Your #1 Management Hack: Weekly 1-on-1s


This post is by Jason Lemkin from SaaStr

When I catch up with founders on the march from $1m to $10m in ARR, the number one topic has always shifted to recruiting.  Where do i find a great VP of Sales, Marketing, Engineering, Product, Customer Success, etc.?

Sometimes, it seems like simply building a management team is all you have time for.  But it’s not.  It can’t be.  It has to just be the start of a journey together.

Once you finally build out your first management team, the last thing you want to do is lose it.  Or more subtly, for your team not to perform as well as they could.

The question I always ask founders here is:  Do you do regular, scheduled 1-on-1s with your VPs and direct reports?  I’d guess 90% do not.  

Most of us end up with once a week staff meetings.  That’s OK.  But it’s not a substitute for a 1-on-1 with your VPs.

Ultimately, I’d suggest the following cadence:

  • Daily meetings with your co-founder.  A quick catch up, if you are both in town.  If you guys don’t want to do this — that’s a sign of trouble.  I did this every single day with my co-founder of my first start-up.  It was a highlight of every day for both of us.  We just got together at 6pm every day, and talked for 15 minutes about our days.
  • Weekly staff meetings with your entire team.  This meeting should have an agenda, and should be about 60 minutes max.  Note that meeting is not about you.  You should already know most of what your team presents.  Rather, it’s a forcing function to get the team together and share information, especially cross-functional information.  And to make sure folks are working together than need to be.  So your VPs don’t end up in silos.  Review your goals for the month and quarter, and status updates from each functional area.
  • Monthly all-hands company meetings.  Most CEOs do this, but not all. At least once or twice a quarter, and ideally monthly in the earlier days, get everyone together for an all-hands meeting.  One hack: just use the board package from the last board meeting as the template for your all-hands meeting.  At least, 90% of it.  It’s usually a great set of slides for you and your VPs to present from, that everyone has already put a ton of work into … without having to do a lot of new work.  After all, you already presented your board slides just a week or two ago before.

and … and this is the tough one:

  • Weekly or bi-weekly meetings with all your direct reports.  I know you are busy.  I know if you have 5 VPs, the last thing you want is 5 more scheduled meetings a week.  How can you even possibly fit them in?

You don’t have time for 1-on-1s.  This is true.  The thing is, you also don’t not have time.  There isn’t a better investment you can make in your VPs than meeting either once a week, or at least, once every 2 weeks.  Get it on the calendar.  And probably, have it agenda-free.  Some folks like to have agendas for 1-on-1s.  But I find them more valuable to talk about whatever is on your VP’s mind.  Not what she has to get through at each weekly staff meetings.  So that you can help.  So that you can backfill areas she needs help.  Or even just so you can help be her work psychiatrist 🙂

If you are like me, you can’t stand too many ‘standing’ meetings. But you have to do them this way.  So one hack is to package them back-to-back with other scheduled meetings.  Do one right after your weekly staff meeting.  One right after a team lunch.  One right before something else.   One over a libation on Fridays at 5pm.

Chatting in the hallway is not a substitute.  Talking in a team format at staff meetings is not a substitute.  Even talking during customer pitches or scrums is not a substitute.

It’s 15-20 quiet minutes, 1-on-1 with each of your reports.

Every week or with some, every two.

Do this, and management will get easier, the team will trust you and each other more, and you’ll execute faster.  With less need for anyone to look over their shoulder, worry where they stand, or even if they are doing a good job.

(A 2020 update of a classic saastr post)

The post Your #1 Management Hack: Weekly 1-on-1s appeared first on SaaStr.

SaaStr Podcasts for the Week with Chris O’Neill and Jason Lemkin


This post is by Amelia Ibarra from SaaStr

Ep. 351: Chris O’Neill (Google, Evernote) shares his lessons from previous downturns and how to chart a new course for growth in today’s changing market.

This episode is sponsored by Lightmatter

 

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from Chris’s session at SaaStr Summit: The New New in Venture. You can see the full video here, and read the podcast transcript below.

 

 

Ep. 352: Decacorns ($10B+ valuation) are everywhere in SaaS, despite the downturn.  SaaStr CEO Jason Lemkin discusses what the new landscape of SaaS means for you in 2020.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Chris O’Neill

We’ve shared the transcript of Chris’s podcast below. You can also jump down to the transcript of Jason’s episode.

Ep. 351:

Chris O’Neill: I’m thrilled to be with you here today. Thank you, Jason and the SaaStr community, for including me. I’ve spent a bunch of my career in and out of the Valley.

So I’ve been in the Valley off and on for about 22 years. I’ve held a bunch of technology leadership roles in startups, in rocket ships and turnarounds, including about 10 years at Google, and just over three years leading efforts at Evernote.

I currently serve on the board of directors at Gap, and earlier this year, I decided to take my operator experience and perspective to pursue a career as a full-time investor.

I grew up in a really small town in Canada on the shores of Lake Huron and in that community, sailing was a really big part of the community and the way of life.

So although I never really became a great sailer, I really love the metaphor of sailing for life and for business and I think we can have some fun with it in today’s talk, and I hope you’ll indulge me. So with that, welcome on board, let’s set sail.

So over the course of those 20 or so odd years in technology leadership roles. I have seen my fair share of storms and or crises from the early days of the dot-com boom and bust to 2008, 2009 crisis and then having a front row seat at some of these turnarounds at iconic brands like Evernote, and more recently on the board at Gap, which is undergoing its own transformation.

And there’s no shortage of advice floating around there, but the perspective I’ll lend today is through that of an operator who’s been through some of these crises, sailed through these storms, and made every mistake in the book and have the scar tissues to show for it.

So that’s really what I’ll do, and I’ll start by just giving a sense as to what it clearly must feel like to everyone. It is gnarly out there.

The seas are rough. It must be like you’re operating on the open seas with wind in your face and, gale force winds causing waves to crash at you from all sides, and if you’re like me in these crisis, you feel like, “Gosh, you could sink at any one point in time or get washed up on the rocks on these shores,” and it’s completely natural to feel this way.

I really do believe, however, that Roosevelt’s quote is true, and he said, “Calm seas never made good sailors.” And that’s of course, easy to say and hard to really figure out what to do.

And that’s really the purpose of this call or this chat today. I do believe that great leaders thrive under adversity.

People who are entrepreneurs with all the right reasons who have a deep personal commitment to the problem that they’re solving, and then have an earned secret and a special approach to solve that problem in an enduring way.

That’s really what it’s all about. Weathering these storms requires a steady hand on the wheel requires a resilient crew with endless reserves of grit, and if you’re really on a mission that matters, I believe that it’s worthy and you have to persist through the storms.

And to perhaps inject some good news into this crazy world we’re living in, is that storms have a way of washing away all that came before them, really thrashing previously held assumptions, and we’re certainly seeing that today.

So a lot of the assumptions that held us back and held technology from fully being embraced are really being challenged. Of course, we’re seeing many of the trends that have been in existence being accelerated by 5, 10 plus years whether it’s telemedicine, ecommerce, mental health, food delivery, we’re very well aware of these COVID fuel tailwinds which are changing industries literally in weeks as opposed to decades.

And there’s a quote in keeping with the sailing metaphor that I find myself coming back to at times like this and it goes like this.

It says, “The pessimist complains about the wind, the optimist expects it to change, while the leader adjusts the sails.” And really, that’s the jumping off point for our discussion today.

We’ll break it into three parts. The first will be sharing five perspectives and things that I found to be useful in adjusting sales in the midst of a crisis or a turnaround.

The second is really the how to think about your crew, really, how to take care of your crew, how to up-level your crew, how to invest in them, how to listen and engage them, and then also how to think about your extended crew.

And lastly, I’ll share briefly just a few things that I see on the horizon. 

First things first, adjusting the sails. So this crisis is very much like the wind and the gale forces on the open sea and that it’s the self-propagating, amorphous ever changing thing that requires us to take a different approach to how we lead.

And again, I’ll dive into five specific things that, again, I found to be somewhat useful in times of crisis. And if I pause just to reflect on those mistakes that I’ve made, and one of the biggest is really being too slow to react to a new reality, or a close cousin of that, which is to take a playbook or a set of assumptions that worked in the past, and to extend them to a fundamentally new reality and fail miserably or failing to unlearn previous behaviors or habits.

So the first of these five really starts with battening down the hatches. In crisis, you have to react and your first job is to survive and really specifically, I found scenario planning trumps future or fortune telling, right?

Meaning, you’re not in the business of predicting the future, but you should really be in the business of doing a scenario planning to say, “Hey, what’s the worst case? And what’s the best case? What’s the base case?”

And invest your team’s time and energy to say, “Hey, if this, then that. How can we prepare for a variety of scenarios so that we can nimbly respond to whatever comes our way and adapt in accordingly to the situation?”

When I took the helm at Evernote in 2005, many people had written the company off. If you recall, it was one of the very first unicorns.

It attracted capital from the top venture capitalists in the planet, could do no wrong until in many ways it could do no right.

And the headlines were brutal. Evernote was written up as the first dead unicorn among other unflattering headlines, and it was somewhat of a risk of being true in that we had very limited resources and cash runway.

So we had to fundamentally batten down the hatches and address cost in order to survive. So how do we do that? The first thing was really to adopt what I call a zero-based budgeting approach.

We gathered every single line item of expense and we scrutinized every single one of them through the lens of, “Hey, can we survive?”

And then we debated like how across the leadership team to say, “Hey, can we afford this or not?” And it led to some decisive action, difficult decisions.

We shut down five offices, we said goodbye to many of our really talented colleagues. We shut down something called the Evernote Market, which was selling physical goods, sunset some niche products like Evernote Food which had nice followings, but I felt were distracting from the larger priorities.

We did all this by being thoughtful and compassionate with the employees and we’re careful to communicate to our partners, why we’re doing this and really what to expect in the future.

The good news is that we extended our runway by a minimum of six months and that allowed us to redeploy resources into some of the things that really needed our attention, like the fundamentals of our product.

We had way too many bugs, latency had grown to too long and crashes were a problem with the product. So we spent a lot of time there.

Another benefit was the ability and the confidence, frankly, to experiment. Get back into experimentation mode with our business model, with our pricing, to really think about not just how we can shrink costs, but inflect growth on the top line so we could ultimately control our own destiny, which is in fact what we did.

So the lesson here of course, is to save your powder, to really, really scrutinize every dollar of spend, and keep your powder dry so that you can redeploy on the other side and hopefully accelerate as that happens.

The second is what I call establishing ground truth. So inevitably, when startups evolve and start to scale, they get off course and this is especially true in times of stormy weather, almost by definition, and to invoke a sailing metaphor in the days before GPS, sailors used the North Star to determine where they were.

They had to figure out literally their latitude. And I think the same is true in companies. So I’m a big fan of two concepts: you have to understand where you’re going, and you have to understand where you are on that journey.

So the North Star, when I describe this, it feels fluffy and very obvious, but I really can’t think of a higher leverage thing, if you don’t have it in place already in your company, to really get everyone rallied on what your North Star is.

What’s your purpose, what’s the dream, the rallying and inspirational purpose of your company that really binds everyone together?

A mission, really the overarching objective for your company in any one time and then in times of crisis, I’m a fan of having like one singular objective or goal.

So when we, when we reached out to the community at Evernote in this turnaround, we really started to hear very consistently that the purpose of the company was more relevant in that time than it was at any other time in the company’s history.

People were seeking to gain control and find a sense of calm in a world of constantly being overloaded with information. So they really wanted to find, you’ll feel more organized and feel somewhat more productive, whatever that meant to them.

And that’s the job that Evernote was hired to do. So that was really fantastic, and then the mission really set up nicely as an extension of that to help people remember everything and turn their ideas into action.

So we spent a lot of time leading up to then our objective, which was to really reinvest in the core user experience, get back to the basics and deliver and untap the love that made the company and the product great in the first place.

And really doing that provided needed clarity around which the entire company could revolve, and then we doubled back on our current reality and our ground truth and we’re really brutally honest with everyone about where we were in terms of the company, in terms of the balance sheet, in terms of the team, in terms of our product.

And really, that’s essential. So once you understand your North Star, and you have a sense of your ground truth, the question becomes, “Okay, how do you plot a course to go from one to the other, or at least move closer to your North Star?”

And that’s really the third, which is really about charting a new course for growth. This is about the cleared and shared understanding of the physics of how growth happens in your company.

And I have a really messy pie chart here on the left hand side. I’m not going to walk through it, don’t worry, but it should give you a sense as to how comprehensive people can be and companies can be when this is done right.

But also how you can really quantify each step of the way. And why you want to do this might be obvious, but I’ll state it anyways.

It’s really to rally around facts and data as opposed to opinions. There’s lots of opinions at all times in companies, but you really want to rally around the facts.

More specifically, you want to identify the single gear of your growth engine that’s really slow or stalled where you bring to bear overwhelming force.

In a B2B context, you can imagine overlaying the concept of go-to-market fit which really outlines your approach and your playbook at every step of the way, from awareness to evaluation, purchase, and then pricing and renewals.

That’s a really important thing to be really crisp on and know that these things almost certainly have changed in this crisis, so you have to go back and remap them.

A close cousin of this is cohort analysis. I’m not going to go into too many details here, but there are three things to look for here is just number one, the size of a cohort.

So cohorts of course are usually expressed in months or quarters or even years. The second is the engagement level of that cohort.

Meaning what percentage of that cohort is doing the thing that you really want them to do? In our case, it was capturing a note, and then lastly is just retention over time.

How is it performing and that in many ways of course is the most, single most important determinant of your success in SaaS.

If you’re really interested in this topic, I highly encourage you to read Sarah Tavel’s classic Hierarchy of Engagement, it’s just fantastic, and it really goes into lots of details here.

So how do you do this in addition to mapping it out? You have to actually go and talk to your customers. Again, this might sound obvious or common sense, but it’s not always commonly practiced.

So get out there, get in touch with them, and truly listen to them. Their needs have changed, their pain points have inevitably shifted, so you have to listen to them and understand how to stay top of mind.

At Evernote, one of the first things that I did was ask the team to send me a list of like 50 or 60 customers, and I just started outreaching to them and calling them directly to gain a sense of the visceral feedback and a sense of what was truly going on.

And the customers and members of the community were super receptive and in many ways, that did give me a really good grounding as to what our priorities ought to be.

So I highly encourage that as an activity and borrowing a metaphor, this notion of Davy Crockett comes from a friend of mine named Bob Tinker ,who’s a great entrepreneur, the founding CEO of a company called MobileIron.

He talks about channeling your inner Davy Crockett, and what he means by that is in the early stages of starting a company, you’re in like Davy Crockett mode.

If you think about backwoods explorers coming over the Appalachian Mountains, you and your team are often in the woods foraging your way and finding your way through and it’s usually messy.

It’s through experimentation and iteration, and if you’re lucky enough to survive long enough, you can start to build a sense of what’s working and where the dead ends are.

And you can crystallize and distill the things that are working into a playbook and if you’re really good, you can start to rally around that playbook and all of a sudden, you emerge like not a ragtag bunch of backwoods explorers, but like an army that’s charging across the plains, and he likes to call that the Braveheart mode, but I digress.

That’s really a call in this crisis to get back to your Davy Crockett. You have to learn to unlearn. About two, three months ago, everything changed literally overnight.

So your value proposition, your messaging, your positioning, and most likely elements of your product, have to change and they line up around two broad areas in what I’m seeing.

The first, of course, is just to save money. Everyone’s really watching every single dollar that they’re spending. CEOs literally have spreadsheets open with every line item.

So finding ways to address that is obvious. Secondly is to really reposition what you do from like a nice to have or an innovation budget to something that’s essential and must have that really reflects how people are doing business today and or operating their companies.

And I’ll share with you maybe a counter intuitive example from the 2008, 2009, timeframe while I was at Google. And for context, it’s hard to imagine but in Q1 of 2009, Google laid people off and had its first down revenue quarter, in its history, I believe.

And that was like super shocking, but really when you unpack it, Google at the time was primarily viewed as this tactic that primarily drove traffic to ecommerce sites.

It did other things, but primarily, that was the main source of revenue and I was responsible for the retail relationships at the time.

So that was really shocking to us that people were starting to pull back. What we did was really started to challenge those assumptions and really adopted what we call the more for less strategy, and what specifically we did, we approached media buyers and or the retailers themselves, and we created spreadsheets for every single category that that retailer had.

And we showed that with very small shifts in media allocation towards Google, in this case, that they could get at least the same, if not more traffic for fundamentally less cost.

And it really, it changed the game and people really embraced that, but we didn’t stop there. We also challenged the sacred cow, the assumption at the time, that the website was cannibalizing store sales, in the bricks.

So we decided to queue up 50 or 60 experiments that really were controlled causal experiments that really got after that and we proved definitively that when you drive traffic to a specific category on a website, rather than cannibalizing, it actually boosted sales in the store.

So really started to challenge some of the conventions and then the company became more relevant to the C-suite rather than just the director of ecommerce.

So that’s one example of many. So if you haven’t experimented with an ROI calculator in your go-to-market motion, I’d highly encourage it.

It seems to be almost a necessity in today’s world. Shifting to the fifth is around pricing. So pricing is obviously a very powerful lever.

I’d argue it’s one of the most powerful levers in SaaS, yet the least understood or the most misunderstood, perhaps. I talked a little bit about the cost side of Evernote and that really bought us time.

But really, the improvements we made to some of the product experience and then the pricing and packaging were really the keys to inflecting top line growth and doubling subscriber base and literally putting the company in control of its own destiny.

The way we went about this is really interrogating the value that got the people in the community derived from our product.

In this case, it was the ability to capture ideas in any format, anywhere, anytime, on any platform, and then use that insight to align our business model against it.

So specifically, we adopted a Netflix-like model in that to unlock premium features, we asked people with three or more devices to pay for those premium features.

We also raised prices by 30 to 40% at the same time. So clearly it wasn’t a very popular person on Twitter for several days or weeks, but really, this move allowed us to stay in the game and continue to improve our product.

Interestingly, we saw an improvement in conversion rates and we saw an improvement in retention rates, which were very counterintuitive.

And more generally, I just think pricing is so misunderstood and most people, most companies, don’t charge enough and then they starve themselves the ability to invest in great product, starve themselves the ability to invest in great go-to-market machinery that really allows people to get … To try and find customers on a consistent basis.

So that’s I think is really important to consider in pricing. In today’s environment, there’s a very uneven experience in terms of economic impact.

And to simplify it, those who are struggling to keep up with demand, and those who are struggling to find and retain customers, and if you’re in the first camp like, “Oh, congratulations. Good for you.”

I also would encourage you to resist the urge to increase prices and ride the wave. It might seem like a good thing to extract some surplus in the midst.

I think it will have potentially a poor impact on your brand in the short and most likely the long-term too. Maybe you can think about, in that situation, new layers of value.

White Glove service, a different premium product extensions and then charge more for that. In effect, raising your prices without actually being perceived as gouging or profiteering.

For most, we’re struggling with the opposite, which is really how do you retain and prepare for inevitable churn. So to protect the number of customers, protect long-term ARR and lifetime value.

It’s super hard to find new customers, we all know that. It’s easier to upsell them or resell them later when times return to a slightly more normal state.

I think it’s helpful as a tactic to classify and be really rigorous about doing your customer base along value and risk and really clearly tripling down on the high value folks, but also know that not all customers can be saved, and not all customers need to be saved.

One tactic that is very popular, people are going to be asked for discounts. It’s easy to … It’s not easy always, but one tactic that has been successful is to extend the terms of the contract and lower the overall cost on a per month or per year basis.

I guess I like that, but I’m more a fan of being a little more creative, to look for ways in which you could do more, offer more for the money.

So things like no risk trials, free cancellations, performance rebates, loyalty credits, you name it, and the last thing on pricing that I think is a good way to think about it is free months as opposed to discounts.

And the benefit there is you can end them more easily without having to have another charged conversation.

So those are the five big areas that I found to be successful, especially in the midst of a crisis.

*****

Ep. 352:

Announcer: Welcome to the official SaaStr podcast. In today’s SaaStr Insider episode, SaaStr CEO and founder Jason Lemkin chats about SaaS decacorns and the COVID beneficiaries.

Jason Lemkin: Hey, everybody. I wanted to talk for a minute about COVID beneficiaries. And what do I mean by this almost macabre or strange term? Well, it’s tough to figure out what’s going on in the world today. On the one hand, we look at our LinkedIn and our Twitter, at TechCrunch, and we see many iconic companies laying off 30 to 40% of their teams. We see friends that we know losing their jobs. And it’s terrible, and the economy is terrible, and we are approaching 20 to 30% unemployment. Maybe more if you include underemployment, and furloughed and paid, but not working. And yet the stock market is essentially at all time high. And yet, there are over 20 SaaS decacorns, 20 SaaS companies worth more than 10 billion today. Shopify is worth almost a $100 billion, Wix just crossed 10 billion. Datadog, it just IPOed, it’s now worth 20 billion. Zoom, when Zoom IPOed, they thought they might be worth four billion. Now they’re worth $60 billion and going up. That’s more than the entire airline industry. Decacorns are everywhere in SaaS, in what are in some ways the worst of times for us.

So what’s going on right now? Well, the simple point is there’s three categories of SaaS companies, and you know this. There are the COVID beneficiaries, and that’s probably only 15, maybe 20% of SaaS companies that folks that are getting to benefit from it. There’s the COVID-impacted, folks who many of their customers are hurting. So their growth has decelerated, but still growing, but not what it was before March 15th or so. And then there’s SaaS folks who, they’re great companies, but their products just aren’t needed today.

Maybe the most iconic example that’s public is Eventbrite. We love Eventbrite. You love Eventbrite, but without live events, as much of 95% of their bookings have been lost. So that’s tough, but there was enough COVID beneficiaries. We know about Zoom and we know about Slack and we even know about AWS, but look at these other categories. Some of you know this, but some of you don’t. E-commerce is on fire. Look at Shopify. Its growth has gone up incredibly. And more importantly, it’s not just Shopify. It’s almost everyone in e-commerce. We talked about Gorgeous, a contact center for Shopify and e-commerce. They grew 70% last month, 70%. So anything connected to e-commerce is getting the boost. Algolia, a search as a service company, has seen record usage because people are searching for products to buy.

Etsy, which many of us almost gave up on a few years ago, it seemed like no one needed Etsy. Etsy is worth more than $10 billion today. So e-commerce everywhere that it can is growing. Instacart is coming up on $20 billion of value. So e-commerce is a beneficiary. Mobile apps and app development. Twilio’s on fire. Everyone I know building mobile apps is getting more demand. I’m not even sure why during shelter we’re building more apps, but we are. Banking and FinTech, all over the place. Some folks are struggling a bit, but other folks that are enabling this digital transformation, banking APIs and others, are growing at unprecedented rates since March. And another one that folks might not realize but now you’ll see it’s obvious is contact centers. Look here at RingCentral. RingCentral is coming up on $30 billion market cap for doing cloud contact centers.

Five9, which you might not even know about. In 2014, I know it was worth $150 million, because that’s what I wrote in my Talkdesk memo when I invested, $150 million in 2014. Today it’s worth seven billion. 150 million as a public company, which isn’t great. Seven billion today. That’s 40x by Five9. That’s a COVID beneficiary you didn’t even realize was there until you go to type Five9 into Google. So COVID beneficiaries aren’t all of us, many of us are hurting, but it’s enough. It’s enough that the BVP NASDAQ cloud index is at an all time high. There are more of them than we expected. We did not expect the Etsys, we did not expect the RingCentrals. We did not expect– here’s Atlassian. We knew Atlassian would be great, but we didn’t know that quietly, because Atlassian isn’t making a big deal of it. They would be doing just as well as Slack. So there’s enough COVID beneficiaries to drive the markets up.

COVID impacted, that may be more of you. My guess is that’s 50, 60, 70% of SaaS companies. Interesting times for the COVID impacted. You may have segments of your customer base that are doing well, the ones we just talked about. If you’re selling to e-commerce, if you’re selling to collaboration, if you’re selling to contact center, you may see more demand for your product today in those categories. But other segments of your customers can be hurting. If you’re selling to recruiting, they may be deeply hurting. If you’re selling to segments of sales and marketing, they may be deeply hurting. So do your green lights weigh out the red lights? It can really vary. You also see a balance between push deals and upsells, and a lot of folks in sort of what I call COVID impacted, a lot of their existing customers may need more during shelter. They need more of their product. And when you’re sheltering, you trust your existing vendors even more. So I’m seeing more and more upsells in the COVID impacted, but deals are still pushed.

Even now when people are calming down, deals get pushed. So there’s a balance. The green lights and the red lights segments, they weigh back and forth, and upsells and push deals. So in many cases, the COVID impacted might see their growth cut by 30%, 50%, in some cases as much as 100%, but they’re still growing in some segments, which is super important.

And then lastly, and I don’t want to spend a lot of time, there’s obviously what I call the COVID neutralized. These could be great companies, iconic companies, but if you’re in travel, if you’re in events, if you’re in similar areas, it will be years until things are normal. And it is what it is, no matter how good a company you are.

