As SaaStr Europa 2022 drew to a close, attendees took one more opportunity to ask Jason questions about topics like how to navigate the current market, the future of work, playing in a crowded space, and hiring your first VP of Sales.
Podcast episode 585 is an excerpt from the AMA:
Transcript
Jason Lemkin:
I’ve got no agenda, no slides. I did a lot of slides already. I just thought that if there was anybody left at the end of day two that had anything they wanted to talk about, scaling SaaS, fundraising, hiring, anything, and I could be helpful, we could do a little extra Q&A. I’ve got no particular topics but if I can help in any way, let me know. Open it up if I can help in any way, or I can make it up, but anyone got a question they’ve got to start?
Attendee 1:
Is there anything you don’t know?
Jason Lemkin:
Is there anything I don’t know? There’s a lot I don’t know. I think we’re all still learning. Well, look, I think everyone here, and importantly, for everyone you hire, you hire need to hire curious minds. It’s curious minds that let us be great at what we’re doing. I must have talked with four or five CEOs here today doing more than 5 million, not 500 million, who asked me… Oh! One doing a 100 million asked me, “Am I good enough to be the CEO still? Should I still be the CEO?”
Jason Lemkin:
That’s not the question you asked, but I do think it’s a question everyone should ask themselves each year, and the answer is twofold. One, if you can recruit people better than you, you should still be the CEO, and two, I think you have to have a curious mind. You have to be deeply passionate about what you’re doing and want to learn more. Sometimes we’re not as founders, sometimes founders sell their company because they don’t end up being deeply passionate about what it does.
Jason Lemkin:
For me, I find that the mechanics of building these companies, how it’s changed, the physics of it, are very interesting. So I try to be a subject matter expert, but everything I do… I learned a lot today. I learned… I’ve done a bunch of things with Henry from ZoomInfo. If you were at that one, you could probably see I learned a few things on stage, even though I knew the slides. So there’s a lot I haven’t learned.
Jason Lemkin:
For what it’s worth, I try to write these on SaaStr. I think there’s a gift today, which is that in the last two years… ZoomInfo only IPOed right after COVID hit, so it’s probably April or May. It’s not that long ago. It’s two years ago. Now there are 20 or 30 public SaaS companies we can learn from. I write one each week on SaaStr.com. If you haven’t seen it, it’s called 5 Interesting Learnings.
Jason Lemkin:
There’s nothing in those 5 Interesting Learnings you can’t find on stock-picking sites and Seeking Alpha. I try to do it from a founder’s perspective, and you can learn from these. What’s their NRR? How do they get their customer? What’s their deal size? What’s their acquisition channel? How much do they get from SEO and SEM?
Jason Lemkin:
It’s a rambling answer, but I think it’s just a gift that we can learn from all these public SaaS companies. Some things are too big, right? It was funny for Henry to say he segmented his sales team at 80 million in ARR. That’s a little late for a lot of people here.
Jason Lemkin:
But, we can learn a lot from ZoomInfo. Its sales and marketing efficiency, which is crazy good that early, the fact that there’s still only 11% international today and why. Those are the next-level gifts, this learning from the public companies and the real unicorns, because there’s something in each of them that you’re like, “Holy shit! This information was not … I didn’t even know it was public.” In some cases, it wasn’t even known just a couple years ago. That’s the answer to the question.
Attendee 2:
Where are we in the crisis in valuations?
Jason Lemkin:
The crisis? I’ll give you maybe a little bit…I went to maybe half the VC sessions. I’ll probably give you a different perspective on them. First of all, as I said in the opener, there’s no crisis in SaaS. There’s no buying crisis. And again, I mean this a little bit meanly, but there’s no excuse to not hit most of your plan this year. There’s no excuse.
Jason Lemkin:
Look at the public companies. Look at Snowflake and GitLab and ZoomInfo, growing almost 60% at a billion in revenue. Yes, Zoom and Shopify and folks that were huge COVID beneficiaries had a bit of a hit, but even those have resumed their growth path. There is a downturn here in venture, which I’ll chat about. But the downturn in SaaS, at best, is uneven. At best, it’s concentrated in overfunded unicorns and some parts of consumer. But, the economy, even though it’s weird, there’s inflation, it is close to as good as it’s ever been. So sell your product.
Jason Lemkin:
I just wanted to repeat that piece because, ultimately, they’re connected. I heard half the talks… Let me be clear on the valuation thing, which I knew before I came out here, but I knew even better when I talked to so many VCs here, it was a reminder. Let’s go back from the top, and Christoph touched on this, but we can go into more detail.
Jason Lemkin:
The highest stage of venture is crossover, crossover funds, TCV is one of an early one, but even mutual funds that invest in unicorns. And why these are crossovers, is they have a dedicated amount of capital, and they can pick a public company or private company. VCs mostly can’t do this. A few can, Andreessen and maybe Sequoia, but 99% of the VCs you meet, legally, they can only invest in startups, whether they’re late stage or early stage.
Jason Lemkin:
Crossover funds can go where it’s greener. For a long time, until this boom, until the 2019-2021 boom, crossover funds would be very careful. They would invest in … They would find a tech company that IPOed, that was a little undervalued, that people didn’t understand, and they would put 50 or a 100 million here. Then they’d find something funky like Atlassian, no one ever heard of, that was maybe bootstrapped, and they’d give them some money.
Jason Lemkin:
Then what you started to see is unicorns and decacorns rose. All that money went from public to private because, holy crap, Sequoia invested at Zoom at a billion. 12 months later, it IPOs at 4 billion, and 12 months later, it’s worth 80 billion. So everyone in the world wanted to do Zoom at a billion because there was the greatest play on mankind. So crossover ventures, they’re investing 0% in the private market. All that money’s gone at the top.
