This year will be more about nailing it than scaling it
The record-breaking venture investment of 2021 did not carry over into 2022. Rising interest rates, inflation, geopolitical issues and a declining economy caused fundraising to plummet during the year.
2022 was a year of major changes, and 2023 will be the time to discern who comes out on top. More importantly, we’ll have clearer criteria for measuring success.
The landscape for software companies
Since cloud computing emerged as a trend over a decade ago, the tech ecosystem has experienced some minor downturns, though none have been truly significant. Now we face an unfamiliar challenge: inflation.
Inflation has been a major macroeconomic factor for 30 years, and to stay ahead of it you must grow at least 7% annually—or shrink.
In a difficult budget environment, high gross retention rates can be a strong signal that customers love your products and get real value from them.
Inflation and demand are shifting rapidly: from a period of strong product growth spurred by the pandemic to tightening budgets as businesses brace for the storm.
The predictors of success
Investors will seek out efficiency metrics such as high gross margins, impressive retention rates, customer growth potential, reduced acquisition costs, shorter sales cycles and productive sales reps.
Gross retention is key to 2023 growth plans; it signals that customers are receiving value from the product and love it. In a tough budget climate, strong gross retention rates are critical.
Investors are monitoring the break-even path via metrics such as cash burn to net new annual recurring revenue.
