#10 Thriving in Turbulent Times - advice from B2B SaaS Investor Mark Velik

This week we caught up with Mark Velik, Investment Principal at EVP.

EVP is an Australian VC that specialises in B2B SaaS startups, typically at the Series A stage. They provide capital for scale-ready startups to build out their go-to-market motion. With 45 portfolio companies and over $300 million under management, they’ve got a proven thesis in B2B SaaS investment.

Here’s Mark’s elevator pitch - “We’ve got a specialised focus. There’s accrued learnings with EVP - tips and tricks of how to scale a software business, how to do international expansion, how to think about pricing and packaging - all these elements are quite specific for the B2B SaaS business model. We invest from the series A stage and deploy a highly active approach to a concentrated portfolio, typically leading rounds and taking board seats with all our investments.”

Stalk the EVP portfolio and you’ll see they’ve invested in SaaS firms serving almost every sector.

With the economy stalling across most industries, ensuring your business caters to the mission critical needs of your customers is essential, unless you can show a markable benefit to their revenue generation in a reasonable timeframe. Customers are taking longer to acquire and are more payback conscious than ever. Mark’s observations of companies that, on balance, excelled during COVID, demonstrates that narrowing your strategy and getting crystal clear on what you will and won’t do for your customers, sustains startups through tough times.

What binds founders and investors is their determination to shape the world, a passion for calculated risk taking, and a pragmatic ability to leverage resources around them to face any challenge head on. During tough economic times, here’s what separates the good from the great 👉

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Read the show notes from our chat with Mark:

• Prioritise valuable revenue streams - Be weary of accepting not quite ideal customers. As you grow, you naturally pick up a bunch of customers that don't fit the ideal customer profile, or come from another industry who can still make use of your software, so you might start spending some money to acquire those customers. In challenging times you must narrow your focus and understand which are the most profitable customers that can afford to pay for your product. Find those customers that are not going to churn out after a couple of months. For example, EVP’s portfolio company EatClub, serving the hospitality industry, tanked during lockdowns. Before COVID, they had a national approach to customer acquisition. In response, they narrowed in on specific postcodes where they could see a high demand for restaurants - retaining the highly profitable segments.
• Deliberate cash management & capital stewarding - Historically when cash is abundant or when your business is flying, burn rate management prioritises speed. When things got a little scary during COVID, the best founders in the EVP portfolio were deliberate about their risk parameters, for example identifying the minimum cash balance, and how many months or runway or OPEX was tolerable, then agreeing with the Board what the cash depletion cycle looks like. Mark reflects - “We didn’t want to be running out of cash when they're still burning. We had to figure out what a soft landing might look like. We asked - how do we make sure we use the cash we've got earlier in the funding cycle? If we hire a salesperson, we want to give them time to actually provide value, rather than hiring a salesperson when you've got three months runway and you don't even have time for them to ramp up. I think by and large the portfolio has emerged with a healthier financial profile around capital consumption versus the growth rate that they're achieving and probably a sharpened approach to how they go about growth and which customers they tackle.” 
• If you’re not mission critical, how resilient is the value you provide in a disrupted environment? - Since COVID, Mark and his team are placing more emphasis on defensibility and stickiness. “You've got some solutions that are absolutely mission critical. If you rip it out then you can't take bookings or you can't get paid, or you can't pay your staff. On the other end of the spectrum, you've got some solutions like intelligence or reporting, or tools and widgets that are helpful but not necessarily mission critical. Having a really strong appreciation of what is the value that the software is providing and how resilient could that potentially be in a disrupted environment is something we just ask ourselves a little bit more.” You could have a deeply nuanced UX, a proprietary AI model, or a proprietary data set - understanding that as a whole package as to why the customer's loving your service, and why it’s hard for them to shift off, is where stickiness comes from. Having thorough conversations about risk at a Board level includes looking at how risk-exposed your customers are, too. 

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Trends we’re noticing: Google's U-turn on removing cookies

"The cookie apocalypse for advertisers” is starting to look like it'll pan out similarly to the way that the 'Mayan Prophecy' of 2012 did for all of civilization. - It won't.

Google's recent U-turn was the final step in a four year journey to deprecate third-party cookies in Chrome as part of a wider privacy push across the industry.

Instead, Google will lean into their Privacy Sandbox, a tool that they've been working on which facilitates online advertising by sharing a subset of user private information without the use of third-party cookies.

So, what should you do? Honestly, it could be a while before Google rolls out a full solution.

👉 Continue leveraging cookies, but also tie in a focus on alternative methods of attribution and targeting (like self-attribution and first party data) as well as optimising inputs like creative.

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Tech Spotlight: Yabble Exit

Kiwi martech firm, Yabble, has been acquired by British data giant, YouGov in a £4.5m cash deal. Since starting in 2017, Yabble has been at the forefront of AI-powered audience intelligence. Their acquisition intends to fuel the next stage of growth. They’ve been recognised in the GRIT Top 50 Most Innovative Supplier list for 2023 and CEO Kathryn Topp as one of the World’s Top 250 Global Innovators for Insights.

Acknowledging their early backers, founder Rachel O’Shea said “New Zealand Inc benefits hugely from businesses like ours seizing an opportunity and investors who believe in backing world leading innovation. We want to thank our many investors including Hillfarrance LP, NetX Partners, Movac, Aspire NZ, Enterprise Angels, Angel Investors of Marlborough, Icehouse Ventures and numerous individuals as well as NZTE and Callaghan Innovation.”