7 Guidelines on Selling Some of Your Stock in a VC Round

This post is by Jason Lemkin from SaaStr

These days, if you raise money at a >=$80m-100m valuation, and are oversubscribed, most bigger Silicon Valley VC firms will offer to provide some founder liquidity.

It’s not out of the goodness of their hearts. It’s so they can buy more. Bigger funds want to own as much as they can, and if they can get another 2%-3% more than otherwise, secondary liquidity is a way to get it.

Screen Shot 2017-03-31 at 1.58.42 PMSome advice here though:

  • Founders taking secondary liquidity at lower valuations creates signaling risk — especially CEOs. If a founder is willing to sell shares at $30m … there is no way I believe you are trying to build a $1b+ company. You are selling way, way too cheap.
  • It’s much, much, much better to be asked. If a founder really wants to sell at almost any price, it’s a flag. But if the VC offers first, and the founder “reluctantly” agrees — it’s not such a negative signal.
  • You can’t or at least shouldn’t sell too much – as a %. It’s important the founders only sell an immaterial stake, at least on a percentage basis. Don’t sell more than 5% of your shareholdings. Too much sends a signal you aren’t all-in. But selling 1% of your 1,000,000 shares is clearly immaterial.
  • Some, not all, investors will get nervous if the absolute $$$ are too much. Selling some shares at $100m for a downpayment on a house? Doesn’t create anxiety. Cashing out $5m in a hot deal? Who >wouldn’t< worry?
  • Don’t force it. If it’s going to happen, it will happen organically. If you force it, it won’t work. At least, very rarely.
  • Fewer rules for non-founders. Ex-employees can sell everything, if there’s a market and the company allows it, at any price. If we are doing a round at say $15m pre, and an ex-employee wants to sell $500k in stock — all of her stake because she’s left — that’s great for me. I’ll buy it all, and there is zero signaling risk or issues. She’s not a founder, or even, an employee anymore.
  • In a super hot deal, no one will care. For now. In a super hot deal, VCs will break their own rules. They’ll throw secondary money at you. But that doesn’t mean if it’s too much, they won’t resent you or judge you later. They will. Be cognizant of this if you “break the rules” because you are super hot.
  • Be cool. Do what’s right by the company first. Then, it will all work out. Everyone will get nervous if it doesn’t feel like secondary liquidity is your secondary priority.

And importantly, these core guidelines are for founders.  Founders know.  They have tons of legal inside information.

Ex-employees don’t have that inside information.  Tiny angel investors that never get updates don’t have that inside information.  And they also have no control over what will come.

So the less inside information you have, and the more anxiety you’ll have if you never get another chance to sell — the more you should err on selling in a hot round if you can.

(note: an updated SaaStr Classic post)

The post 7 Guidelines on Selling Some of Your Stock in a VC Round appeared first on SaaStr.

The Top 5 Challenges to Starting a Successful SaaS Company

This post is by Jason Lemkin from SaaStr

Q: What are the challenges that a SaaS business owner must overcome to be successful?

My list:

  1. Finding a truly great co-founder. Yes, some can do it on their own. Eric Yuan, CEO of Zoom did. But he also did it before as SVP of Engineering at WebEx. Almost all of us don’t need just a co-founder, but a truly great one. Are you sure you have this? A bit more here: What are the qualities of a good co-founder?
  2. Funding the first 24 months — not just 6 or so. Yes, as CEO your job will always be to keep the company funded. But the first 24 months are particularly tricky. Folks can’t work on smiles and promises for 2 years. Maybe a few months, but not 2 years. Yet, in SaaS it generally takes 2 years to iterate, iterate, iterate and get to a true MSP — a Minimum Sellable Product. Can you fund it? How? Yes, it’s hard. More here: If You’re Going to Do a SaaS Start-Up … You Have to Give it 24 Months | SaaStr
  3. Finding and executing in a real, truly monetizable white space. It’s not enough to build a product that is useful, or even needed. It must be one customers are willing to pay for in general, and in lieu of other proven solutions. Why do you have that? Are you sure? A bit more here: Planning to Do a SaaS Startup? Don’t Forget the 20 Interview Rule. | SaaStr
  4. Having at least one 10x feature vs. the competition. Your product is new, bug-ridden, and feature poor. Why will someone pick you? Being cheaper or even free is rarely enough. You need one killer feature than is 10x better than the competition — that at least some small segment of the customer base really needs and will pay for. More here: The 10x Feature is Real. At Least, for a While. What’s Yours? | SaaStr
  5. Getting great folks to follow you, and your vision. A great co-founder is critical, per point #1. But you’ll need then to go even further. And get a small group to follow you. A few engineers. Some partners in the ecosystem. Some vendors that shouldn’t take the risk on you. Can you do that? What you’ll need to be able to do: What Your First 100 Hires Will Look Like | SaaStr

Without these 5 … it’s tough to get there in SaaS.

The post The Top 5 Challenges to Starting a Successful SaaS Company appeared first on SaaStr.

25% of You in SF Plan to Go Back to The Office Soon, Apparently

This post is by Jason Lemkin from SaaStr

So we did a quick informal Twitter poll with 830+ votes, and 25% of you said you’re going back to the office now that San Francisco is allowing non-essential employees to return.

Density is capped in SF as it reopens offices, and safety policies must be followed.

But it’s already happened if you look a little further down the Peninsula.  Right now, SF offices are still empty.  But the secondary office of SaaStr is in downtown Palo Alto.  And the VCs are here, in the office.  They’re at work.  And each start-up in downtown Palo Alto at least seems to have the CEO and a few others inside.  Philz is pretty packed.  Most of the restaurants have tech folks you’ll see at lunch.

We’ll see how it goes.  There’s no vaccine.  There isn’t even a plan, really.

But expect folks in SF to start trickling back to the office soon.

The post 25% of You in SF Plan to Go Back to The Office Soon, Apparently appeared first on SaaStr.

You Can’t Hire a VP That You Don’t Love

This post is by Jason Lemkin from SaaStr

Recently, a good friend of mine running a Hot SaaS Start-up asked me if he should hire a particular VP of Product candidate I knew well.  The team he’d be managing was a big thumbs up on him.  The board was in favor.  And I knew this VP.  This VP is a 10/10.

But … it wasn’t what this CEO was looking for.  He wanted someone different.  It just didn’t click.  Not deep down.

My advice?  Let her go.  Just don’t hire her.  Even if everyone loves this VP … you have to love the VPs you’re with.  Or you’ll never really trust them.  And then, they’ll never really succeed.  It’s just too hard unless everyone really, truly has each others’ backs.


Over the past 18 months or so, I’ve played a little bit of a matchmaker.  I’m no recruiter, but I’ve “placed” probably 20 folks I know in promising SaaS start-ups as VPs or Directors.  The key here is I look not just for the necessary experience (at same ACV, ability to hire a team), but also, a good personality match.  People that would work well together.

Screen Shot 2014-08-11 at 1.10.43 PMAnd I’d say my success rate so far is about 19/20.  19 have gone on to be, at least so far, a real success in as a VP or Director at their Next SaaS Start-up.  But the 1 that failed did shake me a bit.

