Hey SaaStr Community,

I remember the first time I worked directly for a CEO. 

I’d reported to leaders before, and a VP before, but never the CEO.

It was also my first start-up job.  The start-up I joined had about 60 people and just one office, a big shared office like a fishbowl.  My desk was in there. 

In one big open office in the center of the company sat the CEO, the President, the Controller, and as of my first day … me.  The four of us in that fishbowl.

It was quite a way to begin your first start-up job.  By being in that office with the CEO and President, almost every time the “door closed” for a conversation, I was in it. 

I always asked if they wanted me to step out, but they almost always wanted me to stay.  I guess if it was a conversation they didn’t want me involved in, they could have met down the hall or in a conference room or at Starbucks or wherever.

So … that’s a bit of a long story on How it’s Great Reporting to a CEO.  You learn so much, you get to be a stakeholder, your responsibilities and influence accelerate at an unprecedented rate.  But it’s also hard. 

“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. 

But much more interesting than the short list of Kodachrome-colored successes that are easy to recall are the gloomier-toned failures I try to forget.

While I struggled to produce 10 things I got right in a decade, the list of mistakes flowed much easier. Here are my 10 greatest (worst?) hits, in no particular order:

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So I think the second SaaS app I ever purchased was LivePerson.  The first was Salesforce, to get our CRM going (today, we would likely have gone with HubSpot). 

And the second was LivePerson, to handle chat and support.

Back in the day, it was a magical app.  It tracked tickets, shared personas, and provided analytics.  All in the Cloud!

I fell so in love with support automation, when I invested, I did a ton in support, from Talkdesk (first VC), to Front, to Gorgias (#1 e-commerce contact center) to MaestroQA and more.

But the space is competitive, and LivePerson didn’t keep up, even as the product suite did more and more.  While today they are still at a stunning $480m in ARR … they aren’t growing any longer.  In fact, they shrunk 1% last quarter, and are losing money.

As a tough result, their market cap is $335m.  Less than 1x ARR.

A cautionary tale of being innovative, but over time … not keeping up.

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?

So folks in general are under more pressure to hit numbers and the plan than just a few quarters ago, and at bigger startups, that brings up a question in so many investor meetings and board meetings I attend at $30m+ ARR:

Should we cut off our long tail?  It just takes up so much time and resources, and just isn’t generating much revenue anymore.

What I mean is, in the early days, everyone is excited about your Free users, your single-seat customers, and the little guys. But later … that fades:

It definitely can vary based on what type of investor.

But for venture-backed start-ups raising from more traditional funds (the ones you’ve heard of), here are some rough rules:

Seed VCs would like to buy 10%, sometimes 15%, if they can. They often “settle” for a bit less.

• Series A VCs would like to buy 20%
• Series B VCs would like to buy 15%
• Series C VCs would like to buy 10%
• Series D VCs would like to buy 5%, or at least, be able to deploy at least $20m-$30m

These ownership percentages are pretty rough guidelines, but they are based on general rules about what it takes to “return a fund” for Series Seed through Series B, and to at least return 20% of the fund for Series C and later deals.

And if a VC truly believes a deal will be a decacorn, they can take a bit lower ownership if they really truly believe it’s a generation investment. 

But too small an ownership stake, and it’s just too hard for almost any investment to return enough absolute capital to “return a fund”.

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

Customer retention software can help your business reduce churn, increase revenue and grow LTV. Upzelo's guide explores both the build vs buy options and deep dives into the pros and cons when deciding between the two.

It’s here! We’re so excited to announce our launch speakers for SaaStr Europa 2023 in London.

Join us on 6-7 June at the Tobacco Docks to learn from the leaders of UiPath, Rippling, Zapier, Bill, Braze, Loom and more! Check out the detailed agenda here.

For 2 days, more than 75+ sessions and 100+ expert speakers will be sharing their best practices on scaling, revenue, profitability, venture and so much more.

And the best VCs from the best VC firms will be everywhere, and also doing mentorship sessions and meet-a-VC sessions to help you learn.  From Point9 to Accel to Index to 20VC and so many more.

There will be over 3,500+ SaaS and Cloud professionals joining us there in person. Will you?

Get your ticket now and get a front-row seat when SaaStr comes to London.

Not every leader is created equally. A bad experience with a revenue operations leader might taint your view of the position at all future companies, but that would be a mistake, as CRO Confidential podcast host Sam Blond learned first-hand. 

In this week’s CRO Confidential episode, Blond talks to one of the best revenue operations leaders on the planet, Cherishma Shah, where she shares insights into the Rev Ops role, why your startup might need one, and how to maximize impact with this powerhouse position. 

Shah is the Senior Vice President of Go-To-Market Strategy, Operations, and Enablement at Guild Education and formerly held the same role at Brex, working alongside Blond. 

Vanta is seeking a Content Marketing Manager to create content that brings the Vanta story to life, working closely with the Communications, Growth Marketing, and Product Marketing teams to grow our brand and our business. 

Vendr is looking for a Customer Success Manager to orchestrate the customer journey through proactive engagement strategies, guide Vendr’s clients to their desired outcomes, and drive value. 

• SaaStr 649: Being a Rebel and Building a Movement: Non-Traditional Approaches to Scale with DoNotPay CEO Joshua Browder
• SaaStr 648: CRO Confidential: Cherishma Shah, Senior Vice President; Go To Market Strategy, Operations & Enablement at Guild Education
• SaaStr 647: Scaling The Top SMB SaaS Companies: What It Takes with GGV Capital Managing Director Jeff Richards and GGV Capital Partner Tiffany Luck

Listen on Apple Podcast, Google Podcasts or Spotify

2007: SaaS is Really Hard

2008: SaaS is Really Hard …

2016: SaaS is Really Hard

2017: SaaS is a Great Business

2018: Everyone Invests in SaaS

2019: SaaS is Eating the World

2020: I’m a Genius

2021: I’m King of World!

2022: Nothing Makes Sense

2023: SaaS is Really Hard …

Years I have been investing that VCs complained

YC rounds were too expensive:

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

If it seems hard in SaaS, just remember if you can get to $25m-$30m ARR, growing at even a modest clip, and your burn is low ... someone will buy you

Just don't raise at a crazy valuation, that's all

© SaaStr 2023

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