Jason Lemkin:
Then there are different types of growth, late growth and growth. Anything north of a billion is frozen. The deals aren’t happening. When you read… There are several unicorns that got announced today, I think, on Tech Crunch. I’m pretty sure all those deals were in process before the crash. I might be wrong, but I think if they say it’s not, they’re either misinformed or lying or euphemistic. There are basically no deals above a billion being done. There will be an exception, but holy cow, when companies like GitLab are at 400 million growing 70%, and they’re worth 5 or 6 billion, you can’t invest in a unicorn anymore. The math does not support it today. It could come back. So crossover completely frozen, late growth semi-frozen.
Jason Lemkin:
Then this iceberg kind of melts a little bit as you get closer to seed because you have a longer time horizon, valuations are not as variable. As several folks said, starting with Christoph, at the early seed stage, I would say, folks are about half as active as they were 60 days ago. So you have to try twice as hard, meet twice as many people and maybe be eight times as patient, not twice as patient. But I think it’s about half as open. Zach Coelius, who did the last session, he’s a prolific angel investor. We chatted after, I’m like, “How are you doing?” He’s like, “My deal flow and my deals are down 50%.” I thought he was going to say they’re up, because he is very active.
Jason Lemkin:
So I think that ties to 50% and then at the top it might be 5% of what it was. I’ll give you one last insider example. There’s a company I invested in, it’s a little funky. Last year it went 1 to 12 in 1 year. That’s pretty good, right? That’s pretty good. And they had a hundred VCs that wanted to invest last year. And he decided three weeks ago was the right time to raise. Perfect timing.
Jason Lemkin:
He sends me an email. I’m like, “Listen, don’t read everything on the internet. But where were you in December? Or maybe wait.” He is like, “No. I’m going to do it.” Those hundred shrunk to two. A hundred people would’ve funded him. Now, it’s not a cheap valuation, but it’s not a unicorn, but the hundred shrunk to two. That’s an anecdote.
Jason Lemkin:
Then let me finish, what’s different about the two folks? One of them offered to invest 50 to 75 million, the other offered to invest 15. So very different structures. The difference is one was a big growth fund, one was smaller, but neither of them had a lot of scar tissue. Neither of them had a lot of companies that they’re digging out, that were worth 5 billion and now are worth 1 billion. That triage consumes oxygen for individual VCs, but it also consumes oxygen in the fund. I only worked at someone else’s fund for 22 months. But, when you go to a partner’s meeting at a VC fund on Monday, and it’s four hours long or all day at big funds. Unfortunately, the yellow lights take up all the time, and the tougher times are, the more all the time is, “Well, our company, whatever, mug.net has eight months of runway, what do we do?”
Jason Lemkin:
The tougher times are, it consumes all the air so deals don’t get done. So the two out of the hundred that came through weren’t overloaded, not with dogs, not with red lights, because red lights are painful, but then you don’t talk about them ever again. But the yellow lights totally grew in every VC’s portfolio. Now they’re full of yellow lights, but these two are new. One has about 1 billion to invest. One has 400, but they’re new VCs, not brand new VCs, but new funds. An insider tip if you are fundraising, figure out… Now’s a good time to raise from new funds and newer VCs that have less baggage. If you look at their portfolio and they invested in Bird and Bolt and these other high profile…. And nothing wrong with those, I mean, they tried, their founders, but if you see those, maybe the odds that comes through are pretty low today. Right?
Attendee 3:
Oh, Hey Jason, what would you tell to your 20 years old Jason?
Jason Lemkin:
I don’t know if I had enough presence of mind at 20, so maybe I’ll answer the question differently. I think a couple things I would say. One in gen… Well, maybe 20, I’ll go with 20, and then maybe I’ll go like 28 or 30, 33. One is stick with everything good longer. Don’t be impatient. A lot of folks that have a lot of passion like me are impatient. They’re impatient to do great things. They’re impatient when the people around them are not as committed, they’re impatient. If you join something either as an executive, a VP, or a director and your boss is great, but there are other things that aren’t, stay. Stay if you have a great boss. Even if the growth slows, even if there are issues, stay with the great boss.
Jason Lemkin:
If you’re a founder and you have something good, do it longer, don’t quit. Don’t move on. Don’t wish that you ran a hotter startup. If you do something great, time is your ally. Everything compounds. That’s my advice to the 20-something self is stay longer at everything. I’ll tell you, of all the founders I’m impressed with, I’m most impressed with founders that I meet and I’m like, “How you doing”, “Well, I’m at 2 million in revenue and I’m going to grow 2.5 X this year. I’m going to go from 2 to 5 or 2 to 6.” I’m like, “Oh my God, that’s great. When did you start the company?” “2012.” Go read 5 Interesting Learnings from UiPath on SaaStr. UiPath took 10 years to get to 1 million in revenue. 10 years to get 1 mil… Those are the… I respect all founders that give it their all, but those folks are so much better than me. I could never go 10 years to 1 million in revenue. So go longer.
Attendee 4:
What does hiring look like?
Jason Lemkin:
What does hiring look like? I think that I see, so far, zero benefits to hiring from these issues here. First of all, for a couple reasons, this first thing is mean to say, I know I’m going to trigger some people, but the problem with small layoffs, if you lay off a small number of people, a lot of them are not the best people. So great. Some company lays off 4%. There are gems there, and go find the gems and hire them. There really are gems in every company, and layoffs suck, but usually, they’re cutting the bottom 10% of their performers. These layoffs don’t help in SaaS. They don’t address the lack of labor because…. It’s terrible. If they lay off a third, be on it that day; just be hitting them. If it’s single digits, there’s a gem, but maybe it’s hard. It’s tough, but only a gem.
