      SaaStr · 2018-12-17
      · 2725d
    

SaaS Contingency Planning: A Plan B Strategy for Market Downturns (2019 Edition)

Jason Lemkin provides guidance on developing contingency plans for SaaS companies across different growth stages in anticipation of potential market downturns. The article categorizes SaaS companies into three types based on ARR and burn rate, prescribing different Plan B strategies for each. The overarching thesis is that while current market conditions (2018-2019) remain exceptionally favorable, historical patterns suggest inevitable cyclicality requiring preparedness.

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Metrics in this report

AppDynamics Acquisition Price

3.7$ billions

actual

Cisco acquisition in 2016

GitHub Acquisition Price

7.5$ billions

actual

Microsoft acquisition in 2018

Initial Scale Threshold

10$ millions ARR

minimum

Stage at which companies gain operational flexibility for cost reduction without layoffs

Initial Traction Threshold

1-1.5$ millions ARR

minimum

Earliest stage at which contingency planning becomes relevant

Monthly Burn Rate at $2m ARR

400-500$ thousands per month

range

Typical burn rate for well-funded hot SaaS startups

Qualtrics Acquisition Price

8$ billions

actual

SAP acquisition in 2018

Unicorn Count

100count

approximate

Cloud/SaaS unicorns as of 2018-2019