How to Improve Efficiency of Growth for SaaS Companies

The impact of COVD-19 on the economy is still unfolding, but investors are already telling the founders of the companies in which they have invested to prepare for the worst.  As founders think through their options, an understanding of how previous recessions have affected their industry can help set some parameters for their decisions. Recently, Andreessen Horowitz, a top venture capital firm in Silicon Valley, wrote an article on how to improve efficiency of growth for SaaS companies that we found particularly informative. This article can help SaaS CEOs navigate through these difficult waters.

The article made three main points to focus on when improving efficiency of growth for SaaS companies:

1. Retention is first priority: All though sales may go down, churn will be higher for businesses that sell into SMB. These companies should proactively contact customers and prepare for near-term down sell, while making sure to keep current customers happy during the downturn.

2. Efficient customer acquisition: Use a bottom-up model for lower cost of acquisition. Invest in customer acquisition in profitable (cheaper) customer segments. Meet new customers where they are, meaning target new acquisition paths by analyzing the most active paths to reach your target customers.

3. Manage your runway: Cut costs meaningfully, collect and manage accounts receivable, and restructure contracts for upfront payment or longer renewal periods.

This page was written by Juliet Fern and Jeffrey Camp. Ms. Fern is a member of the Cane Angel Network investment team. Mr. Camp is the Managing Director of the Cane Angel Network.