Jason Lemkin:
That’s not helping. Despite TechCrunch and Twitter, there are not that many layoffs, it’s not that big of a deal. That’s not helping the lack of hiring, and everyone that’s big is hiring like there’s no tomorrow. I’m going to get the numbers wrong, I think Amazon has 10,000 open positions out in AWS. I think Azure’s like 7,000, Google. I hope that people don’t arrogantly quit like they did during the great resignation, but I don’t see any other relief. I think hiring is harder than ever. The only thing I will say informally here is, cry me a river. Because every single year I’ve been an entrepreneur, hiring was hard. It’s either hard because you’re early in an industry and there’s no talent at all.
Jason Lemkin:
Anything you think, it’s worse when there’s no one available. Let me tell you, I’ve done multiple companies where, in the beginning of e-signatures, in the beginning of implantable batteries, there was nobody. So, cry me a river that 100 people want to hire your VP, but at least she exists. It’s actually better today because the people exist. It is better than it has ever been. Of course, it’s competitive because there are more startups than ever, but it means there’s more talent. I still think there’s nothing harder as a founder than recruiting or a VP, it’s never easier, but I’m not sure it’s harder. It’s just different, and so you have to evolve your playbook.
Attendee 5:
Hey, yesterday you said that we are all vitamins and not painkillers. Can you elaborate on that a bit?
Jason Lemkin:
I just think there are a lot of VCisms that are a little bit dumb and trite, and there are germs of truth in them, but you don’t want to take them too seriously. VCs are like, I don’t want to invest in things that just make my company a little better. Vitamins make me a little healthier, but painkillers solve a huge… I need the painkiller when I break my leg, but the vitamins you don’t really need to take. Maybe I don’t even really understand that. I’m not even sure that’s the best metaphor now that we say it. The point is, vitamins are kind of nice, but painkillers you must have. In the enterprise, there’s a handful of problems you have to solve. You need your CRM, you need your ERP, you need your human capital management. These are categories of software that have existed for 30 or 40 years for a reason. You can mock Salesforce or Oracle or Workday, but these are endemic issues that will always need heavy software.
Jason Lemkin:
They’re painkillers. Then a lot of folks will say, “Well, great, another video app. I don’t need a Zoom or a Calendly; that seems dumb. Yes, it’d be nice if the video and the audio synced, and it’d be nice if the link worked in the calendar thing, but we don’t really… Come on these are not earth-shattering problems, these sorts of companies.” My point is that even if that’s true, even if some applications are so epic, they’re rarely there in the beginning. Salesforce was a very rudimentary SMB app for a brief period of time, but it was. It sold to very small companies. It didn’t even have custom tabs. It just had four tabs out of the box. Even compared to where Pipedrive was in 2013, it did less. It was rudimentary, and it became enterprise. Salesforce today is clearly a painkiller. It solves massive enterprise workflow and issues, but it did not start there.
Jason Lemkin:
That was my point. We all just really started with the 10X feature. One little thing that matters to a buyer that someone else doesn’t do or ignores or doesn’t have time to do anymore, that’s what matters. Not immediately building…being irreplaceable your first year. It’s not going to happen.
Attendee 6:
Hi. So you were saying that we shouldn’t worry so much about the economical situation. What would you-
Jason Lemkin:
With a large caveat for fundraising. How it impacts you, but keep going with the question.
Attendee 6:
Yeah, my question would be, which megatrends do you think we should look at these days and these coming months?
Jason Lemkin:
I’m not smart enough to know about megatrends. The only thing I think makes sense for everyone to do today as a minor trend, is… There is still uncertainty today, now is a good time to go a little more enterprise. Those budgets are not as impacted. There is some, and if you’re not enterprise at all, don’t start tomorrow because of a little bit of uncertainty. Don’t go from a $10 a month product to 1 million dollars a year. If you’re already teasing into it, if your deal size is going up a bit, if your customers are getting a little bit bigger, I think so much of the money is going into bigger enterprises today in cloud. That it’s a good conservative bet to accelerate that six or nine months in your product roadmap.
Jason Lemkin:
Go a little more enterprise now where there’s less sensitivity, less volatility. The most volatility is in high burn rate unicorns. Those are the most stressed today. SMBs are still… there’s still going to be some stress. There are weird things happening with SMBs, with inflation and some parts of consumer, but so far, there’s no material impact in enterprise. That’s my minor…no megatrend, that’s my minor trend. I would say the other thing is, that’s the most important thing. I think the other thing just to be aware of it may not be true of your company, I think it’s really, really… Even though overall buying is growing at insane rates, it’s going to be a long time until folks are comfortable with lower-quality revenue again. What I mean is, FinTechs with 20% margins, folks with huge… Even folks like Twilio, one of the best companies in the history of cloud and SaaS, with 50-something percent margins, they’re suffering because their telecom costs are high. Things with margins below that, they’re going to be out of fashion for a really long time.
Jason Lemkin:
If your gross margins are lower, because you have hardware, because you have telecom, because of the way you do FinTech, it may be time to rework things. As a really interesting example, Payhawk’s here; they’re great. They’ve architected the way they do payments differently in Europe. Brex is amazing in the US, Ramp is amazing, but those are like 30%, 20% gross margin products. These guys, and probably others, are 70%. Last year, no one cared, just grow. No one really cared about revenue quality. Twilio grew insanely because no one really cared whether it was 55% or 80% margin. Today these are the models that enduring, and it’s tough with these low margins. So you can’t change who you are, but now’s the time to go a bit more enterprise and increase your margins and quality of revenue. Those are the tactical trends to take advantage of.
