years ago #

        David thanks again. You make some great points. I think too often entrepreneurs (myself included) get so excited about an idea that we just start trucking forward before taking the time to stop and truly find reliable data / feedback from real potential customers.

        I've found that big companies especially, but even in small companies people have become comfortable within the silo style organization culture and your right that simply bringing people together makes such a difference. I hope that we can continue to see more smart senior leaders unify their organizations and pull from all areas for growth.

        Thanks again & I look forward to reading some more great answering below. :)

  • JS

    Javier Sardá

    over 3 years ago #

    Hi David, thanks for doing this AMA.

    2 questions:

    Understanding that each business is different and generally speaking...

    What are the three tactics you see work best for early stage B2B SaaS businesses get initial traction?

    What are the three most important mistakes you see early stage SaaS entrepreneurs do?

    • DS

      David Skok

      over 3 years ago #

      Hi Javier,

      1) Right now the tactics that I am seeing work really well for very early stage traction:

      - Use of Sales Development Reps and outbound prospecting to get directly to prospects in your preferred target segments. Expensive, but predictable. A typical SDR can generate about 25 conversations for a sales person per month. (See this slide deck for more info: http://www.forentrepreneurs.com/outbound-prospecting/)

      - PR, and outreach to influencers to get them to write about the company

      - Inbound Marketing to start to build your own traffic, and market awareness.

      2) The three most important mistakes that I see early stage SaaS entrepreneurs do:

      a) Not do enough customer meetings for validation and market testing before committing serious resources to developing a product.

      b) being too committed to their idea that they can't hear the negative feedback that they are getting from customers. Instead the weaker entrepreneur will use "happy ears" to interpret every conversation as positive, or convince themselves that the customer was wrong.

      c) Underestimate the difficulties of getting their first customers. A common mistake is to believe that customers will want to find them, and they won't have to invest much to fill the top of the funnel. Sometimes it happens that way, but most of the time it doesn't!

      5 Share
  • KH

    Kevin Hurley

    over 3 years ago #

    David,

    Really appreciate you taking the time to share your experience and insight with a (clearly) very passionate community!

    I have a quick question:

    If you're building a product that isn't inherently viral in that - people likely wouldn't want others knowing they use the product bc it helps you appear better/smarter at what you do - how would you go about growing it?

    Ex. Think LinkedIn Sales Nav. - it helps sales people build relationships but their relationships likely wouldn't appreciate that they use it

    caveats:
    - virality would greatly help the product as it needs mass scale
    - there may be an enterprise play once mass scale has been achieved
    - It doest integrate with areas of viral opportunity such as social, email, teams etc.

    Thanks again for taking part, look forward to it!
    Kevin

  • AH

    Archer Hobson

    over 3 years ago #

    Hey David,

    Big fan, long time follower of the blog.

    You've spoken in depth on virality coefficient in SAAS. Link here for forum.
    http://www.forentrepreneurs.com/lessons-learnt-viral-marketing/

    What practices do you see the top SAAS companies using to propel viral growth?

  • AR

    Alun Rafique

    over 3 years ago #

    Hi David. Love your blogs.

    Currently we have a product that sells and people benefit from. Our greatest constraint at the moment is being able to recruit salespeople fast enough given cash flow constraints. I have two questions on this:

    Firstly - Due to the multi tennanted infrastructure of a SaaS business, is the main bottle neck for any company like ourselves essentially sales? (With a widget company for example I can imagine many more constraints such as new machines , premises etc..and what I am essentially saying is that there seems to be an untapped opportunity)

    Secondly - Given the above and our LTC/ CAC ratio >3, should we go for investment or is there another way to speed organic growth?

    • AR

      Alun Rafique

      over 3 years ago #

      Just to clarify my second question. We have a untapped opportunity created due to the pricing and usability of our products which has opened up options for larger companies and also for an untapped market of smaller companies (£100m-£500m). Obviously investment is a way for us to grow the sales force quickly (VC, seedinvest.com) but have you seen any other successful strategies such as large loans, perhaps peer to peer loans to cover shortfalls in cash flow. Our lead time for a sale is between 3-6 months.