This was for a VP Sales position for a fast-growing SaaS company at about $4m in ARR.  The company had never had a true VPS before, and clearly, it was time.  No VP of Sales candidate is perfect — if they are, something’s off.  Why would they take the job if it’s exactly what they’ve done before successfully?  But this candidate was good.  He had managed a team of 20 before, hired 8 of them successfully, and 3 of the best ones were ready to join him.  He had sold as a similar ACV and even in the same vertical.  And he clearly cared a lot, and was excited about selling the product.

What he wasn’t, was a Mr. Dashboards.  He couldn’t sell up.  He didn’t schmooze, and he didn’t look Great in a Suit.  And he was relatively young and only been a Director of Sales before.   He wasn’t 100% proven a a VP.  He liked to just deliver.  And the CEO didn’t love him.  Instead, he loved another candidate he couldn’t get.  Another candidate that was smooth as silk, knew the industry cold, and had a proven “VP of Sales” on his resume.

I told the CEO to just hire this VP of Sales candidate.  That at $4m in ARR, it was late already, the logo accounts were there, there were enough leads, enough to build on.  Get it done.  I believed, at a minimum, this VP of Sales would drive revenue per lead up, and more than pay for himself.

And the CEO hired him.  And never loved him.  And within 4 months, the VP of Sales was gone.  They never really hit it off, and everything this VP of Sales did that was “wrong” (and there was plenty, as there always is), was viewed as failing a test.   And I guess … this failure … it was my fault.

Fast forward to today.  Coincidentally-ish, I recently met with this VP of Sales and his new CEO in the next job he took.  Where this VP of Sales is just killing it.  They’ve just crossed $10m in ARR and growing fast.  I asked this second CEO, how the VP of Sales was doing.  Blowing it up, he said.  And importantly — the new CEO loved this VP of Sales.  Just loved him.  One of his best hires ever, he said.

Ok …

So we all know different folks excel in different environments.  But it’s more than that.

SaaS is going into battle together every day.  Wining that next customer.  Saving that big deal.  Building that crazy feature.  Every day, there’s a new drama.

It’s truly a team effort.  The VP of Sales opens and closes.  The VP Marketing feeds the machine. The VP of Customer Success keeps it running and adds fuel to the fire.  The VP Product makes sure the 1,000+ customers get what they need, as impossible as that is.  And the VP Engineering’s job is to make a business process 10x better than it ever was before, just using computers.  This is teamwork.  And it’s really not that silo’d at all.  You’re all working on different parts of the same puzzle — Customers.

Where I don’t see true teamwork, I almost always see eventual failure.  Or at least, underperformance.

As CEO of a SaaS start-up, you really can’t micromanage past Initial Traction ($1.5m in ARR or so) at least.  Before, maybe.  But then, there will just be too much going on.  And you can only let go and delegate to people you trust.

So don’t hire a VP you don’t love.  It’s a little bit like a marriage, perhaps.  No matter what their LinkedIn is, no matter what anyone else says, you have to 100% believe it them on Day 1.  Period.

If not — just press on.

(note: an updated SaaStr Classic post)

The post You Can’t Hire a VP That You Don’t Love appeared first on SaaStr.

Which VCs Open Cold Emails? Keith Rabois. Aileen Lee. David Sacks. Satya Patel. And More.

This post is by Jason Lemkin from SaaStr

A little while back, we did a great digital event, The New New in Venture.  We explored how venture has changed since Covid with many of the best, and many I look up to, from Aileen Lee of Cowboy Ventures to Satya Patel of Homebrew to Keith Rabois of Founders Fund and so much more.

I took advantage of the format to ask every VC I interviewed one question: Do You Open Cold Email?

And you know, it’s not just me.  (I love a great cold e-mail).  All of them do.  You can catch up on the sessions here:

I asked again and again, clearly.  Do you open cold emails?  How often?  And have you funded deals from them?  The answers were consistently yes, most of them, and yes I’ve funded them.

I learned:

  • Keith Rabois prefers a deck, and he reads most of them.
  • Aileen Lee or her partners read every email pitch that comes into Cowboy Ventures.
  • David Sacks of Craft prefers a short email pitch that summarizes the opportunity.
  • Satya Patel of Homebrew reads everything sent to him

Personally, I do get behind on email, but I love an amazing cold email and have funded maybe ~50% of my investments from them.  I like an email pitch that is so amazing, that I’d fund it just based on the email alone.  More on that here:

2 Cold Emails I Funded For Millions

So yes, is a perfect warm intro better?  Well, maybe.  But even the top, most famous Seed VCs are hunting.  Hunting unicorns and decacorns.  And they can’t wait for them all to come from their networks.

So put together the very, very best cold email you can.  Make it awesome, in every way.  And send it to your top VCs.

They may not respond.  But if it’s awesome, including the title, I bet they open it.  And if it’s super awesome, you have a better chance than you might think of getting a meeting.

Just don’t ask for coffee or to compare notes.  Selling stock in sales.  Make it count.  And it will work.

Here’s one of the best SaaS companies in the world, worth $3b+.  That I funded from an A+ cold email.  The email’s even shown in the video:

The post Which VCs Open Cold Emails? Keith Rabois. Aileen Lee. David Sacks. Satya Patel. And More. appeared first on SaaStr.

The Real, Simple Reason SaaS Execs Get Fired

This post is by Jason Lemkin from SaaStr

Q: What are some common reasons that CEOs and other top executives are fired?

Ironically, it is rarely for missing the plan — at least at start-ups.

Rather, execs and CEOs are fired for (x) hiding that they are missing their plan, and (y) blaming others.

The reality is VCs and board members know externalities do matter. Times get tougher and then easier. And they know the best VPs and CEOs will course correct and go find the help they need to get back on track.

A VP that doesn’t make excuses, and telegraphs issues calmly ahead of time, and doesn’t spring surprises is rarely fired. At least, not for quite a while. They are almost always given more chances at least.

But the VP that keeps saying they’ll make it up next quarter, but that never does? The VP that cries wolf is shown the door after 2 quarters of misses.

A deeper dive here:

How do you prevent yourself from getting fired from a company you own by shareholders?

The post The Real, Simple Reason SaaS Execs Get Fired appeared first on SaaStr.

At About $2m in ARR, Every Great Hire Will Be Accretive.

This post is by Jason Lemkin from SaaStr

Recently, I was talking to the CEO of a pretty successful SaaS company doing ~$3m in ARR, growing nicely, in a good space.  Doing just fine.

And he was proud he’d just hired a VP of Sales at a below-market rate.

Dude.  I told him.  That’s a negative.  Because at your size and growth rate, It Just Doesn’t Matter.  If they are any good.  You don’t want to save money on a great hire.  You want to instead, make sure they are accretive.

Because it turns out, once you hit just $2m in ARR, and maybe even much earlier — every great hire will be accretive.  Will make you more money than you pay them in cash.  I guarantee it, in fact.

