Software Buyers in 2023**Companies keep increasing their software investment regardless of market conditions
The Cledara SaaS Index (CSI)
We created the Cledara SaaS Index (CSI) in 2021 to examine the health of the Software Market and have been tracking it since. Powered by Cledara’s dataset, the world's largest Software dataset, the index analyses close to 400,000 Software purchases and renewals every year and gives us a view of momentum on software buying.
Despite volatile market conditions in 2022 and 2023, including the Silicon Valley Bank’s downfall, the index has only shown a weakening momentum in software buying twice (February 2022 and January 2023). This shows that no matter the market conditions, companies keep buying software.
In other words, companies keep growing their software stack, no matter how tough the market is. In fact, our data tells us that companies were found to be using an average of 21% more software apps in July 2023 than they did a year earlier.
Why software buying doesn’t slow down
2023 has taught us that only startups with great product-market fit will make it to the next round of funding. According to Christoph Janz’s 2023 SaaS Funding Napkin, an annual funding analysis based on 60 SaaS VCs that was presented in Q3 2023, ARR requirements have got tougher… But Seeds and Series Bs have got larger.
This means that the bar is higher, but that building great products will still get you funding. In other words, now more than ever, it’s building time. It’s also a time to acquire customers at a cost that is not detrimental to your next funding round. And your software stack has to help you get there fast.
Making the right choices in software unlocks profitable growth for startups. In this guide, we’ll provide you with everything you need to know to get those choices right.
Tips for Building a Great Software Stack**What to do and what not to do
The right tools ultimately allow startups to move faster. Similar to hiring the right people, getting your software stack right will increase velocity. More product shipped, more meetings booked, more tickets solved and ultimately more growth.
But it comes at a risk.
As you grow, software quickly becomes one of your top three expenses. If not managed well, those costs can spiral out of control with duplicate tools, unused applications, and a never-ending stream of new sign-ups to the newest and greatest. Not only do the costs spiral, but so does the time spent managing this for your finance, ops and IT teams.
A recent survey to CXOs conducted by Battery Ventures clearly manifests the growing concern in uncontrolled software stacks. 74% of respondents allowed developers to select their own software in Q2 2022. That number dropped to 46% in Q3 2023. In that same survey, 93% of respondents admitted they want to consolidate their software vendors to reduce spend.
So how to keep your software stack under control? Here’s our list of dos and don’ts.
Software Stack Don'ts
Choosing your Software Stack
- ✕ Depend on non-scalable tools: Be cautious of tools that might limit your growth. Think about their role in your expansion plans and be ready to adjust. Not every tool is designed for growth.
- ✕ Too many tools: It’s tempting to give the team free reign to add what they need to move fast but eventually this slows you down and adds overheads for other teams; have a purpose. Prioritize those that support your growth.
- ✕ Data silos: If your systems aren't interconnected, they'll slow you down. Keep this in mind when choosing new tools.
Financial control
- ✕ One card for all subscriptions: Using one card might seem easy, but it complicates expense tracking and risk management. A lost or failed card can cause disruptions. Similarly, using multiple cards with multiple tools on each can de-risks a lost or failed card but can cause chaos for Finance teams trying to reconcile expenses and invoices.
- ✕ Blind renewals: Before renewing essential tools, assess if they still align with your growth strategy. Blind renewals can waste time and money, especially if it’s a blind annual renewal.
- ✕ Uncontrolled software purchases: Unrestricted buying can create a messy software environment. This can lead to wasted resources and misalignment with your goals.
- ✕ Centralize excessively: While IT and Finance are crucial, excluding other team inputs can result in ill-fitting tools. This can reduce efficiency, creativity, and speed.
Managing your tools
- ✕ Use spreadsheets to track tools: Depending solely on spreadsheets to manage your stack, renewals and usage can lead to disorganization. As you grow, they become harder to manage, leading to missed renewals, lost invoices, and extra manual tasks.
