Investor Insights for Scaling from Seed to Growth Stage with Sage Intacct and OMERS Ventures

another second or two to get started and settled, and then we're gonna jump right in. I'm really excited to welcome Laura Lin. She's a partner at Omers Ventures, and David Appel, he's head of software and SaaS at Sage Intact. Second or two to get— They're gonna be walking us through investor insights on scaling from seed to growth stage. So before I pass it over to them, just a couple housekeeping reminders. We do have 20 minutes for this session. If you wanna go to the next slide, Dave. 20 minutes for this session. So please use the Q&A at the bottom to drop in any questions throughout. They'll be leaving the last few minutes for questions. Drop it in the chat where you're joining from, we'd love to know. And as I mentioned, we have 20 minutes, so be sure to send your questions throughout. And then these sessions are being recorded and will be available post-event. So make sure you follow ASSASTR on SlideShare and subscribe to our YouTube channel. Laura, Dave, thanks so much for joining us. Gonna pass it over to you to take it away.

Well, we're fired up to have all of you. Laura and I have known each other a while, and she's an amazing investor and has great insights. We're going to play off each other. She's doing the investment point of view for all of that, and then I'm going to talk a little bit about the operator point of view, about how you pull together all that. We're going to do all this in now 16 minutes. So, Laura, jump in. I, um, let me just lay out the agenda and then we'll get your first slide. Why do metrics matter? What are the metrics that matter? And again, this is from an investor point of view. So many of you are listening, we can see the participants are operators, you're trying to get your firm off the ground. Several of you are investors, and so hopefully this jives with what you tell your companies. Then the path of producing the metrics, and then you, you need to automate in order to operationalize all this. So what is the ideal finance tech stack for getting there? So Laura, over to you. Why do metrics matter?

