Need Leads in Q4? Sponsor SaaStr Scale!


This post is by Jason Lemkin from SaaStr

So our SaaStr Digital events since March have been wildly successful — much more than we expected.  With 100,000+ total attendees, and probably 200,000+ including on social, we’ve had a ton of fun and learned a lot, from the CEO of Slack, Box, PagerDuty, Unsplash, and so, so much more.

Our next big Digitial Event will launch next week, SaaStr Scale 2020 on Dec 8-9.

But if you want to partner with us and sponsor Scale, and connect with 20,000+ Cloud founders, CEOs, and execs … get ahead of the line.  We’re limited to about 10 core sponsors in the current format.

Reach out here:

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How To Still Hire a Great VP of Sales Even If You Are Struggling


This post is by Jason Lemkin from SaaStr

When you are finally ready to hire your VP of Sales, oftentimes, there’s often a bit of a quiet panic around time.  About getting the hire done.  Because there’s a window.   Even if you are growing like a weed up to $1m, $2m, $4m ARR or beyond … you can see growth is going to slow down without help.  You can’t hire more reps yourself.  You don’t know the rest of the playbook and don’t have the rest of the toolkit.  You can see that even with great sales rep efficiency with say 1-3 reps, it is going to slow down unless you bring in that VP in time.

And indeed it often does.  If you don’t hire the management you need for each stage, you’ll almost always at least slow down at each phase transition.

But then so often, I see startups still able to hire a great VP of Sales even after sales slows down a bit.  Often, to much less than outlier rates.

Why?  Why would a great VP of Sales hire a start-up with mediocre growth?

Because great VPs of Sales aren’t dumb.  Some of the most proven ones only want to join the next Snowflake or Zoom.  If they truly have it all, they will wait for that shot.

But the most self-aware stretch VPs of Sales know they aren’t going to get called up at Zoom, so they look for the next best thing.  And that’s probably:

  • A decently-enough funded startup (so they can hire)
  • With a great CEO they believe in (so they can run)
  • With at least a mini-brand (to back up sales)
  • With leads.   With demand.

And a great Stretch VP of Sales can come in and see say 30% annual growth paired with a beloved product and tons of leads … as an opportunity.

And opportunity to turn that 30% growth into 50% growth with a few tweaks to the sales team.  To 70% growth with a new playbook and some strong hires.  And 100% growth with a great VP of Demand Gen to help them.

They know when they see the raw ingredients of success, and know if they can turn that into something special.

So if growth has slowed down, but you have happy customers, a mini-brand and leads … don’t hire your challenges from those VP of Sales candidates.  And don’t assume you can’t hire one.  Share the good, the great — and the challenges.

You’ll be surprised that 1-2 stretch candidates at least are up for that challenge.

And a SaaStr Classic on how this happens:

How My VP, Sales Doubled Our Sales in 90 Days. And No, It Wasn’t Magic.

The post How To Still Hire a Great VP of Sales Even If You Are Struggling appeared first on SaaStr.

Speaker Submissions are OPEN for SaaStr Scale 2020!!


This post is by Jason Lemkin from SaaStr

Ok on the heels of 100,000+ across social, Zoom and more at 2020 SaaStr Annual at Home, our next big digital event is the 2nd edition of SaaStrScale.com on Dec 8-9.

Scale particularly focuses on helping founders scale to $1B ARR … and beyond.  We’ll have top CEOs like Todd McKinnon, CEO of Okta, and Howie Liu, CEO of Airtable, top product leaders like Carl Gold, Chief Data Scientist at Zuora, and 40+ CROs, CMOs, CCOs, and much more!

We’ll also have 100+ roundtables and workshops and much more.

We are now taking speaker submissions, so if you want to lean or join a session or workshop, please apply here:

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That Super-Successful VP of Sales. Great? Or Just Lucky?


This post is by Jason Lemkin from SaaStr

I get sent this resume to review all the time. Director+ of Sales at Slack / Zoom / DropBox / Pick Your Brand Name SaaS Company. Took Hot Start-Up from $0 to $30m as VPS from Day 0. Was there “early” through IPO and did amazing things.

That all sounds impressive, for sure. But were they great? Or just lucky?

The thing is, it’s actually hard to know on the surface. Because it’s not ARR growth or even an IPO alone that determines if a VP of Sales him or herself is great. Because so many people were involved in getting Salesforce to $20,000,000,000 in ARR. It’s really how well they did based on a situation. Come into a #2 player and turn it into #1? That’s kind of amazing. Come into Salesforce at $2 billion and help it get to $5 billion? I mean, that’s great … but … not the same thing. And there were probably 100+ RVPs of Sales at that point. They aren’t all great. Really, only a subset are — at least in the context of jumping into a VP of Sales role at a SaaS start-up.

So when I meet a Candidate from Very Well Known SaaS Company, I add a few extra questions to my interview, and focus extra on some we always try to ask. To see if they really did it … or at some level at least, were just lucky.  Or at least, had so much help, so much infrastructure … that they may not be able to do it at a true start-up in a competitive environment.

My extra questions:

  • How much of your team did you actually recruit yourself?  This question is always important, but especially for someone from a Very Successful SaaS company. Because often, the managers were given a team, or a lot of it. That’s not remotely the same as recruiting your own team.
  • What’s your current team-level quota?  And what % of quota did you hit last year?  If she manages say 8 reps, what’s the total quota she’s responsible for? 8 x $800,000 = $6.4m, for example. You’d be shocked how many “directors” and “VPs” at bigger SaaS companies that are in “sales” don’t have a quota to hit. Pass on these hires. At least until you’re at $100m ARR. Maybe, always.
  • Why / why weren’t you promoted?  This is a trick question, in a way. Promotions are important, but a ceiling is less of a flag for me. It’s OK if your Director of Sales from BigSaaS Co never made VP at a BigSaaS Co. There may be many good reasons. Management change. Different strategy at $200m ARR than $30m in ARR. I like to see at least one promotion, that may be enough, as long as they are a true manager. But if they stumble with the answer, can’t answer it honestly … they’re not a real manager.
  • Do you currently hold a quota or commit? Why or why not?  If he or she hasn’t held a quota in a while, I don’t like it. Why did you get “promoted” out of a quota-carrying job? Probably because you weren’t that great at carrying a quota.
  • Who are your best 2-3 reps ever? And why? Will they come with you?  Not unique to BigSaaS Co candidates. But even more helpful here. If they won’t come, Houston, we have a problem. If the question isn’t answered with absolute ease and fluency, Houston, we have another problem. And why will these reps excel at your company?
  • Why did you leave? There are many good and fine reasons to leave. But if they struggle to answer crisply and coherently — that’s a flag. There should be a clean, clear, obvious reasons To Leave Something So Great.
  • Will your boss say you’re one of her best hires ever?  Really her boss should. If not, we may have a problem. If the candidate stumbles here … I’m pretty sure she was lucky. Not great. Get some stories here too.