      • DS

        David Skok

        over 3 years ago #

        Hi Alun, it does sound like your first constraint is the number of sales people you can hire. But if you were able to hire instantly, you will likely then run into the bottleneck of how to generate enough leads for these sales people to work on. That can be addressed by scaling marketing, and also by adding Sales Development Reps that do nothing but lead generation.

        Hiring sales people is an extremely expensive investment that takes quite a long period of time to payback. See the slides in this recent presentation: http://www.slideshare.net/DavidSkok/the-saas-business-model-and-metrics

        So I believe you will likely end up finding that the only way to bridge the cash flow gap is to raise capital. However note the slide that shows what happens to cash flow if you are able to collect money a year in advance. Also if you can reduce the time to recover CAC, that will greatly reduce your cash needs.

        However ultimately every successful SaaS company that has IPO-ed, including highly capital efficient companies like Zendesk, have required a ton of capital.

        Here is another article that will help you calculate how much capital you will need:
        http://www.forentrepreneurs.com/saas-economics-1/

  • GB

    Gary Bryan

    over 3 years ago #

    What is the best value-add a VC could bring to a service-based business and is that different from any other type of business?

    • DS

      David Skok

      over 3 years ago #

      If you look to the answer I gave Sean Ellis about management team building, that is my answer to your question as well. It would not be different for a service-based business. I hope that makes sense to you.

  • RA

    Rahul Aggarwal

    over 3 years ago #

    Hi David, for a startup primarily focused on servicing startups, what would be the most effective marketing and outreach strategy?

  • IM

    Imriel Morgan

    over 3 years ago #

    Hi David

    I'm a self taught Marketer and I'm on the fast track (18months) to CMO which is a huge stretch position. I have a lot to learn in a short space of time. What area's should I prioritise learning in preparation to take on this position? What makes a great CMO in a fast growth setting? Thanks in advance for your time!

  • PB

    Phil Benham

    over 3 years ago #

    Thanks for taking questions! My technical partner and I are building a SAAS product after having validated it with over 100 purchasers.

    We have an idea of who our target market is; but we don't REALLY know who they are or how to target them more specifically.

    Our product will help entrepreneurs and startups create higher converting emails with dynamic and engaging graphic elements. Since our customers have had an eye-opening moment of truth when they see a very low click-through rate for one or more email campaigns they have sent.

    The problem for us is that the target market is anyone who wants to increase their email click-through rates! We think that market is really too big, though.

    Would you be able to give us some insight here?

  • LB

    Lili Balfour

    over 3 years ago #

    Which tools (Mixpanel, Kiss, etc.) do you recommend entrepreneurs use for tracking growth metrics?

  • IR

    Igal Rabinovich

    over 3 years ago #

    Hi David, Big fan and long time follower.

    When is the right time for a young Saas company to formalize a relationship with a service like Gartner, Forrester, etc. There is a cost attached which is not insignificant and the time to recoup the investment is unclear. Would love to hear your thoughts.

    Be well.

    Igal

  • NV

    Nicolas Vandenberghe

    over 3 years ago #

    Hi David,
    Big fan of your blog like many others here.
    What are the top 3 pain points of your portfolio company in their Sales effort?

  • TV

    Thyaga Venkat

    over 3 years ago #

    #1 Which startups from Silicon Valley have impressed you the most in the recent years and why?

    #2 If you.ve had any exposure to the startup ecosystem in Bangalore, India, what's your opinion of it and how might you improve it?

    Thank you.

  • EY

    Eslam Yosef

    over 3 years ago #

    Hi David, thanks for doing this.

    What methods have you tried grow your website/blog and is there anything you learned from what worked that others could apply to their process?

    Thanks in advance!

  • AA

    Andrew Allsop

    over 3 years ago #

    Hello David, thanks for doing this AMA.

    I've just started working at an early stage SaaS platform and I was wondering if there are any practices you'd recommend conducting to help me understand the companies position better?

    For example, running a product/market fit survey.

  • PK

    pardeep kullar

    over 3 years ago #

    One of your quotes "In the startup world, if your primary focus is on making money, you usually won’t make money"

    Is this still true and why?