Now, especially if you’re COVID impacted, what are five lessons we can take from the beneficiaries and bring back to our companies so we can do better? Let me give you five things that I see working well today in this crazy world.

Number one is real free editions. And what do I mean by that? I don’t mean yet another free trial, and I don’t mean a COVID edition for first responders. Those are fine, but those are marketing tactics. Those are not changing what your customers can do today. A real free edition, I mean, is something that’s awesome, that most of you don’t have today, but, but think about it for a minute. You know what the two best free products on planet Earth are in my opinion? Zoom free and Slack free. They’re so free, sometimes we don’t even need the paid versions. I mean, you can go 40, 50 minutes on Zoom, and never pay. And Slack, I mean Slack free is awesome. Yes, you don’t get search and you don’t get some other things, but boy, you can chat away and communicate with your team for a decade and never pay with Slack. And yet it hasn’t hurt either of them. In fact, it’s just grown their bases. But the key to a real free edition is it has to be so good that five to 10 times more people will use it than are using your paid version. And they have to be roughly similar to your existing paid customers, so that they can spread the word and maybe eventually convert. So it has to be awesome, but an awesome, real free edition does work today.

The second thing, which sounds obvious, and we talked about this earlier, but you have to focus your sales and marketing teams, not just on small, medium, and large customers, not just on geographies and traditional ways we divide up our team, but on green, yellow, and red segments. You have to take part of your sales and marketing budget, and go after your customers in collaboration, in e-learning, in communications, in these areas that are benefiting. And there’s no need to reduce quotas or to change anything in green light segments. You may even be able to increase quotas a little bit. But in segments that are impacted, not unneeded but impacted, you may need to have some quota relief for folks doing that. It’s going to be harder. And in the not needed categories, you may not even want to charge. You may not even want to charge customers that are so hurting. So you have to segment your marketing and your sales activities by green, yellow, and red customer categories. You got to do it.

The third point is realize, if it feels like all the marketing spend in your category disappeared in March and April, it probably did. It probably did disappear, but I see everywhere that it’s back, that marketers are back. In some categories, they’re not back like they were before. In some categories, they’re back to normal, but they’re back. Marketers now have a plan for this year and next year, and they have to hit it. And their spend may be the same, it may be 50% lower than before, but they’re ready to spend on high ROI categories. There’s probably still skepticism on things they don’t believe will work, and we’re all still fatigued with dealing with new vendors, but marketing spend is back. So how can you access it? It’s back.

Fourth point is, this works really well today in challenging times. But when folks have time for discovery is better onboarding. And I don’t mean of employees, although that’s super important. I mean better onboarding of prospects during trials and discovery, and better onboarding of new customers. We all think we’re great at this because our web app has such a beautiful UI, but it’s not. A Wiki is not enough. An FAQ is not enough. One customer success person handling a hundred accounts is not enough. Make your onboarding awesome.

And how do you know if it’s awesome? Well, check your activation rates. Within one day, 24 hours, one hour, one week, whatever is right for your app, do more than 90% of your new customers go live? If it’s not over 90 in the shortest possible time you can define onboarding as, you’re getting an F. You are flushing customers you worked so hard to get right down the drain. And if you’re not over 90, something’s wrong in your onboarding. So go fix it, set a quantitative goal. And this is how you can measure onboarding. What percentage of customers go truly live, go for real, within the shortest possible date that makes sense? If you start measuring that, you’re probably going to be disappointed. You’re probably going to see it’s lower than you think, and if you set an almost immediate goal to drive it up, your onboarding will get better by nature.

And the last of the five tips of things that are working well today that are maybe slightly non-obvious is helping builders. Folks like Twilio are seeing this left and right, they’re exploding. Folks that are helping builders build for real are accelerating. It’s related to but different than the onboarding point. If you’re B to D, if you’re an API, folks are out there. They want to build more stuff during shelter, for whatever reason. Square, Twitter, they’re never going back to the offices in many cases. Salesforce will be very limited this year. Facebook, Google, not going back to the offices. Your folks want to build more, but enable them. Whatever you’re doing, make your documentation better, make your API better. Do a weekly webinar, hire a solution architect. Do whatever it takes to help builders build, and they will build more today than they would have 90 days ago.

And just two last points on cloud beneficiaries. Here’s one from Gartner, and Gartner isn’t perfect, but it’s probably our single best source of what’s going on in enterprise minds today. At least they’re doing the work. At least they’re talking to hundreds and hundreds of CIOs every day and every week. And it’s very interesting, and what they said, just as recently as a month or so ago, they said IT spending would be 0%, would be flat this year, which is unprecedented. Even 0%, IT hasn’t grown 0% since the last [inaudible 00:11:13]. So for over a decade. Now they came out with a report that said IT spend is going to be down 8%. I mean, that’s stunning. IT is almost $4 trillion spent just in the US. The US alone, four trillion. And for the first time it’s going to drop, and it’s going to drop a breathtaking amount, 8%. So if that was it, maybe we should all hibernate or quit. I mean, that’s a drop like we’ve never seen before. That is falling off a cliff, IT spin.

But Gartner also said cloud spend, not withstanding that, is going to grow 19% this year, and SaaS will grow 20 some odd percent. And they said that 50% of the CIOs they talked to are cutting their spend. Cut, cut, cut. Even now, 50% said they’re increasing their spend in automation. That can mean digital transformation, that can mean collaboration, that can mean contact center. That can mean whatever. That can mean RPA. But SaaS, the money that’s there, it’s going to SaaS and cloud and automation. So find a way to position yourself so you can get it.

And the last related point for these COVID beneficiaries, and really, if you think about Gartner and you think about things that are working, even if you’re not a COVID beneficiary, you have to find a segment where you’re a COVID beneficiary. Find an area where you are, and focus your efforts there so part of your company can thrive, even if all of it can’t today.

But what’s going on with VC? Well, VC is back with a passion. The Wall Street Journal just said that Sequoia, Lightspeed, and a bunch of the other top firms all said they’d done a significant investment since COVID-19 with founders they’d never met in person. So that’s a big step forward. It had to happen. But the biggest firms and the best firms are investing on Zooms today, with new teams, not folks they met before all of this. So VCs are back. They’re back, they have more funds than ever. They may be a little more conservative before, but not much. They’re all sitting on lots of money, and they want to make money. And they’re looking at these decacorns, they’re looking at the Datadogs and the Zooms and the MongoDBs and the Wixes, that are all worth 10, 20, 40, 50, 60 billion. Wouldn’t you want to invest in them? Of course you would. VCs are back. There’s more decacorns than ever.

But here’s the thing. Remember all the money’s going to cloud beneficiaries. I mean, not all of it, but almost all of it. If even only 15% of SaaS companies are growing faster since March 15th, wouldn’t you invest there? Of course you would. VCs can make a bet. They can make a bet in the future. They can even make a bet that, “Hey, you’ll come back. You’ll come back when the world is normal and you’ll be stronger than ever.” But the further along you are, the harder it is to make that bet, because VCs do need proof points. They don’t need all the proof points, but they need proof points. And if you have fewer proof points than 60 or 90 or 120 days ago, it’s very hard to get funded.

So they’re going to put massive amounts of money into Instacart. They’re going to put crazy monies into Notion. And even though Notion’s only doing 40 million, 30 million, and it’s worth two billion, but it’s growing like a weed today. That’s where the money is going to go. So if you’re not a COVID beneficiary, either just don’t even try to get funded today or find a way to make yourself a beneficiary. Find a way to highlight the part of your business that is growing like a weed, even if the rest of it needs to be in a different color than it is in. So hopefully you are a COVID beneficiary, but if not, find the piece that is. Rally the team around that, and use that to pull you through these crazy times.

 

The post SaaStr Podcasts for the Week with Chris O’Neill and Jason Lemkin appeared first on SaaStr.

5 Tips for Communicating with Employees During a Crisis


This post is by Brooks Holtom from HBR.org

Based on a survey of more than 800 employees across 10 organizations.

SaaStr Podcast #350 with Contentstack Founder & CEO Neha Sampat


This post is by Amelia Ibarra from SaaStr

Ep. 350: Neha Sampat is the Founder and CEO @ Contentstack, a modern content management system bringing business and tech teams together to deliver personalised, omnichannel experiences. Atypical in our world, but Neha scaled the business to well over $1M in ARR before raising funding. Now Neha has raised over $31M from the likes of Insight Partners and Illuminate. Prior to Contentstack, Neha was the Founder and CEO @ Built.io and before that spent 10 years as the Founder and CEO @ Raw Engineering, building a leading digital transformation consultancy.

In Today’s Episode We Discuss:

* How did Neha make her way into the world of SaaS and content management systems having previously built a digital transformation agency?
* How the heck did Neha scale Contentstack to over $1M in ARR without raising capital, whilst being based in the Bay? What were the signals that made Neha realize she had a scalable software business? What did Neha look for in her first seed round investors? How did that profile change when she went out to raise the Series A?
* How has being a sommelier helped Neha break the glass ceiling of business? What are some lessons Neha has learned in terms of building true and genuine relationships with customers beyond the transaction? What are the counter-intuitive strategies Neha has found work when it comes to motivating remote teams?
* Why did Neha decide to build out so much of the tech team well outside of the Bay in a town outside of Mumbai? Does Neha believe the future of tech is in the valley or decentralized?

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
Neha Sampat

Below, we’ve shared the transcript of Harry’s interview with Neha.

Harry Stebbings: Welcome back. You are listening to the official SaaStr Podcast with me, Harry Stebbings. And diving straight into our show today, I’m very excited to welcome an incredible founder who did something very atypical for our industry. She scaled her business to well over a million dollars in ARR before ever raising any funding. Intrigued? You should be. And so with that, I’m very excited to welcome Neha Sampat, founder and CEO at Contentstack, a modern content management system, bringing business and tech teams together to deliver personalized omni-channel experiences. As I said, atypical in our world, but Neha scaled the business to well over a million in ARR before raising any funding, and now Neha has raised over $31 million in funding from the likes of Insight Partners and Illuminate. And prior to Contentstack, Neha was the founder and CEO at Built.io. And before that, spent 10 years as the founder and CEO at Raw Engineering, building a leading digital transformation consultancy.

Harry Stebbings: I do also want to say a huge thank you to the wonderful Teddie Wardi at Insight and Cindy Padnos at Illuminate for some fantastic question suggestions today. I really did so appreciate that. 

Harry Stebbings: But that’s enough from me. So now I’m very excited to welcome Neha Sampat, founder and CEO at Contentstack.

Harry Stebbings: Neha, it is such a joy to have you on the show today, I’ve heard so many great things, both from Cindy at Illuminate and Teddie at Insight. So thank you so much for joining me today.

Neha Sampat: Thank you. And thanks for having me on. I’m very excited to be here.

Harry Stebbings: Not at all. When Cindy says the incredible things she does, it’s an episode that I’ve been looking forward to. So I would love to kick off, though, with a little on you. So tell me, how did you make your way into the wonderful world of startups, but really come to found Contentstack?

Neha Sampat: So I’ve been an entrepreneur for as long as I can remember. When most kids played house, I always pretended I was running my own fashion firm or my own factory. I was always up to something. So when I was 12 years old, my best friend and I started a fan club for our favorite band, who I’m not going to name right now, and I charged teenagers all over the world $18 for a homemade fan club folder that we made ourselves. And we made over a thousand dollars in profit one summer and then reinvested that into creating a competitive Olympics event for our neighborhood.

Neha Sampat: And then that in turn funded our next young venture. And we essentially took bootstrapping to the next level when we were just kids. So it’s kind of in my blood. And from that point forward, went to high school and college like normal kids do. And I graduated and moved to Silicon Valley, not really knowing what I was getting into, but knowing that I wanted to be in something that was fast paced and exciting. And my brother actually pointed me to tech and to Silicon Valley. And so I moved and within a year of being in Silicon Valley, the entrepreneurial itch kicked back in and I ended up leaving the job I was in.

Neha Sampat: And I started a PR firm with my closest new friends from Silicon Valley. And we started to represent major consumer technology brands and then software brands. I essentially started off doing services in tech as a marketing person, and eventually went into product marketing and product management and realized that I have an incredible passion for products, and products that change the way that we work and the way that we do things. That eventually led me to building products. I built a parking app, Curb Karma, which we launched at TechCrunch Disrupt back in 2012.

Neha Sampat: I learned a lot about wine, so I launched some products around wine education, and that series of ventures eventually led me to where I am today, running a world class software company for enterprise companies.

Harry Stebbings: Can I ask you a question? A lot of people are coming out of college today, and they’re questioning what to do with their careers in terms of direction. And they always ask me three options. They say, “Hey, I could join a startup. I can start a start up or I could join an incumbent.” I’m really intrigued, given your kind of ingrained entrepreneurship from birth, what do you advise those graduates and how do you think about the advice you give them?

Neha Sampat: It’s really funny, cause I think back to that time and how confident I was and how I thought I knew everything, and I really didn’t know that much. I just had the confidence, right? And so I go into this job thinking if I work for a PR firm, I can learn everything I need to learn and then eventually I’ll start my own. So I kind of had that intention, but a few weeks into it, I kind of already felt like I could do a better job on my own. I started thinking about spinning off to do my own thing right away. I feel like it depends on where you are in your kind of journey and your confidence.

Neha Sampat: If you feel like you’ve got it, if you’ve got the itch, I would say, just go for it because you learn so much in that journey that you can constantly pivot and change and continue to learn more. If you feel like you need to gain more experience, do that first, but just kind of have an eye on, what would you do differently? What would you take away from the experience and how would you put that to work?

Harry Stebbings: Yeah, no, I agree. I think the confidence is key, but I do want to move to Contentstack. As I said, I think one of the most fascinating things with Contentstack is the many narrative violations that worked out so well and gone against the grain of startup mythology. And one that I spoke to Cindy about before is, your scaling from nought to a million in ARR. And you scale to a million in ARR, based in SF without any outside funding, which seems pretty impossible and unheard of in today’s world. Bluntly, and thanks to Cindy at Illuminate, how the heck did you do that without taking any outside capital?

Neha Sampat: So it’s funny. We actually scaled pretty far beyond that before we raised funds, but essentially, for a Silicon Valley based startup, our playbook did not look like the companies around us. We were doing everything very different. For starters, I’m not an engineer and I’m a female. So running a tech company with a lot of engineers, as a CEO from my background, was already kind of against the odds. We built our engineering team in an unproven location in the outskirts of a city in Mumbai, in a city called [inaudible 00:07:55] which is not known for tech. There’s no tech schools there, but we were able to find undiscovered talent in a place that you wouldn’t necessarily expect it, which helped us to grow a team that was super talented.

Neha Sampat: We started off by building a profitable services business, and that services business helped us to uncover real use cases for the products that we wanted to build. As we started to build those products, we were doing that with the profits from the services business. So that allowed us to extend our time without needing any outside capital, and building really cool products that we were able to test in our customer base before we really essentially went to market. So we had almost like an incubation company within our own company, building incredible products that were super competitive. And when we were ready to take those to market and to actually put the fire behind them for go-to-market marketing, sales, all of that good stuff, that’s when we spun them out and started to look at raising funds.

Harry Stebbings: Can I ask what were the signals to you, when you look at those kind of incubated products? What were the signals that made you go, “Absolutely. We’ve got a sustainable, scalable business here with these products, versus let’s keep incubating and keep doing more services.” What signals drove you to feel confident that you had the business?

Neha Sampat: The obvious thing is demand, right? We were not spending a ton of money on marketing. I would say we were very scrappy with what we were doing from a marketing perspective, but we were selling products and we were hearing from the market that they wanted more and that they wanted to talk to us and we couldn’t keep up with that demand. That sort of product market fit being in your face was probably the biggest thing. And then we were in two very distinct spaces that were really hot. One was an integration platform, as a [inaudible 00:09:40] space with a company called Built.io, and then content management, which was modernizing with Contentstack. And so we had both of these products under our services business, and they’re both really incredibly hot areas to grow. We realized if we don’t spin these out and give them what they need, we won’t be able to capitalize on either of them to their full extent. And so that was kind of the obvious moment for us to make that change.

Harry Stebbings: Speaking of capitalizing on that opportunity, then you decide to go out to raise the seed round. And that’s where Cindy comes in. But I guess my question is, and this was asked for by Cindy, so I guess there might be a little bit of bias, but what did you want in that seed investor, first off?

Neha Sampat: It really came down to sharing the excitement about our space and with Contentstack in particular, this is the product that I have had the most passion about from when I started doing entrepreneurial things many years ago. And the reason is, it actually is we’re in this world that’s changing and modernizing. There are people on the business side and people on the technical side that want different things. And we built a product that addresses both sides and addresses large organizations and enterprises, and it’s really hard to do that. Cindy got it right away, as did our other seed investor, Linnea from Gingerbread Capital. Both of them not only shared the passion for the product and what we were doing, and they believed in the opportunity, but they also shared a passion for our team and the rest of the founders. And we just felt that connection. So from a seed perspective, we were looking for that.

Harry Stebbings: Okay. So you’re looking for that shared excitement, the shared passion, the enthusiasm of the seed investor. When you think about the translation to the series A, obviously you got my former colleague and the wonderful Teddie from Insight onboard, but what did you want from the series A, and how was that different from that?

Neha Sampat: Yeah, so the series A, we actually raised a pretty sizable round. We did a 31 and a half million dollar series A, which is usually a B or further down. And so it was really about the scale. The reason that we raised such a large round was so that we could triple our sales teams, so we could get the go to market underway, so we could address all the demand that we were seeing. So what we were looking for there is a longer term partner, someone that potentially would have that multi-stage experience, that not only shared the excitement that we got at the earlier stage, but also understood our longterm vision and brought operational expertise to help us meet that scale and demand. So that’s where insight was an incredible fit for what we were trying to do.

Harry Stebbings: Yeah, no, absolutely. And I think they have the funds to scale rounds as well. I do have to ask, though, because it’s a unique experience, bootstrapping then raising from more boutique seed firms, like as we said, Gingerbread and Illuminate, but then also adding Insights to the cap table. When you advise entrepreneurs today, what advice do you often find yourself giving them when it comes to fundraising?

Neha Sampat: I think the biggest thing that stood out to me is that you shouldn’t be married to your plan. You can learn as you go, you can pivot quickly. We essentially thought that we were going to do a series A a bit earlier, and we decided that the seed was enough to get us to the next inflection point. But that was sort of an argument we had to have in our heads. And if anything, I would go back to myself and say, you know what, that’s actually okay. And it’s going to turn out better as a result.

Neha Sampat: And so I think that’s the big thing. And then a couple of tactical things, we learned that all investors, whether they’re going to move forward or not, will want to have conversations with your customers, and customers are your lifeblood. They’re sort of the most precious currency you can give to an investor in the process. So I would just caution other founders that yes, you should ask your customers to support you, but do it in a way that’s a little bit more limited to getting further along in conversations with investors. And when you know that you’re likely to move forward, that’s when you bring your customers into the mix.

Harry Stebbings: I’m so with you on preserving the customers and you really don’t want to overload them. As you said, customers are King. But how do you think about diligencing, how far along the investor is, and is it right to put an FAQ pack together from your customers? How can you actually ensure that the lead is as warm as you think it is before you introduce them?

Neha Sampat: Yeah, that’s a really good question. I mean, I think what I learned is the ones that were very serious about us and not just trying to learn about the space, were doing a lot of their own diligence. And it came back to me. I was getting text messages from either customers or other strategic partners in the industry that were saying, “Hey, I just heard from this investor, are you guys looking to raise?” You would know. If there’s a pulse on what you’re trying to do, you’ll find out about it and the better investors are doing their own homework before they’re really coming to you for that information.

Harry Stebbings: Yeah, no, absolutely. I do have one more question on the investor to founder relationship [inaudible 00:14:14] in the last 18 months, I’ve joined my first boards, and I constantly think about what I can do to be the best board member that I can be. In your mind, what would you advise me, a freshly minted board member, on how I can be the best partner to you, the founder, and how I can build that relationship?

Neha Sampat: You know, I’m actually new to having investors on my board too, cause this has all happened in the last year, but what I get the most value from, and Teddie’s an incredible partner on my board, is that he listens and he provides insights, no pun intended, from the rest of the portfolio and from his own experience. And that’s, I think, the best thing that you can bring to the table and you’ve had some 2,500 conversations with either investors or entrepreneurs. So you’ve been exposed to so much information that just making things relatable, helping people to solve problems, that’s really what it comes down to and being supportive. It’s been a really weird year, and being an entrepreneur in general, there’s lots of ups and downs and smiles and frowns as Snoop Dogg would say, but it’s kind of rolling with that and being supportive and being able to kind of help point your entrepreneurs in the direction of something positive and progressive, to move the ball forward.

Harry Stebbings: You mentioned your relationship with Teddie there, and I obviously spoke to Teddie before the show and he mentioned the incredible relationship you have also, but he mentioned kind of the conviction building that was driven with the investment, largely being with you and just the faith that he had in you. I’d love to start on you as a leader. And when we look at your background, it’s also a fascinating background, because I think you’re the first guest I’ve ever had on the show, who’s a sommelier. I mean, first, congratulations on that. But I mean, second is also, and this one is from Teddie, how have you used that background as a sommelier to break the glass ceiling in business?

Neha Sampat: I love that question. It’s so incredible because when I became a certified sommelier, it was actually about 10 years ago. I did it as a hobby. It was something that I was passionate about. I love wine. I love the taste of it. I love what I’ve learned about the world and geography and history as a result of my studies of wine. I did not know that it was going to become such an incredible business tool, but it has. I’ll give you a few examples that stand out. I remember when I was first studying, before I even passed, I was so involved in it that people knew, and I was working at a wine bar and moonlighting and my whole company knew, and I got invited to so many executive events that I would not have otherwise qualified for, or so many conversations that I would most likely have been left out of, because of my wine experience.

Neha Sampat: You know, and it’s interesting how that has then led to events that we’ve been able to pull off within our customer base, with partners, with analysts, with press, just because they’re interested in the knowledge that we bring to the table from a wine perspective. Cause it’s just so different than sitting around and talking about tech and APIs and things like that. So it’s been an incredible tool to open doors and I didn’t know that’s what I was getting into, and we’ve actually been able to turn it into something that has been a business development tool and a customer relationship management tool and a lot of fun for the internal team employees, the brand, all that good stuff.

Harry Stebbings: I absolutely love it. Tell me, what’s your favorite wine?

Neha Sampat: I go through phases. So I’m currently really stuck on Italy and specifically the Piemonte region. I’m trying a lot of different Barolos.

Harry Stebbings: I am writing down, and I look forward to trying on your recommendation. In terms of counter intuition though, you said there about using wine is a customer relationship tactic, in terms of other counterintuitive elements, I spoke to your team and they spoke about what an incredible motivator you are of the team more broadly today. I guess the question for me was, what are some really counterintuitive lessons you’ve learned along the way, on what it takes to really motivate, especially remote teams? You mentioned the team in India earlier, how do you motivate them?

Neha Sampat: It’s interesting. This year has just been weird for everybody. We’ve gone through a lot of turbulence. More specifically, the pandemic has changed all of our lives in ways that we have yet to see the longer term impact. I think the big thing is, and I don’t know if this is necessarily counter-intuitive, but it’s really about the importance of motivation in turbulent times. That’s been a big focus area for the last quarter for me. And as a growing, scaling company, we had a lot of people that were new to Contentstack that joined early this year, and they didn’t necessarily know what they were getting into when all of a sudden we shut down all of our offices, everyone’s working from home. Luckily we did that early and we did it in a way that was pretty non-disruptive to not just employees, but our entire customer base.

Neha Sampat: That whole business continuity went flawlessly and people appreciated that. But at the same time, you have to think about the wellness of employees and they’re sitting at home and they’re dealing with all these new nuances and all of these different challenges of either being at home with kids or feeling lonely or trying to get medical attention when they need it, there’s just so much going on. A focus on people and wellness and just kind of checking in became a really important part of my daily process as a leader.

Neha Sampat: We did a lot and we’re still doing a lot to try to just keep everyone connected. In terms of our core values as a company, we’re pretty distributed. We’ve been distributed for a long time, but connection’s been super important and not being able to get together in person makes it harder to connect, but doing things like cooking classes online or working out together or offering people summer Fridays, things like that have helped us to continue to uphold our values, feel connected, feel like we’re not just colleagues, but a tribe.

Harry Stebbings: I have to ask one thing that I’m experiencing now in many different ways is all hands. And I didn’t necessarily have a love for all hands. I find the daily all hands for half an hour, it’s kind of a waste of time and not everyone gets to share a voice. I’m just not a fan. How do you approach all hands? I’m really intrigued. And how does that scale with the scaling of the team?

Neha Sampat: Yeah. So all hands meetings are, typically, they used to be more about reporting out business metrics and big things that were happening. What I find has happened in the last few months is they’ve become a little bit more about specific topics. We recently held an all hands called “Upholding Our Values,” specifically to talk about what’s happening with the Black Lives Matter movement and how that’s impacting people in the company, and what we’re doing about it as an organization and just giving people the platform to share and to be open and to talk about it.

