Monologue of a software Investor: why don't I pursue fast-growing companies

The update and iteration speed of technology is getting faster and faster , The consumer behavior of users is also changing all the time , In order to meet the rapid changes of the times , Enterprises are also trying to make their growth faster , because “ To be behind is to be beaten ” Apply to anything . that , For investors , Are they sure to pursue fast-growing enterprises when they invest ？ not always , The following software （ Or say SaaS） Investors expressed their views on why they did not pursue fast companies ：

Growth at all costs ： This is almost all SaaS Companies are familiar with the saying . But is it always the right choice ？ A few weeks ago , I held it in London SaaSGrowth Give a speech at the conference . When the speaker in front of me began to talk about the importance of not expanding too fast , A room full of sales executives from European software companies breathed a sigh of relief .

It's hard to describe “ Rapid growth at all costs ” How deeply rooted is the concept of . In the field of venture capital , My industry ,SaaS The default growth expectation of the company is “ triple 、 triple 、 twice as much 、 twice as much 、 twice as much ”—— let me put it another way , Tripled in the first two years , Double in the next three years . This is a kind of “ Refuel , Push the engine forward at full speed ” State of mind . and , Although this rule may be tried and tested , But it is not suitable for all enterprises .

Not all SaaS Companies are the same

Up to a point , What an enterprise sells and who sells it decide the growth rate of the company . for example , Those companies that are in the expansion stage and focus on enterprise customers , About every year 50% To 150%. Their growth rate is naturally Limited , Because they pursue high contact sales —— Enterprise customers need a long time to initiate 、 Persuade and complete , But once these customers go online , It usually provides considerable continuous subscription revenue .

The time it takes to acquire these customers 、 Money and energy , In particular, establish a sales team to target and track their time , Highlight the enterprise SaaS company “33222” The problem of patterns ： If you are ready to expand before , There is a great chance that you will lose a lot of money ,.

therefore , Before you can put your foot on the accelerator , Your company needs to accomplish the following three things ：

1. Find a suitable point for the product market （PMF）. Have you found a product suitable for the market ？ Every year, 300 Wan to 500 A recurring income of $million is a good indicator .

2. Formulate clear market strategies . You need to know your target customer base 、 How to target them and what messages to use to attract them .

3. Define a repeatable process to find clues , Train them , And smoothly train them for new employees , And take care of these salesmen after obtaining them —— And know which team is responsible for which part of the process . The litmus test of this is predictive ability , With reasonable accuracy , What will happen if you add more salespeople , Including marketing expenses 、 Sales Development Representative 、 Sales Engineer 、 Support and customer service teams .

Once this clearly defined process is in place , Before entering high-speed operation , It's best to spend a quarter or two to make sure everything is ready to expand to a larger customer base .

The fallacy of missing

I'm often asked ,“ But will suspending buying stocks risk being overtaken by competitors ?”“ No ,” This is my usual short answer . The view that the company will lose to another company in the market in oneortwo quarters , stay B2B The enterprise field is not established . stay B2B Enterprise field , Things are not going fast enough , There is no need to move on .

about SaaS For the company and its investors , The worst is , You inject fuel into an unbearable engine , Then there will be an explosion . We've all had this experience , For me, , That's why I should stay away “ Growth at all costs ” State of mind . for example , If you are a company , This means that you have more salespeople than you can provide sales leads , This soon means an dissatisfied sales team , Because they can't achieve their goals , Then people left . You pay people , Train them , Let them go , Then lose them , Because you're not ready to deploy them , Can't support them correctly .

You will find that you spend all your money faster than you carry out your plan , So we have to raise more money under worse conditions . You haven't reached the milestone of the last round of financing , So a new round of salary increases may be more expensive , It will also cost more equity . This hurts the founders and management —— These people need to stand aside , pull oneself together , Concentrate —— And investors , Their equity will be diluted more than expected . at best , This may still be a rising market , But it is far from reaching its due level . For most SaaS The company is , Expanding faster than expected is a wrong economic model .

Examples of sustainable growth

Do not follow triple 、 triple 、 twice as much 、 twice as much 、 Twice the defaulting investor , There must be different fund models . Most funds expect , stay 10 In this investment , Yes 6 to 7 Item will fail ,2 to 3 Xiang will muddle through , Another one will do well , And can return 10 to 100 Times the capital —— Enough to support the entire fund .

But in a sustainable growth model , You certainly don't expect any company in your portfolio to go bankrupt ; You want to see a range in 5 Times return and 1.5 The scenario between times the return . In a world that pursues rapid growth , This means maintaining growth for a longer time , And use capital to go further .