Attendee 7:
What does the future of work look like? Do you think the remote trend continues, or will we see back to the office more?
Jason Lemkin:
We’re all equally experts in this today. We’re all running companies that, in many cases, were not distributed before COVID, and almost all of us are distributed today. Actually, I only know a few things everyone else doesn’t know, but I guess just one thing is, I don’t think this is profound. We’re never not going to be distributed. We have learned these skills the hard way, and we’re all global, and it’s never going back. There may be segments that go back fully to the office, and certainly, in places like London and Europe, it’s more common, but I can tell you in SF, all the offices are close to lease now. They’re full and they’re all empty, and they will never be full. You will never, in SF classic SaaS, be able to get anybody to go back to the office.
Jason Lemkin:
Now the old school tech companies, the Apples, Googles that are in the Bay Area, even Microsoft, LinkedIn, where they have folks that have lived in the Bay Area for 20 years and did not leave. They can try to force them to go back to the office. I don’t want to drive 15 minutes from my house in Mountain View. Because most of their teams never moved. The Apple and LinkedIn, the Googles, they never moved. You can just say, “Come on back.” Most of us, the vast majority of our teams no longer live… So it’s gone, right? That doesn’t mean the office is dead.
Jason Lemkin:
I’m a small investor in a company that used to be called HelloOffice, that’s now called Raise, that does leasing and software for Y Combinator and our old co-working space and Notion, a lot of cool companies. They’re doing pretty well now, and all the folks that are unicorns, not all, a lot of them want a trophy office. They want a 100,000 square feet, 150,000 square feet for when the teams come together or for the management team. So I think the hybrid office is here, but for tech, it’s in infrequent use, but I don’t know if that’s super helpful.
Attendee 8:Â
Hi Jason. So can we talk a bit of this differentiation in enterprise SaaS? In MarTech, you have a bunch of players, it’s not winner takes it all. Some of them are stronger, and then there are younger guys like us that want to win the market or grab the share. Shall we innovate more in marketing or in products, kind of unique features? What type of approach do you think is more important?
Jason Lemkin:
There’s a lot in that question. The question is, in crowded spaces, should you focus on marketing or product or what should you do? I think Henry from ZoomInfo had a lot of good thoughts on it that I can reiterate now that he’s at 1 billion in revenue. I think if you’re early stage, it’s the wrong way to think about it. Crowded, it’s not bad to be in a crowded space. Crowded space means there’s a lot of buyers and there’s a lot of money. Crowded space also means you don’t have to do everything. You don’t have to do every single function to still get a customer. There are spaces where if you don’t do everything, the product’s worthless. If there’s a thousand vendors in the space, that means if you just do one thing well there’s enough ROI and there’s enough mental bandwidth to buy that you can sell.
Jason Lemkin:
That’s the reason there’s a thousand marketing applications, because every CMO needs to generate pipeline, awareness, leads, and they will test anything that works and shoot what doesn’t and keep trying things. Same in cybersecurity, like the threats always change. I’m not an expert in cybersecurity, but since the dawn of time, security is evergreen because every year, you’ve got to try to keep up with threats, every year there’s budget. There’s always room for innovators, even if they’re niche solutions. For all these types of categories, I know it’s trite, but you just have to find your 10 X feature that someone will buy. What’s something, that one little thing you can do 10 times better, that five people can build, not 5,000, that is being ignored by the marketers mediocre and that people will pay for. There’s constantly more room in many spaces for this to be possible.
Jason Lemkin:
You figure out your 10X feature, that’s how you break out. Like ZoomInfo with Henry, they started off in a little segment of data around sales leads that no one else had good data on. They sold a little bit, and they built on, and they built on it, and then they bought their direct competitor, and they built on. They started with a little piece, and we should have… Maybe it would’ve been a good topic to have more… They attacked with a little tiny piece that they were 10X better at. Even though general contact data was a commodity and they found one piece and they built it and built it and built it. Then in a lot of categories, eventually, there’s parity. With Gong and Chorus, they bought Chorus and Gong and Chorus… I would argue Gong has now become a much richer product than Chorus, but there were a couple years where they both were these point solutions for listening to your sales teams. They were both great, but Gong out-executed Chorus, even though, in his opinion, the tech was similar.
Jason Lemkin:
We could debate it, but his point isn’t wrong is that there becomes these parity things where marketing is more important than product, but it’s pretty uncommon, but before 10, 20, 30 million in revenue and sometimes a lot later.
Attendee 9:
What would be your advice on finding a mentor on a personal level and for management, and what are things that we should be careful about when finding a mentor?
Jason Lemkin:
It’s such an important topic. I wish I had the perfect answers. I’ll say a couple obvious things, then try to be helpful. One is that there’s no point in a mediocre mentor. Don’t hire washed-out people, don’t hire someone that didn’t do it, don’t hire some… There are some great ones. Be wary of expensive coaches. It’s worth the money, but they better have done it. They better have done it. I would say most mentors… It’s tough because the best ones don’t really want to be mentors anymore, and the mediocre ones want to be mentors. As a founder exec, it’s your job to hunt and find the best, because they’re always hard. But again, I really see negative ROI from a mediocre mentor, so barely helpful. Then I’ll give you the next, barely helpful insight and then just try my best answer.
Jason Lemkin:
I think you want two mentors, for most of the folks here. You want one mentor that’s about 18 months ahead of you and one that’s maybe four or five or further years. If we could get Henry from ZoomInfo to be our mentor, that’d be great, and he has so many good lessons, but you heard him on stage today, “Oh, it’s early around 80 million.” Most of us aren’t there. That’s not how we define early. I would give a lot for Henry to be my mentor, but not my only mentor.
