Swedish SaaS investor Monterro has shared its Nordic B2B software growth benchmark report for 2024. It’s based on data from 298 Nordic software companies and has data around CAC payback (it is going up), salary increases (about 4.5 % planned for 2024), pricing increases (almost 7 %), churn and many other things a founder, executive or investor would be interested in.
Looking at the data it seems like the companies reporting are mainly bootstrapped and backed by lower risk type of investors (family offices, private equity etc as opposed to venture capital), as profitability is quite high from very small to €25+ million revenue companies.
We talked about 1X (humanoid robots), Strise (anti money laundering), Enode (energy integration platform), Oda (world leading online grocery), Two (B2B BNPL), Tana (knowledge management), Remarkable (“the paper tablet”), Dune Analytics (crypto analytics and more) and a bunch of other great companies.
Two takeaways from a Swedish perspective:
From a founder perspective. Norwegian founders and startups are quite similar to Swedish (small home market, expanding internationally, funding works the same), so don’t let the border stop you from reaching out for peer advice or to talk with a startup that has gotten one or two steps further than you.
From an investor perspective: The Nordic countries are quite similar, but there are also differences, e.g. which sectors are the most popular among startups. That gives a broader range of startups to invest in, and the potential of a stronger and better balanced portfolio.
Spotify reported Q1’24 results this week and stated that it will now be consistently profitable going forward.
The profitability indicator I like to pay attention to is gross profit/employee. On an annual basis it was 520,000 euros.
At that level Spotify really should be able to continue operate profitably and if it grows gross profit faster than employee, marketing and G&A costs it should see increased profits.
With revenue growth of ca 20 % year-over-year and increasing gross margins that should be very doable.
In addition to the AI discussion, I find Mark Zuckerberg’s comment on how he thought about not selling Facebook a good general approach:
If you like what you are doing, like your company and would build the same company again, why sell?
The full question and answer:
“Dwarkesh Patel 00:06:47
This is a total detour, but I want to ask about this while we’re on this. We’ll get back to AI in a second. In 2006 you didn’t sell for $1 billion but presumably there’s some amount you would have sold for, right? Did you write down in your head like “I think the actual valuation of Facebook at the time is this and they’re not actually getting the valuation right”? If they’d offered you $5 trillion, of course you would have sold. So how did you think about that choice?
Mark Zuckerberg 00:07:08
I think some of these things are just personal. I don’t know that at the time I was sophisticated enough to do that analysis. I had all these people around me who were making all these arguments for a billion dollars like “here’s the revenue that we need to make and here’s how big we need to be. It’s clearly so many years in the future.” It was very far ahead of where we were at the time. I didn’t really have the financial sophistication to really engage with that kind of debate.
Deep down I believed in what we were doing. I did some analysis like “what would I do if I weren’t doing this? Well, I really like building things and I like helping people communicate. I like understanding what’s going on with people and the dynamics between people. So I think if I sold this company, I’d just go build another company like this and I kind of like the one I have. So why?” I think a lot of the biggest bets that people make are often just based on conviction and values. It’s actually usually very hard to do the analyses trying to connect the dots forward. “
The stock market is great, but most of the time the core business model of the stock market is not to provide capital to companies that want to grow. Providing capital is the core business model of private investors, like venture capital. The stock market is more about providing liquidity for trading shares and most public market investors look to take money out of companies in the form of dividends and share buybacks, not putting money into new share issues. (Public market investors, like private investors, also buy shares for price appreciation, but that is not a direct use of the cash in a company.)
Two slides that indicate that times are getting better (software is growing and venture capital invested has stopped going down):
Public software companies are growing Net New Annual Recurring Revenue (adding more future revenue than they are losing)
Venture capital dollars invested have declined for eight quarters, which is very close to the 9-10 quarters of decline after the Internet bubble and the Great Recession, but now seem to have bottomed out and are at the same level as in 2017-2019.
Klarna released its annual report and an investor presentation for 2023 results a while back (which I missed at the time). I liked the format of the investor presentation, and believe it is one to get inspiration from. Two things in the investor presentation interested me in particular:
1. The Profit and Loss statement, and the development year-over-year. Growing revenue more than 20 % while cutting most costs 10-30 % per main cost area is good execution.