Let me explain the math.  Let’s assume you are at $2m ARR, to make the math simple:

  • You hire a Great VP of Sales.  Accretive in 90-120 Days.  For say $300k OTE.  A great VP of Sales, within one year, can easily close 20-50% more business than you would have without him or her.  Even just 20%, the bottom end of the range … is $400,000 in additional revenue ($2m x 20%).
  • You hire a Great VP of Marketing.  Accretive in 90-180 Days.  Let’s say you’re at $2m ARR again, growing 80% YoY.  And you don’t have a great VP of Marketing yet.  Well, make that hire, and you really don’t think you can get another 20-30% improvement from your existing lead flow?  By properly communicating and marketing to them?  By doing better webinars, better city tours, better whatever?  Of course she or he can.  Another 20% is again … an additional $400,000 in revenue.  Even just a 10% improvement in your lead-to-revenue performance, even just another 10% in true qualified leads … will more than pay for the hire.
  • Every Great Sales Rep is Accretive at $2m in ARR.  In Just 2 Sales Cycles.   Even just at $1.5m-$2m, there’s enough momentum in the business, enough repeatability, that a great rep can really have an almost instant impact.  Take his or her leads, and make 20%-30% more out of them than a mid-pack or mediocre rep (and maybe more.  The best reps often can yield 50-100% more than the mid-packers from a given set of leads).  So that incremental Great Rep takes his or her say 500 leads a year, and instead of turning them into $350,000 like the last guy … she turns them into $500,000.  Again, more than pays for herself.  And fast.  And that’s just first year ACV.
  • Every Great Engineer is Accretive at $2m in ARR.  In Just One Full Release Cycle.  You think engineers are cost centers, at least from a financial model perspective?  Not if you are selling into the enterprise.  What you’ll learn is that if you can get one more Needed-it-to-Close-the-Big-Deal feature every 3-6 months … that great engineer will pay for herself.  You need to lose a few five or six figure deals to a feature gap to get this, to see it.  But once you do, it will become crystal clear.  If you just had that one extra great engineer, you would have closed Google.  More than pays for herself, again.
  • Great Customer Success Managers Can Be Accretive Managing Just $800k-$1m in Existing ARR Within 9-12 Months.  A lot of mature SaaS companies use the metric of ~$2m in ARR per customer success rep.  But if you get a great team — you can hire a lot more aggressively than that.  A mediocre CSM might say retain 100% of your mid-market revenue on a net-of-churn basis.  But a great one might, by really creating true customer success, with upgrades, can get that same customer base to renew at 110-120% of last year’s ACV.  That incremental 10% … pays for the CSM right there (10% of $1m = $100k).  And that’s just one year’s worth of ACV.  If that customer lasts 3-5 years, and you see Second Order revenue from it … the ROI will be very, very high.  Even with a great CSM managing as little as $800k in ACV, he or she can be very accretive.  A great one.
  • Picking Up the Phone Can Be Accretive in 90 Days.  It’s even true in customer support.  No one picks up the phone.  It’s too expensive.  They want to do email tickets.  Which customers hate, 9 times out of 10.  They want someone to answer the da*n phone.  Imagine you save just 10 customers over the course of a year at a $4k ACV by picking up the phone.  That’s less than one saved customer a month.  And voila! — you’ve more than paid for an extra customer support rep right there.

I didn’t figure this out until $4m in ARR.  Once we got there, I saw all of this.  I told every manager at EchoSign to hire everyone they wanted.  No headcount limits.  No budgets.  Only so long as they were truly Great.  And hence, accretive.

Because I waited until $4m in ARR, with hindsight, I wasted a lot of time from $1.5m to $4m in ARR.  Because we should have just hired every single employee that was Great, no matter if it seemed expensive on paper.

This only works if you have 12+ months in cash.  Because these accretive employees need time to close their deals, build their features, launch their campaigns.  So don’t make all these hires if you have < 9 months of cash in the bank and are too worried about money.

And this only works if the hires are truly great.  That extra rep, if she or he is mediocre, is mid-pack … may play a role in your org.  But she’ll just be taking leads from another theoretical or existing hire, she won’t be increasing revenue per lead.  The mediocre, incremental rep or engineer or CSM isn’t accretive.

But at $2m ARR, maybe even $1.5m ARR or even less if you have a repeatable process … everyone great is accretive.  If you meet one — hire him or her.  That day.  And just pay market.  Don’t quibble over salary for the great ones.  Because it doesn’t matter really, what you pay — if he or she is a profit center.

(note: an updated SaaStr Classic post)


Image from here

The post At About $2m in ARR, Every Great Hire Will Be Accretive. appeared first on SaaStr.

Pick Up The Phone. Answer the Chat. Be Present.

This post is by Jason Lemkin from SaaStr

We’ve talked quite a bit on SaaStr about Customer Success, and there’s a very specific reason for it.  It’s one of the most non-obvious drivers of revenue growth in Years 3, 4, 5 and beyond of your SaaS start-up.  More on that here.  Customer Success can feel like a cost center in Year 1 (and indeed, it is), but by about 18 months out after your first 10 paying customers … it will be your largest profit center.  So invest in it!  Early.  And get it right.

What we haven’t really talked about is Customer Support.  Basic, reactive, customer support.  Solve the customer problem.  Try to.  Pretend to.  Etc.

mimirogersAnd we won’t talk a lot about the nuts and bolts of how to process tickets, etc.  SaaStr is about growing revenue faster with less stress.

But there are a few things in customer support that you can do that will clearly move the needle, but that may be slightly non-obvious.


Let’s step back.  Almost everyone not out of a B2C/e-commerce background is going to tell you phone support is a terrible use of time and resources.

Your customer support folks will tell you:

  • It takes 10x longer to resolve a voice call than a trouble ticket.
  • I can’t filter phone calls.  I can filter tickets.  So tickets actually are like 50x more efficient than picking up the phone.
  • I just don’t have the time in the day.  I already spend 12 hours just responding to tickets and in-bound emails from existing customers and all the rest of the drama.

All 3 are true.

And your sales folks will tell you:

  • Oy.  Any in-bound call just sucks up 20 minutes of my time with d-u-m-b questions.  I could be doing a demo to a true opportunity.
  • 95% of whomever calls in never buys.
  • 95% of the rest are single seat customers I don’t want anyway.

All 3 are true.

callcenterhellSo yes, viewed narrowly, picking up the phone is one of the lowest ROI things you can possibly do.

But, that’s wrong.

Here are three things we know that are also true:

  • Customers will forgive problems much more often if they can get someone on the phone.  We all panic less, and feel better, when we reach someone competent.  And at the other end of the spectrum, we never forgive apps if no one responds to a ticket for 24 hours.  Do more here, customers will forgive you, and bond to you.  Do less — and they’ll never forgive you.
  • Sales prospects will believe you are much more professional, and real, if someone picks up the phone.  That’s what great companies do.  Even if the person that picks up the phone can’t really help close the deal.
  • You will build true attitudinal (vs. mere behavioral) loyalty if your customers and prospects can talk to a real human.  Even if it’s not the perfect or right human.  And attitudinal loyalty is key to building a true brand, second-order revenue, and an in-bound lead machine.  Customers that are merely behaviorally loyal, or even — prisoners — don’t churn in a day.  But they don’t buy more than they absolutely have to, they don’t upgrade, they don’t take the upsell call.  And they churn at a much higher rate.  More on that here and here.

Ok, so how do you do this?  How do you resolve the seeming paradox that picking up the phone is extremely expensive and distracting, and time consuming — but also one of the cheapest and simplest investments you can make in customer satisfaction?

