Archive for May, 2014
Excellent post about the SaaS business model from Andreessen Horowitz
Tune into any cable network stock market channel and the airwaves resonate with one consistent theme: SaaS companies are simply too expensive. In fact, we might even be in a bubble!
The argument goes as follows — high revenue growth coupled with lack of profits means these businesses are fundamentally broken. Just as we saw in 1999-2000, investors’ willingness to pay for growth at any cost will end and many SaaS companies will be left behind.
But that line of reasoning conflates the lessons of the 1999-2000 tech bubble. The businesses that failed in the last tech bubble were valued on metrics that were both poor indicators of the health of the business (“eyeballs”, anyone?) and were nowhere to be found in generally accepted accounting principals (GAAP). In contrast, SaaS companies can be properly valued based on metrics that are both good indicators of financial health and…
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A worthwhile read about pricing for a SaaS business. The fact is that there’s no one correct answer for pricing. Think about tiers, value to your customer, and keep testing and measuring. The most important thing is to have a good feedback loop and analytics so you can keep refining.
Many businesses (either mature ones that have slowed their growth due to market share maturity) or even startups can benefit from better practices here. Now, the reality is that many online data businesses are small…
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