Jason Lemkin:
If you’re at 2 million, find someone at 10, if you’re at 10, find someone at 30. If you’re at 30, find someone at 100. I was just talking with a great CEO here at 100, and she’s seeking out everyone that’s just IPOed. She’s seeking them out like a heat-seeking missile. She asked me for three introductions in 60 seconds to CEOs I know that have just IPOed or are going to IPO because, at 100, she’s two years behind them. So you need both. No mediocre; you need to really get the benefits. Then the only thing I can tell you is every great founder learns to be a noodge without being too noodgey. I’m not great at it, but most folks they’re aggressive without crossing the line.
Jason Lemkin:
You don’t know who wants to be a mentor, but you might be surprised if you do a volume game. It’s like recruiting for a VP today. You’ve got to talk to 30 or 40 VPs at least to find a good one, three isn’t enough. Do the same thing with a mentor. Try to meet, do some in person, do Braindates, do it over the internet, do it over LinkedIn. Don’t be too transactional, but aim for 30 or 40, and you’ll be surprised. There was a moment in time when I didn’t have that much to do 2013, 2014, and I was an angel investor, but really a mentor. PJ from Showpad spoke yesterday about the way to 100, I was the first person they met when they came to the US from Belgium. I’m pretty interested in iPad for SaaS, that was new. I’m like, “You guys seem pretty cool. I’ll be your mentor.”
Jason Lemkin:
Now there’s just no way. I don’t care what you do, I can’t be your mentor. I don’t care if you’ll pay me 1 billion dollars in stock, I can’t be your men… I literally… Even for me, I could imagine a random time in two years I might have time. There were moments in COVID I had time. There were moments, there are brief moments in COVID, I’m just speaking personally. You wouldn’t know unless you did the outreach at just the right time. So you got to be tenacious. What’s that? [inaudible 00:30:10] Yeah, but you got to make your luck as a founder, right? It doesn’t find you. Right. That’s the thing.
Attendee 10:
I like your statistics around SaaS spending, and nevertheless, we see some budget freezes with enterprise sales. Especially in the manufacturing side of things. So any best practices around, do you just go higher because you need bigger budgets, or do you go lower and split up the solutions so you get your foot in the door?
Jason Lemkin:
I’d say two things. First is strategic, and then the tactical. The strategic thing is for everyone, it is true, but in most cases and these freezes are new. I would say, this is really rough. It may not be true for you, but I would say really rough. A lot of SaaS companies are seeing 20% of their companies have freezes, but the top 20% are growing faster than ever. So instead of whining about the freezes, go hunt the 20% that aren’t frozen. It’s not 100%, and it’s not even 1 to 1, you actually are coming out a little bit ahead because the top ones are growing even more than the ones that are frozen. That’s the strategic. The tactical thing is what folks are doing. There was just a little sidebar conversation that Jack Ryan on our team said, “When it’s frozen, it doesn’t mean it’s inaccessible, but you may have to touch 10 times as many people at the company.”
Jason Lemkin:
So don’t give up, if you talk to one person at your buyer and she says our budgets are frozen. Well, have you talked to the CMO? Have you talked to the CRO? Have you talked to the other VP? Have you talked to all of them? You may find if your product is not $10 million a year, that there is still budget, but it’s a different way to access it. Freezes are not all frozen, but there’s always extra budget. There’s always innovation budget, and there’s always unused budget. I frankly didn’t even fully appreciate this until I learned this talking to a bunch of leaders here; you might have to talk to 5 to 10 more people at those frozen companies to open it up. If they’re not going bankrupt, it’s often openable if they really want it. You just need all the stakeholders to say yes, not just one.
Attendee 11:
I have a question around scaling from founder-led sales, especially if you’re good at closing as a founder. Question A would be, is there a ballpark estimate for the ARR and when to do it and then how, just feeding with SDRs and keeping the closer or actually bringing in someone who takes over completely from you so you can get a bit hands-off and more strategically laying out for the next years.
Jason Lemkin:
There are a lot of questions there on founder-led sales. It’s a discussion that I don’t think can be discussed too often because if I have to talk about this single biggest mistake I still see with founders I work with, is screwing this up to this day. They screw it up even more often. I see it’s screwed up all the time, and I’m going to come back and tell you when… I want to talk more about this, but I want to give you the number one mistake founders make today that I don’t know that they made that often five years ago and definitely didn’t make when I was doing it, is they step out of sales immediately.
Jason Lemkin:
Here’s the one thing you got to learn for founder-led sales. When you hire a VP of Sales or direct or whatever, Head of Sales, this is how many minutes you get back in your day. Zero. Now, what does happen is if they’re any good, they rework your calendar. Instead of the CEO being the opener and the middler and the closer, they handle the closing, and they handle the opener, and you become more of a middler, okay? You spend your time being the visionary, the architect, the product expert, you jump into the deal, and the customer falls in love with the CEO, and maybe even the CEO does the extra demo. A few things they don’t do: build the relationship, build trust. Maybe doesn’t have to send the contract out for his signature, but you never, ever, ever get the time back. At least not very much of it.
Jason Lemkin:
Now, there are times when you’re 100% in sales, you got to get a little bit of your time back, but the number 1, 2, 3, 4, 5, and 6 mistake I see founders is they finally hire a Head of Sales, and they’re like, “Well, I’m going to spend 5% of my time in sales.” 100%, no, no, 90% of the time, sales plummets. Plummets. If you accept the fact that you know need a Head of Sales and then you accept the fact you’re not going to get any more of your time back, which is hard emotionally for founders… All founders, “I want get back to product. I’m tired of sales. I want to get to…” no. If you built a self-serve PLG product, then great, but you didn’t, you built a product that needs… You’ll never get your time back. If you accept that, then you’ll actually hire the right VP of Sales.
