Paul Davenport:
Hello and welcome to What The Tech from Boast AI, where we talk with some of the brilliant minds behind new and exciting tech initiatives to learn what it takes to tackle technological uncertainty and eventually change the world. Today I'm thrilled to welcome to the show Lauren Thibodeau, who along with being the founder at SaaSCan, is an advisor and all-around rock star within the Canadian startup ecosystem. At SaaSCan, Lauren and her team provide mentoring, enablement and advisory services to Canadian SaaS startups at almost all stages of their growth journey. What sets SaaSCan apart is that they help SaaS leaders be metric savvy and customer-centric, leveraging the latest research to inform all decisions. This ultimately helps businesses achieve higher ARR, net dollar retention and ultimately SaaS company valuation.
On the topic of research, however, Lauren and her team recently published The SaaS Metrics That Matter Most for Startups in 2024 report, which highlighted the key success factors that burgeoning SaaS businesses need to prioritize to navigate all that 2024 has in store. From the expected impacts of generative AI to the rise of #growficiency, I'm excited to get Lauren's take on how these metrics are starting to bear as 2024 rolls out. But, as I mentioned before, Lauren's reach goes beyond SaaSCan as she's an advisor to incubators and accelerators across Canada, including our friends at Volta and Invest Ottawa, as well as directly providing customer success strategy for a roster of startups in her network. She's got her finger on the pulse of the Canadian startup ecosystem, and I cannot wait to pick her brain on the current state of startups and what it takes to succeed into today's market. So, without further ado, welcome to the show, Lauren.
Lauren Thibodeau:
Thank you so much, Paul. It's just fantastic to be here.
Paul Davenport:
Oh, we're so happy to have you. So I know I did give some background about the work you're doing, and I think you could probably tell from that intro that you are based out of Ottawa, but Lauren, tell me a little bit about you and how you got into the startup space in the first place, and specifically SaaS, what made this an interesting arena for you to provide your support and expertise?
Lauren Thibodeau:
Yeah, thanks so much, Paul. So, like many people probably I stumbled into this career a little bit by accident and I would say coming out of school, look to see what would be interesting and really came into the software space before SaaS was even a thing. And then as software companies grew, I was at big globally traded companies, Cognos, IBM, PTC out of Boston, Kinaxis. Things shifted to SaaS and that business model excited me, mostly because you need to really keep customers happy and engaged and excited to renew them. And my focus on driving customer adoption, customer value really resonated with that SaaS model. And so as I saw some of the struggles larger companies had, I thought, "Gosh, wouldn't it be amazing to help companies earlier in their journey, so they can set themselves off on the right foot?"
Paul Davenport:
I love that. So it actually taps into a recurring theme that's happened on the past couple episodes, putting the customer at the center of your mission and making sure that when you're developing a solution, you're really thinking about solving that key problem and an acute customer need. We had Alina and Sal actually from [inaudible 00:03:16] on the show recently, and that was a long point that they actually elaborated on, because they both had to make product pivots, because they realized they weren't solving that acute customer need with the solutions that they had in market. So, they more or less went back to the drawing board and started collecting that data. And while I'm glad that they, in their words, failed fast, I think if they had that access to the valuable research that a company like SaaSCan provides to inform that earlier on, it would've saved a lot of headache and time. So I'd love to know a little bit more about SaaSCan, specifically, and what your mission has been there and the different kinds of SaaS businesses that you've worked with so far.
Lauren Thibodeau:
Yeah, that's great, Paul. So yeah, thank you. I'll maybe just tell the quick origin story and then how it's evolved since then and who we're helping now. It really came out of the early days of COVID and the panic and the sky is falling mentality. When I was talking to SaaS companies and CEOs and investors thinking, "What's going to happen to our customers and our churn? Is it going to go through the roof?" And so I just did a study, I did a quick study, what did people think would happen? And surveyed Canadian SaaS leaders, startup founders, and of course they thought the sky would fall, closed the loop about four or five months later and did a second follow-up. This was all back in 2020 and lo and behold, the sky only fell half as much as people predicted. But what was fascinating was the interest and the take-up and the fact that both founders and investors were interested in this data and it really helped SaaS founders, certainly the findings from the second study, show; wow, the companies that weren't impacted as negatively did a couple common things. What did they do? What can we learn? How can that help other SaaS companies?