I'll jump in quickly here, David. Thank you. So metrics matter for a few reasons. The first is benchmarking against your peer group. It's just like getting on a bike at the gym, right? If you see the speed and the rate at which your peer is biking, you're going to want to go faster. You're going to want to beat them. So having that benchmark is always great rather than just being so siloed and running your own business. The other thing is around fundraising. Of course, metrics matter during fundraising, and VCs love to dig into all the metrics, and we'll get into those in a minute. And then finally, it's an instrumentation for your business. Think of it as, as, you know, your, your cockpit when you're flying a plane, or when you're driving a car, that stoplight— red, yellow, and green. How do we look at our business? What's working? Green. What's not working? Red. And that's where we want to spend our time. It helps you manage your management meetings, your board decks, as well as set your OKRs, or your goals for the company for the year. So maybe when don't metrics matter? And I can tell you, before we jump to that slide, metrics sometimes don't matter at all. And when they don't matter, that's when you're at the seed stage, right? What matters at the seed stage is your vision, the, the size of the market that you're going after, and of course the experience of the team. Metrics also don't matter in frontier tech, like in quantum computing as an example. When you aren't yet commercializing, you don't care to commercialize yet because you're building this frontier tech, you don't have metrics in your business that are financially driven. Of course you've got your quantum metrics there. It also doesn't matter in early product-led growth companies, right? You're looking at different metrics there. You're not looking at these metrics that we're getting into. You're looking at engagement metrics for your product-led growth businesses. And sometimes, I hate to say it because I always think metrics matter a lot, but in really frothy markets like we're in today, metrics might not matter as much as the vision, the team, and that high-level metric of your month-over-month revenue growth. So next slide. I think a lot of founders have heard about Rule of 40. Rule of 40 is a really great quick glance at your business as a starting point. It's that high-level indicator of performance, and it's the trade-off between growth and profitability. So let me just dive into that quickly in case some people aren't familiar with it. Growth is represented by your revenue growth, so your year-over-year revenue growth. Profitability is represented by your EBITDA margin, so your OpEx less your revenue And so if you're growing at 80% year over year, then VCs are saying you can afford to lose— you can afford to have a negative 40% EBITDA margin, right? 80 plus minus 40 gives you 40. But if you're only growing at 20% year over year, well, you better make sure that you have a 20% positive EBITDA margin or else investors tend to stay away. So that's why rule of 40 is that, is that starting point. But of course, VCs dig a lot deeper. And get used to it, because we dig deeper on the diligence portion of an investment, but we also dig deeper when we are sitting on the board and working with you to scale the business. Because again, going back to that first slide of why metrics matter, it's an instrumentation for your business. And so if you can flip to that next slide for me, David, please. Here's how I look at businesses. Now, just to kick off, we are at SaaStr, and so of course these are SaaS metrics that we're talking about. We're not talking about marketplace metrics here. These metrics are also best-in-class metrics. We do not expect you to have best-in-class metrics, to have every single one of these being green, at all times in your business. It will fluctuate, but what we do want to hear is that you're focusing on the ones that are red or even the ones that are amber. And so when your metrics aren't necessarily in the green, tell us why. Tell us what you're doing to help improve those metrics. Tell us why you care that it's not in the green today, right? And maybe there's a trade-off that you're taking, and if you help us understand that you understand that trade-off, it makes us feel much confident in how you're running your business. And so there are 3 buckets of metrics that matter here. The first is velocity, then profitability, and capital efficiency. Now you do not need to jot all this down. I'm told that they are shared with you on a slide share. So this is sort of what I use. You can put this in your own dashboard to use as well, and David will get into some of the tools that you can use to monitor this because this is a challenging thing to monitor in your business. But here's a couple, let me jump in on a couple, right? Net dollar retention, otherwise called NDR. This wasn't something that VCs looked at probably 4 or 5 years ago. Now we're really looking at it, and COVID made us look at it more than anything else, because during COVID it was more difficult to get those new customer logos. So what VCs cared about is How much additional revenue are you getting from your customers? And that's what NDR represents there. NPS is, of course, industry-specific and will depend on whether you're not— you're in B2B or B2C and which industries within SaaS you're in. But it just talks about your promoters and your detractors. Lots of great tools out there to help you with that. Of course, days in sales cycle at less than 90 days is ACV dependent, right? If there's— if you're signing $1.5 million contract values, you can afford to have a longer days in sales cycle, but this just talks to the velocity in your business. And then profitability, of course, we care about how much does it cost to acquire a customer, and how much revenue do you receive back from the customer once you've acquired it, and what is their payback? And there's some numbers there. Revenue per employee is just one of those really simple numbers, kind of like Rule of 40. We can take a quick look at, and then we can say, is this company— does this company have the right unit economics? We kind of know what an average salary is for employees, so it's an easy number for us to do in that first pitch when we're hearing your story. And then capital efficiency, right? Capital is in increased supply right now, but we do want to see that you are being efficient and you're making the right decisions with that capital. And so, you know, a good proxy there is net new ARR is greater than 1 on your net burn. So for every dollar that you spend, you're driving at least 1 new dollar of net new ARR to have a sustainable business. So lots of good content there. Again, this is your high-level dashboard. As a company matures, you want to go deeper into each department, so each department alone would have metrics that matter to them that they monitor. And of course, you want to look at maybe different markets and maybe different customer segmentations. How do you segment your enterprise versus your mid-market and your SMB across all of these different line items? And are you making the right decisions for your business? I just lost David on— my end. But which means we've lost our slides too. He was going to— about to talk about— oh, there you are, David— about how companies and operators can manage these metrics because they're not necessarily just in your financial statements, in, you know, in your, in your Quicken and your Xero, etc. You need to be able to pull them up and show them on either a monthly or quarterly basis, both to your management team and to your board members. So, um, David, I'm not sure if you can hear me or if we're frozen here. He might be frozen.

While he's coming back, Laura, do you want to jump into some of the questions that we have?

Sure, let me do that. Yeah, let me just pull up these questions. Capital efficiency metrics seem confusing these days with so many mega rounds. What are startups doing that are able to raise a ton of money? Yeah, I mean, this is a fantastic question, and I think, um, there's a lot of VCs out there that aren't necessarily looking at capital efficiency, or they're looking at capital efficiency 3 years from now, right? What do we need to get to in 3 years to believe that the money we're putting in today is going to be capital efficient. Um, and, and what are startups doing that are able to raise a ton of money? I think this comes down to vision, product roadmap, but also the amount of capital supply that is in the business today that, um, is really dictating the round sizes. But again, they're setting these companies up for 2 to 3 years of growth, and so their growth expectations for these businesses are extreme relative to probably 2 years ago. How about collections? How do I improve the amount of cash I collect? That's a great question. That's not a metric that we would track at the high level. Of course, the finance team would track that. And, and that's something that as your business scales and you start to monitor the working capital in your business, cash collection becomes very critical to monitor. So whoever asked that question, it's a great one. Um, when do my financials have to be 100% accurate? Oh, I think it— that's, that's interesting. Um, I would say financials have to be 100% accurate from, from day one. You want to set up the discipline and the reporting at the earliest stages because it's hard to go back to Laura, I'm back on.

