A while back I wrote a post called Churn or Growth for Startups, and referenced the excellent content from the VC blogger Tom Tunguz. The answer was churn.

What should be the focus for the SaaS company looking to scale its business and grow at a rate that attracts heathy valuations and juicy multiples for an IPO or an exit? It’s grown by bringing on new companies and keeping them, so surely it should keep adding new logos, right?

The beauty of the SaaS model is that on the first of the year you can count on the revenues for all your customers who are renewing their annual commitment. Going from $80m to 100m in one year may seem like a giant jump, but the successful SaaS company has close to the €80 coming in during month 1, so it’s not such a big leap and, indeed, many such companies see themselves growing at phenomenal annual rates, far in excess of the 25% in my example.

The scaling company should focus on keeping and growing its existing customer base.

Have a look at this post from Mr Tunguz, which he said in an email recently was far and away the most popular post he did in 2018, 10 times more popular in fact than the next most popular post. Which is intriguing, since the post he links to is from 2016…

So startups should focus on preventing churn, and more established companies should focus on renewals, which is to say they should focus on preventing churn…

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