For the full findings in an interactive Tableau dashboard, click here.

As the world began to experience the effects of COVID-19 earlier this year, we surveyed enterprise cloud tech CEOs in March and many were bracing for the worst. Thankfully, increased demand for digitization in the last two quarters has led to renewed optimism, as enterprise software is proving to be more resilient than initially forecasted.

Last month, during the same week of the successful IPOs of Snowflake and JFrog, Salesforce Ventures announced the fifth annual Forbes Cloud 100 list, which saw the average valuation of its ranks more than double since its inaugural list, from $1 billion in 2016 to $2.7 billion in 2020. Nine out of every ten companies on the list this year are worth more than $1 billion.

In this second edition of the survey, Salesforce Ventures surveyed the CEOs of 90+ enterprise technology companies to gauge their sentiments about their businesses, their customers, and the state of the markets. The survey was collated and administered by our portfolio company, SurveyMonkey. We asked CEOs about their go-to-market strategies, bookings, and churn, as well as their plans for hiring and remote work. The CEOs surveyed were from leading Salesforce Ventures portfolio companies and/or CEOs from companies recognized on the Cloud 100. You can see the full Tableau dashboard with findings here.

Our chief finding: While some sectors are still struggling and cutting spending, others are looking to technology to help them reposition and/or improve their businesses. Enterprise cloud companies are benefiting from rapid shifts toward online processes, including banking, transactions, and supply chain management, as well as distance learning and virtual communications.

We found three key takeaways worth highlighting:

#1 Digital transformation has momentum — and urgency

Despite a bleak outlook in March, when surveyed in September, nearly 90% of CEOs noted an acceleration in digital transformation and attributed it to the pandemic. About half of them believe the pandemic has created a tailwind for their business, and of those, half also believe that tailwind will fuel growth into 2021. About half of the CEOs surveyed believe their customers’ digital transformation budgets have increased. That said, not everyone is out of the woods: Of the 39% of companies experiencing a headwind, 12% believe it will have “a lot of negative impact” while the majority (76%) believe that it will have “a little negative impact” for 2021.

#2 Bookings and customer retention are stronger than expected

In all, Q2 was far better than many expected, with 64% of CEOs reporting they were at 76% or more of their plan, versus the 30% forecasting as such in March. Expectations for Q3 are trending positively, 87% of CEOs are forecasting at 76% or more of plan. Moreover, the majority of CEOs think they will see less than 5% increase in churn.

Nearly 60% of CEOs surveyed said they shifted their sales strategy as a result of COVID-19 — an improvement from our March survey when 84% expected to do so. In September, two-thirds of CEOs reported that they lowered their sales team quotas, compared to 30% in March. Three out of four say they will not be adjusting compensation for their sales reps. Of the 25% who stated that they will adjust compensation, 75% said they will implement those changes across the board (versus individual sales reps). Each CEO’s strategy of how to handle reps under quota varies widely.

Fundraising was another positive. One out of three CEOs said they raised their latest funding round within the last six months, during the pandemic — and of those, 38% completed the process with meeting new investors only virtually.

#3 CEOs are optimistic about their workforce

Signs of growth and optimism are aligning with hiring plans and views on remote work. When surveyed in March, 67% of cloud CEOs expected to implement a hiring freeze and/or layoffs, yet in September, fewer than 25% have done so or plan to in the near future. Nearly three out of four CEOs plan to increase hiring for sales positions. Of those, 41% say they will add more than 20% to their existing sales headcount.

Remote work has proven to be a much smoother transition than feared. Nine out of ten CEOs surveyed continue to be optimistic about working remotely: 87% plan to operate under a hybrid model with employees both remote and in physical offices. Only 13% operate as or plan to operate as fully remote. As a result, half of the CEOs surveyed say they expect to reduce office space.

The past seven months have brought a truly unique set of challenges. With so much changing day-to-day, it’s been difficult to make prudent strategic decisions and long-term plans. We hope you find this survey to be useful as you contextualize your own business, and we wish the best for you and your teams.

If you would like to drill down into more detail on our findings, we welcome you to view all the findings here. For the best experience, view the findings on a desktop. We plan to make this a biannual study, repeating some questions as a way to gauge evolving plans, as well as introducing new ones based on the business climate and relevant topics at the time.

If you have specific questions you’d like us to ask in our next survey, please email us here.

As we come to terms with the profound impact COVID-19 is having on our personal and professional lives, people and businesses everywhere are balancing their short-term need to stabilize with their long-term plans for growth.

We surveyed Salesforce Ventures portfolio companies to get a sense of how companies are adapting to the rapidly changing environment and to share some best practices. (You can see the full survey results here.) Recently, I was fortunate to share a virtual stage at SaaStr Bridging the Gap with Adnan Chaudhry, SVP Commercial Sales at Salesforce. We discussed some of the ways SaaS companies large and small are shifting their sales and go-to-market strategies to meet the times.

While we are all still working our way through a very difficult period, we are seeing encouraging signs of the resiliency of enterprise SaaS.

1) Companies are managing churn

Most of the companies we surveyed expect to see some increase in churn. While no amount of churn is good, respondents expect it to increase to a manageable level: Only 12%* of respondents said they think churn will increase by 11% or more this year.

One way to keep churn numbers in check is to provide existing customers with some financial flexibility. More than a third of our survey respondents said they have offered payment deferrals to customers to help them stay afloat and keep them committed for the long term.

Adnan suggested another approach to keeping existing customers happy: Get creative about pivoting your solution set. Consider sweetening the pot by providing access to extra functionality along with your base product for a limited time.

Finally, focus on deep listening, empathy, and flexibility. Your customers, like everyone else, are likely experiencing some level of financial pain and concerns about the future, as well as new execution and productivity challenges. You might discover new opportunities to reshape your product or service to meet their needs, and you’ll build a more meaningful, resilient, long-term connection.

Key Takeaway: The more profoundly you understand what your customers are going through, the more you can help them solve their problems.

2) New opportunities are breaking through

One of the best pieces of news we saw in our survey: Nearly three-quarters of respondents said they are seeing entirely new revenue opportunities that previously did not exist.

While most companies are still in the initial phase of the COVID-19 cycle, aiming to stabilize their companies and manage the effects of the crisis, they are focused on surrounding existing customers to see how they’re doing and finding ways to help them bridge through this time. Additional areas they are tackling are investing in their teams, recalibrating operations, and requalifying customers. We are encouraged to see a number of companies are also beginning to identify new opportunities.

In our survey, 84% of respondents said they are shifting their sales strategy and more than half said that they will focus on upselling and expansion. Sales teams are working very closely with account management and customer success teams to quickly identify opportunities that are already in hand.

As far as new accounts, sales teams are prioritizing near-term prospects. Companies are exploring how to meet prospects where they are, including adjustments such as reducing minimum order size and adding additional services.

Sales, customer success, and account management teams are becoming more nimble, more adept at identifying new opportunities and innovating on the traditional sales motion.

Key takeaway: Even amidst economic contraction, areas of growth are emerging.

3) Companies need technology that can help them quickly respond to the changing environment

In recent weeks we have seen the acceleration of tools that allow remote communication, online shopping, collaboration, and more. We are also starting to see second-order effects appear as every industry is being impacted. As supply chains get disrupted, companies are having to rapidly ramp up new suppliers and manufacturers.

Nine out of ten CEOs we surveyed said COVID-19 is accelerating digital transformation and will create a tailwind for their business. More immediately, we are seeing increased demand for technology that solves new problems, such as the need to rapidly pivot to new production methods and supply chains, as well as old problems that are suddenly more urgent, such as solutions that empower distributed workforces.

The pace of change is dizzying. Business processes that used to take months now need to happen in days or weeks. Entire industries are being upended, leading to previously unimagined outcomes, such as the need to spin up and serve new customer bases overnight.

Key takeaway: Digital transformation is helping enterprises become more nimble in an effort to respond quickly to the new environment.

None of us knows how long this will last. But we do know that eventually, this crisis will begin to abate, and when that happens, companies want to be poised for growth. To learn more about how enterprise SaaS CEOs are managing during this time, you can access our complete survey results here, and watch a recording of the Sales & GTM Strategies in Uncertain Times presentation here. Be well.

*Note: Data in our SaaStr presentation varies slightly from our full survey data due to additional survey responses.

