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Local investor shares how Houston SaaS companies can stay afloat amid the pandemic

In the golden age of software companies, here's what SaaS entrepreneurs need to focus on to thrive. Getty Images

The COVID pandemic has created a macro environment that is similar to that of the 1918 Spanish Flu and the 2008 downturn and B2B software-as-a-service companies, like Salesforce, found the 2008 downturn an advantageous environment for cheap revenue growth — I've discussed this in a previous column. Now, I'd like to explore how B2B SaaS founders can position their businesses to capture this opportunity and better prepare themselves for the $400 billion of private equity looking for IT investments.

A prolonged recession due to the global response to COVID-19 provides opportunities for smart founders. Talent and partnerships from non-tech industries are likely to be much easier to access in a recessionary environment. Widespread adoption of technology is likely to result in a much more open and fruitful sales environment. And robust exit opportunities mean that this over performance will be rewarded.

So, how should smart founders operate given this opportunity? Here are a few implications that are congruent with our research.

Know your sales performance data

Many companies forsook effective KPI management while growing. Now is the time to home in on metrics so that you can discern the payoff of different tactics. Knowing sales performance metrics will help founders deploy capital wisely. Good quality and frequent data will also help you assess whether this thesis is working out for your firm.

Get whatever funding you can — and fast

In 2008, funding dropped by 20 percent, valuations by 20 to 25 percent and check sizes by 35 percent, and the current environment could be more drastic. This is paradoxical given the incredible opportunity for B2B SaaS right now, but it is in line with the human urge to run from risk. Despite claiming to be risk-seeking and long-term focused, most venture firms will pull back in this environment. Get what you can and be flexible on valuation. A smart founder who sees the opportunity can overcome additional dilution now.

Hire expert sales talent

The urge to cut back on salaries and freeze pay is high right now. Don't make that mistake, especially not in sales. There will be many firms that make this mistake, giving you the opportunity to hire expert sales talent. Pay them at the top of market, give them uncapped commission plans, and capture the growth opportunity.

Create a survival plan and set limits

This growth opportunity might not materialize. Fortunately for most B2B SaaS, there is operational flexibility built into the cost model. You can cut back on aggressive sales growth and pull expenses within your recurring revenue. Once you have a cash floor in mind and a downside plan of what you will do if either 1) you get to your cash floor or 2) the sales metrics are not proving attractive, you are safe to charge ahead. Armed with compelling acquisition data and a stable customer base, it would be easy to find additional capital.

Prepare for inflation in you customer contracts

While most B2B SaaS investors love long term contracts, the unprecedented level of fiscal and monetary support in the wake of a global shutdown will likely lead to above average levels of inflation. Current inflation expectations are muted (measured by the spread on the 10 year TIPS and the 10 year treasury). Inflation may not take off, but it is wise to prepare for it and include annual increases on multiyear contracts or a CPI price adjustment each year.

Be nice

Most companies are beating up on their vendors right now, if for no reason other than this is 'what you do during a downturn.' It is worth exploring what your vendors can do for you, but this should be a partnership driven discussion. Invite your vendor in and explore how to reach a win-win during this time. Communicate often and clearly and try to their point of view. Larger companies have programs in place to help where smaller ones might not have as much flexibility. This downturn will pass, but how you treat people will have consequences.

Build flexibility into your growth plan

This environment is a great opportunity to add flexibility and optionality into your cost profile. Leveraging flexible development resources from a firm like Golden Section Technology can get you expert talent and execution with month-to-month flexibility. This will help you scale down if your survival plan kicks in, but it will also help you ensure the product keeps up with a successful sales push.

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Dougal Cameron is director of Houston-based Golden Section Venture Capital.

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Axiom Space has announced plans for its third commercial space launch and revealed details of its high-tech spacesuit. Photo courtesy of NASA

A Houston-based space tech company has revealed details on two of its commercial partnerships with NASA.

NASA and Axiom Space have again signed a mission order for a private astronaut mission to the International Space Station. The mission will commence sometime in November or on and will be from the agency’s NASA’s Kennedy Space Center in Florida. Axiom Mission 3 is the third mission of its kind and, according to a statement from NASA, is expected to be a 14-day trip.

The ISS's Multilateral Crew Operations Panel will approve four proposed crew members and two back up crew submitted by Axiom for the Ax-3 mission. The crew will be expected to train for their flight with NASA, international partners, and SpaceX beginning this spring, according to NASA.

“Axiom Space’s selection to lead the next private astronaut mission to the International Space Station enables us to continue expanding access to nations, academia, commercial entities, and emerging industries to research, test, and demonstrate new technologies in microgravity,” says Michael Suffredini, CEO and president of Axiom Space, in the release. “As NASA’s focus shifts back to the Moon and on to Mars, we are committed to transforming low-Earth orbit into a global space marketplace, where access to space moves beyond the partners of the space station to nations, institutions and individuals with new ideas fueling a thriving human economy beyond Earth.”

Axiom's historic first commercial launch was in spring of 2022, and Ax-2, which will launch the first Saudi astronauts to visit the ISS, is expected to launch this spring. In addition to these two missions, Axiom has been tasked by NASA to develop spacesuits and space station technology.

After several months of working on the suits, Axiom has revealed the details of the technology that will be worn by NASA astronauts returning to the moon on the Artemis III mission that's scheduled to land near the lunar south pole in 2025.

The newly revealed spacesuit will be worn by the first woman and first person of color to visit the moon. Photo courtesy of Axiom Space

“We’re carrying on NASA’s legacy by designing an advanced spacesuit that will allow astronauts to operate safely and effectively on the Moon,” says Suffredini in a statement from the company. “Axiom Space’s Artemis III spacesuit will be ready to meet the complex challenges of the lunar south pole and help grow our understanding of the Moon in order to enable a long-term presence there.”

Called the Axiom Extravehicular Mobility Unit, or AxEMU, the prototype was revealed at Space Center Houston’s Moon 2 Mars Festival today, March 15. According to Axiom, a full fleet of training spacesuits will be delivered to NASA by late this summer.

At the same time as the Ax-3 mission announcement, NASA also announced that it has selected Firefly Aerospace of Cedar Park, Texas, to carry multiple payloads to the far side of the Moon. According to NASA, the commercial lander will deliver two agency payloads, as well as communication and data relay satellite for lunar orbit, which is an European Space Agency collaboration with NASA.

The contract — awarded for around $112 million — is targeted to launch in 2026 through NASA’s Commercial Lunar Payload Services, or CLPS, initiative, and part of the agency’s Artemis program. It's the second award to Firefly under the CLPS initiative.

“The diversity of currently available commercial orbital human spaceflight opportunities is truly astounding. NASA’s commercial crew flights to the space station for our government astronauts paved the way for fully private missions to space like Inspiration4 and Polaris as well as private astronaut missions to the orbiting laboratory like the one we are announcing today,” says Phil McAlister, director of commercial space at NASA Headquarters in Washington, in the release. “We are starting to see the incorporation of space into our economic sphere, and it is going to revolutionize the way people see, use, and experience space.”

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