There’s no perfect answer, but you can do this:

  • Screen Shot 2015-07-24 at 5.28.45 PMAt least outsource it for now, with a script.  Make sure someone ALWAYS picks up the phone, even if for now, the answer has to be “That’s a great question.  Let me have sales give you a ring back later today” or “Oy.  Sorry to hear things aren’t working right for you.  That’s a new one for me. I’m going to create a ticket right now!”  You can outsource this with a good script, for the cost of just a few dollars per call.  It’s not great if they can’t solve the problem.  But it’s much better for someone to answer the phone, even if they can’t solve the problem.  Than if no one answers the phone at all.  You know this.
  • Budget for it.  Assume you’re going to get X calls per day, and budget for it.  This sounds simple, but people don’t do it this way.  And if you can, measure your customer satisfaction afterwards.  I bet you it goes up.  And I bet you, measured over 9-12 months, it pay for itself in decreased churn or at least, increased Net Promoter Scores.
  • Segment it, when you can.  The one thing that will kill you is taking phone calls from free users.  So probably, don’t expose phone support to folks that don’t pay anything.  But expose it to everyone that has a paid seat (everyone), and everyone that might buy.
  • It works itself out with customer success.  Once your engine is running, this works itself out with customer success.  Because the customers that know their CSM will just reach out directly to their CSM.  So the burdens here aren’t as great as you think.  The larger the customer, the more CSM dedication they’ll get.

My main point is here is picking up the phones is one place where you definitely should not listen to your team. 🙂  Your interests are not aligned.

They don’t want to pick up the phone.  That makes sense.

But you do.  Make it happen.  Especially because while it does have expense associated with it in the short term … It’s easy.  It’s simple.  It’s a quick improvement you can make right now, this month.  You don’t need any engineering team, any new features.  It will make things better, and give you a lift over the medium term.

It pays for itself in your brand, your NPS, your customer happiness.

Screen Shot 2015-07-24 at 3.17.20 PM

Screen Shot 2015-07-24 at 5.38.17 PM

(note: an updated version of a Classic SaaStr post)

The post Pick Up The Phone. Answer the Chat. Be Present. appeared first on SaaStr.

What’s Your Moat?

This post is by Jason Lemkin from SaaStr

A few years back, we did an extra “Day 0” AMA session at SaaStr Annual with Christoph Janz of Point 9 Capital and several hundred founders came.  One asked what were top moats are in SaaS.

At the time, I didn’t have a great answer.  A lot of SaaS apps don’t really have moats, I thought.  But that’s wrong.

Let’s take a look at moats in SaaS:

  • Brand.  Brand can be a big moat in SaaS.  Most customers just want to pick the app they’ve used and heard of.  We all underestimated this in the earlier days of SaaS.  There may be 100+ CRMs today, but most us just want to pick the one we know.
  • Data. Data lock is real.  LinkedIn owns the human record.
  • Structured Data.  Even if data resides in many silos, structuring makes it unique.  Exporting your Customer records from Salesforce is a huge task.
  • Partners + Ecosystem.  The top partners in the Salesforce, Shopify, etc. ecosystems do get most of the leads.  And this compounds over time.  The AEs, the biz dev folks, tend to send deals to the partner everyone trusts and knows.
  • Integrations.  Most vendors only integrate one third party in each category, maybe two.  Zapier is integrated everywhere.  Maybe 10x more than anyone else …  So also, build more of them.  Before someone else does.


  • Agencies and Implementation Partners.  Third parties want to specialize on helping customers deploy just a handful of leading apps.  This is a big part of Hubspot’s GTM, and of many in the Shopify ecosystem.  Own the agency relationships, and it’s really tough for others to break in, absent strong organic customer demand.  No one ever got fired here for deploying a market leader …
  • Long-Term Contracts.  Yes, we hate this.  But getting customers to sign 3+ year contracts does work.  Not perfect.  You can buy out these contracts, and break them.  But 3-year contracts are a partial moat.
  • Using Massive Amounts of Capital To Play In Every Segment.  Dominant-dominant strategy is tough to play well, but being in every single segment when the competition can’t afford to be is a form of moat.
  • “Most Enterprise” Vendor.  If you are the most secured, most trusted, most 2FA, most HIPPA, most SOC-2, most everything vendor … you will win where that matters.  And it matters a lot in the enterprise.
  • No Contract At All.  Yes, a long-term contract is a “stick” moat.  But there’s a “carrot” flip-side: making it 10x easier to onboard than the competition does.

So the meta-point is there are actually a lot of moats in SaaS, of various strengths.

As we start to plan for next year, maybe that’s a place to agree on an initiative or two.  A company goal.  And maybe a priority change here or there.

-> Ask the team at your next planning session — What’s Our Moat?  And How Do We Reinforce it Next Year?

And see where that goes. It probably goes somewhere good.  If you are going long, that is.

The post What’s Your Moat? appeared first on SaaStr.

I’m Tired of Running My Successful Start-up After X Years. What Should I Do?

This post is by Jason Lemkin from SaaStr

The Holidays are coming up, or likely depending on when you are reading this post, at least some holiday is coming up soon — and I hope you are taking a vacation.  Even in these crazy times.  Some sort of break.

Because, I know you are tired.  Really tired.  SaaS is hard.  The New Revenue dials and dashboards in Salesforce go back to zero every month, or at least every quarter.  Everyone wants to grow even faster.  The team is a bit restless.  The customers are great but … they … are … so … tiring.  The travel.  The competition is everywhere.  The complaints.  The 1-on-1s.  The investors.  I know.

I know.  As the Holidays come, though, let me reach out if you’re feeling really burnt out.

“I’m Tired of Running My Successful Start-up After X Years.  What Should I Do?”

First, let’s be clear — everyone gets tired after about 4-5 years.  Really tired.  Everyone.  You are not alone.  You would be surprised how many of the Top 100 internet CEOs were exactly there.  And after 4-5 years is often when one CEO steps down, for another.

But if you’re Burnt.  Crispy Burnt.  My first suggestion is this:  take 2+2 weeks off.  It’s hard to take a full month off, so instead do this (or if you’re already going on vacation, flip it around):

  • For the first two weeks, come to the office, but don’t really work.  Go to the gym or for a run after you get in.  Decompress at the movies in the afternoon.  Just let yourself disengage a bit.
  • Then, then two weeks really off.  Go at least as far as Hawaii, maybe further.  Check email only once a day, and do nothing other than simple responses for mission critical items.  No phone calls, no work product.

Only then, consider your next options.

Bringing in an outside CEO might seem on the surface a good option — but I’m skeptical, because after X years … you probably would have already done this if it was the best option.  You would have done this earlier if it was the way to go — because that’s obvious.


So I think the more likely practical option, after the 2+2 weeks, is if you’re burnt out after X years — Redefine your Role for this and next year. 

Dedicate yourself to bringing in that missing VP, or a COO, someone to somehow shoulder at least 40-50% of your load.  Since you’ve stuck it out for 4-5 years or however long, I bet if you can find someone to take half the weight off your shoulders — you can still do amazing things at your company.  And economically, you probably should.  You have so much invested in these shares, this company, this journey.  SaaS is a 7-10 year journey — and you already have learned and accomplished so much.

>> Tired?  Burnt?  Then Bring in the Help next year.  Make that Job 1.  Put everything else aside.  Then it will be better.  Maybe even great.  I promise.

(note: an updated SaaStr classic post)

The post I’m Tired of Running My Successful Start-up After X Years. What Should I Do? appeared first on SaaStr.

5+ Basic Tips to Assigning Leads to Your First Sales Reps

This post is by Jason Lemkin from SaaStr

Some of the ideas in this post are … basic.  So forgive me.  But I’m going to include some of them as I’ve noticed that as SaaS explodes, more and more SaaS companies do better and better in more and more interesting spaces.  But they also just miss some of the very basics sometimes.