Jason Lemkin:
Instead of hiring someone with the perfect resume, so you don’t have to sell anymore, you’ll hire a wingman. You’ll hire a wingperson. You will hire your Rio. I haven’t seen… what’s the new Top Gun movie called? Maverick. Do they still have the one in the back? The Rio? One of you’s got to be the Rio. You’re still in the plane together. You don’t get to get out of the plane. All of a sudden you’ll hire someone you want get in the plane every day with. You want to co-sell together. You want to backfill together. You want to figure out what she’s good at and then get out of her way and then do the stuff she’s not good at. You’ll have a radically different approach to the hire, when you accept the fact you don’t get out of sales. That may sound basic, but 9 out of 10 founders make this mistake.
Jason Lemkin:
They don’t want to be the Rio. They don’t want to do the work. Those are the real answers. In terms of when, actually, the timing hasn’t changed since the first SaaStr post here in 2012. We’re in the 10th year of SaaStr. Get two AEs that hit quota. One’s not enough. If it’s one, you don’t know why. If it’s one, the VP of sales doesn’t know why. If it’s two, the VP of sales is a hiring job mainly. If you have two hitting quota and the VP of sales is good, even if they’re new, even if they’re a stretch VP, they’ll figure out what the two are good at and hire 3 through 30. If you hire a VP of sales before you have two reps that can hit quota, the risk factor is massive. The only time you should take that risk is when you are truly atrocious at sales.
Jason Lemkin:
When you are so bad at sales, horrible… And listen, it turns out it’s hard for a founder to be this bad at sales, because even though you’re nervous to ask for money and even though you don’t know the lingo, customers love to talk to the CEO. They love to talk to the CEO at Henry’s level at 1 billion, they love to talk at 100 million and believe it or not, they love to talk to the CEO when they’re your first customer. Just use the letters CEO, don’t be arrogant. Don’t be Mark Zuckerberg from The Social Network. Just say, “Hi, I’m Linda. I’m the CEO of a small growing startup out of Barcelona. We’re 10 folks and we’re here to solve your problem.” That’s magical. Any customer that’s actually going to take that call for those 10 people in Barcelona, from the CEO, they’re already interested and you can close them. The CEO can close them.
Jason Lemkin:
Even if you don’t know how to close, it may take a month longer, but you can close them. Even if you think you’re atrocious in sales, I doubt it. I think you’re at least, okay. Mid-pack. Your skills as a CEO make up for all the other ways you’re crappy as head of sales. But, if someone gives you 3 million bucks in your seed round and you are the worst salesperson in the world, take the risk. Even if you don’t have two reps and you can’t hire reps, use the 3 million bucks, because you’re almost certainly going to flush it down the toilet, but you got to make a play. It works out. I’ve seen that work out once in a while, but boy, it’s risky.
Attendee 12:
A challenge when scaling up: I just got an email from a prospect. So we got money. We are growing, we get more meetings. We just got an email saying like, “Okay, based on your marketing, your speediness of response and all this, it was great. But the demo was messy. And actually the UI is not really what I was expecting.” So I’m wondering, did you see companies dealing with this just because of the fastness of growth or…
Jason Lemkin:
So a customer came in, they saw your website.
Attendee 12:
Yeah.
Jason Lemkin:
They saw your marketing, they loved it. They didn’t love the product.
Attendee 12:
Exactly. It’s pretty scary to hear when you are in a conference, when you’re talking about product-led growth.
Jason Lemkin:
Let’s step back for a minute. There’s a silver lining here. This is one of the things anyone can fix in this… Is it June? There’s a whole month left. This is something almost all of everyone here, except you, can do in June, which is make your marketing site better than your product. I wrote this in SaaStr and then I rewrote it. Listen to me, your marketing site should be better than your product. It should be prettier. It should work well. You don’t have to write a lot of code on your marketing site. You can do it yourself, you can hire an agency, you can do it in WordPress, you can do it in Webflow. If you have to, you can do it in Notion, but make it… It’s easy to edit.
Jason Lemkin:
I know it’s not your question, and I’m going to answer your question. But for everyone else, it might be a feature and not a bug up to a point because it’s really a shame, especially when you have a very producty team and the product’s great and they don’t touch the marketing site and then they hire a mediocre marketer and he makes it worse. I’m like, “Oh my God, that site doesn’t even say what you do.” I had one founder who walked around here and went to her booth and came to me and said, “This booth doesn’t even say what we do.” That’s a booth that’s worse than the product, which is not that different than a marketing site that’s worse. To some extent, that should be true. That’s point one, point two is my co-founder back in the day did something that really upset me as someone that thinks they’re ethical and upfront, is when we launched EchoSign/AdobeSign, he put 20 integrations on our marketing site of which we did none.
Jason Lemkin:
Now other people do this. He’s like, “Well, I’m not sure people wanted Salesforce integration back then, but I’ll make a page that says we have it. And then I’ll talk to the lead and then I’ll build it if we get three.” We put them all up and Salesforce was the one that all asked about, so we built the first e-signatures on Salesforce and he was right. I hated that he did it. I wanted to kill him, but he was right. You have a little bit of that. The good news is your customer, your prospects are telling you what to build. That’s a gift. They’re telling you what… Most of us don’t have enough extra leads telling us what to build. The bad news is your product doesn’t do all of it today, but you can sequence it out. The next lead you get like this, you can fill one of the gaps and then next quarter two, and then three or four quarters later, you close the next one that looks like them.
