SaaS has fundamentally changed the technology adoption life cycle for software. What Marc Andreesen said took 25 years to accomplish is now happening in less than a decade. The birth, rise, and demise of new software technologies can now be measured in months instead of decades. So what has happened to the Technology Adoption Life Cycle in 2021?
There are lots of inspiring stories of success in the tech industry. There are also a lot of lessons that product managers can learn from failures as well. Failure stories are always interesting to read. Product managers sometimes get a vicarious thrill and say “there by the grace of God I don’t go.” The stories of Oxy Media, ScaleFactor, and Quibi are especially informative.
CB Insights recently published Insights State Of Venture Q3 2021, a 246-page analysis of what is going on in the global technology investing and M&A world. Not surprisingly, tech investing has reached all-time highs and Asia-Pacific is driving a lot of the activity.
Private SaaS companies have always been valued less than their public company peers. SaaS Capital recently reported that the gap had grown to almost 50%. While SaaS valuations have moderated a bit in 2021, they still stand at near all-time highs. As the Software Equity Group has reported, median public company SaaS EV/Revenue valuations were almost 15x at the end of Q2 2021. Leading companies like Zoom and Shopify are valued at over 50x EV/Revenue. There are many factors that account for private companies being valued less than public companies: illiquid equity, no public/audited financials, no SarBox certifications.
The first investor lawsuit in response to the crisis at Oxy Media has been filed. On Monday LifeLine Legacy Holdings of Beverly Hills, Calif., which put more than $2 million into the Oxy’s Series C fundraise, filed suit in Federal Court. The suit alleges multiple fraud violations associated with Ozy’s dealings with Lifeline during their Series C raise where Lifeline invested $2 million. With daily revelations of wrongdoing on Ozy and Carlos Watson, what shoe will drop tomorrow?
ARR growth rates are the largest factor driving private SssS company valuations. SaaS Capital’s long-term research (>10 years) shows some great insights, especially for smaller revenue SaaS companies.
Growing revenues is a challenge for all product managers. The further along a product is in the Technology Adoption Life Cycle, the harder it gets. A company’s valuation, whether they are a public company or are privately held, is driven by the scale of total revenues and the revenue growth rate. Fortunately, there are several tactics product managers can use to optimize current revenue streams and innovate new ones.
On Sunday, September 26th, Ben Smith from the New York Times published an article entitled “Goldman Sachs, Ozy Media and a $40 Million Conference Call Gone Wrong”. What followed was a bizarre tale of how the COO of Ozy Media started a Zoom due diligence call with Goldman Sachs, then switched to a conference call. On that call, Samir Rao, the co-founder and chief operating officer of Ozy, used a voice changer and impersonated Alex Piper, the head of unscripted programming for YouTube Originals. After the call Goldman figured out what had happened and the proverbial shit hit the fan. How were sophisticated investors deceived by Oxy Media?
Product managers deal with technical debt all the time. Privacy debt is the new technical debt. Privacy-related issues have become critical. In the United States in 2020 there were over 1,000 data breaches that exposed over 155 million records. Many of these breaches were due to vulnerabilities exposed by unaddressed technical debt. Privacy debt is now the new technical debt and its impact can be disastrous.
Bessemer Ventures is one of the leading venture capitalist firms in the country. They recently published a great report Scaling to $100 Million that provinces detailed metrics about ARR, Growth, Retention, Gross Margins, CAC Paybacks, Free Cash Flow, and Valuations from over 200 of their cloud investments. The data analyzes firm performance by ARR revenue bucket from $1 million to $100 million.