Dig in more along these lines. Don’t get suckered into the ride she was on. No matter what, make sure this candidate really did it. Not just knows how to talk the talk. Because all managers know how to talk the talk at Big Successful SaaS Companies. All of ’em.

It will help you find out if that seemingly terrific candidate (on paper / LinkedIn, at least) from that Super Successful SaaS Company really did it. Or — was just lucky.

(note: an update classic SaaStr post)

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You Don’t Want Your Dream VP Candidate


This post is by Jason Lemkin from SaaStr

Ok this is a simple post, and one we’ve touched on many times before.  But it deserves its own post because it’s a mistake so, so many of you will make as you go to hire your first VPs.  And even your second VPs.

Don’t hire the “Hot VP”.  Not until you are equally hot, at least.

What do I mean?  So many founders, especially first-time founders, fall in love with That Great VP They’ve Heard Of.  The one at SaaStr Annual at Home.  The one that worked at Dropbox, or Slack, or Twilio.  The one on the podcast you listen to.  The one on twitter.  The one that won the VP of the Year awards.

And if they did all that at say Twilio in early days … and your product is a little like Twilio … well, they’d do magic at your start-up!  Won’t they?

It can be true.  But, 99 times out of 100, even if you get to that Hot VP, get her to meet with her, and closer her … she’s just not that VP anymore:

  • They doesn’t want to be so scrappy again.
  • They doesn’t want to do it all again.
  • They need a much bigger team.
  • They don’t do as well without a brand behind them.
  • They are convinced their way is the right way.
  • And more often that not, they weren’t even that Amazing VP you think they were back then.  Being part of a Hot Startup made them seem like a magician.

Lighting does strike twice in great VPs — but even when it does, it doesn’t strike the same way.

None of us can go back in time.  If you hire that great, “Hot” VP today, that did it all, remember you are hiring her as she is today.

Not as she was.

It rarely works out.

If nothing else, at least do more diligence.  And not with VCs, or other Hot VPs.  With their old bosses.  With their direct reports.  And make sure you are at least aware of who you are hiring.  Not what you want to believe, and see.

That Super-Successful VP of Sales. Great? Or Just Lucky?

 

 

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Top 7 Regrets in Hiring VPs. Firing Them Is Not One of Them.


This post is by Jason Lemkin from SaaStr

Q: Have you ever regretted firing an employee?

No.

I’ve regretted, and still regret almost daily:

  • Waiting too long to make a critical hire. You overload the existing team, and progress stalls out.
  • Not closing my A+++ top choice for a role, no matter what it took. This haunts me to this day. When there is a true game-changer, do whatever it possible takes to close them. And then even when they say No, remember, you still have another chance next week, next month, and next year.
  • Underhiring. Not hiring someone experienced enough for a role.
  • Hiring for the logo.  Just because they worked at Zoom or Twilio does not mean they can do it at your little startup.
  • Not topping a hire that has truly reached their limits. It’s tough to time this right, but if you leave someone in a senior role too long, once the business has gotten too big, you slow down.
  • Settling for a top hire. At some point, sometimes, enough time goes by that you have to settle. But it’s never a great thing.
  • Not working things out. With a key employee that left. Don’t let emotions cloud your decisions here too much. Find a way to keep the great ones, even if the role and position have to change.

But firing?

For most of us, by the time that comes — we realize we should have done it months ago. Not only has the damage been done, but it continues to compound. And so much time was lost, without progress.

That, you never look back on. You just wish you’d done it much, much earlier.

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What’s Your Loss Rate? You Really Should Know


This post is by Jason Lemkin from SaaStr

A ways back on SaaStr, we wrote a classic post, Beware of the Confidence of High Win Rates.  It’s something I see again and again, especially below $2m in ARR or so.  A start-up says they have a lot of problems, but winning deals isn’t one of them.  That they win every deal they are in.  Well, of course these early stage start-ups win all these deals.  Because they are only invited to just a very small percentage of the dances.

So ultimately, it’s healthy and positive to see win rates decline after $1m-$2m.  That means your mini-brand is coming into its own, prospects are starting to hear about you, and that marketing, one way or another, is starting to work.  You are getting into more deals that you aren’t ready for.  That’s OK.  You’ll learn from the ones you lose, and that gives you a roadmap to grow and improve.

And once start-ups start losing more deals, they don’t do the next thing they really should do.  Track their Loss Rate.  And just as importantly, every week, have a Win-Loss meeting.

If you don’t track your loss rate, even as your win rate goes down, you can lull yourself into a sort of false sense of “we’re doing great.  we’re doing as well as we can”.  Imagine you are at $3m ARR, growing 100%, burning little, with a 60 NPS.  You can kind of get … slightly complacent.  Things are going well.  But imagine your loss rate is 60% (you’re in a competitive space).  What would happen if you closed just a handful more deals, and drove the loss rate down?  You’d go from amazing growth, to outlier growth.  But if you don’t measure it, you can’t improve it.

Tracking your Loss Rate, somewhat counterintuitively, is NOT the same as the converse of your Win Rate, at least usually not initially.  Why not?  It’s too easy to make up numbers in a less than rigorous Win Rate analysis.  Tracking Loss Rate first and foremost forces the AEs and others to close out every Opportunity after a certain time, and be clear if it was Lost — and importantly, to Whom.  This generally will uncover a Loss Rate that is higher than what a roughly tracked Win Rate would suggest.