So let’s talk about lead allocation 101.  Really, 100.  01.  The very basics.

When you have 1 rep, it’s pretty easy to know where to send the leads.  You either keep a few for yourself as CEO — or you send them all to her.  But what do you do with reps 2-10?

A few very basic thoughts:

  • First, start with round robin.  Like almost always.  If your early sales folks are from bigger companies, they are likely used to territories.  Territories certainly make sense with field reps who … go to visit customers in person.  They also sort of make sense even with inside sales, and most bigger companies arrange teams in “patches”, even if those patches are often very far away from their geographical location.  It makes life simpler, later, to do this.  But don’t start here.  Instead, until you at least have a team of reps, just route the leads automatically, in order.  Start there.  Don’t make it more complicated.  Because more complicated makes it harder to measure.  You need to learn what works.  And you won’t learn unless all of the reps are basically running the same playbook, and using the same quality and types of leads.
  • Segment your leads as soon as you are big enough to, at least into Small Medium + Large.  This is often around reps 4-5.  Start with round-robin yes, but as soon as your leads start to bunch into different sized companies — Small, Medium and Large — you want to begin the process of specializing.  Some reps will be better with the bigger leads.  They have longer sales cycles, more decision makers, and more complexity in questions and decisions … but also a bigger check size.  Get the folks good at high velocity doing the smaller deals, and the folks better at solution sales doing the bigger deals.  But you can’t specialize here with 1 or 2 reps.  Reps #4 and #5 is usually about as early as you can start to do this.  Maybe rep #3.
  • Segment your leads by industry when you are ready This sometimes can be later, or sometimes earlier.  But if say 50% of your leads are in insurance and 50% are in technology industries, it can make sense to specialize reps here fairly early.  They then can get good at telling prospects what say Aetna and Cigna did with your product.  Or what Google and Facebook did.  Don’t do this until you are ready.  But even if all the uses cases seem similar, there will be important nuances by vertical.  So segmenting here when you are ready makes a lot of sense.
  • Promote SDRs quickly.  The best source of new account execs are the best SDRs you already have.  If you see an SDR quickly being able to close the smallest deals herself, give her a shot.  They are already half-trained, after all.  One big advantage in the early days is SDRs have an easy and clear promotion path.  Later, it will get more crowded.
  • Most importantly — implement an SLA as soon as possible.  And take away leads that aren’t followed up with promptly. This is the #1 thing you should do once you have even 3 reps.  Once reps’ plates get full, they just don’t give enough attention to the B leads.  But the B leads can be gold.  You need to add an SLA.  In that agreement, you take away any lead not followed up with in say 2 hours, and assign it to the newest rep.  And you take any lead that hasn’t been touched in say 2 weeks, and assign it to the newest rep.  Assign the leads that haven’t been touched quickly enough, or recently enough, to the newest sales pro.  They’ll be more hungry.

There’s a lot of complexity here, and it makes sense these days to add a full-time sales ops person as early as say rep #10.

But if you aren’t taking these 5 steps to optimize how you manage leads, you should.  They pretty much always work.

And now, a few more nuanced thoughts:

  • Listen to their calls.  Use Going or Chorus or whatever, but you have to listen to them.  Listen to at least 5-10 calls a week.  You’ll be shocked what you hear.  And you can jump in and help.
  • Carefully monitor leads per rep.  Some reps can handle more leads than others.  Notwithstanding round robin, if you are “lead rich”, you may not want to split the volume of leads 50/50.
  • Figure out who is good at what.  And route their leads there.  This alone can boost your revenue per lead 20%+.  Concentrate certain types, sizes, industries, etc. of leads in the rep who is best at those ones.

The post 5+ Basic Tips to Assigning Leads to Your First Sales Reps appeared first on SaaStr.

Why Sales is a Tough Job

This post is by Jason Lemkin from SaaStr

Q: Why are sales jobs the worst?

Here’s why sales is tough:

  • Can’t hide — not for long. At some point, you have to put real points on the board. Everyone will know. But in many other roles, you can sort of skate by if you aren’t too senior.
  • Get a lot of No’s. A lot of them. Most of us can’t take it.
  • Limited career path if don’t move into management. You’ll get a lot better in 2, 3, 5, 8 years. But ultimately, just becoming a more senior individual sales rep has a limit.
  • Not everyone sees your value. It’s easy to see in many SaaS companies, but overall in the world, many people don’t really value the large contributions sales professionals make.
  • You can be just a number to the company. If you are part of a larger sales team, you may just be a number on a leaderboard in some sense.
  • At the VP level, your job is always at risk. This is a real stressor. As a VP of Sales, every quarter you have to hit the number. You can miss a quarter or even two, but after that, your job is at high risk. High risk.

Sales is a craft, an art. It really is.

But not everyone appreciates it.

Learn to, and your team will appreciate it.  And be more loyal.  And see less churn.


The post Why Sales is a Tough Job appeared first on SaaStr.

It Takes at Least 7 Years in SaaS: Can You Do The Time?

This post is by Jason Lemkin from SaaStr


I was recently at a dinner with a founder of a pretty successful web company, and he asked how long I had worked on Adobe Sign / EchoSign, and he nodded his head, and he said “Yeah same for me.  It takes about 7 years”.

People know SaaS takes longer than consumer web to scale.  But it’s not always clear how much longer.  Let’s look at some basic math, assume it takes you about 2 years to really get going, and then you grow 100% a year through $50m in ARR or so (not easy mind you):

  • Y1 revenue: $0
  • Y2 revenue: $1m
  • Y2 revenue: $3m
  • Y3 revenue: $6m
  • Y4 revenue: $12m
  • Y5 revenue: $24m
  • Y6 revenue: $48m
  • Y7 revenue: $80m
  • Y8 revenue: $110m

So even here, ready for your IPO in Year 8, having done extremely well and hit $80m ARR in Year 7.  If you do well, but it goes a little slower than this, it can take a decade or longer.  A full decade.

What about M&A?  The challenge with M&A is most SaaS M&A, unless it’s trivial stuff — the acquiror wants to wait for some scale at least.  Often $10-$20m in ARR at least, unless your category is seen as super strategic.  So with the math above, that can take 5-6 years as well to get a healthy exit.

Anyhow this math isn’t new.  Everyone in the old days used to talk about 7 years to an IPO, or whatever.  But the problem is a lot of folks who haven’t lived in the SaaS world, or come out of consumer, I’m not sure they really get it.  In consumer web, you really can think in terms of 18-24 month commitments, at least initial commitments.  Fail fast, pivot fast, acqui-hires, viral coefficients, and all that.

But if you want to start a SaaS company — you have to be willing to do the time.

24 months often to really get to a minimum sellable product and $1m in ARR.   Often 5 years just to get to Initial Scale, and say $10m in ARR.  And 7-10 years to get to something Big.

You gotta plan for it.

image from here.

(note: an updated version of a SaaStr classic post)

The post It Takes at Least 7 Years in SaaS: Can You Do The Time? appeared first on SaaStr.

10 Simple Tips to Do Better This Quarter — With The Leads You Already Have

This post is by Jason Lemkin from SaaStr

So you want to do better this quarter. Maybe last quarter was rough. Maybe it was fine, but you want to step up your game.