So in the early days, it really started off as; let's research retention and churn in SaaS companies, very narrow focus. Where it evolved and where we're at today is a much more broad focus on SaaS metrics in general. We support research for companies up to about 5 million in ARR. And we've added in one-on-one mentoring for founders, because nobody wants to ask a question that they think is dumb, never is, but people don't want to ask a question in a public space. So that's what we've now got. We've coupled this research with one-on-one mentoring, and we're all about enabling any vertical, any SaaS founder based in Canada who is under that 5 million ARR mark.
Paul Davenport:
I love too that; this was born out of the pandemic and the panic of the pandemic. I know we all thought the sky was falling. I know it's been a roller coaster ride just for people who are employed at tech companies over the past few years. But again, you started off with that key point around retention and churn, which I think is the key point around SaaS companies. Again, it's a subscription model. You got to keep your customers happy and get that pay coming in and it's all ARR, but that you've broadened it out to, and I love that you even alluded to that, one-on-one mentoring that SaaSCan provides. I love that you had said there's no such thing as a stupid question. I'm not necessarily a technologist and I find myself asking what I think are a lot of stupid questions on this show, but I think even founders who aren't inherent technologists, they're going to have that same apprehension. So I love that there's a program like that where you can feel safe with a partner and that is beautiful.
Now, I would love to talk a little bit about the metrics that matter most for SaaS startups. This is your latest research. I know it was published back in November. We did do some blogging on it on the Boast side.
Lauren Thibodeau:
I saw that. Thank you.
Paul Davenport:
Absolutely.
Lauren Thibodeau:
Awesome.
Paul Davenport:
I love good stats. That is just my marketing brain, but we'll be doing even more blogging about it after this episode. But I'd love to hear a little bit about; how did you collect the data for this, I guess, as a starting point?
Lauren Thibodeau:
Yeah, great question. So the data came from two sources in this report. The first was a survey of investors, mostly investors, mostly Canadian, about four dozen investors. And we ran a survey, it's now the third year I've run this survey, and we asked them not what they care about, but what SaaS founders should focus on if they're under a million in ARR or if they're between 1 and 5 million in ARR. So that was the first thing, reaching out to mostly investors, a couple lenders, but mostly investors.
So that tells us what metrics are important. The second piece was; what does good look like? What does great look like on these metrics? And so, in partnership with a number of other partners, including BenchmarkIT in the U.S., SaaS CFO, there's maybe 8 or 10 of us now, we did a survey to SaaS companies across North America and said, "Tell us your values on these key metrics." And so from there we were able to glean benchmarks. And so this report that SaaSCan published says, "Hey, what should you be focused on," as part one and B, what does great look like on those key metrics compared to benchmarks? And in that data set, there's about 1,880 companies. So it's a very large and robust data set.
Paul Davenport:
That is fantastic. And again, I love that you took that investor first approach in gathering the data too, because obviously they are going to be the ones who are making the judgment call here.
Lauren Thibodeau:
Yeah, that's right. And I want to pick up on that, Paul, that's so important. That's one of the things I'm passionate about with SaaSCan. Investors have been wonderful partners for SaaSCan and advising, we have a great investor, Isaac Souweine on our advisory board, and they've been wonderful. They see 100s of deals every year, 1000s in their career. SaaS startup founders may have founded one company, maybe two. And so SaaSCan is all about really leveling the playing field for founders, educating founders so that they have both the knowledge and confidence when they're talking to investors and lenders, applying for funding. We got to increase their knowledge and confidence. And so that's what this research is about.
Paul Davenport:
Absolutely, and I love it, you said it best, it levels the playing field and it gets direct access to the folks who this is their full-time job.
Lauren Thibodeau:
100%.
Paul Davenport:
They are making these judgment calls. It just makes so much sense. And Lauren, I love that you guys did that. And then again too, when you layered on actually talking about what does good look like, what does great look like, and talking to such a wide breadth of SaaS companies. And just to again, pull up, this was across all of North America. This wasn't just Canadian SaaS companies, this is for all businesses all within that under 5 million ARR phase who are bumping elbows and experiencing a lot of the same issues, I think we'll find, but let's dig into some of the findings. I said in the beginning, #growficiency. Top one that we saw was growth and efficiency is the goal this year. Now those almost seem like competing priorities in a lot of conversations. They don't need to be. I think at Boast we definitely don't think that's the case, but can you unpack what you found there and how those two factors are coming together in 2024?
Lauren Thibodeau:
Yeah, 100%. So what was super interesting here, Paul, is that this was the first year that it was off the charts, this dual combination. So, let me break it down for a sec. So under a million in ARR, the guidance was the most important thing founders should focus on, hasn't really changed much. It's still product market fit. Under a million in ARR, you're just, like you mentioned earlier, figuring out who your customers are, delivering value for them. So that stayed the same. What changed was on this 1 to $5 million ARR band, the first couple investors filling out the survey actually wrote in growth plus efficiency together, growth plus efficiency together. I didn't give it to them as a choice. I said, "Pick one or the other." And they're like, "No, I'm not." And so that's the biggest...