And that will give you a roadmap to winning more deals, building better software — and pushing yourself harder to do even better.  Even, and especially, when things are already pretty good.

So two suggestions:

  • Start this week with a Win-Loss Meeting with the sales team every week (or at least, every 2 weeks).  Everyone talk about one deal they won, and importantly, one they lost and why.  Sharing this information is a critical part of training and information exchange, and is also a great bonding experience.  It will also introduce Loss Rate DNA into the team organically.
  • Once you have the Win-Loss cadence going, force a rule in Salesforce to calculate Win-Loss-True Hold from every Opportunity.  And they track it monthly and quarterly.  And set a goal to drive down the Loss Rate quarterly.  Yes, this goal will inherently be subordinate to your overall ARR and bookings goal.  But it will also serve as a key cross-functional KPI for marketing, sales, and product, all together.
  • Discuss why you lost every bigger deal, even every deal if you can.  Also maybe even at every all-hands meeting, too.  This will be eye-opening to many folks, not just in sales and support but engineering and across the whole company.  It is too easy just to move on past lost deals and forget about them, especially when overall growth is decent.

Take both of these seemingly simple steps, and in the end, you’ll close more deals.  You’ll be living more in the real world, and you’ll push yourselves to do better than if you simply celebrate your new revenue and wins for the month.  Of course, do that too.

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

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6 Ways Top Accelerators Have Changed Since Covid Hit


This post is by Jason Lemkin from SaaStr

Q: How are accelerators managing remote cohorts?

I can’t literally answer for an accelerator, but as an investor here’s what I’ve observed:

  • It’s a huge, huge boon for start-ups not based in SF / NYC / etc. No one cares anymore. This is a big, big change.
  • Investing has accelerated even faster. All the stakeholders can get together even faster now. So decisions can be made even more quickly, especially for slightly larger checks that require consensus.
  • The 1 slide summary is even more important. There’s too much to process digitally, so if the summary doesn’t hook an investor, it’s tougher than ever. You click and move on, rather than stay in your seat and quietly check your phone.
  • Ballooning class sizes. Many accelerators seem to be taking advantage of the move to digital to materially increase the number of start-ups in their accelerators. This may further reduce the value of many accelerators to a relatively limited amount of … acceleration.
  • Many more investors participating in demo days.  Many, many more. Venue size and travel are no longer issues.
  • Even more focus on fundraising as primary goal. For the past years running up to Covid, many accelerators seemed to de-emphasize a seed round as the end point of a program. But with seed investment sped up since Covid, and not geographically limited … with 10x-50x more investors participating … “getting funded” seems to be the primary goal again.

Net net, it’s somewhat surprising, but going virtual seems to have helped the top accelerators, and their portfolio companies.  Digital has truly not just flattened the world, but dramatically expanded the pie of investors they can attract.  I thought going virtual would be a net negative for accelerators.  I was wrong.

 

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The Top 10 Videos of the Week: ClickUp, YCombinator, Unsplash, ZoomInfo and More!


This post is by Jason Lemkin from SaaStr

This week was our “dead week” at Team SaaStr where we rest and recover a bit from 2020 SaaStr Annual at Home.  Look for more news soon on our next big digital event, new products, and more — soon!!

With 120+ sessions at SaaStr Annual 2020, the Top 10 Videos of the Week are stocked with some of the most popular sessions.  Let’s take a look:

#1 “Almost Screwed: Bootstrapping From $0 to $20M ARR in 2 Years with ClickUp”.   Bootstrapping is always a popular topic, but I was a bit surprised to see this hit #1!!  A great session on how to go big before you raise that first round:

#2: “The 5 things that kill startups after their seed rounds with Michael Seibel, CEO of Y Combinator”.  I knew this session would be good.  But it was even better than I expected.  All of little team SaaStr watched it together and shared our learnings in real time.  Take a watch:

#3  “Churn is dead. Long live Net Dollar Retention Rate with Dave Kellogg”.  Dave Kellogg, ex-CEO of Host Anayltics, SVP at Salesforce and more always brings it.  This session too was even better than I expected, on the cheats and fictions in how folks measure churn.

#4 “Founder Power: Venture Debt & Other Alternatives to Equity in 2020+ with Nathan Latka”.  This was our first SaaStr session with founder favorite Nathan Latka, and we asked him to do something a little different and summarize all the new options available to founders to raise capital … without selling shares.

#5 “The Cadence: How to Turn Your SaaS Startup into an Army” With David Sacks of Craft Ventures.  OK this isn’t a brand new one, but it’s a great one from our recent New New in Venture event.  I’ve been personally thinking about this session a lot, including pacing the team and creating a sane cadence building up to events:

#6: “From $0 to $400+M: 10 Mistakes the CEO of ZoomInfo Made on His Journey to IPO”.  This was a special session.  Henry had followed SaaStr since the early days and created a custom session just for us on his Top 11 Mistakes.  We did a deep dive together and this is one I think any founder will benefit from:

#7: “The Secrets to Closing Really Big Deals with Sequoia Capital India, Sequoia, Vymo and Insider”.  I was pleased to see this session turn out to be so popular.  It’s a great session both on what’s going on in SaaS in Asia, as well as how to close $100k and $1m+ deals:

#8: “How To Really Disrupt the Big Guys — With Free with Unsplash”.  Everyone at Team SaaStr loves Unsplash, and I reached out to CEO Mikael Cho when I realized I’d never read or heard the real story.  Unsplash is one of those products that is so good, you can’t believe it’s truly free.  How did they get there?  How did they start without coding?  A great session:

#9: “What Being a Founder Taught Me About Leadership – Lessons from Eric Brescia, GitHub’s COO”.  This was a reschedule from SaaStr IRL and there were a bunch of conflicts and I was worried it might not happen. I am so glad it did!  Many of these lessons are ones we sort of know, but Erica deeply prepared it with hard learnings and real stories of how to scale.  When it came on the office, everyone stopped what they were doing and listened:

#10: “The Secrets to How Flodesk Bootstrapped to $5M ARR in Less than a Year”.  Another great session on bootstrapping that was more popular than I expected, like Clickup.  A lot of great discussions on how to focus, and where to place your bets, in the early days.  Especially when capital is super tight.

