Over Last year, we witnessed one of the most turbulent times in software history. Courageous founders and teams have grappled with seemingly never-ending, unprecedented obstacles—from macroeconomic uncertainty, to banking collapses, to geopolitical instability, to recession fears. For today’s startup leaders and operators, it may seem like the hits are constant. But know that you are not alone, even the most battle-tested leaders have been exposed to challenges, as many of these headwinds are not unique and have affected everyone in the industry.
We have unequivocally moved to a new paradigm, and much of the thought leadership and industry standards from the past decade-plus of bull market exuberance fail to accurately capture the nuances and business conditions during a volatile period. Cloud leaders will inevitably face ups and downs in the markets depending on the market cycle.
As we approach the 24-month mark of this bleak period and begin to see more light at the end of the tunnel with macro conditions stabilizing and recent IPOs and mergers and acquisitions, we reflect on seven lessons about resilience based on actions taken by growth-stage SaaS leaders It took the past year to prepare the founders to weather any future storms.
1. Benefit from expansion as a permanent driver of growth
During downturns, businesses must be prepared to address the “double-double” headwinds that impact new customer acquisition and existing customer expansion.
As for acquiring new customers, it becomes unsurprisingly difficult to acquire new logos in an uncertain market environment due to frictions such as:
- Lengthy sales cycles.
- Deferred transactions
- Increase budgetary scrutiny (for example, requiring sponsor approval for new deals).
- Additional justification is required for new purchases.
- Frozen budgets that prevent the purchase of new software.
- Rotation of key stakeholders.
Cloud leaders will inevitably face ups and downs in the markets depending on the market cycle.
All of these headwinds are having a rapid impact on sales efficiency. For example, in 2022, we saw CAC payback periods for EMCLOUD (emerging cloud) companies extend significantly to an average of 30 months, even rising to 40 months in Q1 2023. These statistics were grim when compared to the same period of last year. Standards for CAC recovery periods during the most active market periodswhich is closer to 12 months for small and mid-market focused accounts, 18 months for mid-market focused accounts, and 24 months for enterprise-focused accounts.
Additionally, while existing client expansion moves are also not immune to headwinds, there are more levers that can be pulled on this front, such as: