1/ A common dilemma for SaaS founders is whether to focus on individual users or teams as the primary customer. This has important implications for pricing & packaging as well as product design.

TLDR: Team plans are where the money is & where founders should focus. Here's why:

2/ First, Deal Sizes.

Team products have larger contract values (b/c multiple seats). Small CVs of Individual products often can't justify the cost of a sales team. Unless the Individual product is highly viral, it will be easier to build distribution for a Team product.

3/ Second, Retention.

Team products are stickier than Individual products. Multiplayer mode is more engaging than single-player mode. And it's harder to leave.

Account-level churn rates for Individual plans are typically 5% per month, but only 1-2% per month for Team plans.

4/ Third, Seat Expansion.

Team plans add new seats as the product spreads within a company, creating revenue expansion. As a result, successful Team products have “net negative churn,” meaning that expansion exceeds churn.

E.g. this beautiful chart from Slack’s S-1:

5/ The magic of B2B/Team SaaS is in those compounding cohorts. By contrast, B2C/Individual SaaS has shrinking cohorts. 50%/year revenue churn is not uncommon so the SaaS vendor is rebuilding its business from scratch every 2 years! Hard to build a very valuable company this way.

6/ Frankly I’m skeptical of valuations in B2C SaaS right now. Investors are paying B2B SaaS multiples on ARR without seeming to understand the difference between cohorts that are shrinking versus those that are growing every year. Day of reckoning may be coming.

7/ Hybrid strategies can make sense for B2B SaaS startups. Individual plans may not be a great long-term business, but they can be a great lead generation machine for the Team product.

For more on Individual vs Team plans, read my new blog post: https://sacks.substack.com/p/individuals-or-teams-whos-the-better