Startup leaders are used to leading through uncertainty, but COVID-19 brings even more challenges in the most uncertain environment most of us have ever experienced. On top of technical risk, market risk and competition, startup leaders now need to care for and manage employees at a distance, pitch and service customers over video conference, and craft new forecasts and plans in an ever-changing landscape. Questions abound, yet answers are few.

At Salesforce Ventures, we are committed to doing everything we can to support our startups in their missions. In an effort to share best practices around some of the tough decisions startups are facing, we surveyed our portfolio and asked about everything from bookings and hiring to sick leave policies and internal communications.

All 66 respondents are CEOs of Salesforce Ventures portfolio companies, ranging from seed stage to series D+. Our survey was administered and collated by our portfolio company, SurveyMonkey. Of course, all companies and their situations are unique. Our hope is that this report helps CEOS and leadership teams contextualize the way other startups are handling the crisis.

You can find the full report, including resources, charts, and details below.

We’ve summarized some of the key findings in four categories:

Taking Care of Your Employees

Companies of all sizes around the world are challenged to support their employees’ physical and financial well-being. Most are working hard to make sure employees have what they need to get through this stressful time including offering additional benefits to employees. 80% are providing additional resources to employees, ranging from reimbursing them for home office equipment to communicating new empathetic cultural norms, like normalizing children coming on-screen during a video call.

We also found companies are communicating frequently with their employees: 80% of respondents are holding company-wide meetings at least once a week to keep their teams updated.

Even though shelter-in-place mandates led to an abrupt adoption of working from home policies, 88% of respondents say they are more optimistic than they were before about the efficacy of remote work, and many are getting creative about helping employees feel connected.

Taking Care of Your Customers

When we asked what our companies are hearing from customers, respondents said their customers are citing uncertainty about the business and economic climate, budget freezes and cuts, and pending downsizing plans as some of their concerns.

Transparency and trust continue to be important themes. About a third of respondents say they have been communicating at least once a week with their customers about their COVID-19 strategies — more often than the frequency with which they’ve been reaching out about technology, product, and business updates.

Taking Care of Your Business

The vast majority of survey respondents — 84% — are shifting their sales strategies in expectation of budget cuts due to the COVID-19 crisis. Many of these changes are coming in the form of increasing efficiency in the sales process to adapt to the times.

Unsurprisingly, many respondents expect a significant slowdown this year. More than 40% of them expect 2020 bookings to decrease by 26% or more; another 15% expect bookings to be flat; just 11% say bookings will likely increase.

Survey participants also report making adjustments to accommodate customers that have been negatively impacted by the COVID-19 crisis. Slightly more than a third of our respondents report implementing payment deferrals for customers that need the extra time.

Taking Care of Your Community

In spite of increased pressure, many startup leaders and their teams are looking to reach out to people in their community and do what they can to support people who are more vulnerable right now. Nearly two-thirds of respondents are offering discounts or free services to non-profits, government institutions or others focused on COVID-19 efforts. Others are looking to give back by volunteering virtually. We’ve shared some resources in the hopes that they will be helpful during this time.

Onward

We recognize the situation is changing rapidly and in a few weeks, much of the underlying information in this report could change. At Salesforce Ventures, we are working with our portfolio companies, Salesforce leadership, and our customers, to stay up-to-date on industry developments. As we learn more, we plan to continue to share with the community.

Despite what is sure to be a difficult period in the near term, we continue to be optimistic about the long-term future of enterprise technology and the SaaS ecosystem and believe in these industries’ ability to accelerate efficiency and growth. Someday, things will be better. Until then, let’s help each other work it out.

Given the economic and business impacts of COVID-19, every company is trying to figure out how best to respond and adjust their business. To help startups benchmark and share best practices, we surveyed our portfolio companies to ask about the state of their business and the changes they’re making across their organizations to prepare for both short- and long-term market shifts.

We will share more details from the 66 CEO’s who responded and the full survey in the coming days, but meanwhile, we noticed a few important takeaways about sales and go-to-market that we wanted to share now.

Bookings

More than 40% of respondents expect bookings for the year to decrease by 26% or more, while 26% of respondents expect bookings to be flat or up this year. When we asked CEOs what kind of concerns they were hearing from their customers, many reported spending freezes, budget cuts, and a lack of visibility into the future.

Hiring

When asked about hiring, half of the respondents are planning to freeze new hires, while 30% are hiring fewer new people than initially planned, and 16% will need to reduce headcount.