Neha Sampat: I think that it’s crazy how that openness helps bring people together, that vulnerability and that emotional discussion. It’s usually not everybody who speaks up, but the people that are participating feel that connection as well. That’s the feedback I got from the team. So I think choosing ways to connect, that maybe is a little bit more emotional and not just tied to business and metrics and reporting is important. I think the other thing that’s worked well is having guests that people can connect with, having a customer come and speak about what all the hard work that people are doing is doing for them, and being able to feel that sense of significance as a result of all the hard work really connects people together. So those are the types of things we’ve been doing that I think are a little bit different.

Harry Stebbings: I love that, in terms of having a guest speaker. And it’s a really nice idea. In terms of the team itself ,though, I know that obviously you’re also a big proponent in terms of really building diversity throughout the organization. When building out the Contentstack team, I’m interested, did you consciously build diversity into the team? And if so, how so?

Neha Sampat: Yeah. I mean, diversity is a part of our core values. We actually talk about equity, diversity, inclusion a lot, probably before it became a very hot topic. I think part of that, if you think about just our leadership team, I mentioned this earlier, but as a non-engineer running a big engineering company, I’ve been able to bring value to the organization by understanding what the business is looking for, what our business and enterprise customers need, while my counterparts are bringing value from understanding the modern technology aspects of things.

Neha Sampat: We’ve always kind of had that mindset, that coming from different backgrounds and having different experiences, helps you to make better decisions. That sort of undeniable curiosity is what we look for when we build a team. So when I’m looking for candidates, not just for the leadership team, but across the board, we’re looking for people that have that curiosity, that like to learn with their colleagues, that are comfortable being challenged and that have this commitment to teamwork.

Neha Sampat: The idea of teamwork is that you can get aligned around an idea, even if you don’t agree with it, but then you can commit to moving forward. So this whole disagree and commit mentality is based on having a diverse mindset, having diverse experiences that help you to make more cohesive decisions in the long run. Diversity is a big part of how we think about hiring and building. It’s just a part of how we’ve adopted our culture. It’s just inherent in who we are.

Harry Stebbings: How do you respond to… I speak to many enterprise and SaaS founders and they say, “Harry, I know you think that we should do better, but it’s a pipeline problem, okay? It’s not our fault. It’s a pipeline problem.” How do you respond to that? I guess, is there anything that you do kind of deliberately, to ensure the top of the funnel is full of diverse candidates, not just being a pipeline problem?

Neha Sampat: There’s a few things. One thing that stood out to me and I stole this idea from one of the big firms, maybe three or four years ago, was in our CVs that we receive in India, we started to cross out the names of people, so people would not know the gender of the candidate. That actually helped us to just focus on the skillset and not have that subconscious bias that could exist in an organization, and little tricks and tools like that help you to eliminate what could be subconscious bias.

Neha Sampat: Beyond that, we actually have been talking about this a lot this year. How do you attract candidates that maybe don’t look like you? Right? How do you get them into the organization? Our talent acquisition team is specifically looking at going into areas that are underrepresented in the tech community, looking at minorities, working with organizations like Black Girls Code, to attract talent that might be different, or that might look different than the rest of the pool that we have. So it’s really about being proactive and looking for that talent. It’s not necessarily that the pipeline doesn’t exist, it’s just that the pipeline might not be looking at you. Some of that burden has to be on the organization and the talent acquisition team to go and find the talent to help make your organization more whole.

Harry Stebbings: Yeah, no, I totally agree in terms of being much more deliberate about kind of finding them and filling the top of the funnel with diverse candidates. I do want to ask, in terms of the team’s location, because the majority of enterprise companies, as we know, are kind of Bay based, and you took the decision to move a large amount of the team from the Bay to Austin, Cindy told me. Why did you decide to do this? And what’s been the learnings in terms of what it takes to make that transition successful?

Neha Sampat: Yeah, it’s been an interesting transition to even accept that geographical distribution is a good thing. I went through that transition in my own head. I’ve seen a lot of companies starting to accept that now. Especially with this year, we’ll see a lot of that transition happening for many brands, but essentially, for us, we started off in San Francisco and Mumbai. Those were sort of our two locations and we grew the teams there. We had critical mass, we continued to just look locally, and eventually we found that we were finding talent in places outside of the Bay Area. A lot of that came from our own network. When you work with somebody that you really like, and they live somewhere else, you’re kind of open to giving them an opportunity. That started to happen more and more. And as we grew, we understood and realized that there’s talent everywhere.

Neha Sampat: By only looking in the Bay Area, we’re only limiting ourselves. And so we started to deliberately find a few new hotspots. So we’ve got a team in San Diego, a team in Austin, a team in San Francisco, and then Amsterdam, and a couple of places in India. We started to grow small bits of critical mass in each of those locations. I decided to move to Austin after we had already started that effort. I believe that there’s an incredible talent pool here in Austin. Part of my move was also based on wanting to grow the team here, as we continue to scale the company.

Harry Stebbings: Can I ask, how have you found the move, personally? The Bay is such a magnet town and the Bay does have such electricity around tech. How have you found it personally? I’m interested.

Neha Sampat: I lived in San Francisco for 20 years before moving here. So it was a big move and a big change for me. Honestly, I was really excited about being exposed to conversations that were not just about tech and going back to the diversity thing, right? You meet people that have so much talent, but it could be talking about music or playing instruments or screenwriters or people that are just really incredible at coding. There’s just so many different people here. After 20 years of having conversations about software and APIs and dot coms and all of those different buzzwords that built up over the years, it’s been really refreshing, actually, to be in a place where there’s other ideas and thoughts that essentially pique curiosity for the people around you.

Harry Stebbings: Yeah, no, I’m totally with you, or it’s kind of that standing in the San Franciscan living room going, do you like to hike? Oh, me too. Me too. I love to hike. My favorite conversation that happens, I want to move into the quickfire, which is my favorite. Essentially, I’m going to say a short statement and then you give me your immediate thoughts. Does that sound okay?

Neha Sampat: Sure.

Harry Stebbings: Okay. So 60 seconds per one. Favorite book and why?

Neha Sampat: So I think my favorite book is probably The Hard Thing About Hard Things, and I have a lot of other favorites, but that one comes to mind just based on the conversation we’re having today. Really, the reason is it highlights the resilience and adaptability of entrepreneurs. And the fact that Ben Horowitz actually focuses in on some of the things that people don’t talk about in the MBA schools of the world, where you really learn through experience and going through some of the rough times and being an entrepreneur, like I said earlier, there’s just lots of ups and downs. And I think he does a really good job of capturing some of those.

Harry Stebbings: 30 seconds on each here, and this is a tough one, but biggest strength and biggest weakness as a leader.

Neha Sampat: I think my biggest strength is just my ability to be resilient and persevere and essentially reset. I have this concept that I call Tuesdays at noon, and this is based on the foghorn in San Francisco, which goes off every Tuesday at noon as a test. Every Tuesday at noon, I have an alarm set on my phone since I can no longer hear that fog horn, in which I reset, I let go of all the negativity, all the bad stuff, and then everything that I’ve learned, all the positive things, all the goodness, I take forward. And that’s just sort of helped me to kind of take a breath, realize that some things don’t go the way you want. Other things are great. And just focus on progress.

Harry Stebbings: I love that in terms of setting that foghorn on your phone. Tell me, biggest obstacle to success that you face and how did you overcome it?

Neha Sampat: I think the biggest obstacle is really just my background being a female and non-engineer, trying to prove myself in a tech bro world. I have to say, overcoming it is just continuing to persevere. I like to think about Nemo in Finding Nemo. Just keep swimming and just keep going. It’s like just keep swimming, just keep winning, keep proving yourself. And now I’ve established myself to a point where I can walk in with the credibility, but it took some time. I think I had to work harder than probably a lot of my peers.

Harry Stebbings: Can I ask? And this is off schedule. Do you feel it’s getting better?

Neha Sampat: Yes and no. There’s definitely more awareness. And I think that’s been super important and I feel like allyship has been a big word this year. I feel like allyship for females in technology has also grown and that’s been good to see. There’s been more focus from investors on finding female founders and finding females on boards. So I think that there’s a step in the right direction, but we still have to move the needle quite a bit.

Harry Stebbings: Yeah. There’s still a lot to do. Tell me the biggest thing that you believe that most around you disbelieve.

Neha Sampat: This is a little bit of a tricky question because most around me are the people that I work with and spend a lot of time with, and they probably do agree with this and believe in this. But if you think about most of the world in my field, there’s this concept of all in one enterprise software. This is really hot because we just launched an alliance to combat that yesterday. So it’s top of mind, but there’s this concept of mach, which stands for a modern way of doing technology. And mach is essentially microservices, APIs, cloud native, headless, which is where Contentstack kind of fits in. For me, that is the better way. That’s the modern way. That’s why I built this business. There are still a lot of people that could be our buyers and prospects and potential partners that believe that an all in one enterprise suite is easier or better. Part of my vision and part of my goal is to combat that. That’s where I’ll go with that.

Harry Stebbings: Tell me, penultimate one here, what moment in your life served as an inflection point and maybe changed the way you think?

Neha Sampat: I think this goes back to where you discover talent and we kind of touched on it a couple of times, but I think my light bulb almost 10 years ago was when we started to hire people in this small part of Mumbai that nobody had thought of and nobody had heard of. It was like a place where factories existed and somewhat residential, and the people are so talented. They just did not have the opportunity to put that talent to work. So for me, I think that was a big light bulb, knowing that talent exists everywhere. If you can provide the opportunity for that talent to lighten up, it’s like magic.

Harry Stebbings: Final one, and probably the most important one. What do the next five years hold for you and for Contentstack? Can you paint that vision for me?

Neha Sampat: Yes, absolutely. So I talked a little bit about mach, and that really means taking over the old legacy way of doing things and doing things now in a modern way. What that really means is for brands to be able to bring their ideas for digital experiences to life. Imagine if you are out and about, living your life, and you’re able to consume the content that you care about at the right time, at the right place, on whatever device you want to see, or whether you’re carrying the device, or you’re looking at it in the sky, or it’s an AR experience.

Neha Sampat: All of that can be delivered in a way that’s cohesive and personalized and not intrusive and scary and very relevant. That’s sort of the vision for where we’re going with Contentstack as a product. In terms of the team and the company, we essentially will continue to scale and grow and make others believe in what I believe, which is that mach vision.

Harry Stebbings: I absolutely love that. It is such exciting times ahead, as I said, I spoke to Teddie and Cindy before, and they both echoed that. I just really appreciate you joining me today, so thank you so much for coming on the show.

Neha Sampat: Thank you, Harry. That was a lot of fun.

Harry Stebbings: So great to have Neha on the show there. If you’d like to see more from her, you can find her on Twitter @nehasf. Likewise, it’d be great to welcome you behind the scenes here. You can do so on Instagram @hstebbings1996. I always love to see you there. 

Harry Stebbings: As always, I so appreciate all of your support, and I can’t wait to bring you another phenomenal episode next week.

 

The post SaaStr Podcast #350 with Contentstack Founder & CEO Neha Sampat appeared first on SaaStr.

Seed Investing Today: What’s Changed, What Hasn’t with Aileen Lee and Jason Lemkin (Video + Transcript)


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

What Nobody Tells You About Seed Investing with SaaStr CEO Jason Lemkin and Cowboy Ventures Founder and Partner Aileen Lee

Aileen Lee | Founder @ Cowboy Ventures

Jason Lemkin | Founder @ SaaStr

 

Jason Lemkin:
… founders what, how things really work, what it’s really like. And not only is Aileen one of the investors that many of us all look up to-

Aileen Lee:
Oh, God.

Jason Lemkin:
… but she also… What’s that?

Aileen Lee:
Oh, God.

Jason Lemkin:
Well, we admire, but also she’s very early in the micro VC trend. We won’t talk about it too much today, but we will talk about a little bit. When Aileen founded Cowboy Ventures in 2012…

Aileen Lee:
12, yep.

Jason Lemkin:
2012. Now you open up TechCrunch or StrictlyVC or anything, you’ll see a dozen firms a week literally sometimes. Five or 600 since then, but back then, you could probably count the seed firms on one hand or two hands.

Aileen Lee:
Yep. And I was not the earliest. We can talk about that.

Jason Lemkin:
But you were in the… Let’s call you Gen 1, even though… At this new wave. I think it gives us a perspective that maybe we don’t get in some other places, in addition to many great investments over the years. I thought we could talk about really what’s changed, what hasn’t. And it’s funny, just to kick it off, I’ll tell you we’ve heard two… First of all, two things. We’ll have some time. I know I’m not always great at it. But put your questions in the Q&A and we’ll answer as many as we can, right in the Zoom, put them in.
But what I want to do… Oh, I had forgot about this slide. Oh, hold on. Just one take pause. Sorry, I’ll come back to this. I don’t want to go out of order, but I did want to highlight one thank you and whatnot. We’ve been doing these SaaStr events since 2015, the SaaStr Annual. This is just a funny story. You can learn a lot from people on how they act and treat people backstage. You can learn a lot from the COs that bail the last two weeks and how they quit. They say that they have other issues. Then, you see them heli skiing on Instagram. There’s one like that. Those are the unicorns that always bail.
You can learn what founders think of VCs. I will tell you how many COs I’ve talked to that say, “I’ll come to SaaStr, but I don’t want my series B or series C VC interviewing me,” which is sort of interesting. And then you can learn about the people that are for you and this is maybe too nuanced for some of the folks here, and I want Aileen to do most of the talking, but we had to reschedule SaaStr Annual this year right during COVID-19. It was terrible.
The last speaker I was talking to was Aileen and she was like, “I’m coming. I’m here.” We were going through these slides, and not that many people are troopers and supportive. It sounds minor or technical, but if you want to due diligence on a human being, I get to do it a few 100 times a year. And to see someone that is supportive… Even if it’s something that seems minor, most people don’t do it. Most people don’t don’t go the extra yard, so that meant a lot to me. It’s another reason just to take their money as an aside [crosstalk 00:02:58].

Aileen Lee:
Both of our money, actually. Not just mine. Jason’s, too.

Jason Lemkin:
But it meant a lot to me. I want to talk about this slide. I used it in kind of my breakfast pre warm-up, the crazy times we’re in. But before we even get there, we had two talks today. I sat in on all of them and I heard different opinions. From Satya from Homebrew, we just heard that seed’s at an all time high. People have to deploy money. Deals are getting done left and right. They’ve done four or five deals since March and valuations are down a bit and the bar’s gone up, but seed investors know they only get one bite of the apple.
They can’t do the A or the B if they miss the seed. We heard, in a way, like an 11, right? And then I asked Keith Rabois this morning how it’s doing. He said, “Seed is at 10% of what it was.” So, we’re [inaudible 00:03:48]. If you had to summarize, then I want to talk about this slide, just where are we? On either a scale of 1 to 10 or a percentage basis, where is seed investment?

Aileen Lee:
I would say… I don’t know if I can put a number on it, but also, thank you for having me, Jason.

Jason Lemkin:
Thank you for coming.

Aileen Lee:
And hi, everyone. Thanks so much for coming to hang out with us. When shelter in place started, the conversation we’ve had internally on our team is we have to think of ourselves as Navy SEALs, where we’re at base camp right now, and we’re going to train and we’re going to work on our playbooks and do our research. Obviously, our first priority was working with our portfolio companies, but if you’ve got your investing engine on and you’re rearing to go, it didn’t feel like in February or March or April or May was really the time to deploy. I have that feeling we will get super deployed probably maybe end of summer, this fall, and the winter, because I think a lot of the people who are raising right now are still raising on ideas and plans that were pre-COVID.
And I think we need to give people time to adjust their plans and their mentalities, and also, we also need to give folks time, folks who’ve been laid off who have a little time to decompress, and then they think about an idea and they spend the summer working on it and they’re planning it out. Maybe they’ll come out and raise the fall, but if you look at historical recessions, at least in tech, those are just one of the best times to be an investor and the best times to start a company that people are scrappier, they’re really on a mission, they’re clearly not going to get rich quick, and they attract really great hardworking people who are on the mission with them.
I think that’s going to be an awesome time to invest, but I don’t think we’re quite there yet. Personally, our team has been holding back a little bit. We’re taking a ton of meetings, but I think in terms of quality, the best time will probably be… It hasn’t really started yet.

Jason Lemkin:
Let’s just-

Aileen Lee:
I don’t know. What do you think about that?

Jason Lemkin:
Well, I don’t know the answer. My view… I want to depack your term deploy, because it’s an insider term and I want to explain it to founders and [inaudible 00:06:00] what deploy means, because it’s not obvious. I want to hear more views. My views… First of all, March 15th, today has been utterly exhausting on many levels. The rate of change, right? I think whether it’s doing portfolio triage or learning to take pitches over Zoom or whatever people are doing, it’s hard as human beings. We can only process so much change, and I feel like we’ve been through three worlds since early March. I think everyone needs some stability, whether it’s good, bad, or ugly or in the middle to survive.
So, I’m just trying to learn. What I personally have seen in my little portfolio and the founders I work with is what I call the COVID beneficiaries. The ones that have accelerated since March. I mean, it’s what you see on the BBP cloud on the left. They’re on fire. They are on fire, the ones that have grown faster and I’ve seen, and I want to get your views on this. I’ve seen the folks that are the ones that are even growing a little bit less fast where you would think a VC should take a bet.
Look, okay, let’s say half your business sells to eCommerce, but 20% sells to live events. Okay. Well, do the math in your head. You should still be growing, but growing more slowly. I see those folks struggling, which maybe isn’t totally logical, but if you’re a COVID beneficiary, it’s like the money is there at least from someone you’ve met. At least from someone you’ve met, the money’s there.

Aileen Lee:
But these are also super… I mean, you were talking about growth stage companies where they’ve got strong product market fit.

Jason Lemkin:
Anyone post-revenue.

Aileen Lee:
Yeah, and they’ve got referenceable customers, they’ve got pipeline, they’ve got funnels. Seed is just a totally different game, right?

Jason Lemkin:
Yes.

Aileen Lee:
But I think, yeah, for … I mean, the cloud index is not even post-revenue. That’s way post-revenue.

Jason Lemkin:
Yes.

Aileen Lee:
And so, they’re just way easier due diligence, I think.

Jason Lemkin:
I want to get your thoughts on this slide on the best of times and the worst of times, but when you say deploying capital, let’s just [inaudible 00:08:00] for a minute. How big is your… I was going to tease on this in a later slide, but how big is your current fund?

Aileen Lee:
95 million.

Jason Lemkin:
Okay, 95 million. And you have two GPs, right?

Aileen Lee:
Mm-hmm (affirmative).

Jason Lemkin:
[crosstalk 00:08:11]. You have two partners and one or two other investing?

Aileen Lee:
Yeah. We’ve got two awesome other people on our team, Amanda and [Jamara 00:08:18]. [crosstalk 00:08:19].

Jason Lemkin:
Okay, but roughly that means you and Ted each have 50 million. It could vary, but it doesn’t really matter. 50 million. How long before COVID were you planning to take to deploy that 50 million? Because, that’s what this deploy means. It means over a timeframe. Right?

Aileen Lee:
Yeah, it’s … I mean, my version of deploys is kind of deploy capital, but kind of deploy yourself as an investor. [crosstalk 00:08:40] So, when you think about there are … Sometimes, on work it’s super intense and then you have a little … You have to take advantage of the lulls, because sometimes it gets super intense, whether you’re an operator or you’re an investor.
Sometimes, when it rains it pours, right? There’s just, you’ve got five really interesting companies in diligence and parallel and you think they’re all potentially things that you could invest in and founders you really want to work with, and there’s times that you’re not really seeing things that you think are going to get there on the other side.
And so, I think probably it will be really intense this fall and in the winter in terms of great ideas, new waves. Now, the one thing we don’t have that’s new is … Some of the waves have been because there have been new platform shifts, because of mobile or because of cloud or because of security or because of a bunch of other stuff. We don’t…
That’s not clear what the next big tech platform shift opportunity is, so I think that will dampen the intensity a little bit, but I think in terms of some investors feel anxious, like “I need to be writing checks all the time” or “I need to be making investments all the time”, I don’t think that’s true.
You got to … Sometimes it’s slow and let it be slow, and then sometimes it’s really fast and really intense and you’ve got a lot going on, and that’s when you make your investments and sign up to work with new folks.

Jason Lemkin:
So, traditionally in normal and good times, there is a sort of very slow-paced pressure as a VC, which is to do X deals a year. There’s many types of pressure. As time goes on, it’s how many unicorns, what’s your multiple, what’s your DPI, but in the earliest it’s just if you don’t do enough investments, you just can’t make money, right?

Aileen Lee:
Yes.

Jason Lemkin:
If you do no investments, you’re toast. So, and if you’re … How many investments do you and Ted each do a year, roughly? What’s the target?

Aileen Lee:
It’s a wide range. We might do six to 12 a year.

Jason Lemkin:
Together as a team, right?

Aileen Lee:
Yeah. Mm-hmm (affirmative).

Jason Lemkin:
So, each of you will do three to six.

Aileen Lee:
Yeah.

Jason Lemkin:
Okay, that’s a classic seed portfolio. And then as you get [crosstalk 00:10:37].

Aileen Lee:
It’s probably actually a slower pace than I think. We’re probably on a three, three and a half year fund cycle where we’ll make our initial investments. Whereas, other funds are maybe on two years.

Jason Lemkin:
Got it. So, that’s why you were less, right?

Aileen Lee:
Yeah. Yeah.

Jason Lemkin:
And then later-

Aileen Lee:
We’re definitely more [crosstalk 00:10:51]-

Jason Lemkin:
… it’s one to two.

Aileen Lee:
… hopefully a quality, not quantity kind of a thing.

Jason Lemkin:
And so, usually what happens… Let’s say I’m working at Cowboy and I’m supposed to do three or four a year. We’re coming up on June and I’ve done none. I start to feel pressure, don’t I?

Aileen Lee:
Yeah.

Jason Lemkin:
Even if no one says it.

Aileen Lee:
Totally.

Jason Lemkin:
Do you think that pressure is going to come back at the end of the year and therefore … When you talk about deployment, do you think folks will want to do a lot of deals in the back half of the year because they’ll feel the pressure to hit their quota?

Aileen Lee:
It’s very possible.

Jason Lemkin:
Okay, so let’s talk about this slide for a minute. And you have a broad exposure. You have exposure to segments that are, I call COVID beneficiaries. You have exposure to segments that probably are heavily impacted, right?
How do I … How you get your arms around the fact that cloud stocks on the left are at an all time high and we almost, and California is one of the worst economies in the Western world? How do I … How are you thinking about this?

Aileen Lee:
I mean, the multiples that folks are trading at right now on the left hand, I don’t totally understand it. I think it’ll be interesting to see, because also the numbers, we don’t have Q2 numbers yet. When Q2 numbers come out, for some folks they may be softer because budgets were not really locked up for most of Q1.
And so, I mean, I think if you are Zoom, obviously, or maybe an infrastructure, you probably won’t see a lot of the budget freezes and the layoffs and your sponsor being laid off. But I think for a lot of vertical SAS, they’ll see impacts when the Q2 numbers come out. And so that may change what this chart looks like maybe in July or August.

Jason Lemkin:
Yep. When you look at Main Street versus the cloud index, what are you excited about today? Are you more excited about eCommerce? I mean, what especially non-obvious things are you more excited about?

Aileen Lee:
Yeah. I mean, I think in a bunch of categories like healthcare and distance learning and infrastructure, this recession, which super sucks for a lot of people, it is going to be an accelerator for tech, because businesses are going to rely on technology and are also going to adopt technology faster.
So, it’s like in healthcare, one of my friends who’s a doctor says she feels like she fell asleep in 2020 and woke up in 2030 in terms of …

Jason Lemkin:
Yeah, I bet.

Aileen Lee:
… the industry’s willingness to adopt technology. Because it’s been a fight and it needs to be adopting technology across the board. And so, but now they have to.

Jason Lemkin:
Yes.

Aileen Lee:
And so, I think for a lot of states and regulatory agencies and businesses that have been pushing back to enable remote work, they’re going to have to change a lot of stuff and that’s going to take … A lot of investment’s going to happen in software. It’s not going to be like …
If the question would be like, “Do you feel like we have too many unicorns?”, we are going to have more unicorns. There’s no question in my mind there’s going to be more in the US and more in China, and then an increasing number in Latin America and in India and other markets that are really huge because this is… We’re in a good sector, tech is only going to get more important and more valuable.

Jason Lemkin:
So even if you feel that multiples on the left are a little aggressive, if you’re bullish on unicorns, having coined the term. If you’re bullish on unicorns, what does that mean overall for seed investing and venture investing? If folks feel good about unicorns, does that mean it should still be easier? There’s room for many, many more startups. What does that mean for a founder?

Aileen Lee:
Wait, hold on a second. I have kids in the background.

Jason Lemkin:
Bring them on.

Aileen Lee:
Thanks.

Jason Lemkin:
Lunch time?

Aileen Lee:
Yeah, exactly. It’s lunch break at school. Wait. What was the question?

Jason Lemkin:
What does it mean… So we’re in these weird times, the cloud shares are at an all time high, NASDAQ’s closed, this crazy recession we’re in, but you’re bullish about unicorns. Right?

