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May 4, 2023 · 20m · top-founders

How We Help ScaleUps Measure Efficient Growth

Jeremey Donovan · 17m spoken Nathan Latka · 46s spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

At the SaaSOpen conference, Jeremey Donovan delivers an econometric analysis of SaaS valuation multiples, illustrating the macro shift from 'growth at all costs' to capital efficiency. He provides SaaS leaders with practical frameworks for pipeline discipline, deal qualification, and cost center rationalization to maximize enterprise value.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 4.1% of the talking time here. How this is scored →

Nathan as informed peer 0.0 Guest teaching 0.0 Guest disagreement 0.0 Nathan pushing back 0.0
05100:0010:0020:001:25–5:01 · Nathan as informed peer 0/10 Rule of 40 Mechanics and Valuation Multiple Dynamics Solo conference presentation monologue by Jeremey Donovan on Rule of 40 mechanics. The host Nathan Latka is not present in the room, so host-side interaction scores are zero.5:02–9:00 · Nathan as informed peer 0/10 Regression Analysis on SaaS Multiples and Disaggregated Efficiency Jeremey breaks down regression analysis and R-squared variance on SaaS valuation multiples. It is an uninterrupted solo lecture with brief audience check-ins, meaning zero host participation.9:01–11:08 · Nathan as informed peer 0/10 Quantitative Shift from 'Growth at All Costs' to Capital Efficiency Jeremey presents empirical data demonstrating the market shift from growth-at-all-costs to capital efficiency. Solo presentation format with no host interaction.11:08–15:40 · Nathan as informed peer 0/10 Scaling Top-Line Growth through ICP Precision and Pipeline Discipline Jeremey discusses ICP precision and disciplined pipeline generation based on insights from PTC and BladeLogic leaders. Monologue speech with no host pushback or dynamic.15:40–18:21 · Nathan as informed peer 0/10 Rigorous Deal Inspection, Radical Candor, and Qualification Standards Jeremey explains rigorous deal qualification, the MEDDIC framework, and radical candor in sales leadership. Continued solo keynote address with no host presence.18:21–20:43 · Nathan as informed peer 0/10 Operational Levers for Efficiency: Spans, Quotas, and Tooling Jeremey wraps up the presentation by covering span of control, quota multiples, and tech stack auditing. The entire segment is a solo stage wrap-up.1:25–5:01 · Guest teaching 0/10 Rule of 40 Mechanics and Valuation Multiple Dynamics Solo conference presentation monologue by Jeremey Donovan on Rule of 40 mechanics. The host Nathan Latka is not present in the room, so host-side interaction scores are zero.5:02–9:00 · Guest teaching 0/10 Regression Analysis on SaaS Multiples and Disaggregated Efficiency Jeremey breaks down regression analysis and R-squared variance on SaaS valuation multiples. It is an uninterrupted solo lecture with brief audience check-ins, meaning zero host participation.9:01–11:08 · Guest teaching 0/10 Quantitative Shift from 'Growth at All Costs' to Capital Efficiency Jeremey presents empirical data demonstrating the market shift from growth-at-all-costs to capital efficiency. Solo presentation format with no host interaction.11:08–15:40 · Guest teaching 0/10 Scaling Top-Line Growth through ICP Precision and Pipeline Discipline Jeremey discusses ICP precision and disciplined pipeline generation based on insights from PTC and BladeLogic leaders. Monologue speech with no host pushback or dynamic.15:40–18:21 · Guest teaching 0/10 Rigorous Deal Inspection, Radical Candor, and Qualification Standards Jeremey explains rigorous deal qualification, the MEDDIC framework, and radical candor in sales leadership. Continued solo keynote address with no host presence.18:21–20:43 · Guest teaching 0/10 Operational Levers for Efficiency: Spans, Quotas, and Tooling Jeremey wraps up