Payment Relief

We asked if companies were implementing any payment deferral programs for customers that couldn’t pay due to COVID-19-related economic hardship. Roughly one third said yes; two-thirds said no.

Overall Shift in Sales and GTM Strategy

84% of respondents say they’ve shifted their sales strategies as a result of the COVID-19 crisis. Below are the most frequent changes mentioned:

• Pausing outbound prospecting to conserve resources for lower-risk sales, such as retaining and upselling existing customers, as well as closing near-term opportunities.
• Reducing previous time commitment requirements and pricing minimums to help buyers get to “yes” more easily.
• Building more efficiency into the collections process.
• Focusing sales efforts on industries that are less likely to be negatively impacted by the crisis. The assumptions are that hospitality and travel are unlikely to be spending at this time; respondents mentioned online learning, food and grocery delivery, and governments as potentially safer targets.

In the next few days, we will publish our full report on COVID-19’s impact on enterprise technology startups, including our methodology, more data, and resources that can be helpful during this time. Meanwhile, we hope this post is helpful. Stay well.

We are all facing the same existential threat right now — and it’s profoundly more challenging than anything else most of us have experienced. At Salesforce, our priority has been on making sure our employees, families, and communities are safe and healthy. We’ve also maintained our focus on customer success and Salesforce has shared a number of valuable resources to help our customers navigate this unchartered territory.

At Salesforce Ventures, we are acutely aware that founders and teams across the globe are struggling with how to make difficult and sometimes painful decisions — what course of action to take, how to rewrite 2020+ budgets, and what assumptions to make around customer adoption, revenue growth, sales efficiency, and cash burn. Of course, startup CEOs are always operating in uncertain conditions, but the current situation calls for an entirely new level of thoughtfulness, analysis, and grit.

This pandemic is obviously different than any other downturn and so much is still unknown, but I thought it might be helpful to take a look at some data around the last big financial crisis of 2008/2009 to see if there are any valuable lessons we might be able to draw on.

For context, during the 2008 downturn, the Nasdaq index fell by nearly 50%. It took about 170 days for the market to hit bottom. So far in 2020, the Nasdaq has fallen about 30% in less than 30 days due to COVID-19, making this one of the fastest and steepest declines in history.

Here are three metrics and how public SaaS companies were impacted in 2008:

Revenue Growth

For this analysis, we’ve looked at three periods, each comprised of three quarters: pre-crash, mid-crash and post-crash¹.

The median quarterly growth rate (YoY) prior to the crash was 44% growth. This fell to 11% in the 3 quarters after the trough of the crisis, representing a reduction in growth rate of 74%. Importantly, this was true regardless of ARR/revenue level. On a more positive note, SaaS companies did continue to grow (despite the lower rate), which is certainly not true of other industries during this period.

Sales Efficiency

It is pretty intuitive that sales efficiency will get worse in this period. But by how much? We’ve defined sales efficiency as the ratio between gross margin adjusted incremental quarterly revenue and S&M spend in the prior quarter.

A similar picture emerges, where sales efficiency deteriorated for almost every company in the benchmark.

Sales efficiency fell from 68% pre-crash to 30% post-crash, resulting in a 56% deterioration in efficiency. Interestingly, however, for many companies we started to see a rebound in efficiency 6–8 quarters after the trough (as sales efficiency improved from 28% during the crash to 30%).

Cash Burn / Profitability

Finally, we’ve turned our attention to cash burn and profitability. Here we use EBITDA as a proxy for cash flow and look at the evolution of the “rule of 40” over this period (which suggests that a software company’s growth rate + FCF margin should combine to ~40% or more).

Most companies saw significant declines here as well, as sales efficiency deterioration, lower revenue growth and large people costs resulted in lower EBITDA margins.

Companies here saw a 39% decline in profitability, as the median “rule of 40” fell from 41% pre-crash to 25% post-crash.

Summary

The next few quarters will be tough for all of us. The good news is that every company in this benchmark survived the crisis, and went on to become an even bigger company. Recovery rates were also relatively quick, and definitely quicker than other industries (as growth picked up by Q4 2009).

This will be a defining moment for us all, both professionally and personally. It’s more important than ever for all of us to do what we can to plan ahead while also ensuring the well-being of our families and communities.