Aileen Lee:
Yeah.

Jason Lemkin:
Unicorn generation, how does that inform your thinking in terms of types of investments? Pace, valuations, anything? Does it inform your… Does it change your thinking?

Aileen Lee:
Yeah. No, I mean, I think … Look, I was an AEB investor for 12 years and did some growth too and I switched to seed. Partially, I think, for personal reasons. I think it’s a better fit for me and it’s more fun. I’m really passionate about seed investing. And there are lots of really good folks that we partner with at A and B and C and D, who they’re really good at that, and this is the one thing that we want to focus on. We think it’s also a great category for like, you are getting in at the riskiest time where the valuations are lower, but there’s way more upside. It’s also more collaborative as you know.
I had lots of friends in seed who were co-investing with each other and helping each other build companies. Whereas, at A and B and C, you generally, you can be friends with everyone in BC, but you have to beat all of them to win the A or the B. And then you’re carrying the water with the founders for the next decade as a lead board member, and you don’t get a ton of help from other people. So, I love seed and I’m super excited about it.

Jason Lemkin:
So I want to dig into that next, on the next point. But before we leave this slide, do you have any portfolio companies that have benefited from this time that you didn’t expect? Maybe even Zoom, we didn’t fully expect it would be this big. But are there any that folks could learn from they’re like, “Wow, I’m just kind of surprised that one is a COVID beneficiary.”

Aileen Lee:
Not really a surprise. I guess probably one of the more notable companies that we work with is Guild Education. And I think because a lot of the folks that they work with, they basically help hourly workers who work for big companies like Disney and Walmart get high school diplomas or college educations or get vocational training. And I think because there’ve been a lot of layoffs in hourly workers, I think there could be a question about whether that was going to hurt a company like Guild. But it’s turned out that a lot of enterprises who have furloughed workers are suggesting that people who are furloughed use the time to actually get an education.
It’s also being used as an off-boarding benefit. So like, “We’re really sorry, we have to let you go. But we’re going to help you get on a career path, so you can get this benefit of trying to figure out where you’re going to get your next job.” So there’s been a bunch of things that actually have helped accelerate Guild that I think could have been a question. And obviously just the fact that they built this incredible infrastructure for remote learning is great.

Jason Lemkin:
Yeah. It’s an interesting one because on the one hand, it’s remote learning, right?

Aileen Lee:
Mm-hmm (affirmative).

Jason Lemkin:
And very powerful. On the other hand, it’s a benefit, right?

Aileen Lee:
Yeah.

Jason Lemkin:
You know the company much better than I do. But it’s a benefit, that’s where the budget comes from. That’s why it’s done well. But it’s a benefit, and as soon as folks cut at traditional companies and cut people, you would think the benefits … We’ve seen many folks in the benefits space be exactly linearly impacted.

Aileen Lee:
Totally.

Jason Lemkin:
Linearly impacted with layoffs and it’s natural. Right? It’s like cutting back on rent. We’ll cut back on benefits.

Aileen Lee:
Totally. Totally. So that was the one, it was like, “Uh-Oh.” But so far it’s going great.

Jason Lemkin:
That is interesting. What’s your gut? What percent of startups you think are COVID beneficiaries? Have you looked at it? Do you have a sense? What do you think?

Aileen Lee:
I think, unfortunately, it’s a pretty small, it’s a small percentage.

Jason Lemkin:
Yeah. [crosstalk] percent are benefiting.

Aileen Lee:
I’d say 10 to 15. I don’t think it’s …

Jason Lemkin:
10 to 15?

Aileen Lee:
Yeah. What do you think?

Jason Lemkin:
I made up a number just based on a very limited data set. I think it’s, in SaaS, in cloud, if you define it that way, I think it’s about 15 to 20%.

Aileen Lee:
Yeah.

Jason Lemkin:
And it’s more of the folks on the left than we would have thought, which maybe there’s some learning from that. We missed it. We knew Slack would benefit, but actually Atlassian’s benefited much more than Slack. Did we know bill.com would benefit as much as Zoom? I don’t know. If you didn’t analyze its business model, you would think that intuitively. Right?

Aileen Lee:
Yeah.

Jason Lemkin:
But I feel the question, and let’s maybe transition to that. Let’s assume it’s 10 or 15 or 15 or 20, it’s a big delta. But you’re not saying it’s single digits, right?

Aileen Lee:
No.

Jason Lemkin:
For the rest of the year, or at least for the next quarter too, would you only invest in COVID beneficiaries or would you invest in folks in heavily impacted industries? Like how you thinking about that?

Aileen Lee:
It’s a spectrum. I don’t think I’m going to be going to try and find a lot of travel startups right now. But I do think … we’re investors in a company called Homebase that basically sells SaaS for small-medium size businesses to do hourly work management. Like scheduling shifts, paying folks, giving them cash advances, communicating with the manager. Obviously, the majority of the people who they were managing the shifts and the payments for who were working in February, they were not working in March or in April.
But when businesses reopen, I think they are going to rely on technology more than ever before. Some of the older businesses that were a little hesitant about technology, they may not reopen. And the people who start businesses in the next generation are going to be like, “I need a full stack of modern software to run my business, so it’s flexible and it’s nimble and I have good transparency and I can do it from anywhere.” And so they will adopt things like Homebase at a faster rate than businesses that have been around for 30 years. And so I think if you time it right, I mean, you can basically ride the wave of all these businesses reopening.

Jason Lemkin:
For your existing portfolio and new investments, can you model that? I mean, you have to have at least have a position, right?

Aileen Lee:
Yeah.

Jason Lemkin:
Is it six months? 12 months? They just announced today, Disney World’s going to start to reopen.

Aileen Lee:
Wow.

Jason Lemkin:
When will Homebase get back-

Aileen Lee:
When is it going to reopen? Is it going to be like six feet apart and every other? Like on the rollercoaster.

Jason Lemkin:
July. Yeah. They’re going to adopt the Shanghai processes. Attendance will be half. You can’t hug a prince or a princess and you have to get reservations.

Aileen Lee:
Is the price going to be double?

Jason Lemkin:
Well, that’s a question for a lot of things down the road. If the price doesn’t double, I mean, that’s a restaurant question too, right?

Aileen Lee:
Yeah.

Jason Lemkin:
I mean, if prices double, it all works. And obviously Disney can carry a business for a little while. Those are some of the scarier questions for our economy. Is can we adapt to things? Can we adapt to Coachella when we’re 20 feet apart? I mean, I don’t know. I don’t know if Coachella $4,000 a ticket works, does it?

Aileen Lee:
No, but also it was funny. I was in San Mateo County. I think they had a rule that some camps can open, but they have to, you have to sign up for four weeks at a time because they don’t want kids in and out. But it’s like that really disadvantages people who cannot afford four weeks of camp.

Jason Lemkin:
Oh yeah.

Aileen Lee:
It’s not good. Yeah. There’s a lot of challenges.

Jason Lemkin:
A lot of challenges. A lot. And I think a lot of, probably beyond the scope of what can we get into today, but a lot of these flattening things you might… and we can talk about it in deal flow. You might think some flattening helps less advantaged, but I don’t know. Do you think pitching over Zoom helps outsiders more? Do you think it helps the founder that didn’t go to Stanford and didn’t go to YC? Or is it maybe not help as much as you think pitching?

Aileen Lee:
I am hopeful. I mean, I think there’s two things, there’s the pitching, but there’s also, where’s the company going to be based? That’s all up in the air now. So before, I mean, look, when I was at Kleiner, I spent a year spending a lot of time in New York, there was a lot of stuff going on in New York. And when I came back and I was like, “Hey, I found all these cool companies like Mongo and Warby and Stack Overflow.”
And some partners were like, “Why are you wasting your time? No big companies are ever going to be built outside the Bay Area. We clearly didn’t teach you well.” And same thing with HomeAway actually, it was the same thing. It’s like, “Why are you wasting your time?” And so things have changed a lot in the past 10 years, but I am hopeful that I was just on the phone with one of the CEOs we work with today, who is in New York and they’re moving to Denver. I think over the summer, people are going to be moving all over the place and trying to figure out how to run remote or partially distributed or clustered companies. And I think that will advantage founders who are in different places and are not on the coast.

Jason Lemkin:
I think it started like last week.

Aileen Lee:
You think so.

Jason Lemkin:
I think that folks that live in San Francisco, founders and executives that live a crummy lifestyle in San Francisco, in gross parts of the city that have sacrificed that maybe even have families, that have sacrificed a lot, are looking around. Like several conversations I’ve had with looking around, like, “What is the point of being in San Francisco today? I cannot visit Salesforce. I can not visit Twilio. I cannot visit a customer. And I have a baby and a husband or a wife or significant of living in not just a small apartment, but a gross part. I’ve traded off so much.” And I three people I know packed up the minivan and left.

Aileen Lee:
Totally. I agree. Like we had another CEO that we worked with, they packed up their car and they rented an apartment, or a house on a Lake in South Carolina. They had never been there before. They’d never been to the town and they just drove there and they lived there for the past month and a half. And he’s been so much more productive and so much happier. There’s a whole nother thing we won’t get into around mental health and all. Especially if you’re by yourself in a small apartment, it’s not happy making.

Jason Lemkin:
Yep. And how do you think, like, let’s just, maybe this is a, not a good example, but when you invested in Guild, they were based in Denver, right?

Aileen Lee:
No they’re based in Palo Alto.

Jason Lemkin:
Oh, I thought it was based in Denver.

Aileen Lee:
They moved to Denver. It’s funny because Rachel came to us and said like, :Hey, I know we just had a meeting and we discussed, we need to hire a VP of engineering and a VP of product and a VP of marketing. But we also want to move the company in Denver.”
And we were like, “What? How are we going to find those people in Denver?”
And she was like, “Trust me. There are some really good companies there. And some tech like Facebook and Gusto are opening offices. It’s a great place to live. I think I can get people from the east coast and the West coast to move to Denver. Because if you want to have family or if you want to buy a house, you want to send your kids to public school. It’s a great place. And I want to build a company where people can have a family and have a good home life and have a great job.”
And I’m so glad that we were like, “Okay, do it.” Because it was a really smart move in probably three or four years ahead of her time.

Jason Lemkin:
Yeah, it was. So she’s built a unicorn now. And let’s compare today. I mean, you had no choice, but did you have reservations? Did you try to talk her out of it?

Aileen Lee:
Oh, definitely. I didn’t try to talk. But I was like, “Are you sure?” But I mean, I think it gets a lot of the stuff on a slide. Which is we are seed, I would say half the time that we invest, they haven’t built a product yet. There’s no technology, they need money to actually build software. And then half the time they’ve built like some MVP we do about, we’re probably 75% enterprise, 25% consumer, we’re generalists. We usually invest between 500 K to one and a half million. We like to co-leader co-anchor seed rounds and we almost always co-invest with other folks, angels and institutional seed folks like yourself.
And so at Guild, they had basically had an idea for kind of reboot your career boot camps. And they came up with a three hour bootcamp and they posted it on Craigslist. And they rented strip mall, vacant space and they were holding these free three-hour boot camps. And then they were texting the people afterwards asking for. And then they charged 40 bucks and then 80 bucks. But that’s basically what they had when we invested. And so it doesn’t have to be perfect at seed.

Jason Lemkin:
And so I want to make sure we hit the bullets on this slide, but so today let’s fast forward today. So, four years ago when Rachel said, “We’re moving to Denver to build my management.” And now that I understand kind of how raw the vision was in the beginning, I get it. Because it wasn’t technology heavy in the beginning, that’s for sure. So I get it. But today, how are you feeling about not just New York or Denver, how are you feeling about Baton Rouge or Sioux Falls or Tampa? How does that strike you today for new deals? And what would you advise founders that are thinking about leaving the Bay area now?

Aileen Lee:
Yeah. I mean, it’s a better time than ever to both, to start a company in a different part of the United States. People are going to have to be way more purposeful around culture building and about communication. Because it’s still been a rarity to build a really successful scaled company without having formative team members live and work in the same place and be next to each other. A lot of times we recommend for portfolio companies that are opening up second or third office, it’s like you have people all in the headquarters and then you send out people who really understand the culture and how to have a lot of internal credibility and they start the new offices.
In some cases, I’m really curious as like, founders may start companies they’ve never been in the same office when they start the company. When we hear pitches this fall, we’re probably going to hear people who have not seen each other. But SVT Robotics is a company that is based in Virginia, Virginia Beach, actually. And it’s kind of like MuleSoft for warehouse robotics for integrating. If you’ve got a third party robotic arm and you want to integrate it with your conveyor belt or your WMS, you’ll use SVT instead of writing custom code. The founders know warehouses and they know warehouse automation really well. And they’ve lived in Ohio and Pennsylvania and Virginia, and all the places where warehouses are. And we’re super psyched to be investors in that company. And we’d love to find more like them.

Jason Lemkin:
Those are all really interesting examples. Today if you met with a startup and you’re doing seed, so it’s early, but it’s the kind of company that clearly could benefit in a year or two from some Salesforce alums or Box alums or Twilio alums. They’re doing a classic playbook and they want to move to Arkansas or Ohio or Bismarck, is that a no in this flattened world, in this distributed world? Do you think you can get VPs to join a company, Bay Area style VPs, to join nonbearing companies in 2020? Do you think that’ll change?

Aileen Lee:
I think we can do it. It’s funny at Textio, another company that I work with, which is based in Seattle, we tried hard to make the whole team Seattle-based and when we were doing our head of revenue search, we said like, “Maybe we should open it up and look at people who are not based in Seattle.” And we found a great person who’s based in the Bay area. I mean, at the time we had a deal where he was going to spend a week or two in Seattle, a month and then a week or two at home or on the road.
And so we’re fortunate that we had that time together before we wanted to go into shelter in place, but it works. And he’s a huge part of the team and they’re making it work. So I think we’re all learning fortunately or we have been learning over the past couple of years how to make kind of commuter style jobs work and distributed team work which is a good warmup for the next three years we’re about to live through.

Jason Lemkin:
Yeah. Yeah. I think especially for B2B in the next couple of months to watch is can we flatten management teams? Not just the Gitlabs and the Zapier’s, but can bury a type executive, whether they’re based in the Bay area literally or in New York. But folks that come out of the traditional folks where we poach… I mean, once you scale, you want to hire someone to set up [inaudible 00:31:06]. You really do. I mean, everyone that runs Salesforce today came from Oracle and everyone that runs Twilio came from Salesforce. There’s a reason. And if folks in Virginia Beach or wherever it is can hire these folks now is easily, it changes everything. Doesn’t it?

Aileen Lee:
Well, I mean, like internally at Cowboy every other week, we have scenario planning time where we just kind of think about like, “Okay, what if this is 24 months? What if this is 36 months? What if nobody can get on a plane until summer of 2021 the earliest?” From a sales perspective, how is that going to change sales? How’s that going to change marketing? The fact that a lot of our portfolio comes in enterprise, they got a lot of sales done or relationship building done around conferences whether it’s-

Jason Lemkin:
Up in 40%, it turns out yeah. Like 40%.

Aileen Lee:
Like HR Tech Yukon, whatever it is. You may not have been spending a lot of money getting a booth, but like you were hosting dinners, you were meeting up with people and when that doesn’t happen, how is that going to change sales?
I think maybe that’s going to be better for startups because having a lot of money to buy people expensive dinners is not going to be as important and it sounds like COVID has for at least in the folks that we’ve been talking to the past couple of weeks, it’s now a common bond. You make small talk over Zoom for five or 10 minutes about like what’s been hard or how the family time’s been good or whatever, then you get right into the sale process. And the customer on the other end is like, “This sounds really good. I need this. Let’s do it.” And so in some ways, it’s like more efficient, but we’re staying really close to it.

Jason Lemkin:
Yeah. For what it’s worth. And I want to talk about how you’re sourcing deals now. But my personal view just for the conversation is I actually think this selling over Zoom at least for now, is substantially benefiting folks with brands because if I don’t know you yet, and I can actually meet the CEO and I’m meeting [inaudible 00:33:08] over Zoom, don’t get me wrong, but we’re all taking more vendor risks. We’re taking more investment risks. More risks just has to be taken in the shelter world. And it’s comforting to know it’s BOXX. It’s comforting to know that well it’s a unicorn now.
Maybe Gild isn’t as great as Schmild or whatever. I don’t know, but if there’s risks during discovery, maybe I don’t want to take risk today. Now if you’re the only vendor in the space, it’s different, if you’re the notion or tandem, but I wonder if one of the reasons these cloud stocks are going to keep growing is because, “I’ll just stick with JIRA.”

Aileen Lee:
I kind of worry a little bit about whether we’ll move into this like nobody ever got fired for buying IBM for buying certain brands. And I do think like if you are a seed stage founder who is listening to this right now, or you’re pre-seed, or if you’re not a brand, it’s going to be hard to make new sales I think in the next two or three quarters at a minimum.
So being willing to give your product away for free or like changing the packaging so that it’s virtually free for the next six months, and then people pay for it, but getting people to use it and showing that it’s super valuable. And so that when people have budgets again, they’ll buy it. They’ll pay for it and that’s referenceable. I think for a lot of seed stage companies that’s the thing to do because it’s really hard to get new budget, even if you’re an existing brand, but as a new brand, it’s even harder.

Jason Lemkin:
It is harder. Yeah. It is a fun topic we could dig into, but we can if you want. But tell me on this. First, I want to talk about how you find deals and how founders can pitch you. But just the micro topic, say in today’s world, I know you’re slowing down a little bit to learn, but how you’re feeling about being pitched on Zoom? What’s your personal view of not meeting in real life? What’s your [inaudible 00:35:00] one to 10?

Aileen Lee:
I think it’s a bummer on both sides, right? I mean, the benefit is things have been so hot that the velocity of decision making and relationship building was I think untenable. Founders were optimizing for getting it done fast. And I think in many cases, they weren’t really getting to know the people that they were getting married to and who were… Because once you get people on your cap table, you can not get them off.

Jason Lemkin:
Never.

Aileen Lee:
So I was really bummed about how fast the process was happening, where we weren’t really having a chance to get to know people, and they weren’t really getting to know who they were taking out to their cab table. So I think this will actually be better in terms of giving people…
Then we were thinking about, when we moved in shelter in place, “Okay, how are we going to get to know people?” We already had a diligence process, but in marketing, in old fashion marketing, I don’t know if you remember the four P’s? There was price, place, promotion, and product.

Jason Lemkin:
Mm-hmm (affirmative).

Aileen Lee:
Right? So I was thinking about, “Okay, we have our own four P’s that we generally try and figure out.” So our four P’s are people, product, potential, and plan.

Jason Lemkin:
Okay.

Aileen Lee:
So we’ll say to someone, if we kind of have a first meeting and we think it’s interesting and they like us, we’ll be like, “Okay, we have this thing, we’re not going to probably get to meet face to face. So we want to get to know you over a course of meetings and maybe some of them will be dinners,” or something like that. Where we’re like, “We want to get to know the people, where you came from, what you’ve done before, what you’ve learned, what you think of your strengths and weaknesses, your self awareness, where you want to be complimented, what kind of a team you want to build.”
Then on the product, obviously really understanding both, what’s their vision for the product? Competitive landscape, differentiation, how much better it is, the potential. What could this become? Right? Both how big is the market? And if we’re really successful, what are we building? Then the plan.
How much do you want to raise? Valuation range, what are we going to get done during the seed period? Who do you need to hire? All that stuff. So basically just going through those four things is our way of getting to know each other. I think that that’s probably going to be the way we do it first of the year.

Jason Lemkin:
So more time can balance out the lack of the ability to schmooze in person?

Aileen Lee:
Yeah. I think it might, in a way, be better. I mean, obviously in person’s better, but I think a slowing, and I’m also think the velocity and optimizing for speed and just low overhead check… I think there are plenty of founders who will tell other founders that that was a mistake. I think this downturn is hopefully going to give people pause around a lot of… There’s going to be a lot of shitty ups and downs. I want to be careful about who’s going to be helpful to me in a time of a lot of uncertainty.

Jason Lemkin:
Yeah. This morning, the first speaker, I don’t know if you know, Krzysztof Jans from Point Nine Capital?

Aileen Lee:
Hold on one second. Sorry. I just told the kids to go to the other room.

Jason Lemkin:
Oh no, we’re in the lunch session. I don’t know if you know Krzysztof Jans from Point Nine?

Aileen Lee:
I don’t.

Jason Lemkin:
He’s great. His first angel investment, he was the first angel into Zendesk, after he was a CEO. Then he started doing SAS really in the beginning, and we kind of became SAS content buddies before we co-invested.
He’s done half his investments remote since then, because he’s in Berlin. So he couldn’t always get on a plane and pop up for an angel or seed deal. His advice, he had a great… Because he is a veteran, although none of us foresaw shelter, but his point was it’s like anything in sales, but make it easier. So his point was, have the best diligence together, have the references built, do a video, have the best email pitch, if you weren’t going to build the deal room, build the deal room. If folks need more time, bake it in, and just turbocharge the amount of disclosure and transparency you would have to make up for the kind of informal type decisions people are making in those high velocity advice.

Aileen Lee:
Yep. Good. I like it.

Jason Lemkin:
Okay. On this, so just to folks that understand, how do you find… Just some insider stuff to help folks learn. How do you find deals and how do founders pitch you?

Aileen Lee:
Yep.

Jason Lemkin:
Maybe a few case studies from some last deals. How did they find you? How do you discover [crosstalk 00:39:35].

Aileen Lee:
Yep. We get a ton of referrals from angels, from co-investors who we want to work with, from founders, from folks that we know. I think Ted and I, I’ve been doing this for 20 years. Ted’s been in tech for 20 years too.

Jason Lemkin:
Yes.

Aileen Lee:
So we like to say, “Hopefully when you work with us, you’re going to get really experienced, thoughtful, patient, supportive advice, with a huge Rolodex.”

Jason Lemkin:
Yep.

Aileen Lee:
So we get a lot. But also, you and I are both super passionate about using our privilege to try and make tech more equitable and less bro-tastic. So, I’ve been told that the need for the warm intro really disadvantages a lot of people. So we read all of our inbounds. So you can email hello@cowboy.vc. Someone will read it and if it’s a potentially a fit, we will get back to you. You don’t have to get referred to pitch us.

Jason Lemkin:
So let’s break that down for just a second. So if you had a pie chart, number one source of deals, you do is [crosstalk 00:40:39].

Aileen Lee:
Referrals.

Jason Lemkin:
Warm referrals, right?

Aileen Lee:
Yep.

Jason Lemkin:
For better, mostly for better, but for better or worse. Right? They do have some bias and issues associated with them. But the inbound. So the inbound is… Sorry, it’s hello@cowboyventures.com?

Aileen Lee:
Hello@cowboy.vc.

Jason Lemkin:
cowboy.vc.

Aileen Lee:
Yep.

Jason Lemkin:
I got to get this one right, folks.

Aileen Lee:
Yep.

Jason Lemkin:
We’ll layer it on top of the YouTube.

Aileen Lee:
Thank you.

Jason Lemkin:
Hello… Well, it’s probably on the website too. Right?

Aileen Lee:
It is. hello@cowboy.vc.

Jason Lemkin:
If that email is good, if it’s good… If it’s, “Dear cowboy, we’re the team that built the top product at Square. We’re pre-revenue, but we have 10 beta customers. All of them said we’re changing the way finance works. Here’s where we come from. Here’s who we know, here’s our friends.” What are the odds that email gets read and how seriously… I’m just making my…

Aileen Lee:
Well, it’s 100% going to get read.

Jason Lemkin:
100. So let’s [crosstalk 00:41:34].

Aileen Lee:
100% going to get read. Yes.

Jason Lemkin:
Right? I can’t find you. I can’t track you down. I met you at a conference, but that email is going to… This is things founders don’t get, that great email is going to get read isn’t it?

Aileen Lee:
Even a crappy email is going to get read.

Jason Lemkin:
Even a crappy email is going to get read.

Aileen Lee:
Even, “Dear Sir,” gets read.

Jason Lemkin:
Okay. But the good one, if you liked what I just wrote, right? What are the odds someone’s going to read a deck that’s attached? And what are the odds I’m going to get at least a Zoom?

Aileen Lee:
I mean, that email you described is probably a 100% going to get read.

Jason Lemkin:
100% getting read. Yep.

Aileen Lee:
And 95% going to get a, “Hey, let’s have a meeting,” or, “Let’s set up a call.”

Jason Lemkin:
Yeah.

Aileen Lee:
Yeah.

Jason Lemkin:
What percent of emails that come to hello@cowboy.vc are great like that? What percent of these emails are great?

Aileen Lee:
Not that many. I would say we only invest in the US.

Jason Lemkin:
Yeah.

Aileen Lee:
We get some from different countries, and unfortunately we just don’t invest outside the US. But when I was at Kleiner, this is before email was really how we got most pitches, people would mail business plans and pitch decks and the EAs would put them in folders and just put them into giant L.L. Bean bags and just drop them off at my office and I would go home every night and basically order Chinese food and read business plans every night.

Jason Lemkin:
You were like a script reader.