the presentation by covering span of control, quota multiples, and tech stack auditing. The entire segment is a solo stage wrap-up.1:25–5:01 · Guest disagreement 0/10 Rule of 40 Mechanics and Valuation Multiple Dynamics Solo conference presentation monologue by Jeremey Donovan on Rule of 40 mechanics. The host Nathan Latka is not present in the room, so host-side interaction scores are zero.5:02–9:00 · Guest disagreement 0/10 Regression Analysis on SaaS Multiples and Disaggregated Efficiency Jeremey breaks down regression analysis and R-squared variance on SaaS valuation multiples. It is an uninterrupted solo lecture with brief audience check-ins, meaning zero host participation.9:01–11:08 · Guest disagreement 0/10 Quantitative Shift from 'Growth at All Costs' to Capital Efficiency Jeremey presents empirical data demonstrating the market shift from growth-at-all-costs to capital efficiency. Solo presentation format with no host interaction.11:08–15:40 · Guest disagreement 0/10 Scaling Top-Line Growth through ICP Precision and Pipeline Discipline Jeremey discusses ICP precision and disciplined pipeline generation based on insights from PTC and BladeLogic leaders. Monologue speech with no host pushback or dynamic.15:40–18:21 · Guest disagreement 0/10 Rigorous Deal Inspection, Radical Candor, and Qualification Standards Jeremey explains rigorous deal qualification, the MEDDIC framework, and radical candor in sales leadership. Continued solo keynote address with no host presence.18:21–20:43 · Guest disagreement 0/10 Operational Levers for Efficiency: Spans, Quotas, and Tooling Jeremey wraps up the presentation by covering span of control, quota multiples, and tech stack auditing. The entire segment is a solo stage wrap-up.1:25–5:01 · Nathan pushing back 0/10 Rule of 40 Mechanics and Valuation Multiple Dynamics Solo conference presentation monologue by Jeremey Donovan on Rule of 40 mechanics. The host Nathan Latka is not present in the room, so host-side interaction scores are zero.5:02–9:00 · Nathan pushing back 0/10 Regression Analysis on SaaS Multiples and Disaggregated Efficiency Jeremey breaks down regression analysis and R-squared variance on SaaS valuation multiples. It is an uninterrupted solo lecture with brief audience check-ins, meaning zero host participation.9:01–11:08 · Nathan pushing back 0/10 Quantitative Shift from 'Growth at All Costs' to Capital Efficiency Jeremey presents empirical data demonstrating the market shift from growth-at-all-costs to capital efficiency. Solo presentation format with no host interaction.11:08–15:40 · Nathan pushing back 0/10 Scaling Top-Line Growth through ICP Precision and Pipeline Discipline Jeremey discusses ICP precision and disciplined pipeline generation based on insights from PTC and BladeLogic leaders. Monologue speech with no host pushback or dynamic.15:40–18:21 · Nathan pushing back 0/10 Rigorous Deal Inspection, Radical Candor, and Qualification Standards Jeremey explains rigorous deal qualification, the MEDDIC framework, and radical candor in sales leadership. Continued solo keynote address with no host presence.18:21–20:43 · Nathan pushing back 0/10 Operational Levers for Efficiency: Spans, Quotas, and Tooling Jeremey wraps up the presentation by covering span of control, quota multiples, and tech stack auditing. The entire segment is a solo stage wrap-up.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 29.2% · guest 70.8%0:00 · Nathan 29.2% · guest 70.8%3:00 · Nathan 0% · guest 100%3:00 · Nathan 0% · guest 100%6:00 · Nathan 0% · guest 100%6:00 · Nathan 0% · guest 100%9:00 · Nathan 0% · guest 100%9:00 · Nathan 0% · guest 100%12:00 · Nathan 0% · guest 100%12:00 · Nathan 0% · guest 100%15:00 · Nathan 0% · guest 100%15:00 · Nathan 0% · guest 100%18:00 · Nathan 0% · guest 100%18:00 · Nathan 0% · guest 100%
Sharpest disagreement ▶ 6:05 Calling BS on Pre-2022 Rule of 40 Correlations

