For a B2B tech startup that has raised a series A and a series B in the last 12 months, what percent of revenue should the marketing budget be? Growth is a priority. Marketing owns the SDR function.

I wouldn’t think about your marketing spend post Series B solely as a % of revenue. Although you probably should start there:

First, you can probably spend up to 50% of your first year ACV to acquire a customer once you are well-funded. Probably even 100% if you’ve raised a ton of cash and can sustain the burn.

Because if your customers last 10+ years, and you are growing like crazy, and you want to crush the competition, then even spending 1.5+ years of ACV to acquire a customer (say 100% on marketing + 50% on sales) might be worth it. Especially if they are happy customers, and spread the word. And buy more from you.

More here: How Much Can You Really Spend on Marketing? (And The “Problem” With The S+M=ACV Axiom) | SaaStr

At a practical level, you have to decide after you are well-funded if you want to also win in segments where … you aren’t yet winning much, if at all. This is what gets very expensive. Just as other stuff gets cheaper in SaaS, as your brand grows.

But you can probably brute force your way to more market share in SaaS with a ton of capital, as long as you have a mini-brand in a key segment or two.

This is deploying “dominant-dominant strategy”. Winning everywhere possible. Both where you are competitive — and where you aren’t. Leveraging your brand to win deals the product itself doesn’t merit winning yet, where maybe you even have few to no leads at all. More on there here: Why Competition Is So Bitter in SaaS: Oligopolies and Dominant Strategy Equilibriums | SaaStr

In markets where it is possible to gain 60%+ market share, you should probably do this if you can. Raise as much money as possible after you have a brand, and pursue a dominant-dominant strategy once you can raise enough to deploy it.

Dominant-dominant strategy will “ruin” your marketing budget. But if you play this game very carefully and skillfully, you can end up worth 10x-100x more than the #2 player in the space.

Finally, in the end, if your ACV is higher than say $25k, you can “afford” once you are well funded to invest in just about any channel that gets you even a single customer. A trade show that just gets you 5 customers? Well, if they are $50k customers, that’s probably still worth it. Almost any paid programs that perform at all, are worth it in SaaS once your ACV is higher than $25k or so.

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Published on August 13, 2019

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