 

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How To Get Better at Recruiting. (We All Need To).


This post is by Jason Lemkin from SaaStr

Recruiting is tough. I certainly don’t do it well enough. But to be a great CEO, you need to find a way to force yourself to be a great recruiter.

Let me share some learnings, and what I do now to force myself to be a better recruiter.  And what I wish I’d done better as a SaaS CEO:

  • Force yourself to interview 30 candidates for each VP position. Great things will happen if you do. First, you will budget a ton of time for recruiting. You’ll have to, to get through 30 interviews. Second, you’ll force yourself to spend more time tracking and managing candidates. And third, you’ll be less likely to settle. You can stop if the Perfect VP turns out to be Candidate 12. But plan on 30.  Find a way.
  • Hire external recruiters — and be very good to them. External recruiters are juggling multiple clients and multiple sources. And contingent recruiters only get paid if they place a client. So be cool to them. Be responsive. After each of those 30 interviews — email over a note on your feedback. Be timely. If you don’t respond to an email from a recruiter with a great candidate — she’ll start to give up on you. And don’t worry about the cost. Getting a great candidate is more than worth 10%, 15%, 20% of first year salary.

Screen Shot 2017-04-27 at 1.53.29 PM

  • Hire an internal recruiter, too, as early as you can. At least as early as you are hiring more than 1 new employee a month. It’s way too many meetings, way too many candidates, to have individual VPs and employees manage these processes themselves. And do NOT expect your internal recruiter to save you external recruiter fees. She may. But she may also bring in even more, better external recruiters. And she can manage AngelList, LinkedIn, and other platforms that are critical but produce a ton of noise.  I wish I’d hired an internal recruiter even as early as employee #10, with hindsight.
  • Find screening filters you can apply before the first Zoom / face-to-face. Programming tests if you want / believe in them for engineers. A written critique of your product for a product hire. Thoughts on what would work well in the sales process for a sales rep.  Whatever. Something that ahead of time shows they have a brain, are engaged, and might want the job. A fun “test” that takes 5 minutes and doesn’t seem like a test.  There’s a reason internal recruiters like tests.  They know it saves them a ton of time in avoiding bad face-to-face first meetings.
  • Assume your personal and extended network does NOT source the candidate. This is a rookie error we all make. We’d all love to hire from our “networks”, especially in the early days, when cash is king. And hunt candidates ourselves.  But we all fatigue our networks — and quickly. Assume your network won’t be able to produce/source the candidate, and you won’t have an excuse. And you’ll get the hire done faster.
  • Listen. Look for flags. Almost always, flags, issues you see during the recruiting process … become just Bigger Issues after you make the hire. Spend less time asking structured questions, and more time listening carefully to flags. No candidate is perfect. But the flaws you see in the interview process will be amplified 10x once the hire is full-time. Make sure you are comfortable with the trade-offs.  Whatever you do, don’t gloss over flags.
  • Don’t assume because you are so charismatic and your startup is so great you can close anyone.  Bring in the cavalry.  So many Driven CEOs assume they can close any candidate as long as they can get them in the door.  It’s not that simple.  Because there are 100 other Driven CEOs who also think just the same way.  Get your co-founders, your investors, your public advocates, everyone you can involved in closing the best candidates.  At least, as necessary.  And do PR if for no other reason than to help with recruiters.  There are so many 1000s of start-ups.  Do that extra podcast, that extra event, that extra blog post, that extra press interview.  They help with recruiting, even if they don’t help with anything else.
  • Drop other stuff.  Almost nothing really matters, once you have traction, other than building the team. Before too.  But especially after.  A great VP can cure almost all ills in her functional area.  Stop trying to run sales yourself.  Let the month and even the quarter go if you have to.  Spend that time hiring the VP to own it, instead.

These are the 8 “tips and tricks” that help/helped me the most at least.

As you scale, as much as 50% of your time may end up be spent in recruiting.

It’s the job.

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

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What’s a Big Check for an Investor?


This post is curated by Keith Teare. It was written by Jason Lemkin. The original is [linked here]

 

Q: What’s considered a large amount of money for an investor?

A rough answer is more than 1.5%-2% of their investable capital is a “lot of money” for most professional investors. 2% is a pretty standard target for most core VC investments, and then more than that starts to become risky. And 5% starts to become a “this investment has to work” investment.

So take say a $150m venture fund:

  • A $250k or $500k investment is immaterial (0.1%-0.3%). It can generally be done quickly with limited diligence.
  • A $2m-$4m investment is the sweet spot. That’s 1.5%-2.5% of the fund. Enough to move the needle, but not so much it can’t be written off.
  • A $7m-$8m+ investment can work if there is “high conviction” in the investment, but is stressful. That’s 5%+ of the fund.
  • Anything more than this is super risky and rare for a VC fund.

Do this quick math to know where you stand with a VC.

The post What’s a Big Check for an Investor? appeared first on SaaStr.

What’s a Big Check for an Investor?


This post is by Jason Lemkin from SaaStr

 

A rough answer is more than 1.5%-2% of their investable capital is a “lot of money” for most professional investors. 2% is a pretty standard target for most core VC investments, and then more than that starts to become risky. And 5% starts to become a “this investment has to work” investment.

So take say a $150m venture fund:

  • A $250k or $500k investment is immaterial (0.1%-0.3%). It can generally be done quickly with limited diligence.
  • A $2m-$4m investment is the sweet spot. That’s 1.5%-2.5% of the fund. Enough to move the needle, but not so much it can’t be written off.
  • A $7m-$8m+ investment can work if there is “high conviction” in the investment, but is stressful. That’s 5%+ of the fund.
  • Anything more than this is super risky and rare for a VC fund.

Do this quick math to know where you stand with a VC.

The post What’s a Big Check for an Investor? appeared first on SaaStr.

