Slowdowns But Not a Downturn in SaaS; Plus the Top News and Content of the Week

Hey SaaStr Community,

So those of us who know Vista Equity Partners (and many of you may not) think of it as one of the largest Private Equity firms buying SaaS companies.  Perhaps the largest. 

Among others, it’s recently bought Gainsight, Salesloft, Drift, BetterCloud, Pipedrive, Avalara (just in August), KnowBe4, and other leaders, along with established folks like Citrix and more.

But I hadn’t really thought of them as a proxy for all SaaS companies until I saw the CEO’s interview from a few weeks back.

The companies they own a majority of, are collectively at $24B (!) in ARR, so it’s second only to Salesforce in SaaS.

So Vista knows exactly what’s going on in SaaS buying now, especially enterprise and mid-market.

On average, its 50+ SaaS companies at $200m+ ARR are seeing growth ranging from 20%-25% a year, versus 25% last year. That’s some slowdown for sure, but not a downturn.

So ChurnZero put out a great new report surveying 1,037 customer success professionals.  The average size was 51-200 employees, so when things are taking off.

A few things stood out to me:

#1.  53% of VPs of CS report to the CEO or COO, and then 17% to CRO/VPS. Some good data on this split.  I generally see CS reporting to a CRO as a recipe for conflicts, but sometimes it’s the best option:

#2.  There is almost no software and non-headcount budget for CS.  This data is interesting.  64% of CS teams spend $200,000 or less a year on non-headcount, with growth stage companies spending the least, just 0.1% of revenue.  No need to throw money away on tools you don’t need, but folks, please support your CS teams!

So we’ve taken a look at Monday several times in this series, but with so much change in the world of SaaS and Cloud the past few months, it seemed like a great one to dig in on.

Because Monday remains on fire — growing a truly stunning 65% (!) at $550,000,000 ARR.

Jaw-dropping rates.

But it is down a bit from earlier in the year.  A reminder of the conflict in perspectives we’re seeing today in SaaS.  Growth levels for all the best are still at incredible rates.  But in many cases, down from even more incredible rates a few quarters earlier.  E.g., at $400m in ARR, Monday was growing 91%.

This edition of the SaaStr weekly is sponsored in part by BlueSnap

I haven’t failed as an entrepeneur, at least not yet. But I’ve made 30+ investments, and while many have been big wins, some haven’t.

Here’s what’s caused startups I’ve invested in to fail, or at least, not to thrive and succeed:

Founder conflict. This really can kill some startups. I’ve had one where 3 co-founders forced the CEO founder out. The problem was, the CEO was the only one who could sell, or really understood the customers.

Unable to control the burn rate. This hasn’t driven any startup I’ve invest in 100% to failure, but it’s driven them to unoptimal exits. Even if you raise a big round, it’s never infinite. Hire too many expensive VPs especially, that can’t deliver … and your burn rate can quickly grow 3x-5x bigger, or more.

You can’t have it all.

Not only in your first reps, but in any of your reps, really.  What do you look for?

Well, later, you can look for a lot of things.  And later, your VP of Sales can do the hiring.

But over dozens of SaaS start-ups that have churned through their first sales reps, I’ve boiled the key criteria down to Just Two.  Here’s all you need to know to qualify your first two sales reps.

This edition of the SaaStr weekly is sponsored in part by Demandwell

So it’s hard to miss the layoffs on Twitter and in the media.  Even tiny ones seem to get big press, like Salesforce doing a layoff of < 1% of its workforce.  And tons of startups, worried about their cash reach now, are doing hiring freezes.  It’s a natural, quick reaction.

But there’s a third path that’s much more common, actually.  It’s merely slowing hiring.

One example is Monday.com.  They are growing a smidge slower than last year, but really, still at just epic rates.  At 65% (!) at $550,00,000,00 in ARR.  That’s incredible.  And yet … they are slowing hiring.

This is one of the trickiest questions of all.  Especially these days, with so many struggling unicorns, and public SaaS stocks down 50% or more in many cases.

As a start-up employee:

You can’t possibly have enough experience or information to know if you should exercise or not;

Even if the company is doing well — is the price too high? How do you know? 

It's that time - 

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The two biggest mistakes business leaders can make in a competitive space are thinking their competitors are too smart or, alternately, too dumb. The game on the field has shifted dramatically over the past 12 months, and what matters to a startup today is much different from a couple of years ago. 

In the second installment of CRO Confidential, Founders Fund Partner Sam Blond, previous CRO at Brex, chats with the CRO at Divvy, Sterling Snow.

Snow and Blond dive deep into competition — how to position yourself against competitors and make the most of that competition. 

Merge is looking for a Sales Development Representative to manage customer relationships and work with our engineering team to relay customer feedback and feature requests.

Secureframe is seeking an Account Executive to build the foundation for strategic sales in a fast growing startup and hunt for new business in new verticals and markets

• SaaStr 609: SaaStr CRO Confidential Presents How to Survive in a Competitive Market with Divvy CRO Sterling Snow. Hosted by Founders Fund Partner Sam Blond.

• SaaStr 608: AMA with SaaStr Founder & CEO Jason Lemkin at SaaStr Annual 2022 - Part 2

• SaaStr 607: AMA with SaaStr Founder & CEO Jason Lemkin at SaaStr Annual 2022 - Part 1

Listen on Apple Podcast, Google Podcasts or Spotify

I see about 50% of SaaS founders make a truly terrible VP hire. Just terrible.

Common denominator?

The VP worked somewhere very well known before. And/or is very well know themselves.

It just blinds everyone

% of their job they do:

A player: 150%-175%

B player: 80%-85%

C player: 10%

Monday is growing 65% at $550,000,000

With 135% NRR

But sure, call it a downturn

Controversial I admit,

But I wouldn't hire someone from Twitter that complained about Twitter on Twitter

Even if they were 100% right in their criticism

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