- ✕ No Usage Tracking: If you don't monitor tool usage, you will be paying for unused subscriptions. This oversight can waste resources and limit growth.
- ✕ Neglect Security and Compliance: Speed is essential, but security shouldn't be compromised and always benefits in the long run. For instance, knowing which tools departing employees accessed is beneficial.
Software Stack Dos
Choosing Your Software Stack
- ✓ Invest in tools that scale: Choose SaaS tools designed to grow with your business, ensuring they can accommodate increased demands without drastically upping costs.
- ✓ Negotiate for Growth: When discussing terms with SaaS providers, highlight your growth trajectory and seek pricing or scaling options that match your expansion goals. Startup Programs can be a great avenue for this (see below for our list of programs)
- ✓ Evaluate subscriptions regularly: Periodically review your subscriptions, focusing on their contribution to scalability and profitable growth. Ideally, do this before renewal dates approach.
- ✓ Go annual where possible: Opt for annual contracts as they often provide cost advantages over monthly plans and provide financial predictability and stability. A good strategy for this is to use monthly pricing to assess a tool and then move to annual as soon as you’re confident that it meets your needs and will scale.
Financial control
- ✓ Streamline approvals and purchases: Implement a scalable and controlled approval process to ensure software acquisitions align with your startup's strategic objectives. This enables your team to use what they need while keeping control of spending and security and compliance.
- ✓ Regularly assess software spending: With software being such a large expense it’s important to regularly look for tool overlaps, duplicates, and unused tools to keep this cost in line.
- ✓ Use Virtual Cards for Payments: With virtual cards, you can set budgets on each card to prevent overspending and unexpected price hikes as well as cancel them in a click when needed. Virtual cards provide greater control and flexibility over your financial commitments.
- ✓ Strike a balance: There is a space between excessive control and uncontrolled purchases in which users are enabled with the tools they need, without that coming at the expense of the company.
Managing your tools
- ✓ Get yourself a software management tool: Such a tool can automate many of the tasks listed above, setting your software stack up for scalability.
- ✓ Streamline tools on/offboarding: Streamline access controls for both security and efficiency. Onboard team members quickly to necessary tools, and when someone departs, promptly revoke their access.
The Ultimate Software Stack for Startups**According to our dataset of +400,000 software purchases and renewals
According to our data, startups of 1 to 50 employees consume an average of 35 active software apps. As anyone who’s ever bought software for their business will know, there’s no shortage of options; the software market grows yearly and is not a one-size-fits-all all. To put an example, there are almost 10,000 tools for marketing alone.
We’ve looked at our dataset of +400,000 software purchases and renewals to come up with the ultimate list that startups should consider when building their stack out. Please note that every startup and every industry is different and a tool that suits one may not suit another.
1Password - Password management
According to our data, 1Password was the most popular password management tool for startups. Tools like 1Password improve security by centralizing passwords and sensitive information storage in one place.
Asana - Project management
Asana is a web and mobile application designed to help teams organize, track, and manage their work. Project management tools are crucial to enable efficient prioritization and execution of tasks and projects
Chargebee - Subscription Billing
Billing solutions ensure accurate billing and invoicing. They also give you a pulse on revenue and allow you to analyze monetization performance. This year, Chargebee was the top 1 for startups in this category.
CharlieHR - Payroll and HR
Payroll and HR software streamline HR processes, from payroll management to employee onboarding and holiday requests. Some of those are totally essential for launching and scaling a business. CharlieHR was the preferred choice for startups in this category.
Cledara - Software Management
Software Management platforms like Cledara help startups manage their software and streamline processes to manage software and constantly give companies recommendations to optimize their stack. Cledara was the most used platform in the space according to our data.
DocuSign - Contract and E-signature
Contracts and e-signature platforms like Docusign simplify contract management greatly. They reduce paperwork, minimize legal risks and speed up the signing process. Docusign is the go-to solution for startups according to our data.