My Top 10 Learnings From Ben Chestnut, CEO of Mailchimp


This post is by Jason Lemkin from SaaStr

So the recent SaaStr Annual 2020 at Home was a smashing success.  3 days, 100s of roundtables and sessions, and 1000s of 1-on-1s.

I was fortunate enough to lead two discussions, the first with one of my favorite CEOs, but one I hadn’t been able to do a deep dive with before, Ben Chestnut, CEO of Mailchimp.

I’ve been a 3x customer and watched Mailchimp over almost 20 years grow to be perhaps the first SaaS company to hit $1b+ in ARR being 100% bootstrapped.

My top 10 learnings:

1. Yes, bootstrapping really does take 3-4 years longer.  We’ve talked about and written about this many times before, but Ben vigorously agreed.  Mailchimp took years to transition from an agency to a software business, and then years until it finally took off when they added freemium.  In fact, really, it took 2 years to get going and 4 years to hit Initial Traction.  Bootstrapping is less a lifestyle than something we just do when it’s the only or best option.  More here.

2.  You may not need a moat. Maybe let them go if they aren’t happy. Happiness is a moat.  I’ve had a lot of discussions over the years on what constitutes a “moat” for many SaaS products.  Ben confirmed there is no moat at Mailchimp.  He said in fact, he doesn’t want moats.  If a customer wants to leave, he wants them to leave.  And hopefully earn them back later.  “Customer happiness is a moat”.  You don’t get that if you make it hard to leave.

3. Phase 2 might take 12 years to get to. It’s OK. Talk to more customers to know when you are ready.  Mailchimp in the past 2 years has grown from an email company to a marketing automation company.  That’s a big change, and their own version of finally going upmarket.  But boy — they waited!  Almost 20 years.  They waited until $1b in ARR to go upmarket more, to add a much richer and broader product suite that took them out of “just” email.  So do at the right pace. A bit more here.

4.  It can take 24+ mos. to get to real Product Market Fit. Mailchimp didn’t really have product-market fit until it went Freemium a full 2 years in.  We’ve talked for years on SaaStr on how you have to budget 24 months to really get something off the ground in SaaS.  Here’s another case study.  It also took Mailchimp 24 months, and a tilt to freemium (which they initially resisted), to even get to $1m in ARR.  A bit more here.

5. Existential threats never end. Even today, a GDPR type business model threat (or global pandemic) happens regularly.  Ben clearly even at $1b in ARR feels like things are always a bit fragile.  He agreed Mailchimp can’t be killed now — it’s way too big.  But it regularly encounters huge threats.  He liked it a bit to “doom”.  Doom looms, even at $1b+ ARR.  Not sure this made me feel better, but it was real.  It never gets easier.  You just get better.   And perhaps, only the paranoid survive, even in SaaS.

6.  Brand matters, even very early. Be true to it. For Mailchimp, it was being fun.  Many of us are slow to learn the power of brand, even dismissive of it in the early days.  But Ben came from a brand marketing background and strongly believed in brand from Day 1.  Being “fun” was an important part of their brand.  I do remember it, in part, attracting me to Mailchimp as an early-ish customer.  Ben relayed a story of when his marketing team wanted to take an edgier approach to a competitor, and take out a taunting billboard across from their offices.  He nixxed it.   It wasn’t fun, and it wasn’t true to their brand.  A related post here.

7. Bootstrapping isn’t a magical choice. No one would fund them.  We hit this point above, but Ben wasn’t dogmatic about bootstrapping.  They just had no choice.  A bit more here.

8.  Went from agency -> software company only once they had enough cashflow to support it. It took them years.  We again hit this above, but it was interesting to hear just how conservative them were switching from running an agency to a software company.  They took years, and didn’t fully switch over until they could pay their 3 salaries.  Perhaps that still works today.  But things also move faster today.

9. They begged their happy agency customers to buy software. They were mad about the change, but it worked.  This was an interesting point.  Their agency customers didn’t really want to buy email software from them.  They wanted the design agency to keep doing what they had been doing.  But because trust had been built up for years, they still bought the new product from the team.

10.  Thinks we’ll be back to where we were, not soon, but sooner than we realize. We’ll be back in the office, back building together IRL. With a distributed flavor.

 

The post My Top 10 Learnings From Ben Chestnut, CEO of Mailchimp appeared first on SaaStr.

Behind the Round with SaaStr: Klue Raises $15 Million from Craft Ventures for Competitive Analysis


This post is by Jason Lemkin from SaaStr

Tom Taulli

Klue, which operates an AI-based competitive analysis platform, announced a $15 million Series A investment this week.  Craft Ventures led the round and there was participation from HWVP, OMERS Ventures, Rhino Ventures, and BDC Ventures.  The round also saw investments from angels like Frederic Kerrest, who is the co-founder of Okta.  

Founded in 2015, Klue addresses a part of the corporate world that has seen little innovation.  After all, when a company engages in competitive intelligence, there will often be the retaining of a consulting firm.  The engagement may last a few months and involve extensive interviews and online research (yes, lots of Googling!)  

But there are some obvious drawbacks.  First of all, the process is highly manual and costly.  Next, the information may be useful for a limited amount of time, which can definitely be damaging for a company.  Let’s face it, if a sales rep is going after an account and does not know the true competitive situation, then a deal could easily be lost.  

“I used to do this kind of consulting work,” said Brian Murray, who is a venture capitalist with Craft Ventures.  “Klue was one of those products that – when I saw it – I knew it was going to be a thing.  Then we saw the traction.”

It was one of Klue’s seed investors, OMERS Ventures, that made the introduction to Craft Ventures when the company started its Series A round.  This was in March of 2020.  

The Klue platform uses web scraping/monitoring and AI/ML to detect material signals from competitors like changes on a pricing page, the introduction of new functions/products or market expansions.  The information has wide applications across an organization, such as with marketing, sales, and product teams.  Think of Klue as a system of record about your competitors.  

“The main value prop is treating competitive intel as a living cloud document,” said Murray.  “It’s editable by all reps or anyone who gets access to the information.  Then a central group, which is usually the product marketing team, can curate it.”  

