How to Pimp Your Toolstack: Tips From 12 High-Growth Startups
One of the most common questions we at Peak get from our portfolio companies is, “Do you know a good tool for [insert solution here]?” Funny enough, one founder’s questions are often also relevant to our other portfolio companies.
With this in mind, we decided to host a Founder Session around this topic. We organize these sessions a couple of times per year to discuss specific topics with our portfolio founders. Looking back on the session, we figured: sharing is caring. Here you’ll find some key takeaways of the evening, including some of the best tools our portfolio companies are using, SaaS vs marketplace specific tools, as well as how to choose and grow with your tools. Hopefully, these tips can be a useful source or starting point in pimping your own tech stack.
During our event, each of our portfolio companies briefly presented their tooling stack and their favorite tools. Some even publicly share their stacks on Stackshare (which is a great place for finding the right tool for your needs). This gave us a nice opportunity to compare and see what the most popular tools are.
Here are the top 10 of most-used tools in our portfolio:
- Google Analytics / Google Tag Manager (not surprising)
- MailChimp (always a classic)
- Google Data Studio
Key takeaways: 1. Google Analytics is a no-brainer. 2. Use Stackshare to find the right tool for your needs. They group tools by categories, so it’s easy to find alternatives and compare.
Tooling stacks evolve over time
At Peak, we invest in companies at an early stage (sometimes pre-revenue) and help them reach scale. As our portfolio companies mature, so do their tech stacks. For business intelligence / dash boarding tools, that looks something like this:
At the early stages of a company, there’s usually not a huge amount of data to work with. Tools like SuperMetrics can help you pull data from different sources into Google Sheets. From there, you can do your initial data analyses and add charts, etcetera.
After a while, you figure out some of the basic metrics/reports you want to look at on a regular basis. As the amount of data you work with grows, you may want to switch over to an alternative that fits your needs. In our portfolio companies, we see Google Data Studio, Microsoft Power BI, and Redash being used at this stage. These tools require more setup time than a Google Sheet, but they are also more robust and can handle more data.
Then, as you continue growing and your users/customers start generating more data, these tools will also reach their limits. By this time, you will probably have data requests from multiple people in your team and you want to democratize your data. At this stage, we see companies switching over to professional-grade services such as Looker, Metabase, or Tableau. These come with a heftier price tag (except Metabase, which is open-source) and often require a dedicated resource within your team. However, when set up properly these tools can really help you drive your business.
Key takeaway: Look for tooling that fits the size and the stage of your company. There’s no need to implement the most sophisticated tooling right away: start out easy and grow your stack along the way.
SaaS-specific vs Marketplace-specific tools
At Peak, we have a specific focus and expertise SaaS and marketplace companies. All of our portfolio companies – with one or two exceptions – fall into these two categories.
For SaaS companies, we see a number of tools that offer insight into the key metrics defining growth. Tools like BareMetrics, ChartMogul and ProfitWell all offer insight in key metrics that define a company’s MRR, such as new business / expansion / contraction / churn (the key components of the MRR movements charts).
However, for marketplaces, we do not see tools that capture the key metrics in a single dashboard. Perhaps marketplaces have a wider range of metrics that define success, and so it is less clear what numbers to look at. That said, we evaluate metrics like retention, liquidity and concentration for every potential marketplace we invest in. This usually means diving into a spreadsheet for an hour or two. So far we haven’t found any marketplace-specific analytic tools that track such metrics.
Key takeaway: If you want to start a SaaS company and not sure what to build: have a look at marketplace analytics 🙂
Pricing models can work prohibitively
As SaaS investors, we typically look at pricing models from the seller’s (i.e. our portfolio company) point of view. SaaS pricing models typically scale in a number of axes, such as the number of users/seats, premium features, or usage (volume). As investors, we like these axes, as they make SaaS businesses scalable. However, during our event, we saw some examples of portfolio companies dropping SaaS tools, because the costs got out of hand.
For example, one of our portfolio companies was using Segment as their customer data warehouse. Segment is widely regarded as one of the top players in this segment (pun intended). Segment’s pricing scales with the number of users in your database. From Segment’s point of view, this makes total sense. With more users, you derive more value from their tool, so you can pay more.
However, one of our portfolio companies has a model where users sign up early on but only convert into paying users after a while. As such, they have a large number of users that do not bring in any revenue (yet!). With Segment’s pricing model, they are being charged for all active users, regardless of whether these users bring in any money. Unfortunately, Segment did not want to diverge from their pricing model, so our portfolio company switched to another alternative (despite Segment being the preferred option).
Key takeaway: Scaling SaaS-pricing with usage only works if such usage is aligned with the customer’s (financial) performance. If your SaaS does not bring in any substantial top-line improvements but does scale on the cost side, your customers are more likely to churn.