Aileen Lee:
I was single and my girlfriends were making fun. They were like, “Should we buy you cats nor or later?” Because basically my life was just reading business plans. But the business plan for Bloom Energy was a cold inbound from a professor of space technologies at University of Arizona and at the time we had heard about fuel cells and we knew that there was different kinds of fuel cells and we were kind of getting interested in alternative energy and green, and he seemed interesting and so I wrote him and I was like, “Hey, I got your business plan. Do you want to do a call?” Bloom is a public company now and it was a cold inbound.

Jason Lemkin:
Cold inbound. Let’s just finish this because I think this is … It’s not perfect but it does flatten a bit. These emails are going to get read [crosstalk 00:43:44] and you don’t need-

Aileen Lee:
Are you really surprised by this? You sound surprised.

Jason Lemkin:
No, no, no. I’m not surprised. I think founders are surprised and I want to talk about how to hack it because so much of the advice you get on the internet … The fact that warm referrals are your number one source and that a great cold email will get read just seems inconsistent to people, right? I’m happy to share some personal stories. I even published two cold emails that I funded, one of which crossed 100X last… It’s the best made. It’s 100X on a double digit ownership, cold email, and it was an outsider.
There are advantages to being an outsider. You don’t know. You don’t do as much diligence. You don’t have to have gone to Stanford and have done the perfect thing, but I think founders are surprised that investors are so busy. They’ll see you on social media, they’ll see you traveling, they’ll see that you have 20 portfolio companies, and they’ll be like, “How could I get Cowboy’s attention?”
But the reality is there’s only so many great deals a year, and it’s sales for founders and it’s sales for VCs and if the pitch is amazing, the cold email works. Email is profound, and yet people don’t spend enough time on it. They ask you for coffee. “I saw your [crosstalk 00:45:01] on stage. Can we get together some time and talk?” What are the odds you’re going to get coffee?

Aileen Lee:
Right. Yeah, too much coffee.

Jason Lemkin:
Too much coffee, right?

Aileen Lee:
Yeah, or can I pick your brain? That’s one of my-

Jason Lemkin:
Can I pick your brain?”

Aileen Lee:
I do not like that.

Jason Lemkin:
“I have an idea. Can I pick your brain?” Right?

Aileen Lee:
Yeah.

Jason Lemkin:
I think the best founders figure that out but the earlier stage it is, the less they figure it out, right? The less they know, and I think if you write the world’s best email, and it has to be real … It can’t be imaginary but if you even have some hints of excellence, it’s going to get read, isn’t it?

Aileen Lee:
Yeah, yeah. But I do think for years I was kind of fighting the “will read everything” just because I felt like it was the mark of a good founder that knows how to hustle and is a relationship builder and is a talent magnet, that a good founder knows how to somehow get it started. Cold email someone, you, and be like, “Hey Jason, I really admire you. I like this thing that you wrote. I’d love to talk to you about this thing,” and then they didn’t know you but also now you know them and then you introduce them to someone and they introduce you, and then before you know it, the person’s kind of kick started a network of relationships that can be helpful to her or him. And I do think that’s a really valuable skill.
So for years I was like, “Well, if a founder can’t figure out how to get some credible person with some venture capital universe, some founder cred, someone who’s the VP of engineering at a decent company or someone who’s a product manager at a decent company who knows a venture capitalist, maybe it’s going to be harder for them to recruit people or sell customers.” But I’ve kind of let go of that because I think a seed is a really raw stage and I’ve seen founders change over the course of 10 years from where they start to hopefully being a unicorn founder that’s managing thousands of people, and people change.

Jason Lemkin:
Yeah, I used to think that. I used to think… I came up with a simple bar which is a founder that was better than me with more going for them can build a unicorn. And so I felt like if you couldn’t penetrate, if you couldn’t be that aggressive founder that found their way through the door literally by email, physically showing up to Cowboy, whatever it is, if you weren’t that person, you weren’t aggressive enough to build something big. And what I’ve still done, anyone that wants to talk to me, if they want to talk to me about community or SaaStr in general, there’s a million ways to reach me. If they want to reach me about investing, I used to always say, “Well, find my email.” “If you can’t find my email somewhere …” “Then what’s your email, Jason?” “No. How are you going to sell Procter & Gamble or Google if you can’t figure out a prospect’s email?”

Aileen Lee:
Yeah, and it’s also in a way… If you’re in a consumer space, you can be an introvert and just an awesome product person especially if your product has network affects. You can not be able to talk and you can build a huge company. In the enterprise space, I think it’s a little more important that you can talk.

Jason Lemkin:
I think it is. I will say, for what it’s worth, I don’t… Like you said you read more of the emails today. I realize that while that is … It’s too tight a noose. It’s too much of a forcing function. There are other ways to build traction. You can build an incredibly developer-centric product and [crosstalk 00:48:13].

Aileen Lee:
Totally. Exactly, yeah, yes.

Jason Lemkin:
Even if you’re not good at things. And so if you require that almost alpha-esque, put your boot through the door, there’s a lot of privilege and other issues, but you’re also going to miss people, I think [crosstalk 00:48:26].

Aileen Lee:
Totally. I think that’s totally true. I have so many lessons learned about companies that I’ve passed on that I shouldn’t have, but I’ve learned that early on in the process I have to figure out … Or just ask the person if they are more of an extrovert or an introvert.

Jason Lemkin:
It’s a good question, right?

Aileen Lee:
And if they’re an introvert we have a different conversation.

Jason Lemkin:
Yep. All right, we’re going to run out of time [crosstalk 00:48:48].

Aileen Lee:
I know, we have so many questions and we could chat for a long time.

Jason Lemkin:
No, I know. We can do them later if you have the energy but let me just pick a couple because some are tactical. This one’s super tactical but I think it is actually helpful. One attendee asked, “Who would you look for for references?” Talk just a minute about references. What if you don’t have great references? Is that a gating item for folks that come out of nowhere? How important are… especially if yours are funky?

Aileen Lee:
I think it’s important, especially now, like you said. That it’s people that you’ve worked with or worked for, people who’ve worked for you, people who’ve been your boss. We recently did diligence on a company and the founder gave us references and gave us their friends. That was not helpful.

Jason Lemkin:
I used to think that was a no. A close to a no, like such a fail, but I don’t know today.

Aileen Lee:
We’re very … I think as a person, like an immigrant person who has in many ways been underestimated in many different ways in different situations, I have a lot of empathy for being underestimated for giving people chances. And at series B, you got to know this shit. But like at seed, if you never raised money before, sometimes there’s stuff that someone tells you and then you were like, “Oh duh. Yeah, I get it.” And then they move on. So it’s not a no for me, but yeah. I was like, “Hey, don’t give me your friends. I don’t really want to know what your friends think of you. I want to know what you’re like to work with.”

Jason Lemkin:
Yeah. This one’s interesting because it’s not necessarily obvious. This says when you invest seed or pre-seed, what do you expect MRR will be in three to six months? It’s actually not a silly question because you’re not the only VC. You’re betting that someone in the next 12 to 24 months is going to write a check at two to five times the price you did. So what does that have to mean in terms of the window in which you can invest in terms of growth?

Aileen Lee:
Especially right now, that is a really tricky one, right? Because let’s say if you’re going to… We’re basically recommending, in March, we recommend to all of our portfolio companies to basically plan. Come up with a bunch of plans, so that ideally you have money to get you into ’22. 2022.
So either raise money right away, or you’re going to do some cuts because assume that Q2, Q3, Q4 are going to be really hard for new sales and that maybe things will pick up in Q1, but maybe not. Maybe they won’t pick up until Q3 next year. And so you’re going to be going out to raise your A if your seed unpotentially not a lot of revenue growth, especially if you have to go out in the first half of 2021.
And so I think depending on what the product is that you’re selling and what business you’re in, are there other metrics that you can show around customer engagement and customer use or value or, because otherwise you’re going to be competing against people who are starting from scratch in March or in June who are like, “I have no traction, but I just started this thing.”

Jason Lemkin:
That’s a tough thing, right?

Aileen Lee:
Yeah.

Jason Lemkin:
It’s like folks graduating from college this year. It may be a lost generation compared to next year.

Aileen Lee:
Well, I hope not.

Jason Lemkin:
What?

Aileen Lee:
I hope not.

Jason Lemkin:
Well I know, but this may be a year where they don’t get to go through traditional recruiting processes and are impacted. And you’re like, “Well, there’s next year.” But by next year, there’s another-

Aileen Lee:
Yeah. They’re going to be-

Jason Lemkin:
… 50,000 seniors graduating from great colleges and you’re in this weird phase.

Aileen Lee:
Yeah. And the other thing we didn’t get to, I know it was one of your questions was just, there’s so many funds and this is, and that there are multi-stage funds, right? When you look at venture capital, there’s a whole thing going on about how many funds are and how many seed funds there are.
But the other thing that we, I feel like we don’t talk about enough is how many gigantic funds there are and how much of the money is in multi-stage funds that each fund is bigger than $500 million. And so how that changes the ecosystem in terms of when you put someone on your cap table, like we co-invest with multi-stage funds all the time and we partner with them all the time, but you have to be really savvy about when you do take one of those folks on or multiples of them onto your cap table and onto your board it’s a different ball game in terms of their incentives and their portfolios and the size checks they want to write and versus like us simple seed people.

Jason Lemkin:
Yeah. I think for each big fund on the cap table, you need to create $1 to $2 billion in exit value. So once you have four or five of those big names, you’re con is committing to a decacorn.

Aileen Lee:
Yeah, exactly. And that reality is like, I mean, Thomas Jeung has published a thing recently about, I think you’re 26 times more likely to be acquired than to go public, and so the reality is I mean, people can joke about how many unicorns there are, but it’s still extremely hard to build a billion dollar company.

Jason Lemkin:
It is. I keep waiting for your tech crunch article number three.

Aileen Lee:
Are you there?

Jason Lemkin:
I don’t think you put the third one, did you?

Aileen Lee:
I haven’t no. Actually it’s funny because I have, now that we have a little bit more time at home, I’ve gotten back to it actually to kind of get up to speed on the new set and to try and learn where they came from and all that stuff and how it’s different than the original set.

Jason Lemkin:
I think it’s time. I mean, I think-

Aileen Lee:
Oh, thank you. I’m working on it. I’m a really slow writer.

Jason Lemkin:
The first one was like… This is probably the last thing we’ll have to chat about, so maybe it’s a little off topic, but I think it’s helpful. I think the first one was one of the best pieces of venture content marketing ever, right? Which was probably part of the goal. Right?

Aileen Lee:
No, it was completely an accident.

Jason Lemkin:
It was an accident?

Aileen Lee:
Totally. I did not think anyone was going to read it at all.

Jason Lemkin:
Really?

Aileen Lee:
Oh my God.

Jason Lemkin:
Oh, wow.

Aileen Lee:
I worked on it for months just for myself just because I had this new fund-

Jason Lemkin:
Months? Months?

Aileen Lee:
Months. Because I-

Jason Lemkin:
No one had ever assembled that type of data, but now there’s analysts and everyone’s firm does it, but no one had ever seen that whenever the first one was, 2014 or something like that.

Aileen Lee:
2013. Yeah. I did it for myself just because I had this new fund and I was like, “What should I invest in?” If I had to do an analysis of the most successful companies of the past decade, what would they have in common, so I could try and look for those for the next set. And then there was all this stuff that came out of it. I was like, “Oh, actually I think this would be useful for founders and for investors for a bunch of different reasons.”
And so I published it, but I gave it to some friends to read it. I actually was on the way back from the lobby conference and I gave it to a couple of people on the plane to read it. I was like, “Hey, I’m thinking about publishing this blog post, what do you think?”
And they were like, “It’s okay.” Nobody even said like, “Wow, this is really great.” Or like, “This is going to become a thing.” And so it was a big surprise.

Jason Lemkin:
Yeah, the second one was great because it had even more data.

Aileen Lee:
Actually to bring it full circle, when I published it, I was at Disney World, I was at Disneyland with my family, the day that it went up, the Saturday morning it went up and so I’m on line for rides and I was like, “Jason,” my husband’s name is Jason. I was like, “Oh my God, people are liking this and sharing this. This is so crazy.” And he’s like, “Hey, we’re at Disneyland. Focus.” And I’m like, “You don’t understand. People are actually reading this thing.”

Jason Lemkin:
It’s funny, speak from… I mean, it’s the great lesson of all writing, speak for what you’re passionate about. You’re passionate about it because you had to learn how to deploy the fund. So this was your homework and you forced yourself to distill all that work into an article because it was your investment thesis. This was your investment thesis. A piece of it, right?

Aileen Lee:
And also, I mean our industry is huge, right? It manages almost like $500 billion and there was so little data or analysis on our industry. No transparency of… I mean, there’s not even… In universities, there’s no professor on the history of technology who studies the history of the technology business and all the forks in the road of companies, like if you did A instead of B, what happened to the company? I just think it’s fascinating.

Jason Lemkin:
It is. All right. We’re out of time. I’d like to do all these questions.

Aileen Lee:
I know. Sorry.

Jason Lemkin:
Maybe if you’re bored someday, let me know. We’ll do it again on Zoom and answer them together.

Aileen Lee:
Okay. That’d be fine.

Jason Lemkin:
I have time. But I’m looking forward to-

Aileen Lee:
But I always really enjoy chatting with you.

Jason Lemkin:
… the third piece.

Aileen Lee:
Okay.

Jason Lemkin:
I want the third article on TechCrunch. It’s okay if it takes a while. I’ve been waiting for a few years so that’s-

Aileen Lee:
Oh, you’re so nice. Thank you.

Jason Lemkin:
All right. Aileen, thank you for doing this. This was great and we’ll talk to you soon.

Aileen Lee:
Thanks everybody.

The post Seed Investing Today: What’s Changed, What Hasn’t with Aileen Lee and Jason Lemkin (Video + Transcript) appeared first on SaaStr.

Seed Investing Today: What’s Changed, What Hasn’t with Aileen Lee and Jason Lemkin (Video + Transcript)


This post is by Team SaaStr from SaaStr

What Nobody Tells You About Seed Investing with SaaStr CEO Jason Lemkin and Cowboy Ventures Founder and Partner Aileen Lee

Aileen Lee | Founder @ Cowboy Ventures

Jason Lemkin | Founder @ SaaStr

 

Jason Lemkin:
… founders what, how things really work, what it’s really like. And not only is Aileen one of the investors that many of us all look up to-

Aileen Lee:
Oh, God.

Jason Lemkin:
… but she also… What’s that?

Aileen Lee:
Oh, God.

Jason Lemkin:
Well, we admire, but also she’s very early in the micro VC trend. We won’t talk about it too much today, but we will talk about a little bit. When Aileen founded Cowboy Ventures in 2012…

Aileen Lee:
12, yep.

Jason Lemkin:
2012. Now you open up TechCrunch or StrictlyVC or anything, you’ll see a dozen firms a week literally sometimes. Five or 600 since then, but back then, you could probably count the seed firms on one hand or two hands.

Aileen Lee:
Yep. And I was not the earliest. We can talk about that.

Jason Lemkin:
But you were in the… Let’s call you Gen 1, even though… At this new wave. I think it gives us a perspective that maybe we don’t get in some other places, in addition to many great investments over the years. I thought we could talk about really what’s changed, what hasn’t. And it’s funny, just to kick it off, I’ll tell you we’ve heard two… First of all, two things. We’ll have some time. I know I’m not always great at it. But put your questions in the Q&A and we’ll answer as many as we can, right in the Zoom, put them in.
But what I want to do… Oh, I had forgot about this slide. Oh, hold on. Just one take pause. Sorry, I’ll come back to this. I don’t want to go out of order, but I did want to highlight one thank you and whatnot. We’ve been doing these SaaStr events since 2015, the SaaStr Annual. This is just a funny story. You can learn a lot from people on how they act and treat people backstage. You can learn a lot from the COs that bail the last two weeks and how they quit. They say that they have other issues. Then, you see them heli skiing on Instagram. There’s one like that. Those are the unicorns that always bail.
You can learn what founders think of VCs. I will tell you how many COs I’ve talked to that say, “I’ll come to SaaStr, but I don’t want my series B or series C VC interviewing me,” which is sort of interesting. And then you can learn about the people that are for you and this is maybe too nuanced for some of the folks here, and I want Aileen to do most of the talking, but we had to reschedule SaaStr Annual this year right during COVID-19. It was terrible.
The last speaker I was talking to was Aileen and she was like, “I’m coming. I’m here.” We were going through these slides, and not that many people are troopers and supportive. It sounds minor or technical, but if you want to due diligence on a human being, I get to do it a few 100 times a year. And to see someone that is supportive… Even if it’s something that seems minor, most people don’t do it. Most people don’t don’t go the extra yard, so that meant a lot to me. It’s another reason just to take their money as an aside [crosstalk 00:02:58].

Aileen Lee:
Both of our money, actually. Not just mine. Jason’s, too.

Jason Lemkin:
But it meant a lot to me. I want to talk about this slide. I used it in kind of my breakfast pre warm-up, the crazy times we’re in. But before we even get there, we had two talks today. I sat in on all of them and I heard different opinions. From Satya from Homebrew, we just heard that seed’s at an all time high. People have to deploy money. Deals are getting done left and right. They’ve done four or five deals since March and valuations are down a bit and the bar’s gone up, but seed investors know they only get one bite of the apple.
They can’t do the A or the B if they miss the seed. We heard, in a way, like an 11, right? And then I asked Keith Rabois this morning how it’s doing. He said, “Seed is at 10% of what it was.” So, we’re [inaudible 00:03:48]. If you had to summarize, then I want to talk about this slide, just where are we? On either a scale of 1 to 10 or a percentage basis, where is seed investment?

Aileen Lee:
I would say… I don’t know if I can put a number on it, but also, thank you for having me, Jason.

Jason Lemkin:
Thank you for coming.

Aileen Lee:
And hi, everyone. Thanks so much for coming to hang out with us. When shelter in place started, the conversation we’ve had internally on our team is we have to think of ourselves as Navy SEALs, where we’re at base camp right now, and we’re going to train and we’re going to work on our playbooks and do our research. Obviously, our first priority was working with our portfolio companies, but if you’ve got your investing engine on and you’re rearing to go, it didn’t feel like in February or March or April or May was really the time to deploy. I have that feeling we will get super deployed probably maybe end of summer, this fall, and the winter, because I think a lot of the people who are raising right now are still raising on ideas and plans that were pre-COVID.
And I think we need to give people time to adjust their plans and their mentalities, and also, we also need to give folks time, folks who’ve been laid off who have a little time to decompress, and then they think about an idea and they spend the summer working on it and they’re planning it out. Maybe they’ll come out and raise the fall, but if you look at historical recessions, at least in tech, those are just one of the best times to be an investor and the best times to start a company that people are scrappier, they’re really on a mission, they’re clearly not going to get rich quick, and they attract really great hardworking people who are on the mission with them.
I think that’s going to be an awesome time to invest, but I don’t think we’re quite there yet. Personally, our team has been holding back a little bit. We’re taking a ton of meetings, but I think in terms of quality, the best time will probably be… It hasn’t really started yet.

Jason Lemkin:
Let’s just-

Aileen Lee:
I don’t know. What do you think about that?

Jason Lemkin:
Well, I don’t know the answer. My view… I want to depack your term deploy, because it’s an insider term and I want to explain it to founders and [inaudible 00:06:00] what deploy means, because it’s not obvious. I want to hear more views. My views… First of all, March 15th, today has been utterly exhausting on many levels. The rate of change, right? I think whether it’s doing portfolio triage or learning to take pitches over Zoom or whatever people are doing, it’s hard as human beings. We can only process so much change, and I feel like we’ve been through three worlds since early March. I think everyone needs some stability, whether it’s good, bad, or ugly or in the middle to survive.
So, I’m just trying to learn. What I personally have seen in my little portfolio and the founders I work with is what I call the COVID beneficiaries. The ones that have accelerated since March. I mean, it’s what you see on the BBP cloud on the left. They’re on fire. They are on fire, the ones that have grown faster and I’ve seen, and I want to get your views on this. I’ve seen the folks that are the ones that are even growing a little bit less fast where you would think a VC should take a bet.
Look, okay, let’s say half your business sells to eCommerce, but 20% sells to live events. Okay. Well, do the math in your head. You should still be growing, but growing more slowly. I see those folks struggling, which maybe isn’t totally logical, but if you’re a COVID beneficiary, it’s like the money is there at least from someone you’ve met. At least from someone you’ve met, the money’s there.

Aileen Lee:
But these are also super… I mean, you were talking about growth stage companies where they’ve got strong product market fit.

Jason Lemkin:
Anyone post-revenue.

Aileen Lee:
Yeah, and they’ve got referenceable customers, they’ve got pipeline, they’ve got funnels. Seed is just a totally different game, right?

Jason Lemkin:
Yes.

Aileen Lee:
But I think, yeah, for … I mean, the cloud index is not even post-revenue. That’s way post-revenue.

Jason Lemkin:
Yes.

Aileen Lee:
And so, they’re just way easier due diligence, I think.

Jason Lemkin:
I want to get your thoughts on this slide on the best of times and the worst of times, but when you say deploying capital, let’s just [inaudible 00:08:00] for a minute. How big is your… I was going to tease on this in a later slide, but how big is your current fund?

Aileen Lee:
95 million.

Jason Lemkin:
Okay, 95 million. And you have two GPs, right?

Aileen Lee:
Mm-hmm (affirmative).

Jason Lemkin:
[crosstalk 00:08:11]. You have two partners and one or two other investing?

Aileen Lee:
Yeah. We’ve got two awesome other people on our team, Amanda and [Jamara 00:08:18]. [crosstalk 00:08:19].

Jason Lemkin:
Okay, but roughly that means you and Ted each have 50 million. It could vary, but it doesn’t really matter. 50 million. How long before COVID were you planning to take to deploy that 50 million? Because, that’s what this deploy means. It means over a timeframe. Right?

Aileen Lee:
Yeah, it’s … I mean, my version of deploys is kind of deploy capital, but kind of deploy yourself as an investor. [crosstalk 00:08:40] So, when you think about there are … Sometimes, on work it’s super intense and then you have a little … You have to take advantage of the lulls, because sometimes it gets super intense, whether you’re an operator or you’re an investor.
Sometimes, when it rains it pours, right? There’s just, you’ve got five really interesting companies in diligence and parallel and you think they’re all potentially things that you could invest in and founders you really want to work with, and there’s times that you’re not really seeing things that you think are going to get there on the other side.
And so, I think probably it will be really intense this fall and in the winter in terms of great ideas, new waves. Now, the one thing we don’t have that’s new is … Some of the waves have been because there have been new platform shifts, because of mobile or because of cloud or because of security or because of a bunch of other stuff. We don’t…
That’s not clear what the next big tech platform shift opportunity is, so I think that will dampen the intensity a little bit, but I think in terms of some investors feel anxious, like “I need to be writing checks all the time” or “I need to be making investments all the time”, I don’t think that’s true.
You got to … Sometimes it’s slow and let it be slow, and then sometimes it’s really fast and really intense and you’ve got a lot going on, and that’s when you make your investments and sign up to work with new folks.

Jason Lemkin:
So, traditionally in normal and good times, there is a sort of very slow-paced pressure as a VC, which is to do X deals a year. There’s many types of pressure. As time goes on, it’s how many unicorns, what’s your multiple, what’s your DPI, but in the earliest it’s just if you don’t do enough investments, you just can’t make money, right?

Aileen Lee:
Yes.

Jason Lemkin:
If you do no investments, you’re toast. So, and if you’re … How many investments do you and Ted each do a year, roughly? What’s the target?

Aileen Lee:
It’s a wide range. We might do six to 12 a year.

Jason Lemkin:
Together as a team, right?

Aileen Lee:
Yeah. Mm-hmm (affirmative).

Jason Lemkin:
So, each of you will do three to six.

Aileen Lee:
Yeah.

Jason Lemkin:
Okay, that’s a classic seed portfolio. And then as you get [crosstalk 00:10:37].

Aileen Lee:
It’s probably actually a slower pace than I think. We’re probably on a three, three and a half year fund cycle where we’ll make our initial investments. Whereas, other funds are maybe on two years.

Jason Lemkin:
Got it. So, that’s why you were less, right?

Aileen Lee:
Yeah. Yeah.

Jason Lemkin:
And then later-

Aileen Lee:
We’re definitely more [crosstalk 00:10:51]-

Jason Lemkin:
… it’s one to two.

Aileen Lee:
… hopefully a quality, not quantity kind of a thing.

Jason Lemkin:
And so, usually what happens… Let’s say I’m working at Cowboy and I’m supposed to do three or four a year. We’re coming up on June and I’ve done none. I start to feel pressure, don’t I?

Aileen Lee:
Yeah.

Jason Lemkin:
Even if no one says it.

Aileen Lee:
Totally.

Jason Lemkin:
Do you think that pressure is going to come back at the end of the year and therefore … When you talk about deployment, do you think folks will want to do a lot of deals in the back half of the year because they’ll feel the pressure to hit their quota?

Aileen Lee:
It’s very possible.