Klue is built with a card format design, which allows highlighting important information.  This is where the AI/ML comes it as the data is put into manageable blocks.  The app also has integrations with a myriad of collaboration tools, such as Slack.    

For an early stage company, Klue has had strong traction from large enterprise customers.  Just some include Cisco, SAP and Salesforce’s Tableau.  

“One reason is that there is not anything out there like Klue,” said Murray.  “There’s a stark contrast with the status quo.  Second, the teams that are charged with competitive intel work, they never really had tools for them.  And third, the competition only intensifies when a company gets larger.  Your market consolidates and you are competing against little soundbites.”

This certainly highlights an important lesson for any tech entrepreneur.  “One of the most effective ways to attack a market with a SaaS product is to give a tool to someone who is tool-less.”

Note:  You can check out the Zoom interview with Murray here:

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Is the Covid Boost in Cloud and SaaS Already Over?


This post is by Jason Lemkin from SaaStr

We’ve talked a lot on SaaStr recently on Covid Beneficiaries, the ones given a boost by the crazy times of this year.  And I’ve seen it across my little investment portfolio too, from startups like Gorgias tripling on the back of the acceleration of eCommerce, to Talkdesk booming as call centers have to move to running distributed in weeks, to RevenueCat and others benefitting from an explosion in app development.

But can this go on forever?  Doesn’t the Covid Boost eventually have to slow down, as the acceleration into the future becomes … the present?

I thought a lot about a comment from Loren Padelford, GM and SVP of Shopify/Shopify Plus at the recent SaaStr: Enterprise event.  He said the future in e-commerce (where Shopify is #1) had been brought forward 5 years.  You can catch the A+ session here:

Reflecting on it, that does seem just about right in e-commerce.  E-commerce is now where we expected it to be in 2025 or so.  And videoconference?  Well Zoom, Zoom, Zoom.

And yet … can this go on forever?  It can’t.  And we’re seeing lots of signs that the Covid Boost is slowing, and that the New Normal is here.  It might be where we expected to be in 2022, or 2025, but we may have gotten there — and see more “traditional” growth going forward.

Some data is already suggesting ecommerce’s boost has been huge and real, but now has reach a “new normal” that will grow at a rate more similar to 2019:

We may be seeing this in mobile apps too.  As discussed above, mobile business apps saw a huge boost after Covid.  And that level of activity appears to be sustaining … but, at a New Normal level:

Slack perhaps is the most tangible case study here.  You love Slack, I love Slack.  Our little team’s usage has gone up substantially since Covid hit. But that’s it.  We’ve adjusted.  We use Slack 2x-3x more than before, but now that we do, there’s no more Covid growth to wring out of it.

And the market seems to have said the same thing.

Slack is growing 30% at $900m ARR — incredibly impressive — but doesn’t seem to be accelerating more now because of Covid.  Even though it’s a core tool in our distributed team toolkit.  Importantly, Slack’s bookings have slowed from earlier in the pandemic.  Still very impressive, but slowing.  Bookings are your window in the near future in SaaS.

The new normal may simply be here for many apps, with a return to previous impressive — but not anomalous — growth.

And what about start-ups?  I got 5 investor updates this month that were really strong.  Pre-unicorn strong.  But the CEOs all said “growth seems to be returning a bit to normal.”

It had to come at some point.

It’s probably here now.

The post Is the Covid Boost in Cloud and SaaS Already Over? appeared first on SaaStr.

VPs That Can’t Hire … They Aren’t Real VPs. At Least, Not Yet.


This post is by Jason Lemkin from SaaStr

Perhaps the single most important thing you can ever do in SaaS, at least after $1m in ARR or so, is hire the best VPs you can.  We’ve talked a lot over the years about how not to hire a wrong VP of Sales — 70%+ of the first VPs of Sales don’t make it even 10 months.

But there’s a related, larger issue for basically all your first VPs of Every Area.  You’re probably going to hire 1-2 VPs that themselves are smart, driven and successful — but that can’t themselves hire great people under them.

This is something you have to be hyper-aware of.  Because sometimes, these VPs That Can’t Hire are super smart, super engaging, and super competent.  You may really like these candidates.  Up-and-comers are a powerful force to tap into.  You sales-team-conferenceneed to hire up-and-comers.

But you have to do more diligence to believe it’s not a stretch too far.  Don’t just check who they managed at their last company.  Check who they hired.  Not inherited as a manager.  But hired themselves.  And make sure they hired at least 2 good folks.  And ask to talk to both of those 2 great hires.  And figure out if they really are great:

  • For your prospective VP of Sales, did her top 2 hires at least crush it and blow out their quotas?  If they didn’t …
  • For your prospective VP of Product, did her top 2 hires ship amazing software?  Can they explain every facet of how their best, and worst, features came into the world?  If they can’t …
  • For your prospective VP of Engineering, were her top 2 hires just jaw droppingly good?  You or your CTO can figure this out.  Talk to them.  Not over Slack, not over email.  Talk.
  • For your prospective VP of Marketing, did her top 2 hires deliver leads?  For real?  How many?  Did they grow month-over-month?   Find out.  For real.
  • For your prospective VP of Customer Success, did her top 2 hires generate net negative churn?  Drive up NPS and CSAT?  Drive down absolute churn?  Get on jets?  Get at least 2 badges (more on that here)?  Which badges?  What was the top customer they saved, and the top customer they lost?  What’s the story here?  Do you feel like you’d be lucky to have these 2 work at your company?

Most founders don’t go the extra yard here in talking to their prospective VPs’ two best hires.  And you end up with hires that can’t recruit great people.  Not because they aren’t smart, or weren’t great Individual Contributors, or even great team leads.  But because they’ve never truly recruited someone great before.  95 times out of 100, that’s not a risk you should take.

This is job #1 for all your VPs.  Recruiting.

You’ll feel the pain fastest with a VP of Sales that can’t hire, because they’ll miss their number quickly. The impact for a VP of Product that can’t hire will be more delayed, it may take 6+ months, and several releases, to fully manifest itself. A VP of Marketing that can’t hire will hire terrible people — but it may take you a while to see it if they aren’t judged quantitatively. So the tangible effects of a VP That Can’t Hire may take you from 45-180 days to see, based on position.

