The startups in your portfolio are likely paying a high price for top SaaS tools like HubSpot, AWS, and Salesforce, and are missing out on hundreds of thousands of dollars in savings. Let me explain.
If you are part of the platform team at a venture firm or a VC yourself, you know that it’s more important than ever to think of ways that you can have your portfolio companies cut burn.
Because of this change in the market, you should be laser-focused on providing your portfolio companies access to the best SaaS discounts possible. This is absolutely the most directly impactful effect you can do to help startups cut burn right now.
“Why would I offer these deals? They can already get them through other vendors.”
Here’s the TL;DR version. When a SaaS company initially launches a discount, that launch is publicly available to everyone. Then, after their learnings, SaaS companies realize that only the startups that are funded are really worth the CAC. It’s customer acquisition via partner affiliation.
SaaS discount programs are commonly initiated by the CEO or an executive and then piloted by a product marketing or partnerships team member. These programs typically need executive sponsorships because discounts can cause pricing integrity issues and channel conflicts with the sales team.
The first iteration of the discount program tends to be pretty generic. This looks something like “12 months free of our most basic plan for startups.” It’s usually broadly defined and available to all. The performance metrics tend to be very simplistic, and the program is launched for about a year before any analysis occurs.
It’s common to find that most, say 60%, of startups no longer exist at the end of the discount period. Another 30-35% don’t fit the ICP and will never generate meaningful revenue. However, 5-10% will be the exact customers the program is designed to attract.
So, the program develops. A lesser discount is offered to all, and a better one is offered to target 5-10% of startups meeting certain criteria. These criteria most commonly require VC funding of a specified amount or range but could also include other characteristics like geographical preference, the specific technology being developed, etc.
However, a problem arises when discounts are segmented like this. The smaller discount is still made a publicly available discount, but the larger discount isn’t publicly available information. Even though these larger discounts are available exclusively to VCs and accelerators, many VCs aren’t aware these types of discounts exist. I’ll provide some examples further down.
Following the second year into the third and fourth year and beyond, the analysis of the discount program becomes more sophisticated, measures are taken to optimize conversions, and these programs evolve in a few different ways. Look for a future blog for us on these developments, but for now, just know that the same issue brought on by segmenting discounts continues throughout future iterations of the program.
There are publicly available deals, but it's a misnomer to assume your portfolio companies already have access to these deals through their bank or another vendor. On average, at Builtfirst, we typically see four different discount tiers, and the top available tier is almost always available exclusively to VCs. If your portfolio companies are accessing deals through Mercury, or Brex, you can almost always offer them an even better deal, and it's not insignificant. For instance, through Carta or Brex, startups can access something like $5k AWS credits. Through VCs like you, that discount can increase upwards of $100k in AWS credits. It’s the same story with HubSpot, which can increase from a 30% discount to a 90% discount simply by going through a VC.
Just to reiterate. There is no other way these startups can access deals like this unless they go through a VC like yourself. You, the VC, are the only one that can give them access. it is your responsibility to make sure that you are showcasing them.
Okay, so I’ve convinced you that you need to do something. Here’s how most VCs still approach these partnerships.
It doesn’t have to be this hard.
Here at Builtfirst, we’ve developed a platform to allow VCs to access top-tier deals through thousands of partner relationships we’ve already secured.