The Importance of SaaS Benchmarks - with Sam Baker, Scale Venture Partners

**Ray Rike** (0:00)
Hello, I'm Ray Reich, Founder and CEO of RevOpSquared, and your host of the Metrics that Measure Up podcast. We talked to a wide variety of B2B, SaaS and Cloud thought leaders, executives, investors, and people just like you to discuss the metrics and benchmarks they use to make metrics-informed decisions. Now on to today's show.
Welcome to today's episode of the Metrics that Measure Up podcast. Today, we are joined by Sam Baker, Principal at Scale Venture Partners. Today, we'll be covering five main topics with Sam, including, number one, how to think about benchmarking, especially from an investor's perspective. Number two, designing a benchmarking framework. Three, what B2B SaaS and Cloud Metrics to benchmark. Four, how to avoid metrics and benchmarking overload. And fifth, a bonus topic, kind of the private SaaS and Cloud company valuation trends today. Sam, please take a moment to give a brief overview of your journey to becoming a guest on the Metrics That Measure Up podcast.

**Sam Baker** (1:18)
Hey Ray, thanks so much for having me on the show today. I really appreciate it. And I think I owe it to Doug Landis for introducing the two of us originally. So a huge shout out and thank you to him. I've been investor over at Scale Venture Partners for about six years now. And for any of our listeners who aren't familiar today, Scale Venture Partners, we're a Bay Area focused venture capital fund focused on primarily investing in early and revenue B2B software, what we call enterprise software investing. We led early rounds in companies like DocuSign, HubSpot, Box, bill.com, RingCentral, a lot of companies that have become household names in the SaaS and Cloud ecosystem. But my background prior to working at Scale is a mix of both operating and investing. I was at Box in the pre-IPO days, which was one of our early portfolio companies. And prior to that, I was at a Boston-based venture capital fund of funds that focused on venture capital and private equities secondaries, which is now called Glossing Partners. I'm the only person in my entire family that hasn't started my own company, definitely have some of that entrepreneurial blood in me, which is mixing that with the investing world. This is where those two worlds collide and intersect.
Thanks again, Ray.

**Ray Rike** (2:27)
Well, thank you for that background and Scale has a reputation for being a very quantitative venture fund. In fact, I believe you're currently on Scale Fund Number 7, which was about a $600 million fund. Is that correct, Sam?

**Sam Baker** (2:41)
That's exactly right. Fund 7, $600 million. We manage about 1.9 billion collectively across all of our funds today.

**Ray Rike** (2:48)
One of the reasons I was so excited that Doug did introduce us is because you have such a quantitative orientation at Scale Venture Partners. I want to talk about how that impacts how you think about investments, and more specifically, how that makes you think about benchmarking while you're doing an investment due diligence process.

**Sam Baker** (3:07)
I think that that's a really fair statement. Being quantitative is definitely part of our DNA as a firm at scale. There's a lot of hype in the venture ecosystem, in particular recently how people have been talking about valuations or year-over-year growth, the unbelievable burn rates that some of the later stage companies have at this point. But if you really read some of this analysis for press releases, etc. very closely, there's very little conversations that's grounded in real data. We like to use data at scale to help structure the conversation as much as we can. So it's not some of these arm-wavy conversations around what things might be, but specifically what can we prove out from the data. This is typically where benchmark comes in and why it's important to us. And metrics, the benchmarking of those metrics, can help you understand the reality of how you stack up as a business or as we as investors look at it as an investment opportunity. You know, benchmarking, if I look around all different apertures of our business, it's something that informs every avenue that we look at as a business. How we diligence our investments, how we make decisions about which companies we want to invest in, and which ones we pass on, how we work with our entrepreneurs, and how we report to our customers or our limited partners as well.

**Ray Rike** (4:21)
Well, you know, it's interesting. So let me see if I characterize this correctly. Scale typically invests either Series A or Series B. Would that be directly correct, Sam?

**Sam Baker** (4:32)
Absolutely. And I would say that 70 to 80 percent of the rounds that we wind up leading are Series A's and Series B's. But paying less attention to the preferred letter of the round, we invest once companies have identified product market fit and they're looking to Scale, hence the name and hence where we tend to invest. So, you're doing several hundred k, maybe a million, a couple million dollars in run rate revenue. You understand who your customers are, how to find them out in the ecosystem, how to sell them, and hopefully how to retain them over time.