Jason Lemkin:
Okay, so let’s talk about this slide for a minute. And you have a broad exposure. You have exposure to segments that are, I call COVID beneficiaries. You have exposure to segments that probably are heavily impacted, right?
How do I … How you get your arms around the fact that cloud stocks on the left are at an all time high and we almost, and California is one of the worst economies in the Western world? How do I … How are you thinking about this?

Aileen Lee:
I mean, the multiples that folks are trading at right now on the left hand, I don’t totally understand it. I think it’ll be interesting to see, because also the numbers, we don’t have Q2 numbers yet. When Q2 numbers come out, for some folks they may be softer because budgets were not really locked up for most of Q1.
And so, I mean, I think if you are Zoom, obviously, or maybe an infrastructure, you probably won’t see a lot of the budget freezes and the layoffs and your sponsor being laid off. But I think for a lot of vertical SAS, they’ll see impacts when the Q2 numbers come out. And so that may change what this chart looks like maybe in July or August.

Jason Lemkin:
Yep. When you look at Main Street versus the cloud index, what are you excited about today? Are you more excited about eCommerce? I mean, what especially non-obvious things are you more excited about?

Aileen Lee:
Yeah. I mean, I think in a bunch of categories like healthcare and distance learning and infrastructure, this recession, which super sucks for a lot of people, it is going to be an accelerator for tech, because businesses are going to rely on technology and are also going to adopt technology faster.
So, it’s like in healthcare, one of my friends who’s a doctor says she feels like she fell asleep in 2020 and woke up in 2030 in terms of …

Jason Lemkin:
Yeah, I bet.

Aileen Lee:
… the industry’s willingness to adopt technology. Because it’s been a fight and it needs to be adopting technology across the board. And so, but now they have to.

Jason Lemkin:
Yes.

Aileen Lee:
And so, I think for a lot of states and regulatory agencies and businesses that have been pushing back to enable remote work, they’re going to have to change a lot of stuff and that’s going to take … A lot of investment’s going to happen in software. It’s not going to be like …
If the question would be like, “Do you feel like we have too many unicorns?”, we are going to have more unicorns. There’s no question in my mind there’s going to be more in the US and more in China, and then an increasing number in Latin America and in India and other markets that are really huge because this is… We’re in a good sector, tech is only going to get more important and more valuable.

Jason Lemkin:
So even if you feel that multiples on the left are a little aggressive, if you’re bullish on unicorns, having coined the term. If you’re bullish on unicorns, what does that mean overall for seed investing and venture investing? If folks feel good about unicorns, does that mean it should still be easier? There’s room for many, many more startups. What does that mean for a founder?

Aileen Lee:
Wait, hold on a second. I have kids in the background.

Jason Lemkin:
Bring them on.

Aileen Lee:
Thanks.

Jason Lemkin:
Lunch time?

Aileen Lee:
Yeah, exactly. It’s lunch break at school. Wait. What was the question?

Jason Lemkin:
What does it mean… So we’re in these weird times, the cloud shares are at an all time high, NASDAQ’s closed, this crazy recession we’re in, but you’re bullish about unicorns. Right?

Aileen Lee:
Yeah.

Jason Lemkin:
Unicorn generation, how does that inform your thinking in terms of types of investments? Pace, valuations, anything? Does it inform your… Does it change your thinking?

Aileen Lee:
Yeah. No, I mean, I think … Look, I was an AEB investor for 12 years and did some growth too and I switched to seed. Partially, I think, for personal reasons. I think it’s a better fit for me and it’s more fun. I’m really passionate about seed investing. And there are lots of really good folks that we partner with at A and B and C and D, who they’re really good at that, and this is the one thing that we want to focus on. We think it’s also a great category for like, you are getting in at the riskiest time where the valuations are lower, but there’s way more upside. It’s also more collaborative as you know.
I had lots of friends in seed who were co-investing with each other and helping each other build companies. Whereas, at A and B and C, you generally, you can be friends with everyone in BC, but you have to beat all of them to win the A or the B. And then you’re carrying the water with the founders for the next decade as a lead board member, and you don’t get a ton of help from other people. So, I love seed and I’m super excited about it.

Jason Lemkin:
So I want to dig into that next, on the next point. But before we leave this slide, do you have any portfolio companies that have benefited from this time that you didn’t expect? Maybe even Zoom, we didn’t fully expect it would be this big. But are there any that folks could learn from they’re like, “Wow, I’m just kind of surprised that one is a COVID beneficiary.”

Aileen Lee:
Not really a surprise. I guess probably one of the more notable companies that we work with is Guild Education. And I think because a lot of the folks that they work with, they basically help hourly workers who work for big companies like Disney and Walmart get high school diplomas or college educations or get vocational training. And I think because there’ve been a lot of layoffs in hourly workers, I think there could be a question about whether that was going to hurt a company like Guild. But it’s turned out that a lot of enterprises who have furloughed workers are suggesting that people who are furloughed use the time to actually get an education.
It’s also being used as an off-boarding benefit. So like, “We’re really sorry, we have to let you go. But we’re going to help you get on a career path, so you can get this benefit of trying to figure out where you’re going to get your next job.” So there’s been a bunch of things that actually have helped accelerate Guild that I think could have been a question. And obviously just the fact that they built this incredible infrastructure for remote learning is great.

Jason Lemkin:
Yeah. It’s an interesting one because on the one hand, it’s remote learning, right?

Aileen Lee:
Mm-hmm (affirmative).

Jason Lemkin:
And very powerful. On the other hand, it’s a benefit, right?

Aileen Lee:
Yeah.

Jason Lemkin:
You know the company much better than I do. But it’s a benefit, that’s where the budget comes from. That’s why it’s done well. But it’s a benefit, and as soon as folks cut at traditional companies and cut people, you would think the benefits … We’ve seen many folks in the benefits space be exactly linearly impacted.

Aileen Lee:
Totally.

Jason Lemkin:
Linearly impacted with layoffs and it’s natural. Right? It’s like cutting back on rent. We’ll cut back on benefits.

Aileen Lee:
Totally. Totally. So that was the one, it was like, “Uh-Oh.” But so far it’s going great.

Jason Lemkin:
That is interesting. What’s your gut? What percent of startups you think are COVID beneficiaries? Have you looked at it? Do you have a sense? What do you think?

Aileen Lee:
I think, unfortunately, it’s a pretty small, it’s a small percentage.

Jason Lemkin:
Yeah. [crosstalk] percent are benefiting.

Aileen Lee:
I’d say 10 to 15. I don’t think it’s …

Jason Lemkin:
10 to 15?

Aileen Lee:
Yeah. What do you think?

Jason Lemkin:
I made up a number just based on a very limited data set. I think it’s, in SaaS, in cloud, if you define it that way, I think it’s about 15 to 20%.

Aileen Lee:
Yeah.

Jason Lemkin:
And it’s more of the folks on the left than we would have thought, which maybe there’s some learning from that. We missed it. We knew Slack would benefit, but actually Atlassian’s benefited much more than Slack. Did we know bill.com would benefit as much as Zoom? I don’t know. If you didn’t analyze its business model, you would think that intuitively. Right?

Aileen Lee:
Yeah.

Jason Lemkin:
But I feel the question, and let’s maybe transition to that. Let’s assume it’s 10 or 15 or 15 or 20, it’s a big delta. But you’re not saying it’s single digits, right?

Aileen Lee:
No.

Jason Lemkin:
For the rest of the year, or at least for the next quarter too, would you only invest in COVID beneficiaries or would you invest in folks in heavily impacted industries? Like how you thinking about that?

Aileen Lee:
It’s a spectrum. I don’t think I’m going to be going to try and find a lot of travel startups right now. But I do think … we’re investors in a company called Homebase that basically sells SaaS for small-medium size businesses to do hourly work management. Like scheduling shifts, paying folks, giving them cash advances, communicating with the manager. Obviously, the majority of the people who they were managing the shifts and the payments for who were working in February, they were not working in March or in April.
But when businesses reopen, I think they are going to rely on technology more than ever before. Some of the older businesses that were a little hesitant about technology, they may not reopen. And the people who start businesses in the next generation are going to be like, “I need a full stack of modern software to run my business, so it’s flexible and it’s nimble and I have good transparency and I can do it from anywhere.” And so they will adopt things like Homebase at a faster rate than businesses that have been around for 30 years. And so I think if you time it right, I mean, you can basically ride the wave of all these businesses reopening.

Jason Lemkin:
For your existing portfolio and new investments, can you model that? I mean, you have to have at least have a position, right?

Aileen Lee:
Yeah.

Jason Lemkin:
Is it six months? 12 months? They just announced today, Disney World’s going to start to reopen.

Aileen Lee:
Wow.

Jason Lemkin:
When will Homebase get back-

Aileen Lee:
When is it going to reopen? Is it going to be like six feet apart and every other? Like on the rollercoaster.

Jason Lemkin:
July. Yeah. They’re going to adopt the Shanghai processes. Attendance will be half. You can’t hug a prince or a princess and you have to get reservations.

Aileen Lee:
Is the price going to be double?

Jason Lemkin:
Well, that’s a question for a lot of things down the road. If the price doesn’t double, I mean, that’s a restaurant question too, right?

Aileen Lee:
Yeah.

Jason Lemkin:
I mean, if prices double, it all works. And obviously Disney can carry a business for a little while. Those are some of the scarier questions for our economy. Is can we adapt to things? Can we adapt to Coachella when we’re 20 feet apart? I mean, I don’t know. I don’t know if Coachella $4,000 a ticket works, does it?

Aileen Lee:
No, but also it was funny. I was in San Mateo County. I think they had a rule that some camps can open, but they have to, you have to sign up for four weeks at a time because they don’t want kids in and out. But it’s like that really disadvantages people who cannot afford four weeks of camp.

Jason Lemkin:
Oh yeah.

Aileen Lee:
It’s not good. Yeah. There’s a lot of challenges.

Jason Lemkin:
A lot of challenges. A lot. And I think a lot of, probably beyond the scope of what can we get into today, but a lot of these flattening things you might… and we can talk about it in deal flow. You might think some flattening helps less advantaged, but I don’t know. Do you think pitching over Zoom helps outsiders more? Do you think it helps the founder that didn’t go to Stanford and didn’t go to YC? Or is it maybe not help as much as you think pitching?

Aileen Lee:
I am hopeful. I mean, I think there’s two things, there’s the pitching, but there’s also, where’s the company going to be based? That’s all up in the air now. So before, I mean, look, when I was at Kleiner, I spent a year spending a lot of time in New York, there was a lot of stuff going on in New York. And when I came back and I was like, “Hey, I found all these cool companies like Mongo and Warby and Stack Overflow.”
And some partners were like, “Why are you wasting your time? No big companies are ever going to be built outside the Bay Area. We clearly didn’t teach you well.” And same thing with HomeAway actually, it was the same thing. It’s like, “Why are you wasting your time?” And so things have changed a lot in the past 10 years, but I am hopeful that I was just on the phone with one of the CEOs we work with today, who is in New York and they’re moving to Denver. I think over the summer, people are going to be moving all over the place and trying to figure out how to run remote or partially distributed or clustered companies. And I think that will advantage founders who are in different places and are not on the coast.

Jason Lemkin:
I think it started like last week.

Aileen Lee:
You think so.

Jason Lemkin:
I think that folks that live in San Francisco, founders and executives that live a crummy lifestyle in San Francisco, in gross parts of the city that have sacrificed that maybe even have families, that have sacrificed a lot, are looking around. Like several conversations I’ve had with looking around, like, “What is the point of being in San Francisco today? I cannot visit Salesforce. I can not visit Twilio. I cannot visit a customer. And I have a baby and a husband or a wife or significant of living in not just a small apartment, but a gross part. I’ve traded off so much.” And I three people I know packed up the minivan and left.

Aileen Lee:
Totally. I agree. Like we had another CEO that we worked with, they packed up their car and they rented an apartment, or a house on a Lake in South Carolina. They had never been there before. They’d never been to the town and they just drove there and they lived there for the past month and a half. And he’s been so much more productive and so much happier. There’s a whole nother thing we won’t get into around mental health and all. Especially if you’re by yourself in a small apartment, it’s not happy making.

Jason Lemkin:
Yep. And how do you think, like, let’s just, maybe this is a, not a good example, but when you invested in Guild, they were based in Denver, right?

Aileen Lee:
No they’re based in Palo Alto.

Jason Lemkin:
Oh, I thought it was based in Denver.

Aileen Lee:
They moved to Denver. It’s funny because Rachel came to us and said like, :Hey, I know we just had a meeting and we discussed, we need to hire a VP of engineering and a VP of product and a VP of marketing. But we also want to move the company in Denver.”
And we were like, “What? How are we going to find those people in Denver?”
And she was like, “Trust me. There are some really good companies there. And some tech like Facebook and Gusto are opening offices. It’s a great place to live. I think I can get people from the east coast and the West coast to move to Denver. Because if you want to have family or if you want to buy a house, you want to send your kids to public school. It’s a great place. And I want to build a company where people can have a family and have a good home life and have a great job.”
And I’m so glad that we were like, “Okay, do it.” Because it was a really smart move in probably three or four years ahead of her time.

Jason Lemkin:
Yeah, it was. So she’s built a unicorn now. And let’s compare today. I mean, you had no choice, but did you have reservations? Did you try to talk her out of it?

Aileen Lee:
Oh, definitely. I didn’t try to talk. But I was like, “Are you sure?” But I mean, I think it gets a lot of the stuff on a slide. Which is we are seed, I would say half the time that we invest, they haven’t built a product yet. There’s no technology, they need money to actually build software. And then half the time they’ve built like some MVP we do about, we’re probably 75% enterprise, 25% consumer, we’re generalists. We usually invest between 500 K to one and a half million. We like to co-leader co-anchor seed rounds and we almost always co-invest with other folks, angels and institutional seed folks like yourself.
And so at Guild, they had basically had an idea for kind of reboot your career boot camps. And they came up with a three hour bootcamp and they posted it on Craigslist. And they rented strip mall, vacant space and they were holding these free three-hour boot camps. And then they were texting the people afterwards asking for. And then they charged 40 bucks and then 80 bucks. But that’s basically what they had when we invested. And so it doesn’t have to be perfect at seed.

Jason Lemkin:
And so I want to make sure we hit the bullets on this slide, but so today let’s fast forward today. So, four years ago when Rachel said, “We’re moving to Denver to build my management.” And now that I understand kind of how raw the vision was in the beginning, I get it. Because it wasn’t technology heavy in the beginning, that’s for sure. So I get it. But today, how are you feeling about not just New York or Denver, how are you feeling about Baton Rouge or Sioux Falls or Tampa? How does that strike you today for new deals? And what would you advise founders that are thinking about leaving the Bay area now?

Aileen Lee:
Yeah. I mean, it’s a better time than ever to both, to start a company in a different part of the United States. People are going to have to be way more purposeful around culture building and about communication. Because it’s still been a rarity to build a really successful scaled company without having formative team members live and work in the same place and be next to each other. A lot of times we recommend for portfolio companies that are opening up second or third office, it’s like you have people all in the headquarters and then you send out people who really understand the culture and how to have a lot of internal credibility and they start the new offices.
In some cases, I’m really curious as like, founders may start companies they’ve never been in the same office when they start the company. When we hear pitches this fall, we’re probably going to hear people who have not seen each other. But SVT Robotics is a company that is based in Virginia, Virginia Beach, actually. And it’s kind of like MuleSoft for warehouse robotics for integrating. If you’ve got a third party robotic arm and you want to integrate it with your conveyor belt or your WMS, you’ll use SVT instead of writing custom code. The founders know warehouses and they know warehouse automation really well. And they’ve lived in Ohio and Pennsylvania and Virginia, and all the places where warehouses are. And we’re super psyched to be investors in that company. And we’d love to find more like them.

Jason Lemkin:
Those are all really interesting examples. Today if you met with a startup and you’re doing seed, so it’s early, but it’s the kind of company that clearly could benefit in a year or two from some Salesforce alums or Box alums or Twilio alums. They’re doing a classic playbook and they want to move to Arkansas or Ohio or Bismarck, is that a no in this flattened world, in this distributed world? Do you think you can get VPs to join a company, Bay Area style VPs, to join nonbearing companies in 2020? Do you think that’ll change?

Aileen Lee:
I think we can do it. It’s funny at Textio, another company that I work with, which is based in Seattle, we tried hard to make the whole team Seattle-based and when we were doing our head of revenue search, we said like, “Maybe we should open it up and look at people who are not based in Seattle.” And we found a great person who’s based in the Bay area. I mean, at the time we had a deal where he was going to spend a week or two in Seattle, a month and then a week or two at home or on the road.
And so we’re fortunate that we had that time together before we wanted to go into shelter in place, but it works. And he’s a huge part of the team and they’re making it work. So I think we’re all learning fortunately or we have been learning over the past couple of years how to make kind of commuter style jobs work and distributed team work which is a good warmup for the next three years we’re about to live through.

Jason Lemkin:
Yeah. Yeah. I think especially for B2B in the next couple of months to watch is can we flatten management teams? Not just the Gitlabs and the Zapier’s, but can bury a type executive, whether they’re based in the Bay area literally or in New York. But folks that come out of the traditional folks where we poach… I mean, once you scale, you want to hire someone to set up [inaudible 00:31:06]. You really do. I mean, everyone that runs Salesforce today came from Oracle and everyone that runs Twilio came from Salesforce. There’s a reason. And if folks in Virginia Beach or wherever it is can hire these folks now is easily, it changes everything. Doesn’t it?

Aileen Lee:
Well, I mean, like internally at Cowboy every other week, we have scenario planning time where we just kind of think about like, “Okay, what if this is 24 months? What if this is 36 months? What if nobody can get on a plane until summer of 2021 the earliest?” From a sales perspective, how is that going to change sales? How’s that going to change marketing? The fact that a lot of our portfolio comes in enterprise, they got a lot of sales done or relationship building done around conferences whether it’s-

Jason Lemkin:
Up in 40%, it turns out yeah. Like 40%.

Aileen Lee:
Like HR Tech Yukon, whatever it is. You may not have been spending a lot of money getting a booth, but like you were hosting dinners, you were meeting up with people and when that doesn’t happen, how is that going to change sales?
I think maybe that’s going to be better for startups because having a lot of money to buy people expensive dinners is not going to be as important and it sounds like COVID has for at least in the folks that we’ve been talking to the past couple of weeks, it’s now a common bond. You make small talk over Zoom for five or 10 minutes about like what’s been hard or how the family time’s been good or whatever, then you get right into the sale process. And the customer on the other end is like, “This sounds really good. I need this. Let’s do it.” And so in some ways, it’s like more efficient, but we’re staying really close to it.

Jason Lemkin:
Yeah. For what it’s worth. And I want to talk about how you’re sourcing deals now. But my personal view just for the conversation is I actually think this selling over Zoom at least for now, is substantially benefiting folks with brands because if I don’t know you yet, and I can actually meet the CEO and I’m meeting [inaudible 00:33:08] over Zoom, don’t get me wrong, but we’re all taking more vendor risks. We’re taking more investment risks. More risks just has to be taken in the shelter world. And it’s comforting to know it’s BOXX. It’s comforting to know that well it’s a unicorn now.
Maybe Gild isn’t as great as Schmild or whatever. I don’t know, but if there’s risks during discovery, maybe I don’t want to take risk today. Now if you’re the only vendor in the space, it’s different, if you’re the notion or tandem, but I wonder if one of the reasons these cloud stocks are going to keep growing is because, “I’ll just stick with JIRA.”

Aileen Lee:
I kind of worry a little bit about whether we’ll move into this like nobody ever got fired for buying IBM for buying certain brands. And I do think like if you are a seed stage founder who is listening to this right now, or you’re pre-seed, or if you’re not a brand, it’s going to be hard to make new sales I think in the next two or three quarters at a minimum.
So being willing to give your product away for free or like changing the packaging so that it’s virtually free for the next six months, and then people pay for it, but getting people to use it and showing that it’s super valuable. And so that when people have budgets again, they’ll buy it. They’ll pay for it and that’s referenceable. I think for a lot of seed stage companies that’s the thing to do because it’s really hard to get new budget, even if you’re an existing brand, but as a new brand, it’s even harder.

Jason Lemkin:
It is harder. Yeah. It is a fun topic we could dig into, but we can if you want. But tell me on this. First, I want to talk about how you find deals and how founders can pitch you. But just the micro topic, say in today’s world, I know you’re slowing down a little bit to learn, but how you’re feeling about being pitched on Zoom? What’s your personal view of not meeting in real life? What’s your [inaudible 00:35:00] one to 10?

Aileen Lee:
I think it’s a bummer on both sides, right? I mean, the benefit is things have been so hot that the velocity of decision making and relationship building was I think untenable. Founders were optimizing for getting it done fast. And I think in many cases, they weren’t really getting to know the people that they were getting married to and who were… Because once you get people on your cap table, you can not get them off.

Jason Lemkin:
Never.

Aileen Lee:
So I was really bummed about how fast the process was happening, where we weren’t really having a chance to get to know people, and they weren’t really getting to know who they were taking out to their cab table. So I think this will actually be better in terms of giving people…
Then we were thinking about, when we moved in shelter in place, “Okay, how are we going to get to know people?” We already had a diligence process, but in marketing, in old fashion marketing, I don’t know if you remember the four P’s? There was price, place, promotion, and product.

Jason Lemkin:
Mm-hmm (affirmative).

Aileen Lee:
Right? So I was thinking about, “Okay, we have our own four P’s that we generally try and figure out.” So our four P’s are people, product, potential, and plan.

Jason Lemkin:
Okay.

Aileen Lee:
So we’ll say to someone, if we kind of have a first meeting and we think it’s interesting and they like us, we’ll be like, “Okay, we have this thing, we’re not going to probably get to meet face to face. So we want to get to know you over a course of meetings and maybe some of them will be dinners,” or something like that. Where we’re like, “We want to get to know the people, where you came from, what you’ve done before, what you’ve learned, what you think of your strengths and weaknesses, your self awareness, where you want to be complimented, what kind of a team you want to build.”
Then on the product, obviously really understanding both, what’s their vision for the product? Competitive landscape, differentiation, how much better it is, the potential. What could this become? Right? Both how big is the market? And if we’re really successful, what are we building? Then the plan.
How much do you want to raise? Valuation range, what are we going to get done during the seed period? Who do you need to hire? All that stuff. So basically just going through those four things is our way of getting to know each other. I think that that’s probably going to be the way we do it first of the year.

Jason Lemkin:
So more time can balance out the lack of the ability to schmooze in person?

Aileen Lee:
Yeah. I think it might, in a way, be better. I mean, obviously in person’s better, but I think a slowing, and I’m also think the velocity and optimizing for speed and just low overhead check… I think there are plenty of founders who will tell other founders that that was a mistake. I think this downturn is hopefully going to give people pause around a lot of… There’s going to be a lot of shitty ups and downs. I want to be careful about who’s going to be helpful to me in a time of a lot of uncertainty.

Jason Lemkin:
Yeah. This morning, the first speaker, I don’t know if you know, Krzysztof Jans from Point Nine Capital?

Aileen Lee:
Hold on one second. Sorry. I just told the kids to go to the other room.

Jason Lemkin:
Oh no, we’re in the lunch session. I don’t know if you know Krzysztof Jans from Point Nine?

Aileen Lee:
I don’t.

Jason Lemkin:
He’s great. His first angel investment, he was the first angel into Zendesk, after he was a CEO. Then he started doing SAS really in the beginning, and we kind of became SAS content buddies before we co-invested.
He’s done half his investments remote since then, because he’s in Berlin. So he couldn’t always get on a plane and pop up for an angel or seed deal. His advice, he had a great… Because he is a veteran, although none of us foresaw shelter, but his point was it’s like anything in sales, but make it easier. So his point was, have the best diligence together, have the references built, do a video, have the best email pitch, if you weren’t going to build the deal room, build the deal room. If folks need more time, bake it in, and just turbocharge the amount of disclosure and transparency you would have to make up for the kind of informal type decisions people are making in those high velocity advice.

Aileen Lee:
Yep. Good. I like it.

Jason Lemkin:
Okay. On this, so just to folks that understand, how do you find… Just some insider stuff to help folks learn. How do you find deals and how do founders pitch you?

Aileen Lee:
Yep.

Jason Lemkin:
Maybe a few case studies from some last deals. How did they find you? How do you discover [crosstalk 00:39:35].

Aileen Lee:
Yep. We get a ton of referrals from angels, from co-investors who we want to work with, from founders, from folks that we know. I think Ted and I, I’ve been doing this for 20 years. Ted’s been in tech for 20 years too.

Jason Lemkin:
Yes.

Aileen Lee:
So we like to say, “Hopefully when you work with us, you’re going to get really experienced, thoughtful, patient, supportive advice, with a huge Rolodex.”

Jason Lemkin:
Yep.

Aileen Lee:
So we get a lot. But also, you and I are both super passionate about using our privilege to try and make tech more equitable and less bro-tastic. So, I’ve been told that the need for the warm intro really disadvantages a lot of people. So we read all of our inbounds. So you can email hello@cowboy.vc. Someone will read it and if it’s a potentially a fit, we will get back to you. You don’t have to get referred to pitch us.