Jeremey emphatically challenges conventional wisdom, noting he would call total BS on relying on Rule of 40 before Q2 2022 because the statistical correlation did not exist.

 Hardest push from Nathan ▶ 0:00 Nathan Latka Intro Framing

Nathan Latka provides the podcast intro framing the high standard of metrics and tactics required for SaaS Open presentations.

 Biggest teaching moment ▶ 6:55 Deconstructing Free Cash Flow and Variance Breakdown

Jeremey explains the mathematical nuances of deconstructing efficiency into R&D, G&A, S&M, and COGS to achieve 45 percent explainability on multiples.

 Nathan holds their own ▶ 0:15 Latka Platform Database Mention

Nathan highlights the proprietary depth of the GetLatka database and filtering tools across revenue, churn, CAC, and valuation metrics.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Rule of 40 Mechanics and Valuation Multiple Dynamics 0000 Solo conference presentation monologue by Jeremey Donovan on Rule of 40 mechanics. The host Nathan Latka is not present in the room, so host-side interaction scores are zero.
Regression Analysis on SaaS Multiples and Disaggregated Efficiency 0000 Jeremey breaks down regression analysis and R-squared variance on SaaS valuation multiples. It is an uninterrupted solo lecture with brief audience check-ins, meaning zero host participation.
Quantitative Shift from 'Growth at All Costs' to Capital Efficiency 0000 Jeremey presents empirical data demonstrating the market shift from growth-at-all-costs to capital efficiency. Solo presentation format with no host interaction.
Scaling Top-Line Growth through ICP Precision and Pipeline Discipline 0000 Jeremey discusses ICP precision and disciplined pipeline generation based on insights from PTC and BladeLogic leaders. Monologue speech with no host pushback or dynamic.
Rigorous Deal Inspection, Radical Candor, and Qualification Standards 0000 Jeremey explains rigorous deal qualification, the MEDDIC framework, and radical candor in sales leadership. Continued solo keynote address with no host presence.
Operational Levers for Efficiency: Spans, Quotas, and Tooling 0000 Jeremey wraps up the presentation by covering span of control, quota multiples, and tech stack auditing. The entire segment is a solo stage wrap-up.

Statements from this episode (9)

Assertion Partly supported
Donovan: Median SaaS multiples fell two-thirds from 15x to 5x
“We were at the 15 X or so back a year ago. We're now down to, you know, five, five X, right? So we're off basically two thirds of SAS multiples.”
Jeremey Donovan May 4, 2023 ▶ 2:51
Assertion Supported
Donovan: Rule of 40 SaaS valuation premium increased from 1.5x to 2x
“If you were to take all the data that's in the 20, the zero, the under zero to up to 40, and then compare that to the over 40, it was about 1.5 x higher for the people who were over 40 before. And now it's two x higher if you're over 40.”
Jeremey Donovan May 4, 2023 ▶ 4:23
Assertion Partly supported
Donovan: Rule of 40 had zero correlation with SaaS multiples before Q2 2022
“So if you just use rule of 40 where you composite, you smoosh growth and efficiency together, until Q two of last year, there was actually no correlation. So, like, I would have called total BS on using rule of 40 by itself before Q two of last year. It just w…”
Jeremey Donovan May 4, 2023 ▶ 6:36
Assertion Supported
Donovan: Rule of 40 explains 21% of SaaS multiple variation post-Q2 2022
“Now, 21% of the variation in multiple is explained by variation in rule of 40, but you can do better.”
Jeremey Donovan May 4, 2023 ▶ 6:55
Assertion Supported
Donovan: Free cash flow margin explains 40% of SaaS valuation multiples
“40% of the variation in Multiple can be explained by variation in free cash flow margin.”
Jeremey Donovan May 4, 2023 ▶ 7:21
Assertion Partly supported
Donovan: SaaS multiples had no statistical link to margins or CAC pre-2022
“What is kind of surprising is during that period, there was no statistical relationship between your multiple and your margin, your gross margin, or your CAC, your sales and marketing efficiency.”
Jeremey Donovan May 4, 2023 ▶ 9:28
Assertion Supported
Donovan: R&D spending variation no longer predicts SaaS valuation multiples
“Interestingly enough, R&D, which the more you spent on R&D before, the stronger your multiple was, because you were investing for growth, now it's neutral. That very, like, there is no predictive, very, The variation in R&D spend does not have any predictive v…”
Jeremey Donovan May 4, 2023 ▶ 10:18
Assertion Partly supported
Donovan: PTC originated the MEDDIC enterprise sales framework under John McMahon
“So PTC is, is kind of the archetypal progenitor of the enterprise SaaS sales. They invented Medic, if you guys have probably heard of the Medic framework for qualification. So they invented Medic and John McMahon there was, like, one of the inventors. John Kap…”
Jeremey Donovan May 4, 2023 ▶ 14:13
Disclosure
Donovan: Insight recommends setting sales quota-to-OTE multiple at 5x
“We recommend, from Insight, we recommend that you set quota to OTE, or OTE to quota multiple at five X, so your 20% cost of sales on new business. You know, we were routinely seeing four X in our, in the companies that we were funding, as well as just out ther…”
Jeremey Donovan May 4, 2023 ▶ 19:10
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