So then we revised the survey to provide that as an option, but that is the single biggest objective from that 1 to $5 million range that investors advise startup founders to think about. And yeah, to your point, they do go hand in hand. It used to be growth at all costs, run with scissors, grow, grow, grow, grow, grow, grow, grow and burn doesn't matter. But of course investors are now saying, "You should have a longer runway," used to be 12 months, now it's 24 would be ideal. And so being efficient about your capital and how much you're burning really matters. Of course, they still want growth. The number one factor in valuations is going to be growth, it is. They still want growth, but it can't be at all costs. There needs to be that focus on efficiency as well.
Paul Davenport:
Absolutely. And it's just realistic. The world we live in is different than it was for most of the past decade. I'm just thinking of a recent Gartner report that we were blogging about today, and it's just the costs of even tech and the cost of labor, they're in a different direction than where we're going with anticipated GDP growth and anticipated inflation. It's just going to be tougher to leverage the old ways of growth without streamlining and becoming more efficient all around. Achieving that magical EBITDA number is going to be really, really tough for companies going forward is just some anecdotal stuff that I've seen. I'm doing my reporting here at Boast and also just working with these companies. Not to dive right into the Boast of it all, but it really, really puts the emphasis on how important non-dilutive funding can be at this phase and also stretching those dollars further.
I'm going to plug SR&ED here. If you're working on something innovative and you're putting that investment in, it's your money and the government wants you to get back a share of that, so that you can keep doubling down on your investment. And it's money you're already spending, and it's keeping a little bit more liquidity in your bank accounts. It's actually making it so that you can drive that market value, do some more of that customer research, leverage some of the suggestions from these SaaSCan reports, for instance, to actually optimize your workflows. So, I love that point and I think it does make sense. And also, I love that they were writing in growth plus efficiency.
Lauren Thibodeau:
Yeah, I know. Isn't that crazy? Isn't that crazy? I want to pick up on what you just mentioned about the Boast report, because this is another way to level the playing field for founders. So we love sharing that out. Like Boast has an amazing guide on SR&ED, on non-dilutive funding for SaaS founders, for all tech founders, and it's just another tool in the toolkit to increase your efficiency, extend your runway. And so 100%, we love sharing that kind of stuff out with our founders.
I want to mention a finding too, that surprised me, beyond just the writing in growth plus efficiency. In this year's report, earlier than ever, a metric called burn multiple showed up. And so even at under a million in ARR, investors are telling founders, SaaS founders, really early stage, "Understand how much money you need to burn to generate a net new dollar of revenue." If it takes you $3 to burn to generate 1 net new dollar of revenue, that's not very good. In the early days, it's a little different. If you've got lots of venture funding, it's maybe a little different. Certainly if you're bootstrap founder, and about a third of SaaS founders in Canada are, you need to be understanding your burn multiple. That showed up earlier, under this million ARR mark, whereas in the past that was something investors said, "Oh, don't even worry about it until you get a little bigger."
Paul Davenport:
That is super interesting. But I think, again, it draws a fine line under those realities of the economy right now and how investors, they need to think about their short-term payback a lot more than I think that they had in the past. And I'm so glad that you actually explained burn multiple to me too in giving that explanation, because that was going to be my next question actually. I know that we had noted that lifetime value and customer acquisition costs, it's not like those don't exist and those aren't going to be things that SaaS founders should be monitoring going forward. But if we're talking about actually getting your runway in order and fueling your runway for 18 to 24 months, you need to have that burn multiple tailored. Now, that was actually another finding that I saw on the report, that 18 to 24 months of runway is the most common guidance. Now, did that come from investors? Did that come from the actual SaaS founders that you interviewed? How did that number come about and what does that say, I guess, in the context of the market?
Lauren Thibodeau:
Yeah, so good question. That came from investors, not founders. It came from investors who used to say, a year or two ago in our studies, "12 months runway is probably good when you're at this under 5 million." Investors now said, "Whoa, really move the pendulum, swing the pendulum over. You need 24 plus months of runway." I actually just looked this morning on the Bessemer State of the Cloud report for 2023, which is a great resource for founders, and their guidance, they do a good, better, best on the top metrics to focus on, and runway is one. They call it out-of-cash state, but it's the same thing. And their good is 12 months, their great is 18 months and their best in-class is 24 plus months. And so it hasn't really changed in 2023. Big change from '22, '21, but yeah, really keeping that...