Jason Lemkin:
So let’s break that down for just a second. So if you had a pie chart, number one source of deals, you do is [crosstalk 00:40:39].

Aileen Lee:
Referrals.

Jason Lemkin:
Warm referrals, right?

Aileen Lee:
Yep.

Jason Lemkin:
For better, mostly for better, but for better or worse. Right? They do have some bias and issues associated with them. But the inbound. So the inbound is… Sorry, it’s hello@cowboyventures.com?

Aileen Lee:
Hello@cowboy.vc.

Jason Lemkin:
cowboy.vc.

Aileen Lee:
Yep.

Jason Lemkin:
I got to get this one right, folks.

Aileen Lee:
Yep.

Jason Lemkin:
We’ll layer it on top of the YouTube.

Aileen Lee:
Thank you.

Jason Lemkin:
Hello… Well, it’s probably on the website too. Right?

Aileen Lee:
It is. hello@cowboy.vc.

Jason Lemkin:
If that email is good, if it’s good… If it’s, “Dear cowboy, we’re the team that built the top product at Square. We’re pre-revenue, but we have 10 beta customers. All of them said we’re changing the way finance works. Here’s where we come from. Here’s who we know, here’s our friends.” What are the odds that email gets read and how seriously… I’m just making my…

Aileen Lee:
Well, it’s 100% going to get read.

Jason Lemkin:
100. So let’s [crosstalk 00:41:34].

Aileen Lee:
100% going to get read. Yes.

Jason Lemkin:
Right? I can’t find you. I can’t track you down. I met you at a conference, but that email is going to… This is things founders don’t get, that great email is going to get read isn’t it?

Aileen Lee:
Even a crappy email is going to get read.

Jason Lemkin:
Even a crappy email is going to get read.

Aileen Lee:
Even, “Dear Sir,” gets read.

Jason Lemkin:
Okay. But the good one, if you liked what I just wrote, right? What are the odds someone’s going to read a deck that’s attached? And what are the odds I’m going to get at least a Zoom?

Aileen Lee:
I mean, that email you described is probably a 100% going to get read.

Jason Lemkin:
100% getting read. Yep.

Aileen Lee:
And 95% going to get a, “Hey, let’s have a meeting,” or, “Let’s set up a call.”

Jason Lemkin:
Yeah.

Aileen Lee:
Yeah.

Jason Lemkin:
What percent of emails that come to hello@cowboy.vc are great like that? What percent of these emails are great?

Aileen Lee:
Not that many. I would say we only invest in the US.

Jason Lemkin:
Yeah.

Aileen Lee:
We get some from different countries, and unfortunately we just don’t invest outside the US. But when I was at Kleiner, this is before email was really how we got most pitches, people would mail business plans and pitch decks and the EAs would put them in folders and just put them into giant L.L. Bean bags and just drop them off at my office and I would go home every night and basically order Chinese food and read business plans every night.

Jason Lemkin:
You were like a script reader.

Aileen Lee:
I was single and my girlfriends were making fun. They were like, “Should we buy you cats nor or later?” Because basically my life was just reading business plans. But the business plan for Bloom Energy was a cold inbound from a professor of space technologies at University of Arizona and at the time we had heard about fuel cells and we knew that there was different kinds of fuel cells and we were kind of getting interested in alternative energy and green, and he seemed interesting and so I wrote him and I was like, “Hey, I got your business plan. Do you want to do a call?” Bloom is a public company now and it was a cold inbound.

Jason Lemkin:
Cold inbound. Let’s just finish this because I think this is … It’s not perfect but it does flatten a bit. These emails are going to get read [crosstalk 00:43:44] and you don’t need-

Aileen Lee:
Are you really surprised by this? You sound surprised.

Jason Lemkin:
No, no, no. I’m not surprised. I think founders are surprised and I want to talk about how to hack it because so much of the advice you get on the internet … The fact that warm referrals are your number one source and that a great cold email will get read just seems inconsistent to people, right? I’m happy to share some personal stories. I even published two cold emails that I funded, one of which crossed 100X last… It’s the best made. It’s 100X on a double digit ownership, cold email, and it was an outsider.
There are advantages to being an outsider. You don’t know. You don’t do as much diligence. You don’t have to have gone to Stanford and have done the perfect thing, but I think founders are surprised that investors are so busy. They’ll see you on social media, they’ll see you traveling, they’ll see that you have 20 portfolio companies, and they’ll be like, “How could I get Cowboy’s attention?”
But the reality is there’s only so many great deals a year, and it’s sales for founders and it’s sales for VCs and if the pitch is amazing, the cold email works. Email is profound, and yet people don’t spend enough time on it. They ask you for coffee. “I saw your [crosstalk 00:45:01] on stage. Can we get together some time and talk?” What are the odds you’re going to get coffee?

Aileen Lee:
Right. Yeah, too much coffee.

Jason Lemkin:
Too much coffee, right?

Aileen Lee:
Yeah, or can I pick your brain? That’s one of my-

Jason Lemkin:
Can I pick your brain?”

Aileen Lee:
I do not like that.

Jason Lemkin:
“I have an idea. Can I pick your brain?” Right?

Aileen Lee:
Yeah.

Jason Lemkin:
I think the best founders figure that out but the earlier stage it is, the less they figure it out, right? The less they know, and I think if you write the world’s best email, and it has to be real … It can’t be imaginary but if you even have some hints of excellence, it’s going to get read, isn’t it?

Aileen Lee:
Yeah, yeah. But I do think for years I was kind of fighting the “will read everything” just because I felt like it was the mark of a good founder that knows how to hustle and is a relationship builder and is a talent magnet, that a good founder knows how to somehow get it started. Cold email someone, you, and be like, “Hey Jason, I really admire you. I like this thing that you wrote. I’d love to talk to you about this thing,” and then they didn’t know you but also now you know them and then you introduce them to someone and they introduce you, and then before you know it, the person’s kind of kick started a network of relationships that can be helpful to her or him. And I do think that’s a really valuable skill.
So for years I was like, “Well, if a founder can’t figure out how to get some credible person with some venture capital universe, some founder cred, someone who’s the VP of engineering at a decent company or someone who’s a product manager at a decent company who knows a venture capitalist, maybe it’s going to be harder for them to recruit people or sell customers.” But I’ve kind of let go of that because I think a seed is a really raw stage and I’ve seen founders change over the course of 10 years from where they start to hopefully being a unicorn founder that’s managing thousands of people, and people change.

Jason Lemkin:
Yeah, I used to think that. I used to think… I came up with a simple bar which is a founder that was better than me with more going for them can build a unicorn. And so I felt like if you couldn’t penetrate, if you couldn’t be that aggressive founder that found their way through the door literally by email, physically showing up to Cowboy, whatever it is, if you weren’t that person, you weren’t aggressive enough to build something big. And what I’ve still done, anyone that wants to talk to me, if they want to talk to me about community or SaaStr in general, there’s a million ways to reach me. If they want to reach me about investing, I used to always say, “Well, find my email.” “If you can’t find my email somewhere …” “Then what’s your email, Jason?” “No. How are you going to sell Procter & Gamble or Google if you can’t figure out a prospect’s email?”

Aileen Lee:
Yeah, and it’s also in a way… If you’re in a consumer space, you can be an introvert and just an awesome product person especially if your product has network affects. You can not be able to talk and you can build a huge company. In the enterprise space, I think it’s a little more important that you can talk.

Jason Lemkin:
I think it is. I will say, for what it’s worth, I don’t… Like you said you read more of the emails today. I realize that while that is … It’s too tight a noose. It’s too much of a forcing function. There are other ways to build traction. You can build an incredibly developer-centric product and [crosstalk 00:48:13].

Aileen Lee:
Totally. Exactly, yeah, yes.

Jason Lemkin:
Even if you’re not good at things. And so if you require that almost alpha-esque, put your boot through the door, there’s a lot of privilege and other issues, but you’re also going to miss people, I think [crosstalk 00:48:26].

Aileen Lee:
Totally. I think that’s totally true. I have so many lessons learned about companies that I’ve passed on that I shouldn’t have, but I’ve learned that early on in the process I have to figure out … Or just ask the person if they are more of an extrovert or an introvert.

Jason Lemkin:
It’s a good question, right?

Aileen Lee:
And if they’re an introvert we have a different conversation.

Jason Lemkin:
Yep. All right, we’re going to run out of time [crosstalk 00:48:48].

Aileen Lee:
I know, we have so many questions and we could chat for a long time.

Jason Lemkin:
No, I know. We can do them later if you have the energy but let me just pick a couple because some are tactical. This one’s super tactical but I think it is actually helpful. One attendee asked, “Who would you look for for references?” Talk just a minute about references. What if you don’t have great references? Is that a gating item for folks that come out of nowhere? How important are… especially if yours are funky?

Aileen Lee:
I think it’s important, especially now, like you said. That it’s people that you’ve worked with or worked for, people who’ve worked for you, people who’ve been your boss. We recently did diligence on a company and the founder gave us references and gave us their friends. That was not helpful.

Jason Lemkin:
I used to think that was a no. A close to a no, like such a fail, but I don’t know today.

Aileen Lee:
We’re very … I think as a person, like an immigrant person who has in many ways been underestimated in many different ways in different situations, I have a lot of empathy for being underestimated for giving people chances. And at series B, you got to know this shit. But like at seed, if you never raised money before, sometimes there’s stuff that someone tells you and then you were like, “Oh duh. Yeah, I get it.” And then they move on. So it’s not a no for me, but yeah. I was like, “Hey, don’t give me your friends. I don’t really want to know what your friends think of you. I want to know what you’re like to work with.”

Jason Lemkin:
Yeah. This one’s interesting because it’s not necessarily obvious. This says when you invest seed or pre-seed, what do you expect MRR will be in three to six months? It’s actually not a silly question because you’re not the only VC. You’re betting that someone in the next 12 to 24 months is going to write a check at two to five times the price you did. So what does that have to mean in terms of the window in which you can invest in terms of growth?

Aileen Lee:
Especially right now, that is a really tricky one, right? Because let’s say if you’re going to… We’re basically recommending, in March, we recommend to all of our portfolio companies to basically plan. Come up with a bunch of plans, so that ideally you have money to get you into ’22. 2022.
So either raise money right away, or you’re going to do some cuts because assume that Q2, Q3, Q4 are going to be really hard for new sales and that maybe things will pick up in Q1, but maybe not. Maybe they won’t pick up until Q3 next year. And so you’re going to be going out to raise your A if your seed unpotentially not a lot of revenue growth, especially if you have to go out in the first half of 2021.
And so I think depending on what the product is that you’re selling and what business you’re in, are there other metrics that you can show around customer engagement and customer use or value or, because otherwise you’re going to be competing against people who are starting from scratch in March or in June who are like, “I have no traction, but I just started this thing.”

Jason Lemkin:
That’s a tough thing, right?

Aileen Lee:
Yeah.

Jason Lemkin:
It’s like folks graduating from college this year. It may be a lost generation compared to next year.

Aileen Lee:
Well, I hope not.

Jason Lemkin:
What?

Aileen Lee:
I hope not.

Jason Lemkin:
Well I know, but this may be a year where they don’t get to go through traditional recruiting processes and are impacted. And you’re like, “Well, there’s next year.” But by next year, there’s another-

Aileen Lee:
Yeah. They’re going to be-

Jason Lemkin:
… 50,000 seniors graduating from great colleges and you’re in this weird phase.

Aileen Lee:
Yeah. And the other thing we didn’t get to, I know it was one of your questions was just, there’s so many funds and this is, and that there are multi-stage funds, right? When you look at venture capital, there’s a whole thing going on about how many funds are and how many seed funds there are.
But the other thing that we, I feel like we don’t talk about enough is how many gigantic funds there are and how much of the money is in multi-stage funds that each fund is bigger than $500 million. And so how that changes the ecosystem in terms of when you put someone on your cap table, like we co-invest with multi-stage funds all the time and we partner with them all the time, but you have to be really savvy about when you do take one of those folks on or multiples of them onto your cap table and onto your board it’s a different ball game in terms of their incentives and their portfolios and the size checks they want to write and versus like us simple seed people.

Jason Lemkin:
Yeah. I think for each big fund on the cap table, you need to create $1 to $2 billion in exit value. So once you have four or five of those big names, you’re con is committing to a decacorn.

Aileen Lee:
Yeah, exactly. And that reality is like, I mean, Thomas Jeung has published a thing recently about, I think you’re 26 times more likely to be acquired than to go public, and so the reality is I mean, people can joke about how many unicorns there are, but it’s still extremely hard to build a billion dollar company.

Jason Lemkin:
It is. I keep waiting for your tech crunch article number three.

Aileen Lee:
Are you there?

Jason Lemkin:
I don’t think you put the third one, did you?

Aileen Lee:
I haven’t no. Actually it’s funny because I have, now that we have a little bit more time at home, I’ve gotten back to it actually to kind of get up to speed on the new set and to try and learn where they came from and all that stuff and how it’s different than the original set.

Jason Lemkin:
I think it’s time. I mean, I think-

Aileen Lee:
Oh, thank you. I’m working on it. I’m a really slow writer.

Jason Lemkin:
The first one was like… This is probably the last thing we’ll have to chat about, so maybe it’s a little off topic, but I think it’s helpful. I think the first one was one of the best pieces of venture content marketing ever, right? Which was probably part of the goal. Right?

Aileen Lee:
No, it was completely an accident.

Jason Lemkin:
It was an accident?

Aileen Lee:
Totally. I did not think anyone was going to read it at all.

Jason Lemkin:
Really?

Aileen Lee:
Oh my God.

Jason Lemkin:
Oh, wow.

Aileen Lee:
I worked on it for months just for myself just because I had this new fund-

Jason Lemkin:
Months? Months?

Aileen Lee:
Months. Because I-

Jason Lemkin:
No one had ever assembled that type of data, but now there’s analysts and everyone’s firm does it, but no one had ever seen that whenever the first one was, 2014 or something like that.

Aileen Lee:
2013. Yeah. I did it for myself just because I had this new fund and I was like, “What should I invest in?” If I had to do an analysis of the most successful companies of the past decade, what would they have in common, so I could try and look for those for the next set. And then there was all this stuff that came out of it. I was like, “Oh, actually I think this would be useful for founders and for investors for a bunch of different reasons.”
And so I published it, but I gave it to some friends to read it. I actually was on the way back from the lobby conference and I gave it to a couple of people on the plane to read it. I was like, “Hey, I’m thinking about publishing this blog post, what do you think?”
And they were like, “It’s okay.” Nobody even said like, “Wow, this is really great.” Or like, “This is going to become a thing.” And so it was a big surprise.

Jason Lemkin:
Yeah, the second one was great because it had even more data.

Aileen Lee:
Actually to bring it full circle, when I published it, I was at Disney World, I was at Disneyland with my family, the day that it went up, the Saturday morning it went up and so I’m on line for rides and I was like, “Jason,” my husband’s name is Jason. I was like, “Oh my God, people are liking this and sharing this. This is so crazy.” And he’s like, “Hey, we’re at Disneyland. Focus.” And I’m like, “You don’t understand. People are actually reading this thing.”

Jason Lemkin:
It’s funny, speak from… I mean, it’s the great lesson of all writing, speak for what you’re passionate about. You’re passionate about it because you had to learn how to deploy the fund. So this was your homework and you forced yourself to distill all that work into an article because it was your investment thesis. This was your investment thesis. A piece of it, right?

Aileen Lee:
And also, I mean our industry is huge, right? It manages almost like $500 billion and there was so little data or analysis on our industry. No transparency of… I mean, there’s not even… In universities, there’s no professor on the history of technology who studies the history of the technology business and all the forks in the road of companies, like if you did A instead of B, what happened to the company? I just think it’s fascinating.

Jason Lemkin:
It is. All right. We’re out of time. I’d like to do all these questions.

Aileen Lee:
I know. Sorry.

Jason Lemkin:
Maybe if you’re bored someday, let me know. We’ll do it again on Zoom and answer them together.

Aileen Lee:
Okay. That’d be fine.

Jason Lemkin:
I have time. But I’m looking forward to-

Aileen Lee:
But I always really enjoy chatting with you.

Jason Lemkin:
… the third piece.

Aileen Lee:
Okay.

Jason Lemkin:
I want the third article on TechCrunch. It’s okay if it takes a while. I’ve been waiting for a few years so that’s-

Aileen Lee:
Oh, you’re so nice. Thank you.

Jason Lemkin:
All right. Aileen, thank you for doing this. This was great and we’ll talk to you soon.

Aileen Lee:
Thanks everybody.

The post Seed Investing Today: What’s Changed, What Hasn’t with Aileen Lee and Jason Lemkin (Video + Transcript) appeared first on SaaStr.

7 Strategies for Promoting Collaboration in a Crisis


This post is by Heidi K. Gardner from HBR.org

Research-based advice for leaders.

10 Things I Wish My Board and VCs Had Told Me


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

They say CEO is a lonely job, and I guess in some ways true, but in many ways it’s quite the opposite. If you do it right as a founder, there’s nothing more rewarding than getting to work on Monday. Checking in with the team. Being on a journey together.

But what is hard is getting help seeing the forest through the trees. Here are the Top 10 things I wish I’d been told.

So I’m telling you:

1. Power laws are real$1m MRR is when it gets great. No, it doesn’t get any easier then, per se. It never gets truly easier. But you won’t fail after $10m ARR or so if your customers love you. It is different. And you can build something that will trust last once you get there.

2. Just go find the VP you need. You can miss a quarter if need be. No, you can’t miss every quarter. But you aren’t public. You can miss a quarter intentionally once every 6-8 quarters or so if need be to get something bigger done. Focus as CEO on what will move the needle. Go find the VP you really need. I got the VPs of Sales, Product and Marketing I needed. But I should have taken a pause and just found our true VP of Engineering.

3. Truly beloved products win. Invest more there. 60+ NPS, 130%+ net revenue retention, however you measure it is special. Double down there. You can screw up a lot of other things. Most products are not beloved. If yours is, invest more there and worry a little less about pressure to do new things, new market segments, etc.

4/ If you need a little more $$$, and you are doing well — we will help. I needed just a little more money, but not a ton. Now, I just tell the founders I invested in they can have what I have reserved for later whenever they want (if they’ve earned it). No need to wait. This isn’t bridge financing. It’s throwing in a few nickels from the next round now if it will help the CEO scale faster with less stress.

5/ It’s OK to talk honestly about exit goals. It is OK to sell anytime everyone makes money. I wasn’t comfortable having this discussion. Now I tell founders it is cool to talk about it anytime.

6/ Do not be scared we will block a sale. We fear this as founders. I wasted a lot of energy here where I shouldn’t have, and paradoxically, it can drive a sale earlier than need be. I tell founders now anything is OK if we make money, and if it’s fair, even if we don’t. Just remember, it will take you 5–7 years just to get back to where you were if you sell.

7/ If you need a salary raise, just tell us. Stressing about salary after a few million in ARR is dumb. I asked for a $10k bonus after closing a $500k+ deal in the middle of the worst recession of our lifetimes, and felt uncomfortable about it. Now I just tell founders whatever is fair is fine by me.

8/ Play to your strengths. If you aren’t great at something, do more of what you are great at.

9/ It’s OK to sell some shares later. At $10m ARR or so, you’ll get to sell some. That will help you push on for the next 5–50 years.

10/ You are either a very good or a great CEO. We don’t know which yet. But. We believe in you. Hearing this would have helped a lot. Now I know to tell the founders I work with this exactly. That I am extremely proud to work with them. And that in almost every case, they are better founders than I ever was.

note: original post updated with full video on topic above

The post 10 Things I Wish My Board and VCs Had Told Me appeared first on SaaStr.

10 Things I Wish My Board and VCs Had Told Me


This post is by Jason Lemkin from SaaStr

They say CEO is a lonely job, and I guess in some ways true, but in many ways it’s quite the opposite. If you do it right as a founder, there’s nothing more rewarding than getting to work on Monday. Checking in with the team. Being on a journey together.

But what is hard is getting help seeing the forest through the trees. Here are the Top 10 things I wish I’d been told.

So I’m telling you:

1. Power laws are real$1m MRR is when it gets great. No, it doesn’t get any easier then, per se. It never gets truly easier. But you won’t fail after $10m ARR or so if your customers love you. It is different. And you can build something that will trust last once you get there.

2. Just go find the VP you need. You can miss a quarter if need be. No, you can’t miss every quarter. But you aren’t public. You can miss a quarter intentionally once every 6-8 quarters or so if need be to get something bigger done. Focus as CEO on what will move the needle. Go find the VP you really need. I got the VPs of Sales, Product and Marketing I needed. But I should have taken a pause and just found our true VP of Engineering.

3. Truly beloved products win. Invest more there. 60+ NPS, 130%+ net revenue retention, however you measure it is special. Double down there. You can screw up a lot of other things. Most products are not beloved. If yours is, invest more there and worry a little less about pressure to do new things, new market segments, etc.

4/ If you need a little more $$$, and you are doing well — we will help. I needed just a little more money, but not a ton. Now, I just tell the founders I invested in they can have what I have reserved for later whenever they want (if they’ve earned it). No need to wait. This isn’t bridge financing. It’s throwing in a few nickels from the next round now if it will help the CEO scale faster with less stress.

5/ It’s OK to talk honestly about exit goals. It is OK to sell anytime everyone makes money. I wasn’t comfortable having this discussion. Now I tell founders it is cool to talk about it anytime.

6/ Do not be scared we will block a sale. We fear this as founders. I wasted a lot of energy here where I shouldn’t have, and paradoxically, it can drive a sale earlier than need be. I tell founders now anything is OK if we make money, and if it’s fair, even if we don’t. Just remember, it will take you 5–7 years just to get back to where you were if you sell.

7/ If you need a salary raise, just tell us. Stressing about salary after a few million in ARR is dumb. I asked for a $10k bonus after closing a $500k+ deal in the middle of the worst recession of our lifetimes, and felt uncomfortable about it. Now I just tell founders whatever is fair is fine by me.

8/ Play to your strengths. If you aren’t great at something, do more of what you are great at.

9/ It’s OK to sell some shares later. At $10m ARR or so, you’ll get to sell some. That will help you push on for the next 5–50 years.

10/ You are either a very good or a great CEO. We don’t know which yet. But. We believe in you. Hearing this would have helped a lot. Now I know to tell the founders I work with this exactly. That I am extremely proud to work with them. And that in almost every case, they are better founders than I ever was.

note: original post updated with full video on topic above

The post 10 Things I Wish My Board and VCs Had Told Me appeared first on SaaStr.

How a Rising Political Star’s PTSD Fueled His Addiction to Work


This post is by HBR.org from HBR.org

For Jason Kander, workaholic tendencies masked serious mental health issues. In order to heal, he stepped away from his successful political career.

SaaStr Podcast #349 with Craft Ventures General Partner David Sacks: “How to Turn Your SaaS Startup into an Army”


This post is by Amelia Ibarra from SaaStr

 

Ep. 349: Startups can get messy. Especially in growth. David Sacks (Yammer, PayPal) shares how to navigate from 50-500 employees.

This episode is sponsored by Lightmatter.

 

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from David’s session at SaaStr Summit: The New New in Venture. You can see the full video here, and read the podcast transcript below.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
David Sacks

The transcript for this episode is below:

David Sacks: So, probably the topic that I get asked about the most over the past 20 years, based on my operating experience, is just how do we get more organized? How do we solve this? And, wouldn’t it be nice if somehow we could turn this shit show into an army where instead of having this startup chaos, we could get the team working in lock step. Rather than having this feeling of disconnected functional areas, everyone in the company knows what to work on. Rather than having this erratic schedule around hitting sales targets, or hitting releases, that there’s a feeling that just quarter after quarter the company keeps shipping and selling. To me, that’s what the cadence says.

I learnt this operating myself. First, I was the founding era CEO of PayPal during the PayPal Mafia period, and I was a self taught product person, I learned how to do product management operations there. Then, my next company, I founded Yammer. I was the CEO. We adapted this operating philosophy for a SaaS company. We had to learn how to do sales and sales marketing and compete in heads up battles against other companies selling similar products. We refined the cadence then, and it worked extremely well.

We went from zero to 56 million in sales in under four years, and that resulted in a unicorn, we ended up selling the company to Microsoft in 2012 for 1.2 billion dollars. I think, to this day, it’s actually the fastest unicorn SaaS exit.

Now, during that time, we were competing against Salesforce, they had a competing product called Chatter. So, we studied what they were doing very closely, I read, Marc Benioff has a great book called Behind the Cloud, which I recommend to everybody. And, so we learned and adapted key elements of their system and incorporated it into this cadence. Salesforce is the most successful cloud software company, and so it’s worth, I think, learning from the things that they’ve done.

So, what is the cadence? Basically, it’s based on a few very simple insights, but very few startups are actually doing these things. So, the first insight is that there’s two key systems in a startup. The first system is what I call the sales finance system. And, the second system is what I call the product marketing system.

Both of these systems, in my view, run better on a quarterly cycle, and they should be planned on a quarterly cycle. Then the final, the third insight is that, well if you’ve got these two systems that are running on a quarterly cycle, if you just snap them together with a site off set, and we’ll talk about that, you can then create a single operating cadence for the company.