Figma - Design Collaboration
Design collaboration tools are like Figma are indispensable for startups that prioritize creative projects and user-centric design. These tools enable cross-functional teams to collaborate on design projects, iterate on prototypes, and gather feedback. According to Cledara’s data, Figma was the preferred option for startups.
GitHub - DevOps
Tools like GitHub are indispensable for software startups. They streamline code collaboration and version control, ensuring that development teams can work efficiently and deliver features promptly. According to our data, GitHub is the preferred platform of choice.
Hubspot - Marketing Automation
Marketing automation platforms like Hubspot empower marketing teams to launch campaigns, manage and nurture leads, and pass them on to your sales team. They are essential for marketing effectiveness and scalability. A pilar for customer acquisition. Startup chose Hubspot in this category.
Intercom - Customer Service
Efficient customer service software allows startups to resolve issues promptly, collect valuable customer feedback and provide exceptional customer service overall. This is key for any startup looking for product feedback, building a great brand and delivering a great experience. Our data tells us that startups chose Intercom over other players in this category.
Mailchimp - Email marketing
Email marketing tools facilitate targeted email campaigns to engage and nurture leads and customers. They drive customer acquisition, retention, and revenue growth, making them essential for startups looking to scale customer acquisition or boost customer marketing. Mailchimp was the most widely used by startups in this space.
Metabase - Business Intelligence
Business intelligence tools gather data from various sources to generate dashboards and allow users to query critical data to take decisions. Metabase was the most used by startups in the space.
Mixpanel - Product Analytics
Product analytics tools like Mixpanel speed up product feedback loops. These are essential to manage the quick learning and iteration cycles that startups are subject to to succeed. According to our data, Mixpanel was the most used by startups in the space.
Salesforce - CRM
A CRM (Customer Relationship Management) system is vital for any sales team. It’s the brain of the team, allowing it to centralize data, manage pipeline and streamline processes, reports and forecasts. Salesforce founded this category 20 years ago and was the most used tool by startups in this space.
Slack - Internal communication
Effective internal communication tools like Slack are paramount for a startup's success. They facilitate seamless information sharing, real-time collaboration, and remote work capabilities. Slack is the preferred choice for startups for internal communications.
Webflow - Website Builder
Website builders like Webflow allow startups to create and manage their website without extensive technical expertise to establish a solid foundation for their online presence. Webflow was the first in the ranking for startups. It also has a great academy to learn how to use the tool.
Workable - Recruiting
Recruiting software like Workable optimizes the hiring process, from building pipeline, job posting to candidate evaluation and onboarding. If you want to hire A players at scale, this is a first step. According to our data, Workable is what startups use the most to attract talent.
Xero - Accounting
Accounting software is essential for startups to manage their finances accurately and efficiently. It helps track income, and expenses, pay bills, file VAT returns, and claim expenses. Our data says that Xero is the most widely used tool by startups in this space.
Zoom - Videoconferencing
Zoom was by far the go-to option for startups when it comes to videoconference. Platforms like Zoom play a pivotal role in connecting teams, partners, and customers across distances and are a must for the startup stack.
The 18 Startup Programs you can’t miss**Handpicked by Cledara
Software is a core component of business operations. But, according to our data, its costs are on a steady incline.
Our findings show a clear trend: in the long run, software spending invariably increases. To put this into perspective, companies are spending an average of 17.9% more on SaaS than they did a year ago. This significant financial shift can sometimes make software hard to afford for startups.
Luckily, many software companies are aware of this and have launched programs for startups to access their suite of tools at an affordable. We’ve handpicked the ones we found the most relevant.
Set yourself up for software success with Cledara
As startups scale, their software gets out of control and the best way to avoid that is to put something in place today. Cledara helps 1,000+ customers across 29 countries get visibility and control of their software early. Check out Cledara’s Startup Program today to see if you’re eligible.
.webp)
.webp)
.webp)