And for everybody, this is the fun of doing these live, and, uh, of course Wi-Fi goes down in the middle of a live presentation. Uh, yeah, so I'm so sorry for that on a recorded line, but Laura, I know what you nailed it. Am I ready to do this section?

Yeah, go for it, David.

So everybody, I hope you're smiling with me. If you're laughing at me, that's fine. It's just how it goes. But Laura, pulling all that together, we found a pattern about how the data comes together, these 5 steps. For those of you as the leaders and the operators in the crowd, it's just if you can get the order in the system going on the left-hand side, then that's what allows you to speed up cash flow because you're getting it out. And then automate the billing because there's so much going on right now with product-led growth and marketplace and usage based billing models. That's what allows you to drive differentiation. And then deferred revenues is so important. So you want to capture the deferred revenue with your 606 revenue allocations and then do it over the customer lifetime because then that has such a big impact to money that you're going to raise. Seeing all this real time in order to produce those dashboards, they're level 4. That's what's critical because that's what the investors want to see. And the more time you have to do it, As Laura said, you don't always have to have the perfect answer or have everything figured out. You just need to be able to show you have an understanding of the hypotheses behind what you need. And the more you can do that across the whole system, the better off you are. And then be able to forecast, be able to extrapolate out budget versus actuals, what you think is going to happen with revenue, cash, and billings, because that gets you the data that you need. Because all of you— I can see most of the participants that are in here, the companies, there's hundreds of you. Thank you for joining. You're in frothy markets and still bruising sharp elbow knife fights in the alley with your competitors to try to get across. And so I just— none of this is David or Sage Intact opinion. This is coming off a lot of interviews with analysts and investors. Just as you put in your stack, think about how it's all incremental and builds on top of one another. So it all starts with the GL in the middle because that's your source of truth and your source of action. And you tie everything around this. Because of time, I'm going to be really brief. Usage-based billing and how you're going to handle your kind of prospect-to-disclosure aspects of the business. Then tracking all the cash going out with your expenses and your AP. Be able to close the books and then be able to tie all the pieces together. So that's how it all— these pieces, those 5 stages of how the business builds up, and then how you think about your finance tech stack to get into it. I think, Laura, we got a couple minutes here as we're doing your, your summary, and I know you're starting to do some Q&A. Everybody keep the Q&A going. We're going to have a separate session after this. If anybody, instead of attending the next money session, wants to do more Q&A with Laura and I, please join, because the whole point of this was paying it forward. But Laura, do you want to wrap up your key points here?

Sure, David, I'll just say that hopefully you've learned that metrics matter, not just for fundraising, but also managing your business on an ongoing monthly basis. And the high-level metrics that we all want to focus on are velocity, profitability, and capital efficiency. They all say something a little bit different about the health of your business. So it's important to monitor all three of those different categories. And of course, there's a variety of different solutions out there that can help you as an operator calculate and manage your metrics so that you're not overwhelmed with them. So please take advantage of them. Yeah. And we do have some questions, which is great, David, if we want to get to those.

Let's take this next one. What data points are expected to be known from early-stage companies looking to raise a seed who might not have recently— excuse me, who have recently launched and only have a handful of customers? It's going back to your first point of when do they matter, when do they don't matter.

