Bessemer’s Top 10 Laws for Being "SaaS-y"

by aaronross383 on March 14, 2009

Bessemer Ventures collected a great set of learnings around what it takes to build a successful SaaS (“Software-as-a-Service”) company: Bessemer’s Top 10 Laws for Being “SaaS-y”. It’s excellent!

  1. Your key monthly business metrics are: CMRR (Committed Monthly Recurring Revenue), Churn, and Cash flow – “Bookings” is for suckers

  2. Customer Acquisition Cost (CAC) and Customer LifeTime Value (CLTV) are the best indicators of long term value creation

  3. Tune before you scale: the Sales Learning Curve is even more critical for SaaS and it takes at least $300k MRR to climb it. Stop at three sales reps until at least two of them are making $100K MRR quotas

  4. Separate your “hunters” and “farmers” and pay them all on CMRR growth [My blog post about it]

  5. SaaS is a whole new ecosystem where traditional IT channels don’t work – Focus your business development efforts on business services channels, but you will need to sell directly for a long time as these new set of partners are not easy to ramp-up

  6. By definition, your sales prospects are online – Savvy online marketing is a core competence (sometimes the only one) of every successful SaaS business

  7. Stay local – Prove your business in North America first. Only after reaching $1M in CMRR should you consider hiring European sales and services execs behind customer demand. Save Asia for post-IPO

  8. Single instance, multi-tenant, single datacenter – Have only one version of the code in production. Really. “Just say no” to on-premise deployments

  9. The most important part of Software-as-a-Service isn’t “Software” it’s “Service”!

  10. Be prepared to cross the desert – SaaS requires R&D and sales expense up front for a multi-year stream of revenue, so it demands enough investment capital to fund 4+ years of runway. Load up for the long trip and pace your consumption of calories!

Thank you Bessemer!

{ 5 comments… read them below or add one }

Sales Brochure Design March 14, 2009 at 3:23 am

Great post. It’s always refreshing to read a well written piece.

trish bertuzzi March 14, 2009 at 12:02 pm

Fantastic data! Completely formulaic and relevant. Thank you for sharing.

Stefanie Hartman March 17, 2009 at 1:38 am

Wonderful post. Lots of great info.

Aaron Ross March 17, 2009 at 6:53 am

Yep, this one was really worth sharing. Glad you all appreciated it!

Dr. Jim Anderson March 20, 2009 at 1:45 am

Aaron: great post. Is there anything on the list that is really SaaS specific? It sure seems like these laws could be applied to any product that is a service. Something to ponder.

I’d add just one more based on the very public learning experiences of the folks over at Salesforce: you need to work very, very hard to make sure that your service is reliable. You’ll be punished for any and all outages.

– Dr. Jim Anderson
The Accidental Negotiator Blog
“Learn The Secrets To Successful Sales Negotiation – Close the Deal Every Time!”

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