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

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!

• BONUS LAW: You can ignore one of these, but not more than two. Great companies innovate, but pick your battles!

• Click here to see the slideshow of the Bessemer 10 Laws for Being “SaaS-y”

Thank you Bessemer!