    • PK

      pardeep kullar

      over 3 years ago #

      I notice that some people are intensely driven by money and it has become their passion. They wake up excited about making money. (Although they are often in more conventional businesses). Maybe you have to give more of a damn in startups.

  • BI

    Boyan Ivanov

    over 3 years ago #

    David, thanks for the AMA.

    You write about b2b sales constantly. Yet it is more about direct sales. What is your view on channel strategy - how it relates to direct, when and how to employ it?

    Thanks,
    Boyan

  • AA

    Anuj Adhiya

    over 3 years ago #

    Hi David,

    Thanks for doing this with us today!

    What do you beleive is/are the most unique advantage(s) of the Boston startup ecosystem?

    Also, what are the top 2-3 things a startup founder moving to the Boston area should absolutely do take advantage of the resources available?

  • DR

    David Rodríguez

    over 3 years ago #

    Thanks for this AMA David! I greet you on behalf Tractionboard team, you are our mentor without knowing it ;)

    Let's talk about Metrics:
    Para discernir y priorizar las campañas de marketing, qué métricas te parecen las más interesantes a tener en cuenta? Our tool provides the following:

    Visits, Signups, Customers, Cancels, Spent, Revenue, Cost per Free User, CAC, ARPU, LTV, ROI

    There is other interesting stat/metric in your opinion to add? Our software is focused on SaaS. Btw, the business section is based on your awesome excel. Thanks for that!

  • JP

    Jack Poon

    over 3 years ago #

    David,

    thanks for doing this. I have been following you and reading on a lot of your writings on SaaS. They are very helpful.

    I run a startup focusing on security space with a very innovative approach on encryption and key management with zero knowledge. As i start talking to customer, I found the hurdle from zero to one is much higher than other B2B SaaS companies. Companies expect a minimum requirement for security company, such as proven tech, well-funded (meaning company that can last), deployment tools, administration console, etc.

    Any advise of how to break the zero to one, one to ten barrier specific for security SaaS company?

  • SK

    Shaun Keating

    over 3 years ago #

    Hi David, Thanks for doing this AMA. I'm building a news/journalism start up. What advice or insights do you have for that particular vertical? Also, I've heard conflicting opinions on VC interest in new media startups. Are VCs looking for that sort of investment or are they shying away from it? Thanks again for being here and for all your answers so far.

  • YS

    yassin shaar

    over 3 years ago #

    David, thank you for doing this AMA.

    My question is, let's say you're consulting with a new client, B2B SaaS, how do you go about building a growth model and find the growth levers? Is there a specific process you follow?(examples would be great :) )

  • KA

    karim Abd El Kader

    over 3 years ago #

    Hello David,

    Thanks for the beautiful AMA.
    I would really love if you can answer my question anytime.
    Thanks,
    K.

  • KA

    karim Abd El Kader

    over 3 years ago #

    Hello again David @BostonVC

    Kindly answer my question copied in the below as you forgot:

    Hello David,

    Thanks a lot for Conducting this AMA and for your continuous Value that you are adding to our community:

    I am growth hacker and entrepreneur from Egypt; i am a partner in one of the horizontal classifieds marketplaces; we are doing well but we are being a competitor with OLX which is the market leader here in Egypt.

    Please find hereby this brief as a needed intro. on our situation and to be able to answer my questions:

    * we have 150K unique user per month and OLX has 1.5 Million Unique user per month, so we are 10% of them.

    * They spent millions on marketing and we spent like the budget of one billboard they used for a week on our marketing.

    * Our main revenue stream is online advertising then we will introduce featured ads for users.

    * Our infrastructure is based on geocore classifieds engine; which is the one firstly used by OLX when started.

    * Our differentiation is a better usability and better look and feel which will be featured in our revamp a month from now; i know that you will think that we need to go vertical and but i think that is very relevant to your western markets but here we have many competing products in different categories and they are generating money.

    In the below; i am listing my questions:

    * How we can scale our product with a minimum budget?

    * How we can start creating demand on our online advertising?

    * How we can generated addiction for the product (implementing Hooked model)

    Warm Regards,
    karim.

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