One thing you can do is spent a ton on new leads.  You can also totally change your sales team.  Or finally launch that critical feature.

But what can you do now, with the team you have, and the leads you have, to do even better?

A lot, it turns out.

My top 10 tips:

#1.  Drive Down Churn.

This isn’t easier, but 9 times out of 10, it sure is easier than finding brand new customers.  Here’s my #1 tip here.  If driving down churn isn’t a measured, quantified Top 3 goal in the company — try making it one.  If you do, churn will go down.  Almost always.  If you want to say, increase net retention from 100% to 105% this quarter, make that a Top 3 goal and talk about it every single week.  With everyone.

The wheels will turn, priorities will change, onboarding will improve, support will improve, features will shift … and churn will come down.

And driving down churn increases revenue just as clearly and surely as closing net new deals.  Without needing a single new lead, really.

#2.  Drive up NPS.

In a way, this is the same point as #1, almost — except you can recruit even more of the team here.  Every single employee knows something to do to make customers happier, and thus drive up NPS.  You can answer chats faster.  Pick up the phone.  The sales team can call back every single prospect, not just the good ones.  Customer Success can decrease onboarding times.  Marketing can better qualify leads — and qualify out churn-and-burn prospects.  And more.

Drive up your NPS from say 30 to 50, and watch upsells go up, and churn go down, and deal sizes go up.  Again, all without a new feature, lead, or hire.

I Was Wrong. NPS is A Great Core Metric.

3.  Be More Grateful.

OK this one is a bit softer than the rest, but as CEO being grateful is one of your top secret weapons.  Have you thanked a top performer this month?  Taken them to a Postmates Zoom lunch?  Promoted them?  Lauded them in the team meeting?  Said Thank You?

Try it, for real.  It goes far.

Now We Start to Enter the Sad Phase. Take Care of Your Team.

4. Zoom With 10+ Customers A Week.

This also always works.  Customers love, love, love to talk to the CEO.  Even of a 10-person start-up.  They love it.  So now that we can’t really fly anywhere, or visit in person, you have to take advantage and do 3x more customer “calls” than you ever did before.  Ideally, 10 a week.  At least 6.  This isn’t with new prospects.  This is with existing customers.

Again, do this, NPS goes up, upsell goes up .. and churn goes way, way, way down.

5.  Promote Your Star(s).  

We’ve talked a lot about this on SaaStr about retaining your stars.  But let’s go further.  If you promote your top 1-2 or so stars now, this week, this month — they will do even more.  They will rise to the occassion and the new title.  They will close more.  Deliver more leads.  Do more success calls.  Do more follow-up.  Ship that one extra feature.

The best respond to promotions and step-up.  Use that to do even better now.  This quarter.

Who Ya Gonna Promote? Don’t Wait Too Long.

6.  Less Spam, More ABM.

Enough of the endless, untailored cadences.  They work, but they don’t work well.  So ban them.  Force your AEs and SDRs to write a custom email, each time they do email.  To really understand who the prospect is, and how they might really benefit from the product.  To research who really to reach out to.

And watch your close rates go up.  Like magic.

You don’t like to get those canned emails, do you?  Neither do they.  It’s lazy.  And it works a bit.  But not all that well.

7.  Weekly Webinar.

Why, why, why don’t you do this?  Each week, without fail, do a webinar.  Invite both prospects and existing customers.  Do a 20 minute demo, or a customer presentation, or a deep dive.  Mix it up a bit each week if you want.  But do it.  Folks will come.  And the ones that do will care.  Even if it’s just 2 or 3 or 10, they will be some of your top prospects.

But you have to do it every week, without fail, to build up the skills and muscle memory here.

Webinars Almost Always Work

8.  Improve Lead Routing.

If you have even 2 reps, you can improve with rep gets which type of leads.  After even just 3-4 reps, this can be magic.  Start specializing then.  Who gets the bigger leads?  Who gets certain verticals?  Who gets how many leads per month?  Who will call back the smaller leads?  Do you have an SLA, to make sure everyone is called back ASAP?  Maybe even in minutes?

You can get a 20%-50% boost just making sure each lead is routed to the optimal rep.

5 Simple Tips to Improve How You Allocate Leads (In The Early-ish Days)

9.  Improve Lead Scoring.

Are you really doing lead scoring?  Are you doing it well?  Across the right database?  Are you following up with every lead?   There are only 40-50 hours in a sales week.  Optimize how the AEs use that time.

10.  Talk to Every Single Prospect.

Please, please, please do this.  Your reps will stop doing this.  They’ll only want to call back the hot leads.  They’ll forget to call some back.  They’ll be lazy if it looks like a tough or small deal.

So give those leads to someone that wants them.  That is hungry.

Because there is money in those leads, too.  The B leads.  They didn’t inbound because they are bored.  They inbounded because they are interested.  Very few prospects want to waste their time talk to an AE about yet another SaaS product. Give those leads to someone hungrier.  And oftentimes … that rep becomes your top performer.  I see this time and time again.

Make it a rule someone on the team has to call back every single prospect that inbounds in less than 15 minutes.  And track it.

How to Excel in SaaS Sales



The post 10 Simple Tips to Do Better This Quarter — With The Leads You Already Have appeared first on SaaStr.

Top 10 SaaStr Videos of the Week with Hubspot, Dave Kellogg, Gainsight, WP Engine, Github, Y Combinator and More

This post is by Jason Lemkin from SaaStr

With literally 100s of incredible SaaStr sessions and videos uploaded since Covid hit, it’s time to catch up on the Best SaaStr Sessions!

What are The Top 10 This week?

#1: “On Launching a Second Product with Dharmesh Shah, CTO / Co-Founder Hubspot”.  An incredible catch-up session with Dharmesh from this week,

#2: “Churn is dead. Long live Net Dollar Retention Rate with Dave Kellogg”.  A profoundly insightful session on churn from SaaStr Annual 2020 at Home.

#3: “Where Product Development is Going in 2021 with Nick Mehta, CEO of Gainsight”.  Another hot take on launching a second product line.  A great compare-and-contrast with the Hubspot discussion above on their second core product.

#4:  “The 5 things that kill startups after their seed rounds with Michael Seibel, CEO of Y Combinator”.  This session from SaaStr Annual 2020 was so good, the office shut down and just watched it.

#5: “From Burn-Out to $100M in ARR with Jason Cohen of WP Engine”.  A SaaStr classic that is maybe even more relevant now.

#6: “The Cadence: How to Turn Your SaaS Startup into an Army” with Craft Ventures General Partner David Sacks.  Another I personally think about a lot.  How not to burn out the troops, but still do amazing things.

#7: “The Secrets to How Flodesk Bootstrapped to $5M ARR in Less than a Year”.  This was one of those “surprise” sessions from SaaStr Annual 2020 that I didn’t know much about … but ended up performing really, really well.  Bootstrappers especially, watch!

#8: “Dustin Moskovitz, Asana: Fast Growth, Mindful Business”.  On the heels of Asana’s IPO, a great look back at how they really got there.

#9: “Going from $0 to $60M ARR in 4 Years with Podium CEO Eric Rea.”  A great deep dive.

#10: “What Being a Founder Taught Me About Leadership – Lessons from GitHub’s COO”.  Ok this was another session that just shut down the office.  The points Erica makes themselves aren’t profound.  But the lessons she shares, and how she helps you think about them — are.  Watch this one.