Yeah, and I think that's right, David. I think, I think when you are at a seed stage of a business, what I said before really matters, right? What is your vision for the business? How do you paint that really exciting vision? What's the TAM? So what's the market size for your business? And how are you and the tactics you're taking with your business actually increasing market size rather than contracting market size. And then the team, right? Have you lived this specific pain point before, and you've got intimate knowledge of the pain point, or is this a brand new industry or category for you that might be a little bit harder for a VC to understand? And then there's another question. Doesn't a CAC ratio of 17 months, while logical, still burn a lot of cash in most cases? How does a company balance this? I think that is such a great question, and I think there's maybe another panel that will talk to this, but that's what VCs are for, right? And so, so two things. That's what VCs are for, to help, to help grow your business, to scale. But also, you want to have an LTV, so the corresponding number to that is you want to have a lifetime value that's at least 3 years. If the company— if your customer churns after 18 months, then that's going to cost you a lot of money and is really hard to scale. But if you can demonstrate that it costs 17 months to acquire a company, but then only— but then you have that company as a customer for 3 years, then you've got a very profitable business there. Um, no, any more questions, please?

There's a lot of you on, please drop them in. Caitlin said we can run a couple minutes long.

Oh yeah, so someone here has a question about Metrics That Matter. What stage of ARR are we talking about? That's also a good question because these metrics do shift over time as you mature. So the numbers that I'm showing you here are, are sort of, um, $5 to $10 million of ARR. So we don't expect you to have all these numbers figured out if you're at the seed stage. If you're less than a couple million of ARR, there's going to be some numbers that you need to focus on, key metrics that you need to focus on, not all of these.

Another great one just came in, Laura. I don't know if you see it in the Q&A, and then I have one that came over to me. But growth has stalled at my company and churn has increased. I'm trying to turn things around. But I'm overwhelmed by so many different metrics. We're at $2.5 million ARR. What should I focus on?

Churn. Churn. If you don't have happy customers, then you don't have a viable future, right? Think about this. You're spending money in sales and marketing, maybe even customer success too, right, to acquire those customers. That's really hard. Acquiring customers. Once you get them, you don't want to lose them. So figure out why are you losing customers. Is it product? Is it customer service? Is it competition pricing? Dig into those churn numbers because I think if you've gotten to $2.5 million, you're doing something right. Talk to your customers, figure out why they're churning.

Yeah, I was gonna say interview customers, find out what they're happy about and unhappy about, and then relentlessly attack that list. I had a question come into me too, because we're all— most of you are in that $5 to $10 million range— is what to start with to operationalize. And what, by and large, what most of your peers are doing is starting with operationalizing billing, because you want to capture the value of what you've built and increase customer acquisition and get it out there. But what you want to do is you think about this, for everybody who does not have as big a finance background, tag it with as many dimensions as you can as it comes in, because then that's what you want to report upon. Do you do your cohort analysis? And the better you set that up to begin at the beginning, the much better infrastructure. And then shortly thereafter, you want to put in the core GL because then that's your system of truth. So many other areas of data systems have data, but they're never audited, so you cannot totally trust them. And you might have multiple sources. Just get that one source of truth because then you can always be confident about the numbers that you present to fantastic investors such as Caitlin and Laura. Sorry, I was thinking Caitlin on how much time we have left. We have time for one more. Let's go. We got one more. You expect—

okay, go ahead.

Well, we can cover it in the flow over Q&A, so let's do that, David.

I think there were a lot of great questions here. I think you and I both could talk about this for hours. All day. Thank you. Thank you. A lot of questions for you.

Last thing I think to leave us on is On a question that I thought would be nice to end with is, as a founder CEO, focus on running the business. So finance and metrics often aren't areas of expertise for founders and CEOs. What are, like, 1 or 2 resources for identifying some of these metrics for investors you guys can point us to?

Sure. I think Sage Intacct is a great one. You can go to their site. They've got lots of great content. I think KeyBank also has some great content, and some of my metrics has come from their reports. There's lots of great metrics out there. If you just Google metrics, metrics that matter, you'll find some of my Medium content as well.

And I will say Slack groups have popped up for peers of yours that are all trying to solve these answers. And if you're not part of one, just email me to david.appel@sage.com. I'm happy to introduce you because no one's got it all figured out. That's why you're here. Leverage the collective wisdom of all of your peers. As we're wrapping up, I want to say, Laura, Thank you so much for all of you. Thank you for putting up, because of course the Wi-Fi gremlins, uh, come in just as we're presenting. Amaya and Laura, thank you for rolling through that. Caitlin, over to you to wrap everything up with the bow.

Yeah, thank you both for joining us, and despite the Wi-Fi issues, still a lot of great tactical lessons learned and great content. So we appreciate your time. Thank you everyone for joining. We'll see you