Hey SaaStr Community,

So now is simply a terrible time to be raising growth stage venture capital.  With the BVP Cloud Index down 40%+ from a year ago, and many of the top Cloud leaders trading for as low as 5x ARR, it’s just hard to justify a later stage $300m-$400m valuation round these days, let alone a true unicorn round.

We just did our latest Workshop Wednesday with Omers Growth, and they only did one growth investment last year.

Look, venture is a mess today. 

Crypto investments are going bankrupt.  Unicorns that looked like sure things a year ago are now running out of money.  Board meetings are endless drama sessions.  And there are too many founders looking for bridge financing, and not enough bridge financing to go around. 

And yet, these are still very good times to raise a seed round.  If … you are capital efficient.

So there are a lot of rough and armchair metrics for fundraising in SaaS in terms of valuations.  For years, the standard was “about 10x”.  Top-tier SaaS companies would tend to raise at around 10x ARR, with ones with slightly lower growth often raising at 5x.

As SaaS picked up, 10x ARR remained a rough standard but for Series A, B and later rounds grew to about 15x for top performing SaaS companies. 

In 2018-2019, it grew then a bit, and for very top SaaS companies.

20x ARR wasn’t uncommon for Series A and later rounds.

And then things just went crazy. Per Pitchbook and IVP, top-tier growth rounds had a 114x ARR ask at the very peak in 2021!

Get ready for the biggest SaaStr Annual yet!

This September, join an unbelievable community of 12,500-15,000 fellow SaaS industry experts--CEOs and Founders to CROs and CTOs. With early attendance up 226%, take advantage of this incredible opportunity to connect with some of the best leaders in SaaS.

Attend the SaaStr Annual this year to:

• Meet-up with your fellow team members while learning extensively from the top SaaS CEOs and professionals in the world 
• Network with 12,500 SaaS professionals. You could meet your next valuable customers or hires at this year's event
• Learn extensively from top professionals in workshops, Braindates, Meet a VC, the Big Party and more

Don't miss out on a chance that could change everything! 

Find your next great customer, hire or Investor at the Annual. 

So we took a look at ServiceNow a little ways back at $5B in ARR, but I thought it was worth another deep dive now for a very specific reason: Their very seasoned CEO has sees no real slowdown or downturn in their business. 

At $8 Billion in ARR, they're still growing ~30% annually, quarter over quarter over quarter. 

Given that customers sign 3+ year, $1m+ contracts, one wouldn’t expect any massive decline in revenue from any shorter-term macro effects anyway.  But new bookings aren’t really down, either.

During the Boom Times of late ’20-early ’22, we all often confused Taking Risks in hiring … with Just Plain Ignoring Flags.

Great risks to take, IMHE:

• Been a Director, but never VP. The best VPs of Sales I’ve hired were Directors of Sales before.  Not ICs, not top reps.  But folks that had built small teams themselves, and were ready to go to the next level.
• Very smart, but no industry experience.  Everyone over-indexes on industry experience.  The smart ones can pick up what matters in 30-60 days, though.
• Not perfect background, but showed up incredibly prepared.  Who cares where they went to school if they can crush it.  Even if you are quietly biased here, let it go when they show up incredibly on top of how your business works, and where it should go.  That’s far better in my experience than hiring a random top-tier university grad.
• Non-traditional educational experience.  See previous point.  A number of my very best hires never finished high school.
• Someone truly great tells you they are great.  The best folks you know … know the gems.  Even if you can’t quite see it yourself at first blush.

So I’m seeing something I haven’t seen since the high-stress times of March-June 2020 or so:

Founders alienating their investors during tough times.

Some of it is almost natural in tougher times in general, but VC-founder tensions are exacerbated these days due the mammoth size and outsized valuations of 2H’20 to early ’22. 

Founders are under stress where growth has slowed or stopped, and VCs are under even more stress than in other challenging times because they might lose a lot of money.  Not just a little money.

So I see … tensions.  And some of the tensions are just fine.  But then sometimes, I see founders push it too far.  Often because they feel pushed too far by their own board and investors 

The thing is, it’s not symmetrical. 

As a founder, you aren’t an investor — you’re much more.  You’re the CEO and the folks that run the place.  That means of course you know more operationally than your VCs.  And your VCs have more pattern matching on their side.  They’ve seen multiple startups struggle, and are looking for signs you’ll either bounce back later … or won’t.

One bit of advice though.  No matter how frustrating it can be to work with your VCs and investors in tough times, don’t break things.

One of the most important operating metrics in your SaaS start-up, if you aren’t predictably cash-flow positive, is your Zero Cash Date (“ZCD”).

You hear a lot about SaaS metrics, but this one doesn’t often come up.  It should, and it should be very near the top of the list of core metrics.

Your Zero Cash Date is the most likely date, at your current spend/burn, that you will run out of cash.

Many start-ups don’t track this religiously, or with 100% certainty, and just as importantly, don’t always share it with every single one of your investors — and your employees. 

As you can see in the survey above, it looks like most start-ups don’t really share their ZCD, or at least don’t fully share it.

As the past few years have demonstrated, it’s wise to expect the unexpected, especially when it comes to hiring. In particular, hiring for your sales team is critical in an uncertain economic outlook. Additionally, sales professionals looking for a new role should choose their next company wisely.

In this edition of CRO Confidential, Sam Blond, Partner at Founders Fund and former CRO at Brex, discusses the current SaaS sales landscape and tips for hiring in 2023 with guest Ben Braverman, Head of Flexport Fund and former Flexport CRO and CCO. 

Nium is looking for a Senior Sales Development Representative to generate new business opportunities and working side-by-side with our business development team to identify and qualify prospects across the Americas.

Captive Talent is seeking an Account Executive who can 

manage the leads and deal pipeline in the CRM, keep track of the required data, call out interesting elements and help derive sales insights.

• SaaStr 629: CRO Confidential: Sales Recruitment in 2023 For Candidates and Hiring Managers with Flexport's Ben Braverman

• SaaStr 628: Revenue Alignment: How to Pull Marketing, Sales, and Customer Success Together with Divvy CRO Sterling Snow
  

• SaaStr 627: Move Over, Sales: Why Product & Marketing are the C-Suite's New Power Partnership with Checkout.com CMO Leela Srinivasan and CPO Meron Colbeci

Listen on Apple Podcast, Google Podcasts or Spotify

If you have to “get profitable” in SaaS, how do you do it?

There’s a simple but hard-to-achieve answer: “Something” has to be cheap.

Be it engineering, or marketing, or sales. One of them.

Just “doing PLG” isn’t the answer

Most folks that were funded 12 months ago are not fundable anymore

If you're not sure, ask your existing investors

The #1 rule never to bend in startup investing:

Never invest in a founder that isn’t better than you

When I look back, this is really the only reason I’ve lost money

© SaaStr 2023

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