Attendee 13:
What is your vision for SaaStr Europe and how we as a community can help you in achieving your goals with this conference?
Jason Lemkin:
What’s the view of SaaStr Europe? We’re still learning. We don’t have to spend too much time on SaaStr, but since all of you invested all the time to come here, we did 2018 and 2019 in Paris, mainly for fun. They were cute. They’re beautiful. They were basically, though, large community meetups versus SaaStr Annual in the US. We want to be the number one gathering in the world for SaaS. There can only be one number one, there can’t be two number ones. Europe has grown up so much in SaaS and this has been so great, that we want it to be as close to the US as it can be. That’s the answer for this today.
Jason Lemkin:
There’s probably a lot of ways that you can help, but if people really want to… There’s two things you can do that would help. Number one is bring your teams next year. We’ll continue to do more and more content, not just for founders, but for all of your team for sales, mar… And if you haven’t been to the US, we try to have a lot of content. So if you bring your CS leader, your marketing leader, your sales leader, your engineering leader, your product leader, they can have enough value that in theory, you could bring your whole team or even some of your mid-level managers. You can help tactically by bringing more of your team next year.
Jason Lemkin:
The other thing that people can help more in this room than you realize is, and we’ll remind you, promote our inclusion program. We spend almost $2 million a year on our inclusion program. We give away thousands….It’s not just tickets, but we do give away 2000 tickets. It doesn’t look like it, but each person costs us about $1000 here. The average person pays $500 bucks. So we lose $500 bucks, but our good friends in the middle, thank you very much. Go get your badge scanned because they paid half your ticket.
Jason Lemkin:
We have budgeted in, we would like 2000 great, less represented founders at Annual and 1000 at Europa. We do okay in the US, we came up short this year. I was going to talk about it at the inclusion brunch, but we ran out of time. We did a little better in Paris than we did here. We ran out of time, I’m frustrated, I don’t know why, but… Socialize our inclusion program. We have… If the $500, $600 is important, we will subsidize it completely. We give them early registration ahead of time. That’s helping us reach our inclusion goals is one of our top… We talk about it every Monday, every week and we do pretty good on speakers. Our speakers have been at least 50% women and 66% less represented for 5 years, but we have more work to do on attendees, because SaaS is 80% dudes.
Jason Lemkin:
It is. Our list is a hundred thousand people. We know the gender… Forget about other vectors. We have 150,000 people. So if we send that list, it’s going 80% dudes, 20% women. So to get to 40% think about how much work it is, mathematically. The good news for speakers is we can pick; we just say, we said no manels in 2017. We tell all our speakers, you have to bring a diverse co-presenter, and if they say, no, we just say, “Don’t come.” But with attendees, it’s like, you ask the question it’s more work. So any help on spreading the word on our inclusion program is it’s deeply valued and it’s one of our… We work on it literally every single week. So thank you.
Attendee 14:
How much of the great stuff we’ve heard over the last couple days is applicable to network/marketplace businesses? And who would be a great person to consult with on that specifically?
Jason Lemkin:
It’s a really good question. I don’t know. A lot of the best SaaS investors do B2B marketplaces and B2B SaaS together. I’m embarrassed to say I’m not a marketplace expert, and I’m even more embarrassed to say, I’m not even sure I’m interested in it. I’ve done things that have marketplace elements, but figuring out the ratio of each side of the network, those are not my strengths. What I have learned of the limited involvement I have is that, if the buyers are similar and the ACV is similar, the people are similar. The motions are similar, and it’s pretty obvious today.
Jason Lemkin:
If there is any genius in SaaStr, that’s now 10 years old, it’s abstracting product away from the fact that our go-to market motions are pretty much the same at an ACV. It sounds obvious today, but 10 years ago, it was really disruptive that, if your product costs 20K and my product costs 20K probably we have a lot in common, as long as we don’t talk about the features. Frankly, product and even engineering, marketing, and sales are all pretty darn similar at a price point. That’s the best… But I don’t have the best mentor or other idea there. I think the majority is applicable, but there’s a small chance I’m wrong.
Attendee 15:
Could I please ask for some clarity in the point you made earlier? So you mentioned earlier that it’s quite risky to hire a VP of sales or a head of sales whatever, with anything less than two quota-hitting account execs. I’m interested in understanding why, because we’ve why we’ve done that with one quota hitting account exec., But in our case, he helped a lot to put operations process in place and recruit. What exactly do you perceive the high risk to be? Is it because you’re burning a lot more cash before you’ve got quota-hitting people?
Jason Lemkin:
What happens is… You talk to any founder here that’s passed a few million in revenue, certainly past five, ask them who their magical sales rep was. They have one. Okay. Mine was Joe Colletti. I hired Joe back in the day at Adobe Sign Echosign, he crushed it. Then I hired a terrible VP of sales who hired 10 reps, most of them never closed a single deal. Joe was great, but he was a magician and no one knew why he was a magician. Now, yes. If you’re a wicked smart VP of sales and you spend the time with the magician, you’ll learn what the magician is, but if you have two, you have run massive AB tests. No sales reps are the same. Some talk a lot, some demo a lot. Some are great closers. Some are good middlers. Some are great conversationalists, but you won’t… Very few VPs of sales will be able to figure out the playbook without two folks that can run the playbook.
Jason Lemkin:
You’re asking for too much. Even our little team… Our sponsors make this alive and we have 30 million of sponsors at SaaStr this year, 50 million next year. We have a tiny sales team. One of our sales guys has done 23 1/2 million of that in 2 1/2 years. Now we have a good team, but he’s the magician, and when Brian who’s, our head of partners or sales came and said, “We can’t have one. We got to have five, right?” To hit the plan. And what Brian did, which is rare, is he took a quota and he became the… even though it was the VP of Sales, he became the number two AE himself.