Now, on the other hand, you talk to SaaS founders and leaders, they don't have 24 months of runway. If you look at the actual data, they really don't. They're trying everything to extend it through various, various sources. This is aspirational and there's only a few who really are doing that. One of the best things founders can do is get close to their customers and fund your growth from revenue. Get close, sell more, understand that product market fit and get that retention flywheel going. So it's of course connected.
Paul Davenport:
I want to emphasize that point that you made too. First off, again, it's aspirational. A lot of folks will not have that runway, but always work to at least get there. And I'm going to plug again, the SR&ED program, but again, it's what we do here at Boast, and it's specifically, again, to help extend that runway and just stretch those investments you're already making further. You deserve that money back. If you are driving truly unique innovation too, you're going to be solving something that your customers love. That's going to turn up in revenue down the line. So it's being diversified too in extending that runway, not leaning on just one source of capital or one source of investment or one investor necessarily, and getting crafty. And so again, that is my Boast plug, but I think it's very salient for SaaS companies too, because they're driving some of the greatest innovation today. They are solving technological uncertainty.
We like to say a lot of the time that just because you're solving a business problem, doesn't mean you're necessarily driving technological uncertainty or driving unique innovation. In the SaaS space, many of the most successful ones really are. And I can't emphasize, again, if you're not sure about whether you qualify for SR&ED, investigate it. That is going to pay off in the long run. And my last thing while I'm on my SR&ED soapbox, it's also a bonafide. It shows that the government agrees that you are doing something worth the investment, that you're doing something they want to see come to market, if you're not in market yet, or they want to see something that will grow to that next phase of growth, get past that 5 million ARR mark. Really just want to emphasize too that 18 to 24 months of runway point. There are ways to get that help, especially if you're doing something very cool.
So, yeah. And now last point from the survey that I did want to bring up, generative AI. It is everywhere.
Lauren Thibodeau:
Of course.
Paul Davenport:
It is everywhere. Even just for the SEO juice, I want to talk about it here, because I think [inaudible 00:19:21] around it, but one of the findings was that it's going to play a bigger role in product development than actually supplanting, I think, workforces, like a lot of the dooming gloom has been around generative AI, especially in the past few weeks. I think maybe closer to my marketing side of things than in the general tech workers sphere. But could you explain a little bit about the findings in that arena?
Lauren Thibodeau:
Yeah, I sure can. And I'm going to come back to another report we did, which I think will be interesting, I'll plug that one too, but yes, in this report, what's going to matter most in 2024, we asked investors what they're seeing in their portfolio companies, again, trying to level the playing field. Where are they seeing the biggest impact of generative AI? Hands down, they said in product development, and I actually want to read you a quote or two. "One developer tripled his productivity using ChatGPT and Copilot." Another quote, "A CTO reported that Copilot was the most impactful development tool he had seen in 20 years of coding. And then the third one, "Teams' tasks that would otherwise take weeks and months are now getting done in days and at less cost and more reliably." And so that was... They're just seeing a game changing impact. It's not replacing developers, it's making them more effective, more productive, more accurate. And so that was really exciting.
The second part of that was avoid the hype. They provided some great input at the end, basically get educated, avoid the hype. AI on its own is not a strategy. It will feed and fuel and add to your business strategy and your unique value proposition. So we actually did another report called "The SaaS Map of Canada," which is also on our website, where we worked with the three AI institutes in Canada. And so there's Amii based in Alberta, Mila based in Quebec and the Vector Institute based in Toronto, and they have a ton of programs for founders to get educated on AI, to build it into their workflows. And they advised us on what are some of the things founders should be doing as well. So, these two reports together, a ton of meaty content on AI, generative AI and how to use it.
Paul Davenport:
Avoid the hype, I think that is a big thing that founders need to take to heart and really think about that growth plus efficiency when you're deploying AI. Like you had said, it tripled productivity for some of the folks who responded here. I've used Copilot. I hate to say how impressed I am with it. Again, I am a marketer. I like writing the words myself. I like doing it all. I'm getting so much more done when I deploy those tools. And it's something I avoided doing, on my side, for a very long time just because again, I was avoiding the technology, because of the hype, not avoiding the hype itself. Whereas I think founders in a different dimension, like you would say, AI alone isn't the strategy. It's finding the ways to make AI capture growth and efficiency alongside the work you're already doing. That's going to be the game changer here. And I think that aligns to a lot of the findings in the reports that you had mentioned too.
Lauren Thibodeau:
100%. 100%. Yeah.