It’s very simple, I mean this is something that every start up can do. And, when a start up deteriorates into the thing I call the shit show, it’s always because one of these groups, or one of these systems is, either it’s not being run the way it needs to, or it’s not being snapped into alignment with the other systems. All right, so let’s talk about each of these systems and functional areas, and then I’ll explain how they all snap together.

So, the first system is a sales finance system, so let’s start with sales. So, sales, in my view, is best run on a quarterly plan. You can get there by process of elimination. But, two other ways to run a sales team is you can run them on annual quotas, or you can run them on monthly quotas, and in my experience, annual quotas are just too slow to judge performance, it doesn’t let you make modifications and adjustments mid course, you have to wait until the whole year is over.

By the same token, monthly plans are too volatile. Some startups can do monthly quotas if they have an extremely quick sales cycle. But, otherwise, for the vast majority of startups, you want to be on a quarterly quota plan. Then, the other thing you want to take into consideration is that if you adjust quotas and territories more than once a quarter, you’ll really start to affect the morale of the sales team, they’ll start feeling undermined.

So, the first part of the sales finance system is to recognize that sales must be on a quarterly plan, and then that allows you to create a series of milestones within each quarter. So, every quarter is going to start off the same, you’re going to start off with the sales kick off. At that kick off, the sales team is going to receive their plans, their territories, if there is any company objectives, or spiffs, things that the company wants to incentivize, those things will be covered then. And, you’re going to do some significant retraining, you’re going to retrain the sales team on the product, you’re going to train the sales team on any best practices. If some reps have been particularly effective, you’re going to want to share those learnings, that wisdom across the group.

The second month, mid quarter, you’re doing a lot of pipeline inspections, the sales leader is making sure their team is going to hit their goal, they’re making adjustments, giving advice in terms of how to actually close those deals. Then, and we’ll talk about this in a minute, but marketing and product will be generating news in the second month of the quarter, and sales can use that news to warm up prospects, email them news collateral, awards recognition that the company is getting and use that to help put deals over the top. Then, in the third month, you really want to avoid distractions, the team should just be head down on closing and making their number.

So, that’s the sales calendar. The sales calendar is part of one system with the finance calendar. I mean, this is pretty, I think obvious and intuitive, as well. But, the starting point for the finance calendar is to understand that there is a fiscal year, a financial or accounting based fiscal year for the company.

The question really is, well there’s only two choices for that, you can have a fiscal year that ends on December 31st, or you can put the calendar year, or you can have one that ends on January 31st, and my recommendation for most SaaS companies is that you want to have a January 31st fiscal year for the simple reason that you don’t want to be closing deals and have the entire year’s number, because a lot of deals will come down to the wire. You don’t want to be scrambling during that Christmas to New Year’s week when everyone is on vacation. It’s more humane for your sales reps to not make them work during that week, or to have their quarters depend on that. But also, it’s very hard to get hold of prospects during that time, and so I recommend generally a January 31st.

You also avoid being, smart prospects will know at the end of the year to demand discounts, because they know that if the vendor is scrambling to close deals to hit some number, they can get a better discount. You’ll be in a better position of leverage if you’re not having to give year end discounts, so I generally recommend January 31st.

Then, that means that your sales quarters that we talked about, will be based on that fiscal year end. So now, you can basically say okay, well look, if I’ve got that Q4 is going to end now on January 31st, so that means that my Q1, my quarter end is going to be now February, March, April, and then so April is the next quarter. Then, May, June, July, so July is the next quarter end. And then, August, September, October, October is the next quarter end.

So, we can now essentially snap the sales quarters to the fiscal year. You want to do this for reporting reasons, right? I mean, so if the finance team have closed the books on each fiscal quarter, report that to the board, you don’t want to be reporting incomplete, mid quarter sales numbers. You’ll have a much better idea of what’s happening in the business if your sales quarters are snapped to the fiscal year.

Then, the final thing I like to do as part of the finance calendar is make snap board meetings, because you want the board to review the information while it’s still fresh. So, I like to see board meetings, but typically quarterly board meetings occur two to three weeks after the close of these quarters, so we talked about when the results are fresh, that’s when we want to talk about it. And, now the team can get strategic insights from the board right at the beginning of the next quarter, and there’s still time to implement them for that quarter. So, that’s the finance calendar, and the combination of sales and finance working together is what I call the sales finance system.

So, let’s shift gears to the second system, it’s the product and marketing system, and the product calendar. So, the product calendar, I want to tell you about my philosophy on product management, and this is something I learned at PayPal and then refined it at Yammer is, a lot of people, a lot of founders I should say, resist the idea of having planned quarters around product management. I’ve really learned this is a good thing to do. Again, when you’re in that seed stage, when the founder can just run around and tell engineers what to build, that’s fine. But again, we’re talking about the time in a company’s life when they’re expanding from 50 to 500. And, just having the CEO running around every day or every week, telling people what to do just doesn’t scale, and so you need product managers, and those product managers, I’ve learnt, work best on a quarterly calendar.

So, the analogy you can use is, let’s say that you want to fill a jar with rocks, pebbles and sand, we have this graphic here down on the bottom right, and so how do you do it? You see the jar on the left here, they weren’t able to fit the rocks in the jar, because they filled up the sand first, then they put in the pebbles, and then they did the rocks. The right way to do this is to put the big stuff in first, the rocks, then you put in the pebbles then you put in the sand.

Product management is a lot like that, where what you’re trying to do is maximize, it’s about resource planning, right? So, you’re trying to maximize the amount of stuff that you can get pushed through the system with a fixed amount of resources, it’s about maximizing that.

What I found is that companies that don’t think in terms of a quarterly product management calendar, one of two things happens. Number one; they just ship sand, right? They don’t think in terms of shipping tent pole features, new products, major releases. Or, when they do, they end up going wildly, wildly over schedule. So, they’ll put together, and ship a new product, but because they never really planned it, they didn’t scope it correctly, and so you’ll be talking about a product that should’ve taken, or was supposed to take one quarter and you’ll still be doing it two, three, four quarters later. I’ve seen V2s that were supposed to take a couple of quarters end up being literally years late, and it paralyzed the development road map of the company.

So, product management is useful to make sure that you actually do big stuff, you don’t just get the sand done, you actually get some big rocks in there. But, it also helps you make sure you’re scoping correctly. The rule we had at Yammer is that every project we would assign somewhere between two and 10 engineers for two to 10 weeks. So, the absolute biggest project that we could ever do, would be 10 engineers for 10 weeks, and that would be for the absolute most strategic priority. We would just say the max is 10 engineers for 10 weeks, and if we couldn’t do that, the product needs to be re-scoped, it needs to be shrunk down into something that 10 engineers could ship in 10 weeks, that we could put in front of users, get feedback about whether they liked the product before we then went on to the next round.

This is a system that we’ve used, and again what having a product management calendar does is allow you to think in terms of what are the rocks? What are the pebbles? What are the sand? Let’s fill up that jar with rocks first, then pebbles, then sand. You will actually get more done like the jar on the right as opposed to the jar on the left, you will actually fit more through your road map.

Moving on to the marketing calendar. The marketing calendar, I guess a couple of key points here; one is that marketing and product, those calendars are one system for the obvious reason that start ups are product driven, and most news that the company puts out will feed off of new products, new product releases, and so marketing is really going to piggyback off of the product management calendar, it’s going to be marketing those product features. Those product features should be the centerpiece of marketing events.

I also believe that for marketing purposes, having four big releases is better than having 52 small ones. It’s not to say you can’t ship code weekly, or even daily, but in terms of for marketing purposes, and for planning, for product management purposes, you really want to think in terms of a big seasonal release. That’s what Salesforce has done very effectively for 20 years, is that they have a winter, spring, summer, fall release, and the compounding effect of that has been huge.

The other thing you want to think of for marketing purposes is you really want to have an event based marketing calendar, and I don’t know why more start ups and more founders don’t do this. Some of the most successful founder CEOs that we’ve ever had in our industry, have used this technique of event based marketing.

Steve Jobs, I mean the big iPhone release that we think about the big product releases that Apple’s done, they were always based around events. Marc Benioff of Dreamforce, now the largest tech conference, and obviously Elon, whenever he puts out a new product, it’s based on a live product demo.

So, having an event based marketing calendar, I think it does a number of really important things. Number one; it combines, there is so much clutter in the world right now, just putting out a press release doesn’t get it done. When you can combine the press release, that news, with an event, you bring together customers, and fans, and influencers, and you combine it with a live demo, you don’t just put out a press release and create what’s called a lightning strike, it’s much more compelling.

The next thing, though, is that there is an internal benefit, a huge internal benefit to the company in terms of setting dates, setting deadlines in advance. The deadline, the date for these events gets set well in advance. So, if the folks at Tesla know that Elon is going to be going on stage to present the Model 3, they’ve got to hit that deadline. Same thing with Marc Benioff at Dreamforce, knowing that you’re sending your CEO on stage with that product is tremendously motivating for the team inside the company, they know they have to hit those deadlines.

Then finally, it forces the leader of the company, not just the team but the leader of the company to think about prioritization, and what’s really important in a different way. Because, you the leader are going to have to go on stage, and present and explain this big product announcement. You’re going to have to effectively justify why it matters. So, it forces the leader of the startup to think months in advance about what is going to be important to customers.

What I find is that if you think about the product marketing calendar this way, it makes it a little bit more like the sales finance calendar where sales is about selling to customers, sales doesn’t work unless a customer buys what you’re selling. I think that’s a good dynamic, you get market feedback, and I think having to think about the customer and their reaction while you’re doing the product and marketing planning, is a very good thought exercise for the company.

So, that’s how the product and marketing system works. Now, let’s talk about how you snap these two systems together. The most important concept here is very simple, is that you want to have an offset, say a half quarter. You don’t want the product marketing system for their major event, for their launch event, to be coming due at the exact same time that the sales quarter is coming due. You don’t want to light  everyone’s hair on fire at the same time, it creates too much chaos inside the organization.

Also, it’s not good change management. You don’t want the product and the product demos changing right when sales is trying to close deals, you want some stability in the product. By the same token, when you have these big lightning strike events in the middle of the quarter, that usually comes with a bunch of positive press coverage, and sales can take those articles, they can email them to prospects, they can use it to warm up prospects who’ve gone cold, or they can use it to help further deals, to help put deals over the top, so it’s just a much more useful time. So, if you think about these two systems, you just want to off set them by about half a quarter, okay?

So, now let’s think about, well how are we snapping this together? Number one, you’re going to decide your fiscal year, it’s going be December 31st, or January 31st, and then you’re going to snap the fiscal quarters to that, that will snap the sales quarters to it, and then you’re going to snap your event schedule, so that events occur in the middle of the quarter, then you’re going to plan your R&D cycle to hit those event deadlines. It’s very, very simple. But, this will give you a super structure for everything happening inside of the company.

Now, one objection that I get to this, I know a lot of you think that when you hear about events that you think no one is going to come to your event. That’s what I thought at Yammer, is that we decide we’re going to do this thing called Yam Jam, and we made it our annual user conference, and we were very worried that no one would care and no one would show up. But, you would be surprised, even our second year as a start up, that a large number of people showed up. If you have product market fit, sufficient to raise a series A and a series B, and you’re scaling from 50 to 500 employees, you have a fan base out there, you have a community and you can engage them.

You may start small, it may only be a few dozen people at this event, but it will grow. Just look at Dreamforce, the products that Elon and Tesla have rolled out, what Steve Jobs did at Apple, obviously those are very sexy products. But, what Marc Benioff has done at Salesforce, that’s CRM, it’s not inherently the most exciting product, it’s business software. And yet, they’ve been able to, starting from very modest beginnings, they’ve been able to turn that into the largest tech conference.

So, you will get people to turn up at your event, and what I recommend here is one user conference a year, and then three smaller webinars, or city events, doesn’t have to be a huge event for the other quarters. But again, it forces that discipline around making sure that what you’re working on matters.

So, let’s translate this. So, now you’ve snapped these two systems together, let’s just quickly review what’s going to be happening in a quarter. The amazing thing about the cadence is I can tell you what’s going to be happening inside your startup, inside a SaaS startup, without even knowing what software problem your business is addressing. But, if you’re using the cadence, you’ll be marching to this beat, and you’ll be well organized.

So, month one is going to be dominated by the idea of planning, and so you’re going to start off with the sales kick off, there’s going to be prep for the sales kick off. And, at the sales kick off, you’re going to get new sales plans, territories and quarters are going to be finalized.

Meanwhile, the finance team is closing out the quarter, and by the way, the PMs are presenting at the sales kick off, they’re basically re-training or training up the sales reps on the latest changes in the product and what’s coming out next, because selling your project road map is a very important part of the sales process as well. So, you’re going to have this cross functional opportunity at all these events for those kinds of interactions.

Next, you’re going to have board meeting prep, and you’re going to have the board meeting. Then, immediately on the heels of that board meeting, you’re going to want to feed those strategic insights that you’ve talked about back into the company, and typically you’re going to do a product road map prioritization for the next quarter’s launch event. Not for the one that’s just about to happen, but for the next quarter.

Meanwhile, code freeze and QA are beginning for the launch event that you’re about to do in month two. So, month two is going to be dominated by, say in week seven, you’re going to do this event. It’s either going to be your user conference, or it’s going to be a city event, or in the days of COVID, it could just be a webinar, that’s fine. But, you’re going to basically have this launch event, and the first couple of weeks of month two are going to be dominated by people getting ready for that, the marketing collateral is going to get finalized, the event prep, event details are going to get finalized. You’re certainly going to be doing QA and testing on the release, you might be in closed beta with some customers.

Then, the other thing that’s happening, though, is that the product managers should be racing ahead to be getting ready for what’s happening next quarter, and they’ll be working on specs and design reviews for what’s happening for the next quarter.

At the end of the month, at the end of month two, you’re going to want to debrief. You’ve just done this big launch event, how did it go? What are the learnings? You may have convened your customer advisory board, what did they say? You’re going to want to debrief and internalize those lessons. You’re going to want to do recognition inside the company, you’re going to want to recognize the people who made it all happen, there should be some celebration. Normally, there are good things to celebrate, you just did a big launch event, and so recognizing and celebrating that accomplishment is a good thing to do.

Like I mentioned, sales reps can now use the marketing news that you just generated at this event to warm up leads, and the engineering team is going to be really busy if you’ve just done a big launch event. If you’ve just done a big launch, there’s going to be bug fixes, and so for a week or so after launch, they’re going to be busy doing that. Meanwhile, the PMs are finalizing the next quarter’s launch, the next quarter’s release.

Then finally, you’ve got the third month of the quarter, which is really a heads down period inside the company. So, what’s happening in month three is that the sales reps are really focused on just closing deals, you want minimal distractions for the sales reps. Then, coding is going to begin, if it hasn’t already, for the next quarter,s release. Remember that in month two, the PMs and designers really finalized their part of the release, the planning, and now coding begins in earnest. So, month three is really this heads down period where people are just cranking out code and closing deals. And, that’s basically the quarter and then you start again with right back at it, now you’re at the beginning of the next quarter, and you’re right back at sales kick off, you’ve got the quarter end close, you’ve got your next board meeting and so on.

So, this really creates an operating cadence within the company. One of the big benefits of the cadence is, I think it has important cultural benefits. So, there’s this old debate about culture inside of start ups which is well, should a start be run like a sprint, or a marathon? You’ll hear founders defend both approaches. My view on this is actually, which one is better? I would say neither. I think the best approach is ladders.

So, for people that are into fitness, ladders are when you sprint for a while and you do a sprint and then you rest, you let your heart beat return to its resting rate, and then you repeat, and then you do it again. If you try to run, the fact of the matter is that start ups do take a long time, they’re an infinite game, and if you try to just run it as a sprint without rest, you will burn people out. Conversely, if you have this attitude that it’s just a marathon, I do think that is a recipe for going slow.

So, to me, ladders are the right balance culturally. Sprint, hit this big launch, let the sales team sprint to hitting their quarter end, but then you have a recovery period. You have the sales kick off, you have that week after the big launch event where you’re letting people celebrate the accomplishments, reflect on what has happened, and then you do it again.

So, let me just summarize. So, what is the cadence? I think the cadence is four key calendars in the company, which consolidate into two synchronized systems, and then one operating cadence when you have those two systems working in tandem with each other with this half quarter offset.

I think human beings are wired to think in terms of seasons and quarters, and I think this is a very natural way for all of us to work, is in terms of these quarterly planning cycles. The first system, the sales finance system, really orients around the quarterly close as its central event, what it’s building up to. And then system two, the product marketing schedule or system is oriented around this big launch event.

You want to use these two systems in tandem with each other. Whenever you have an event, it’s an opportunity to synchronize people inside of the company around cross functional collaborations. So, like I mentioned, the product managers are going to speak at the SKO. And, I also believe in the sales reps attending, say virtually, through streaming any of these product launches. I think it’s very important to involve the whole company in these big events. Then, what you’re going to want to do is, if you think about your all hands meetings, you’re going to want to work backwards from these events.

So, knowing that these are the big milestones inside the quarter, you almost know exactly what each all hands is going to be about. So, after the quarter closed, you’re going to do an all hands meeting to review the results, what just happened. The all hands meeting before the big launch event, you’re going to want to preview what’s coming out. The all hands meeting after the launch event, you’re going to want to debrief on what you learnt. The all hands meeting after the board meeting, I think it’s a good idea to review what you just talked about with the board.

You should also be thinking about, what are these key events, because each one creates cross functional collaboration, but each of these important events also creates the opportunity for an all hands meeting inside the company, so you can keep everybody up to date and synchronized.

Then, I would just tell you, the compounding effect of shipping just four great quarters a year. I know if you’re shipping daily or weekly, and you say well, wait four? Again, I’m not saying you shouldn’t just push code live, I think it makes sense just for version control, you want to push code. But, again in terms of the planning cycle, I know it seems like you’re getting less done to have four lightning strikes, or four mega launch events compared to 52, but again, think about the rocks versus sand, and the compounding effect of implementing the cadence quarter after quarter for years is enormous, because I can tell you most companies in this few hundred employee range, or big companies, they’re lucky if they have one great launch every year. So, if you can do this quarter after quarter after quarter, the way that Salesforce has, the compounding effect of that will be very big.

Then finally, like I mentioned, start ups are not a marathon or a sprint, think in terms of ladders, I think you’ll be pleasantly surprised culturally what that does for you.

The post SaaStr Podcast #349 with Craft Ventures General Partner David Sacks: “How to Turn Your SaaS Startup into an Army” appeared first on SaaStr.

Research: 3 Biases That Shaped CEOs’ Pandemic Response


This post is by Achim Schmitt from HBR.org

Based on a survey of 500 Chinese firms.

How Common Is It For Founders To Get Some Liquidity in A Venture 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.  And these days, the valuations where it is offered is creeping down a bit as bigger funds do earlier stage deals.

It’s not out of the goodness of their hearts. It’s so they can buy more and/or win the deal. 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.  And if it helps them win the deal, potentially at a lower valuation, that’s easy for a big fund to do, too.

Some advice here though:

  • Founders taking secondary liquidity at lower valuations creates signaling risk — especially at the CEOs level. If a founder is willing to sell shares at $30m … there is no way most folks will 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. Selling 1% of your 1,000,000 shares though 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 — the investors likely will be happy to buy it all.  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.

In the end, done right, “Secondary Liquidity” is a good thing.  I wish I’d taken some as a founder, the second time around.  If it can destress your life, and help you go long — well that’s a win-win-win.  But the best founders never want to sell cheap.  They know those shares are precious.

View original question on quora

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The post How Common Is It For Founders To Get Some Liquidity in A Venture Round? appeared first on SaaStr.

I Think My Boss is Going to Hire a VP Above Me. What Should I Do?


This post is by Jason Lemkin from SaaStr

Q:  I’m Head of Product and I think our CEO is actively recruiting a VP of Product. What should I do?

Go talk to your CEO. It’s totally fine to do that. You just … don’t know.

A few additional thoughts and learnings:

  • If you are potentially being “topped”, be a bit Zen about it. Don’t see it as a threat. It may mean you need to find another role, or another start-up at some point. But not today, and not necessarily. It may be deeply disappointing to find out the CEO thinks she or he needs someone “above” you on the org chart. But that’s probably also a sign you’ve done some things well to get the company to where it is today.
  • Understand most CEOs often don’t handle this well themselves. It’s complicated. When you think someone may have reached their limits, when do you tell them? Do you involve them in the search? How early? Just understand it may be awkward for your CEO, especially if she/he wants you to stay. So don’t take it too personally if you feel like you haven’t been kept enough in the loop.
  • There are many good reasons to stay at least a little while longer, if you are getting a new boss. Maybe he’ll be terrible. But they might be great. You might learn some things from him or her, even if you don’t stay forever. It’s almost always worth it to be a good sport and just see what happens.
  • Being part of the interview process for your boss is good to do once. You will learn a lot. It’s a surreal process and you’ll learn so much being on the “other side” of helping to hire your boss.
  • There may not be someone better than you — even if a search gets kicked off. It’s often a learning experience.  It can be awkward.  But often, you ended up re-interviewing for the VP role.  And you might win it.

So it’s hard not to take some of this personally. But just go to your CEO, be respectful — and just ask.

If you are a stretch “Head of” or VP, you should be regularly having this discussion with your CEO anyway.

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The post I Think My Boss is Going to Hire a VP Above Me. What Should I Do? appeared first on SaaStr.

What CEOs Still Haven’t Said About Race and Policing


This post is by Aaron K. Chatterji from HBR.org

Those who’ve spoken out have largely focused on values, not reform.

Facing Reality, Modeling Positivity


This post is by HBR.org from HBR.org

In stressful times, it’s a challenge for leaders to find the right mix of transparency and optimism.

Good Leadership Hinges on “Organizational Intelligence”


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IQ and EQ aren’t enough.

U.S. Health Care Is in Flux. Here’s What Employers Should Do.


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The pandemic has rocked an already shaky system.

Before You Hire That Awesome SaaS Veteran — Just Make Sure They Are Willing To Do The Work


This post is by Jason Lemkin from SaaStr

One of the biggest changes since we started SaaStr is the massive number of SaaS veterans out there.  The decade-long run of next-generation SaaS start-ups, and the explosion since 2015 of SaaS unicorns and decacorns has led to a lot of experienced execs on the market.  This is great.  I wish there had been even a fraction of this many SaaS execs when I was getting going.

  • But many experienced folks just don’t want to do it all again.  Because SaaS is hard.  Each quarter, the bookings plan starts at $0 again.  The lead commit goes up each quarter and every year.  The bar to grow even faster has been raised.  And as time goes not, not everyone wants to do all of that again.
  • So it’s natural to want more of a team to do it for you.  To hire 3-4 folks to do what you used to do mostly yourself.  To want a head of sales operations and a director of sales to help carry the load not later … but on Day 1.  To not have to manage any customers yourself in customer success, and instead be a strategist.  To hire a head of demand gen to get those leads for you, so you don’t have to get all those leads yourself this time.
  • In many cases this is a good thing.  When you are ready to really scale — say $8m-$10m+ in ARR, usually — there is now a whole surplus of candidates who will come in and build a team for you.  Often in just a month or two, if they are good at recruiting and have kept their network warm (as the best leaders too).  These days, the top VP candidates already are keeping 3-4 folks warm for their team.
  • And you’ll need a true team with management layers in each functional area after $8m-$10m ARR. You can’t scale after that without one.  Your marketing team will need not just a VP, but a head of demand gen, a head of content marketing, a head of field (such as it is now), and even marketing ops.  You’ll need 5 folks in marketing at $10m+ ARR, not 1.  You’ll need not just a VP of Sales, but also a head of sales ops, a head of SDRs, a head of East Sales and a head of West Sales, etc. as you race past $10m+ in ARR.

The mistake though I see a lot is hiring this SaaS Veteran That Needs a Team Too Early.   There are so many great experienced SaaS execs out there, you may want to hire one you fall in love with at $2m-$3m-$4m ARR.  That has the experience, the insight, and even the intuitive deep connection to your product that is so appealing.

But if she or he won’t do the work herself, are you ready to sign up for not just 1 hire — but 5+?  Do you have the budget?  And do you have the budget for all the soft and hard costs associated with those hires?

Most of you don’t.  Not yet.  So make she your dream VP can really do most of it herself in the early days.  Or at least, with just 1 or 2 key hires.  Push here.  Make sure they will really do whatever work you need them to do on the budget you really have.

Because I see too many CEOs fall in love with an exciting VP that in the end has done it all herself before, but today, doesn’t want to anymore.  Which is fair.  It’s just, unless you have the scale, the capital and the infrastructure to support an entire team now … that great VP.  Won’t be great for you.

And she or he will fail, leave, or both.

The post Before You Hire That Awesome SaaS Veteran — Just Make Sure They Are Willing To Do The Work appeared first on SaaStr.

3 Ways to Advance Gender Equity as We Return to the Office


This post is by David G. Smith from HBR.org

It’s an opportunity to set new expectations.