The Official SaaStr Podcast: SaaS | Founders | Investors
00:21:14 · Doug Pepper
[00:21:14] S1: So this slide is, outdated as well, but, we'll still talk through the same topics, which is basically how are companies, reacting to this environment? And the key thing is that it's not a one size fits all because every company is being impacted differently by the environment, and therefore their reaction, their playbook needs to be unique to their own situation. And it is interesting, though, to note that everybody's feeling a bit of the same dynamic. And that dynamic, I think probably most people in the room here can feel a little bit, which is the last two years during the pandemic, there really was a pretty extraordinary tailwind for the adoption of technology. Companies saw more growth rate than they expected in the last two years. And what happened was that they applied those similar growth rates to their planning for this year and next year. And given the new environment, rising interest rates, lower valuations, less demand, normalization of demand, most of those companies aren't experiencing the growth rates that they expected. Varying degrees, right? Peloton would be the most obvious example of extraordinary demand and real normalization, maybe Zoom, but to some degree, every one of our companies that we work with is feeling that same dynamic. But the problem is they all built their spending plans to those more aggressive growth rates. And so what do they do? They've got to make adjustments. And so what we're seeing in our portfolio roughly is that about 20% of companies are doing RIFs. They're doing layoffs. Those are the companies that may be hired too aggressively or are seeing the biggest shock to demand and they're laying off good people. And that's really hard to do. I think that's probably the hardest thing for a CEO to do. The truth is months later, easy for us to say, but we often hear those CEOs saying we're better off for it. We are more efficient. We're actually getting more done by having made that tough decision. So 20% layoffs. Another 20% are really doing hiring freezes. So they're saying, We can't hire anymore. We're really slowing down. We're not letting people go, but we're doing a freeze. The majority, probably around 60%, again, rough numbers, are slowing hiring.
00:23:35 · Doug Pepper
They're still hiring, but much more selectively, much more slowly, and it'll probably end the year 10, 20% below in terms of headcount, what they otherwise would have. And so lots of new plans. And speaking of plans, it's really important to note that companies aren't just thinking about what's my plan for 2022 for this year. They're really needing to look out 2023 and more accurately predict demand and growth because it's those expectations for 2023 that drive the hiring plan for the back half of this year. And so every CEO, every CFO in our portfolio is sharpening their pencils, usually multiple times to kind of come up with new plans for this year and next year to drive growth, but also better efficient spending against that growth. The other thing I'll say, and again, this slide is a bit different than what we expected. The other thing I'll say is that companies rightly so are not just focused on spreadsheets of planning and spending. They're thinking about how do I execute more effectively in a more optimized way in this environment in terms of go to market? And the watchword there again around efficiency is focus. Companies are realizing that to do more, they actually need to do less. They're saying no more often. And so what are some examples of that? One might be they're not expanding internationally right now. If they were gonna go into five countries, maybe they go into one. If they thought they'd go into Europe and Asia, maybe they just go into Europe or maybe they just stick to The US. And so they're making tough decisions like that this year. Maybe they're not launching a new product that they were considering launching. When it comes to customers, maybe they don't launch a new vertical or a new segment and they continue to focus on a segment that they know is most willing to buy and seeing the greatest value proposition. Speaking of value prop, one of the biggest changes this year is that the line of nice to have versus must have has really gone up. And we're seeing companies that used to be must have with that line going up, now falling below into nice to have and it's harder to sell. And so companies are really trying to iron out this value based selling. How do they prove that their ROI is immediate and real? And that kind of new motion is more important now than ever.
00:26:02 · Doug Pepper, Sam Blond
And then of course, as always, they're really thinking about their teams. Do I have the right executives, the right second layer in go to market to really take us beyond 10,000,000 and beyond that? So there's a lot of work happening with those kinds of go to market and team building efforts to kind of gear yourself for growth in a more constrained environment where efficiency does matter. But I'll end with one comment, which sort of flies in the face of everything we've said. Despite everything, for better or worse, growth still is and always will be the most important metric. We're in competitive markets, they're big markets, and you don't want to let your competitor beat you. And so I think every one of our companies, again, no one size fits all playbook, is looking at their resources, their cash runway, the value prop that they have, and making a determination of to what degree do they balance prudence with aggressiveness. Because in the end, we have seen, as Christine alluded, a number of companies in 'eight and 'twenty use this moment, if they're well positioned, to vault ahead of competitors. There's certainly cases of companies where we're advising them to do that. [00:27:22] S0: SaaStr Europa is back, and this time we're heading to London for two fun filled days of content, networking, and SaaS. Join us June sixth and seventh for SaaStr Europa twenty twenty three. Use code FAV100 for $100 off tickets at sasterlondon.com.