Paul Davenport:
And listeners too, we will have links to all these reports that we've mentioned so far in the interview, in the show notes, so stay tuned for that. But I'd love to know too, Lauren, working with partners in the ecosystem, we love partnering with you. You give us access to some very exciting clients. Again, we get to do that fun SR&ED work, dig into that technological uncertainty with some of the folks in your network. But what is your dream partner in the startup community?
Lauren Thibodeau:
Oh gosh, there's so many. And we've been fortunate to partner with a number of organizations. So I would say any incubator and accelerator network that is growing an ecosystem of companies that include SaaS. I just came back from Winnipeg last week and for the first time met the amazing folks at North Forge and met with some SaaS founders on site there. Was out last year at Startup Week, Winnipeg, Edmonton, excuse me, and met amazing ecosystem players there. So I would say any SaaS incubator and accelerator across the country is an amazing partner, because we can add credible research and mentoring to their ecosystem that's heavily Canadian centric and focused on early stage SaaS companies.
I would also say, and here's my plug, I'm looking always, like many companies, would love to have a sponsor or a couple sponsors to keep this work at no charge for founders. And so anybody who wants to get in front of SaaS companies with their platform, their offerings is a great partner for us. And then thirdly, we have data partners. I mentioned we collaborate with a number of organizations, mostly US-based, to make sure that we're providing fulsome data for Canadian founders. We are always going to be Canadian-centric, and we want to help Canadian SaaS startups, but really the market in the U.S. is 10x what Canada is. Most companies, if they're going to make it big, they need to go into the U.S. And so we need to have that data, those data partners, those investment partners. That's my next big frontier is getting a much, much bigger cohort of U.S. investors participating in our SaaSCan research. That's what's next.
Paul Davenport:
That is fantastic. You had gone to Edmonton, you'd gone to Winnipeg. There is a lot of innovation happening, and at least to me, as an American, unexpected corners of Canada too. Last night we just had a Brews and Bites in Calgary, and I know that we were floored with how many people who are working on projects that are very evidently SR&EDable, that are very evidently innovative and that we think there is some serious potential for. And I just want to emphasize again, you're going to be cashing your net wider and you're going to be working with more investors again in the states and trying to get even more data to help inform it all, but we're not losing sight of Canada in any of this. We're very much making sure that all of this information is getting to the people who can really, really, again, capture that growth, capture that efficiency, and just succeed with these resources.
Lauren Thibodeau:
100%, and getting out, one of my goals is just getting to those corners of Canada that maybe have been underserved traditionally, where there's all this innovation. And so yeah, that's a fabulous point.
Paul Davenport:
I love it. Yeah, and I'm right there with you too, Lauren. And one of my favorite things, since I've joined Boast, has been going to the different corners of Canada and meeting these founders, cornering them with my iPhone and making them do a quick interview with me. It's great. And fortunately they don't run away. I just-
Lauren Thibodeau:
Good. We're pretty friendly. We're pretty friendly up here.
Paul Davenport:
Absolutely. And I'm glad that I think, again, they appreciate the services that we actually offer here at Boast too. And it's a true partnership. I keep saying it, we're bumping elbows with founders. We're founders ourselves here. We're all in this together. And I think it's that community that's unique to Canada. And again, you can leverage a global ecosystem of innovators that are going to help get the Canadian ecosystem even more lift than it already has today. Now, with just another minute left, I'd love to know; what's on deck for the rest of the year, or at least the next few months? Anything that we can point our listeners to, to keep up with, Lauren, in the SaaSCan team?
Lauren Thibodeau:
Yes. We are about to open the 2024 version of the founder survey, where we're getting the next round of data, again in partnership with our U.S. colleagues, and asking Canadian SaaS founders; what are your values on these key metrics? And so people can look for that. That will inform the next year's set of benchmarks, which are all available for free on the SaaSCan website. There's an interactive engine. And so that's what's next, in addition to more reports, more mentoring and U.S. investors in our roster this year.
Paul Davenport:
I love it, and like I said, we will make sure to have links to all the resources that Lauren has listed in this interview in our show notes and on the blog here. But Lauren, I cannot thank you enough for joining me today. Again, keep an eye on the blog. We will be pulling more stats and findings from these reports to share with the larger community. And I hope that we get to cross paths in person sometime soon. I know we've just been passing in the night at some of these events, but I'm looking forward to actually meeting and talk and shop.
Lauren Thibodeau:
Sounds great. Sounds great. Well, we'll welcome you to Ottawa anytime, and thanks so much for the opportunity, Paul.