The post Top 10 SaaStr Videos of the Week with Hubspot, Dave Kellogg, Gainsight, WP Engine, Github, Y Combinator and More appeared first on SaaStr.

By The Time You Give Them a Raise, They’re Already Out The Door

This post is by Jason Lemkin from SaaStr

There’s an endless amount written on the internet about hiring “Rockstars”.  Finding them, not settling, and all that.  That you need to spend 20%+ of time recruiting (I said that myself here).  That the #1 most important thing you can do is put together a great team.  Which is absolutely true.

Screen Shot 2013-05-10 at 2.58.20 PM

But the #2 most important thing you can do is retain your team.  And I don’t see enough talk about that.  Today, frictional unemployment for experienced SaaS or any internet engineers, salespeople, marketing stars, and other leads is … about 9.0%.  Negative, near as I can tell.  If you’re great in SaaS, just email me.  I can get you 3-4 job offers by the end of the month.

I did many things wrong as a CEO in both my start-ups.  But one thing at least quantitatively I did well was retain the team (at least before SaaStr).  I tried to copy my old boss, whose motto was Zero Voluntary Attrition.  In my first start-up, not a single person left.  In my second, I only lost one person that I really wanted to keep.  A few of the early folks who were absolutely terrific, needed to do the next thing after we hit Traction, after several years of the very early-stage grind.  You will lose some pure start-up people once things scale up.  But after that, I lost no one that we needed to keep but one.

Now I’m not saying it was all roses.  Some of them could barely stand me at times.  Others needed to find a way to change or modify their roles.  And — importantly — a number of the best folks on the team almost left.  Really, really close.

So what are some tips and tricks here?  Let me add a few thoughts:

#1:  By The Time You Give Them a Raise, It’s Too Late.  They’re Already Out the Door.   You have to get comp right, as best you can, all the time.  These days, anyone good is going to get a 10-20% (or higher) raise to move — and maybe a bonus on top of that.

The thing is — you can’t counter.  It’s too late by that point.  Once they tell you they have another offer … they’re already out the door.  A raise won’t do it, at least not for the good ones.

#2.  Always Pay Market or Above As Soon As You Can Afford It.  At Least to the Great Ones.  The other night I was at an event with a number of other CEO founders.  One CEO told me the story of how he lost a top up-and-coming engineer, who was making a five-figure salary … to a real boooooring company that doubled their salary.  That boring company had to.  How else can a boring company steal a star engineer from a hot start-up?  Lots of money.

My point here is this engineer should not have had a five-figure salary, even if it made sense in historical context (joined as a very junior person, consistent with prior salary).  Pay market, or above, as soon as you can.  It’s a sign of respect.  And most of the best ones won’t ask.  They’ll just eventually get frustrated and leave.

#3.  It’s Probably Not Too Late When They Interview.  So Be Paranoid.  And Intervene.  There are some very tell-tell signs of someone interviewing.  Out of the office at weird hours.  Talking on their mobile phone on the sidewalk – and moving away from you if you approach them to say Hi.   Sick out-of-the-blue one day, healthy at work the next.  Signs of frustration in their posts on Facebook, in new connections on LinkedIn.

Now by the time they take another job, it really is too late.  Even if a raise would work then, which it won’t … the relationship is gone at that point anyway.

But it isn’t necessarily too late when they start to interview.  It may be, in its own way, a plea of exasperation as much as anything else.  If you can fix that issue, and you want to fix that issue — you can keep him/her more times than not.

#4.  Find a Growth Path for Everyone, Especially the Great Ones.  You have to find a growth path for the great ones.  They join a start-up to grow, to learn, to do new things.  If they can’t grow, they die a little every day.  It’s your job to understand the career path for at least your first 50 employees.  Know it.  And do whatever you can, within the boundaries of reality, to help them achieve it.  (But bear in mind that the good-but-not-great ones may not really want a growth path.  Or at least, may not want the stress and hard work associated with it.  So this really only works for those that really want to grow.)

#5.  Talk to People.  For Real.  Get Real Feedback.  At least Once a Quarter.  I know you probably hate annual reviews and the like.  I agree.  They are generally pretty wasteful in a start-up.  But you do need to do something different here.  You need to meet 1-on-1, in a unstructured way, with all your best people beyond your direct reports — at least once a quarter.  Quietly.  And ask them what’s frustrating them about their job.  What they want to be doing — but aren’t getting to do.  Be friendly — but blunt.  You need to learn.  Get it out of them.  And definitely do weekly 1-on-1’s with your direct reports.  You just gotta do ’em.  More on that here.

You may think you know if you have drinks together, or go see movies together, or whatever, that you know.   But you don’t.  Even if people complain in that context, it will be general complaints.  You won’t learn, or know, what your top people need to find their growth path at your company.  Where they feel stalled out and frustrated.  You have to ask.

Just some ideas.

Because there’s absolutely, positively, nothing worse in the pre-Scale days than losing a rockstar employee that you could have kept.  It just kills you.  Later, when you have 100, 200+ employees, $20-$30m+ in ARR … well … you sort of can swap people out, at some level.   Including maybe even you.  Everyone should be redundant at that scale or you’ve failed as CEO.   But until then, every key player is critical.

If nothing else – address retaining your top troops at least as seriously as you do recruiting them.  And whatever you do, don’t ignore the ones that don’t complain.


And on that note, don’t just take it from me.  Take it from Don Draper.  Don’t let it happen to you.


(note: an updated SaaStr Classic post)

The post By The Time You Give Them a Raise, They’re Already Out The Door appeared first on SaaStr.

My Top 8 Mistakes Investing in SaaS Startups

This post is by Jason Lemkin from SaaStr

Q:  What are some of the most costly mistakes done by novice investors?

A few of mine in investing in SaaS start-ups. They actually in the end haven’t been truly costly because, in the end, power laws mean your winners overwhelm your losers if you do it right.

But here they are:

  • Confusing non-recurring and recurring revenue. The one time I did this, the start-up ended up going from $1m “ARR” to $0.1m “ARR” pretty quickly. Because it was all really transactional revenue. I should have done better diligence here.
  • Investing when the CEO was a bit of a B.S. artist, and/or made something up. Being confident is good. Making things up is bad. Claiming something without knowing it correctly … about a customer I knew personally … was a flag. I shouldn’t have invested in this one. Even though the metrics were very impressive.
  • Investing in a founder/CEO not better than me. I haven’t lost money here, but I won’t do this again because it limits returns. Being a founder-CEO is so hard. If you aren’t better than me, you’ll probably sell early or get burnt out.
  • Investing when the CEO didn’t honor their commitments. I invested twice in start-ups where the CEO didn’t honor a commitment from the past. A big flag. Even when the commitment itself was fairly minor.
  • Investing based on a good deal / cheap price. I did several investments that, due to special circumstances, were truly cheap. In both cases, I made money — 3x at least. But I didn’t make enough money for it to be worth it. Cheap isn’t a reason to invest.
  • Not investing due merely to a high price. OK every investor can tell you this story. But not investing at $300m and seeing it worth $3b just a few years later … every investor has this story. You have to invest in your winners. Almost, at any price in Cloud / SaaS.
  • Not just agreeing to a fair deal with 1 quick handshake. I course-corrected here early and quickly. Now, I just ask the founder what they want in terms of price, terms, etc. If it’s fair, I try to just agree to it. No upside to negotiating really in earlier-stage investing. At least, not for me. If it’s not a fit, it’s just not a fit, and that’s OK.
  • Not buying every share I could. I haven’t made this mistake often, but often enough. I now buy every single share I can. I just ask “How many shares can I buy? I’ll take them all.” Because you really can only lose what you invest. But not buying every share you can in a winner is the #1 thing that caps your returns.

