This is the most important thing VCs can do to extend portfolio startup runway (and it’s not non-dilutive capital)
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.
We hear it all the time.
“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.
A brief overview of how SaaS discounts (typically) work
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.
Seriously, the savings are significant.
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.
The old way of providing these discounts
Okay, so I’ve convinced you that you need to do something. Here’s how most VCs still approach these partnerships.
- You’ll need to contact all of the different SaaS vendors you’d like to potentially give your portfolio companies access to their discount programs. We’ve found that out of the 1000+ deals offered through Builtfirst (we’ll get to this), there are about 100-200 deals that are the most popular. These should be your first priority.
- Once you get in contact, you’ll need to provide these SaaS companies with information to verify that you fit the criteria.
- Finally, you’ll need to find a way to showcase these deals to your portfolio companies. In Y Combinator’s case, they built their own proprietary software to do just that.
It doesn’t have to be this hard.
The new way to provide VC SaaS discounts
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.
- Signing up is simple, free, and you automatically gain access to these deals.
- You’ll become automatically pre-qualified for 90% of the deals on Builtfirst.
- You have a direct line of communication with every vendor via our chat feature.
- If you can’t get in touch with a vendor (rare), we will personally reach out on your behalf.
- You have your own white-labeled marketplace with all of the deals you choose to offer your portfolio companies.
- All of your deals are updated automatically as vendors change their terms.