Jason Lemkin:
Now we had another one, but he left. My point is very few people could do that, and now you’re nodding because you realize it’s the playbook. A good startup VP of Sales does not need 10 reps hitting quota to know the playbook. They might like that to feel comfortable, but they need two so they can see what’s working and hire the third, fourth and fifth. I did it. I say this because I learned it was true, but when I hired Brendan Cassidy, who I wrote about, who was the first head of sales as LinkedIn to be mine, there were those 10 reps when he came in and he got rid of eight, he kept Joe and he kept Sam Blond, who’s now CRO of Brex, and brought in other folks. So we sort of had two, but it was really one and a half.
Jason Lemkin:
So, yeah, it can be done, but Brendan’s pretty good. Most startups I work with that bring in a VP of sales at zero or that magician, they never figure out why the magician was magical. They never know why the magician was magical. What happens when you don’t know why the magician’s magical and you see this pattern so often is reps 3 through 10 close nothing. Anyone had that experience where the next one’s closed nothing. Maybe not in this room, but maybe if we were later stage…. Nothing. You have one or two, they close 400,000, 1 million a year, and then you bring in some, and they just close nothing. You need that playbook for most VPs of Sales. What’s that? Are we over time? Is that the sign? Is this one more question? One last question. Yeah. We have one last question.
Jason Lemkin:
If your question isn’t good, we’ll do another one. Just so we’re clear. I’ll try to make it good, but if it’s not good we’ll do one extra one.
Attendee 16:
No pressure.
Jason Lemkin:
You have to end on a good pistachio or nut or something like that, the bull, right?
Speaker 14:
So the first two AEs that you bring in…Â Who gives them the playbook? Are they good enough to bring their own because they’re so different or is the founder trying to educate them [inaudible 00:51:03] secret sauce.
Jason Lemkin:
That’s a good question. There are so many stories. It’s our folks who do like… who are sales folks at heart or salesish they really… Henry said he dialed in too many processes and systems early. I think that’s rare, although not uncommon but rare. Most of us can’t train them. What you need is a natural athlete. You need someone that has worked at another SaaS company, at similar deal size. Then here’s the third thing and Henry brought this up too, smarter than average and loves software. They’ve got to be… Anyone hired that magical rep? Are they smarter and love software? You usually see that they… Or they love your customer. They may not be a great closer, they may be quirky, but they can run the demo as good as you and the customers…
Jason Lemkin:
My Joe, my guy. I remember the first year I went to Dreamforce, I’m walking in San Francisco and this big guy grabs my blazer arm, he grabs me, “Jason, Jason”, I’m like, “Who are you?” He was from an accounting company called Intacct that Sage bought for a billion. He is like, “I love Joe Colletti!” I’m like, “Great to hear that you love Joe.” No one back then had ever been so passionate about e-signatures in the history of the… Now there’s a thousand people at DocuSign and everything, but no one had ever loved putting a signature in a document quite the way Joe had. Joe had also been a thespian. He was an actor, and he was good with computers, but his sales job before that, he was mid-pack. Now, bottom. Bottom’s tough.
Jason Lemkin:
He was not a top seller before that, but he had another 20 IQ points and 20 EQ points of passion. I think if you talk to founders and ask about that magical sales rep you’re going to hear… And Henry said it too, they got their early guys had to be smarter, and they have to be able to do the demo, and they have to have passion. Then we can break on this. You can boil all of that down to one thing and we’ll leave it at this, because this is a mistake I’ve written about this so many times. So many of you make this mistake. Your first… the sales reps, you hire as a CEO, you have to be willing to buy from them. Every time a… And this is actually true of a VP of sales too, but every time I talk to a founder and they tell me, my first three sales reps didn’t work out.
Jason Lemkin:
I’m like, it’s a bummer. I always ask them the next question’s always the same, would you have bought from them? No. Why’d you hire them? Well, they worked at Twilio, they worked at Slack, they worked at GitHub, who cares? Those are great brands. Would you buy from them? Joe had come from a fifth-tier MailChimp competitor, but everyone came out of meeting him, “I want to buy from this guy,” in the meeting and that’s infectious. That’s infectious. Boil all those characteristics of… Sold at your ACV, passionate about the product, can do a demo. As a founder, they will fail those criteria. They will not meet those criteria if you wouldn’t buy from them, and if you would buy from them inherently, they’re going to meet these criteria. Do not hire sales reps yourself that you wouldn’t buy your product from. Just pass, no matter how desperate you are.
Jason Lemkin:
I’ll leave you with this. This is for sure true. Henry said the same thing at a billion in revenue. Once you hire a VP of sales, and once she’s proven herself, once she’s proven herself, the rule doesn’t hold. You cannot force your VP… If your VP of sales hits their number and they inflect the curve and one month or one quarter after they hire, sales are better, so they have proven themselves… Doesn’t matter whether the sales have gone up 2X, but just that they’ve improved. They will bring a much more heterogeneous type of sales rep. They will bring in reps that you think are dumb. They will bring sales that would drive you nuts as CEO, they will bring in reps you would not want to talk to. They will bring in reps with ADD, they will bring reps that still use Windows devices.
Jason Lemkin:
They will bring in all these types of folks, but she knows what it takes and she knows that sales is still a human process. There are different ways to get there, different motions and let it go once you have a good VP of Sales, let them hire whoever they want within reason. They’ll be much more diverse in all ways than anyone you could ever hire, because you don’t need to buy from the ones they hire. So thanks everyone for the extra time. Thank you so much for coming. Everything was great. Thank you.