An earlier look at the topic here:

The Top 8 Mistakes I Made In My First 18 Months As a VC Partner

The post My Top 8 Mistakes Investing in SaaS Startups appeared first on SaaStr.

Why We Are Never Really Going Back to the Office

This post is by Jason Lemkin from SaaStr

Stewart Butterfield threw out an interesting statistic in a recent interview with Fast Company … over 20% of Slack employees have been hired since Covid-19 hit and the shelter order in SF went into place.

By the time this really ends … and my guess is Q2’22, but even if it’s Q3’21 … how big will that number be?  40%?  51%?  60%?

Even at little old Team SaaStr, half of our team has never really stepped foot in our “offices” in San Francisco and Palo Alto.  By the time we’re ready to go back “to the office” … should anyone even go back?  And to what?  They’ve never even been there.  They’ve never even worked in a SaaStr office (or a Slack office or your office) … ever.

Most of us will have never stepped foot inside of our company’s offices when we’re over this.

That’s why there will never be a traditional office again.  It’s time to start planning that way.

Start planning for a year or more of this, probably realistically, two.  This is the New Normal now.  Not what was before.  Not the old processes, the old performance reviews, the old ways of talking, the old office.

Because most of your team will never have even experienced the Old Ways.

The post Why We Are Never Really Going Back to the Office appeared first on SaaStr.

“SaaS Customers Have Never Been Happier”: A Discussion with Nick Mehta, CEO of Gainsight

This post is by Jason Lemkin from SaaStr

Nick Mehta, CEO of Gainsight, and I caught up ahead of their Pulse Product conference.  It was an A+ conversation on, in particular, how to do product extensions and sell a second product, and where product development overall is today:

A few take aways:

Why extend a top brand in customer success into product?

If nothing else, Customer Success professionals wanted it.  They wanted more insight and impact on the product itself.

How have you sold 2 different products to the same customer base?  What’s best, 1 sales team or 2?

We’ve gone back and forth, from 2 to 1 and back to 2.  The key now is an overlay of experts than know Gainsight PX cold.  It’s a complex question.  When existing customers buy a second product, they often don’t want to be “sold” per se.

How do you cross-sell multiple products in SaaS?

One of the most interesting learnings is around customers that aren’t totally happy.  The happy ones always want to take a call to learn what else you offer.  But the ones that believe in you, but haven’t fully gotten there yet in a deployment, sometimes are just as receptive.  It might be your second product is just what they need to unlock the most value from the first one.  We’ve seen that a lot.

Are customers happier in 2020 and 2021?

Yes.  Look at all the SaaS and Cloud IPOs.  We see 130%-140%+ net retention all the time now.  Customers are happier.


The post “SaaS Customers Have Never Been Happier”: A Discussion with Nick Mehta, CEO of Gainsight appeared first on SaaStr.

Be Careful Hiring “Dualies” — Folks That Are a VP of More Than One Thing

This post is by Jason Lemkin from SaaStr

I don’t know about you, but I’ve had to recruit a lot of types of folks over the years where my domain knowledge was limited.  I’ve had to recruit Ph.Ds. from various domains including particle physics.  Front-end, mid-end, back-end engineers of all sorts and types.  Sales managers back when I never managed sales.  Internet marketers when I didn’t know how to internet market.

You get the picture.  Anyhow the one thing I learned, beyond getting help screening and hiring for these positions from domain experts, is to look for Flags.  For signs the prospective hire just won’t work out, no matter how strong they might look on paper.

And I’ve learned again and again, including quite recently, there are 4 types of hires to just avoid:

  • CEOs.  If someone puts “CEO” on their LinkedIn as a prior job at some 1 or 2 person company you’ve never heard of, then generally, be wary of hiring them.  Why join a start-up?  Well reason #1 is personal and career advancement.  It’s hard to advance going from ahem a self-titled “CEO” to Director of Something.  These folks generally just struggle to successfully re-enter a formal work hierarchy.  Just pass here, nine times out of ten at least.  {Note: if you were a CEO of your own little company or small business, then just don’t put that on your resume.  Just Write Owner.  Or Principal.  Or GM.  Or Partner.  Anything but CEO 🙂  Note 2:  it can make sense to make an exception for a ex-CEO of a real start-up that didn’t make it, for a role they were great at before then.  If they’ve truly realized that’s the right path for them, for now.}
  • Architects.  OK, I know many great developers are architects.  And I do think there’s definitely room for one architect in your start-up:  one to step up as your CTO or VPE.   The problem is, beyond that, it’s an awkward title which suggests an awkward hire, for a start-up at least.  An architect is often someone that wants to be more than an individual contributor, indeed is and thinks they are better than an individual contributor — but often doesn’t want to be a real manager.  Doesn’t want to be a Director or a VP.  Do you really have room for this in your start-up?  Probably just that one, at least for a while.  If you hire an architect as an individual contributor developer … that never seems to work out.  This can change for companies with 60-100+ developers.  At that point, VPEs need them to scale.  But.  Not for start-ups.
  • Game Developers / Folks That Have Only Done B2C.  This isn’t personal. But I’ve learned in SaaS at least, consumer folks usually don’t work out moving over to B2B, especially enterprise B2B. Folks from consumer internet are used to users, not customers.  But at least sometimes, they sort of get it if they were at least sort of close to consumers-as-customers. But engineers and others from gaming companies … they just are so far from SaaS customers, it just doesn’t seem to work.  They are often super smart (lots of maths here).  They build games.  Millions use them.  If the game is cool, they win.  No need to talk to anyone, or make anyone happy — directly.  They seem to hate working at SaaS companies in the end, and just leave, and go back to gaming or something very consumer-y.
  • Dualies.This is tip #01.  The ex-VP of Sales and Marketing.  The ex-VP of Sales and Business Development.  The ex==-VP of Product and Engineering.  Yes, the areas are adjacent.  But, no.  Sales and Marketing are different, with different goals, different metrics, and different deliverables.  You can’t be fish and fowl.  And you can’t do both right, at least not in a start-up.  You need the best of the best in Sales, Marketing, Client Success, Biz Dev, Product, Engineering.  Not a VP doing a mediocre job of both.   Pass on the Dualies, unless it was just a single stint in an otherwise string of Singlies.
  • And Be Wary of Folks That Want to Become Dualies Next.  A real VP of Sales doesn’t want to be a VP of Sales & Success next.  Not really.  What they want is an even bigger win.  A VP of Sales that wants to be VP of More Than Sales is someone that’s sort of done … doing sales.

Ok there are many exceptions.  But in my experience, for over a decade of senior-level hiring, these 4 types never work out, for start-ups at least …

Don’t do it.  Especially, most especially, the dualies as VPs.

They just don’t want to do the one single job you need them to do.

(note: an updated Classic SaaStr post)

The post Be Careful Hiring “Dualies” — Folks That Are a VP of More Than One Thing appeared first on SaaStr.