Deeter puts successful SaaS models into two main buckets: companies that adopt the “SaaS for X” model, taking something done by other companies, even other software companies, and doing it better; and companies that do things that are only possible with the cloud and with mobile enterprise.
Deeter notes that Bessemer has backed both types of company, and has had great returns from both. The defining feature of successful SaaS companies in his mind is not the model they adopt, but whether they are able to achieve “efficient growth.”
For Deeter, efficient growth means from Series B onwards at least a dollar of ARR growth for every dollar of net burn. As companies mature, this also means drawing more from the existing customer base and relying less on new customers. This is the reason for the growth in customer success managers and teams, as companies look not just to reduce churn but consistently up-sell and deliver better results to their existing customer base.
In Bessemer’s analysis, this efficient growth has always been rewarded by the market, but as cash becomes more constricted, particularly at the late stage, this efficiency will become more and more important, Deeter said. At the early stage he predicts that VCs, including Bessemer, will not drastically change what they look for or how they deploy cash, but later-stage companies will be punished for inefficiency.