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SaaS Metrics Don't Work in Climate Software
Last week, the Energize team announced a new series entitled “10 Ways to Win in Climate Software".
We kicked off the series this week with #10: When SaaS Metrics Fail in Climate Tech which takes a look at how traditional SaaS metrics are often misleading when applied to climate-focused startups.
Firms like ICONIQ, Bessemer, and Meritech have done a tremendous job of analyzing SaaS data and making them accessible to everyone. However, if you’re focused on building a climate SaaS company, you might have noticed that your business looks quite different than the Snowflakes, Cloudflare, and DataDogs of the world.
Generalist venture and growth equity firms will often encourage founders to build a company that runs toward the metrics on the left, and in most cases that means spending too quickly before the market is ready to adopt at scale or acquiring revenue that isn’t of high quality.
From our post:
We have found that the financial profile of climate software companies looks different than traditional B2B SaaS. Consuming capital and burning cash to force unnatural market movement rarely works in the long run and often leads to non-durable ARR with high churn risk. We advise entrepreneurs to prioritize establishing an operating model and cost structure aligned to the nuances of climate software.
The goal for any company should be to build an enduring, compounding business that can reach profitability when the time is right. To accomplish this the engine must match the race and to that build the engine, you need the right set of plans - or in this case metrics.
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