But it will wreck you as you scale. Yes, maybe you can backfill a few hires. But not all of them.

So my first piece of advice is go the extra yard in recruiting. Talk not just to the VP’s references, but to the top 2 direct reports that they hired.  Did they really hire at least 2 great reports? Oftentimes, they didn’t. And if they did — are they really great? If they can’t find you 2 great ones to talk to — that’s a huge flag

My second piece of advice is top (i.e., hire above) these VPs That Can’t Hire fast if you do end up hiring them. If you ignore the advice, or take it but ignore the results, and do hire a VP That Can’t Hire … so be it. But as soon as you see they are unable to hire even one great report – don’t wait for the 3d failed hire. Top them then and there. That doesn’t mean fire them. But you have to hire a real VP. Who will be their boss.

You’ll need a Real VP that can recruit great people.

(note: an updated Classic SaaStr post)

The post VPs That Can’t Hire … They Aren’t Real VPs. At Least, Not Yet. appeared first on SaaStr.

How to Scale a SaaS business: 5 Growth Tips with Jason Lemkin + Algolia


This post is by Jason Lemkin from SaaStr

The CMO and team at Algolia did a session with me a while back on the top mistakes founders make in the early days.  While some of it was familiar territory, I thought it was a pretty fun discussion with a different perspective in many cases than we’ve touched on before.

Check out the session here:

Algolia also summarized their Top 5 take-aways here, and below:

Most SaaS founders start out the same way— armed with ample expertise of the technical details that go into a product and with limited experience of other aspects of scaling, such as sales.

In our SaaS expert series, we asked Jason Lemkin, founder of SaaStr and a successful startup investor, for advice on creating a strong framework to scale a high-performing SaaS company.

1. On finding product-market fit in the early stages

Jason identifies product/market fit (PMF) as the stage where a startup that has struggled to get customers suddenly sees growth but they don’t know why. It could be, for example, because a feature they launched was far more important than they thought it would be, etc.

Jason cites the example of how Algolia found PMF when it started. The first product Algolia built never achieved product-market fit. When it started out, Algolia was a lightweight mobile SDK that was anticipated to work inherently on mobile in 2012 when phones were much less powerful today. While everyone loved that the search functionality could be implemented so simply, there were no paid takers for the product. It simply wasn’t a big enough problem on mobile that you could build a business around it.

“So they took the same technology and repackaged it as an API. And then boom!” Basically, a different expression/use case of the technology but the one that was right for the market.

The next stage in achieving product-market fit is to create a dialogue with paying customers about the gap in features. Understand and zero in on that one feature that will make them pay more. “You’re paying me $500 a month. What could I build for you to pay me $2,000 a month? If your customers love you, they will want to buy more from you,” said Jason on talking to them (over and over again) to develop PMF.

2. On acquiring customers consistently

You may not have that magical sales person, but as a founder, you simply have to sell. Here’s the trick with founder lead sales: customers and prospects love to talk to the CEO. If you can solve a prospect’s problem and you are the CEO leverage that. You don’t have to be the World’s Best Salesperson to sell as a founder, you just have to try to sell.

And then, there are your superpowers. In those early days, founders are good at one or two aspects— these are what work well for your company. These are what Jason calls your superpowers.

For instance, when Algolia was trying to get off the ground, the co-founder Nicolas Dessaigne often got on the stage at events, which generated a lot of buzz and product interest.

He would also attend developer networking events and man a booth. His consistent efforts paid off when Algolia became a known brand among developers.

Julien Lemoine, Algolia’s other co-founder, wrote a data-rich blog article comparing Algolia with its top competitor at the time. It was an earnest piece that spoke about instances where the competitor was better than Algolia and vice versa. The article which was well-researched with supporting data brought in consistent leads for a very long time. This generated tons of leads and credibility — before content marketing was even a consideration.

The idea is to identify your superpower(s) and double down on it. Most SaaS startup founders have shiny object syndrome— they want to try events, blog articles, partner programs, outbound outreach all at once. This will spread you thin, not allowing you to focus on one channel entirely. It also becomes difficult to track and invest more in the channels that are working well in terms of lead generation.

Another tip to remember: marketing efforts compound over time.

“Whatever works at all, do more of it, give yourself 24 months and watch what compounds”, Jason said.

3. On hiring your first (and second, and third) sales person

One day, you’ll have a great VP of sales who will train and hire different profiles. In the beginning, you have to think differently. Think about whether you would buy your product from this person. And keep in mind that, while you may wish for someone who crushed it at Twilio or SendGrid, this person is probably not the best for your startup.

For your first sales “magician”, you want someone who knows your product really really well – way more than salesperson #100. “I often find that quirky, innovative, super smart people who may have been in a different industry do great in these positions,” says Jason.

One day, you’ll have a great VP of sales who will train and hire different profiles. In the beginning, you have to think differently.

4. On hiring a CRO or CMO

Hiring the right person for the right stage of your company is more important than making big hires for the sake of having a certain title. In addition, Jason advises startup founders to beware of title inflation, as it sets misguided expectations for both the company and the hire.

In most cases, companies are looking to hire a VP of Sales but confuse it with CRO or CMO. The Chief Marketing Officer (CMO) or Chief Revenue Officer (CRO) is not an expanded role for the VP of Marketing or Sales.When a CRO or CMO can’t really own the full function, they are setting themselves up for failure when they could have otherwise succeeded as a VP doing most of the same job.

SaaS roles are getting more and more cross-functional, and the involved teams have to be aligned for sustained growth. A CRO aligns revenue generation so that the VPs of Marketing, Sales, and Customer Success are all working together to maximize revenue without being distracted from their core goals.

5. On coping during a global crisis

Businesses have been dealing with the repercussions of COVID-19 since early March. While some of them, like Zoom, have been “COVID beneficiaries”, many companies operating in the travel and hospitality space have taken a hit.

“I am not saying you are not going to hurt. But stop focusing so much on the downside and put all of your efforts into the segments that are winning”, Jason advises startup founders.

