The Latest from SaaStr: The Worst End-of-Quarter Sales Rep Behavior

Sell less of the company. And in particular, raise fewer venture rounds.

Let me give you my learnings on the SaaS side.

At Adobe Sign / EchoSign my answer was only to raise $8m, get to cash-flow positive with much of the money still left in the bank, and sell for an exponential multiple. But although it was lucrative, I would not do that again. With hindsight, it was too conservative.

We did an analysis of how overall dilution impacts some of the most successful portfolio companies that have also raised a lot of cash a ways bacl.

The uber-learning was that notwithstanding all the dilution of many rounds — total employee ownership actually went up once the companies hit post-Scale and say $100m+ valuations, no matter how much capital they raised post $100m valuation.

How is this possible?

The SMBTech economy is very different from enterprise software, and there is massive opportunity to capture it. There are over 400M small businesses worldwide. That’s more than 90% of companies and 40-50% of GDP. 

Jeff Richards, GGV Capital Managing Director, and Tiffany Luck, GGV Capital Partner, share what it takes to win as a SMBTech startup in today’s economy. 

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“I never make the same mistake twice. I make it 5 or 6 times, just to be sure.” -Random quote I found on the Internet.

If that doesn’t describe the CEO experience, I don’t know what does.

In February 2023, I hit my 10-year anniversary (or “Gainaversary,” as we say) of running Gainsight. After receiving my gold watch and Silicon Valley AARP card, I had a chance to reflect on a decade of community-building, cheesy music videos, and #CustomerSuccess. 

So the other night as the quarter was ending, a leading SaaS company sent us 4 threatening emails in the span of less than two hours to upgrade to annual and pay for 46 seats for a 48-month term or they will shut off our service. 

The thing is — we have 9 folks on the team. 

And aren’t even using half the seats we pay for.  And we’ve happily paid monthly for years, and didn’t ask for any change.

I don’t condone this behavior, but I do sort of get the motivation at least. 

It was end-of-quarter pressure at a leading public SaaS company whose growth had dramatically slowed.  A forced 48-month term would shore up churn, which has grown dramatically at this public company, and doubling our seats without telling us, if it worked, would more than double the revenue from the deal (they also raised the pricing).  Heck, if even 10% of their existing base signed this deal, they’d probably make the quarter right there.

But even if this works …What do you do next quarter?

This edition of the SaaStr Daily is sponsored in part by Infinicept

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So everyone is now paying the price for lowering the bar in the Boom Times of mid ‘20 to early ‘22.

On the hiring side, it often seemed like you just couldn’t hire anyone.  While layoffs are all across the news today, looking back, July 2021 was the nadir for layoffs.  Everyone was hiring everyone, anyone, back in mid-2021. This data from Carta helps illustrate it.

So we cut corners.

We stopped doing reference checks.  No time, didn’t want to know.  We hired job hoppers that never stayed anywhere for more than 18 months for leadership roles. We hired folks that really never understood the product in sales, or that never really finished any projects in marketing.  We all did, just to get it done.

And now we’re paying the price.  Those folks aren’t productive, or quit, or are gone. We learned. We learned it’s almost never worth it to lower the bar.

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