Travel still exists, and it has rebounded from the lowest points. What can you do to make it better for the folks that are traveling?

He suggests that the revenue isn’t going to be what was projected at the beginning of 2020, and the goals for Q3 must be redefined and reestablished. “Lean in where it works and guide the team there,” he says.

He cites the example of SaaStr, his annual trade conference in the first quarter of every year. The event gets 15,000 people from all over the world. This year, it had to be cancelled because of COVID restrictions. They immediately pivoted to online events, which have seen the attendance of 30,000 people since.

For more founder wisdom, recorded talks, and search and discovery knowledge, head to the Algolia resources library.

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When Selling for $2 Billion is Too Early


This post is by Jason Lemkin from SaaStr

Q: Why do many startup owners sell their firm and move on instead of planning on making it a big player like Google, Microsoft, etc.?

I remember not long ago I was at a SaaS event. A SaaS CEO running a $20b+ SaaS company bumped into a great SaaS CEO that had just sold for $2b, and said to him:

“You sold too early.”

The SaaS CEO that had sold seemed almost defensive, and responded, “It was the right call in our space.”

That’s the answer, that’s the story.

I’ve sold 3x, twice as a founder, once as a start-up exec:

  • The first time, we sold to the wrong company. That haunted me for years. I lost $10m in paper gains, and that haunted me for years. We should have picked the other offer instead (to Amazon). Instead of $0, I would have ended up with $100m+ most likely if I’d stayed. At least millions instead of nothing.
  • The second time, we sold right after we got traction, but before a decade of high-risk work. We never looked back. It was a crazy tough year getting there, but we knew selling then was a better choice than slugging it out for a decade and needing to raise $100m+ more in a tough space.
  • The third time, we sold just as we hit scale. I’ve thought about that every single day since. About how today, we’d be running something worth billions.

Selling is complicated. You turn illiquid work and stock into real money. And money does matter.

And yet, it ends a chapter of your life. There are only so many of these.

You’ll know in your gut what to do, should you get a strong M&A offer. Just make sure you talk it out with 3–5 other folks you know and respect. You’ll likely hear 3–5 pretty different opinions. Whatever you do, take your time and make sure you are 51% sure, ideally 95% sure, you’re making the right choice.

Losing that one great offer is terrible and heart-wrenching. And so is ending that journey just as it started to become something truly special. Different. But both equally hard on a true founder.

The post When Selling for $2 Billion is Too Early appeared first on SaaStr.

How Do You Solve “Hit By a Bus Risk”? With Great VPs


This post is by Jason Lemkin from SaaStr

Q:  How do you deal with bus factor in a startup? We are losing an employee which had a cornerstone role but he was tackling this area alone.

Goodness this is one of the toughest parts of scaling.

I remember Aaron Levie, CEO of Box, and I discussed this at one of the SaaStr Annuals, when he lost his VP of Engineering. He had no back-up and thought that was it for Box, it was over. We’ve all lived it. I still live it myself!

It’s one of the biggest risks not just in the early days, but really just as you scale. Until you get to at least 50 employees, there’s rarely a second layer of management, a Plan B, a back-up for each role.

All I can tell you is this:

  • First, if you hire great VPs, it partially takes care of itself. Great VPs attract great directors and great ICs. A Great VP almost always hires at least 1 great person under her than can take over. So always listen and learn, and err on the side of promoting the best you have.
  • Second, the rest of the team rallies — if you have a good team. This isn’t a perfect answer, but if you have a good team, they get it. They know they have to step up. They fill the gap as best they can.
  • Third, it’s better if the mediocre leave in the end. The best ones tend to stay longer, and it’s the mediocre that leave faster. You may fear the hole in the org chart if someone mediocre leaves. But in the end, you’ll see that it would have been even better if the mediocre had left earlier. It’s time to get on with finding someone great.

The “my top person gets hit by a bus risk” almost never ends until you have a deep bench of management. Maybe not even entirely then.

But the #1 key to solving it is hiring truly Great VPs. They attract the best talent under them. And it’s that talent that mitigates the risk.

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Want To Steal a Customer from the Competition? You Gotta Do The Work


This post is by Jason Lemkin from SaaStr

Q:  What factors that make it difficult for a salesperson to sell a new product to a customer who has been buying a competing product for many years?

You can steal a customer from a competitor. But unless they are so fed up with you, that they’d inbounded to switch — you have to go further. And most vendors are too lazy to go far enough to get folks to switch to them.

I see so many reps trying to steal a customer that focus on:

  • Price (we can save you 10% vs the competition!! so what)
  • Wanting to get “on a call” to talk (i don’t have time to help you sell to me)
  • Why their product is so great (why do I care?)

None of this matters, most of the time, in SaaS. Not really. Because the switching costs are so, so high to rip one app out and replace it with another. To find the time to deploy a new app. To train the team. To figure out the corner cases that won’t work as well. To learn slightly different, new ways to do the same thing.

So a discount isn’t remotely enough. The switching costs will far exceed the costs for the software itself, in many cases.

What sales reps should be selling if they want to steal a customer from the competition is:

  • “We’ll do all the hard work for you to replace their app with ours. We’ll install it, tweak it, and even let you do a totally risk-free pilot for 90 days if that helps.”
  • “Is there 1 critical thing you are missing from your existing vendor?  What is it?  Let me know so we’ll see if we can solve that big problem for you.”
  • “Here is the 1 reason we are 10x better. Does this solve your problem? If so, again, we’ll do all the work.”
  • “We’ll buy out the term, if any, with the other vendor so the direct switching costs are zero.”
  • “If you want, you can use both apps at the same time and test them side-by-side. And we’ll do 99% of the work for you.”

Imagine you heard that …

Then, when there’s a real bump with an existing vendor … you just might switch.

But so few companies and sales orgs go this far. So very few. It’s more work, no doubt, than just closing a warm inbound lead.

As you get bigger, you may need a SWAT team that just does … this.   At a minimum, the best marketing teams do.  They track Lost to Competition Leads as ones they get a new shot at every 12-24-36 months down the road.

A bit more here: How to Steal a Customer From the Competition | SaaStr

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