The Latest from SaaStr: Why Build vs Buy is Really Now vs Later

So something quietly changed in the past few years.  Maybe it was the investing craziness of late ‘20 through late ‘21.  

Maybe it was VCs not wanting to rock the boat.  Maybe it was a lot of startups just plain not having real boards of directors.

What’s changed is the majority of startups that are venture-backed don’t seem to get the CEO’s and founders’ compensation packages approved by the board anymore.  

At least not through the early and even middle stages.

Most of the Seed / Series A / Series B founders I’ve invested in don’t get their comp approved by the board.  Eventually, everyone does when the company adds a true CFO and outside directors and even a compensation committee pre-IPO.

But so many founders skip it these days for years, even after raising VC capital.  

Until just a few years ago, though, almost every founder got their annual comp approved by the board, at least the CEO. A few thoughts on getting the CEO’s compensation approved by the Board of Directors.

Goodness, this is one of the toughest parts of scaling.

I remember Aaron Levie, CEO of Box, and I discussed this at one of the SaaStr Annuals, when he lost his VP of Engineering. He had no back-up and thought that was it for Box, it was over.

We’ve all lived it. I still live it myself!

It’s one of the biggest risks, not just in the early days, but really just as you scale.

Until you get to at least 50 employees, there’s rarely a second layer of management, a Plan B, a back-up for each role.

All I can tell you is this:

• First, if you hire great VPs, it partially takes care of itself. Great VPs attract great directors and great ICs. A Great VP almost always hires at least 1 great person under her than can take over. So always listen and learn, and err on the side of promoting the best you have.
• Second, the rest of the team rallies — if you have a good team. This isn’t a perfect answer, but if you have a good team, they get it. They know they have to step up. They fill the gap as best they can.
• Third, it’s better if the mediocre leave in the end. The best ones tend to stay longer, and it’s the mediocre that leave faster. You may fear the hole in the org chart if someone mediocre leaves. But in the end, you’ll see that it would have been even better if the mediocre had left earlier. It’s time to get on with finding someone great.

In this episode of the podcast, SaaStr Founder and CEO Jason Lemkin shares five more marketing strategies that are sure to generate more leads if done right.

If you aren’t spending money on marketing, it’s time to step it up.

Most SaaS companies don’t spend enough on marketing, and that’s a mistake best avoided. 

Most of these SaaS marketing strategies require little money, which is great for those lean, mean teams looking to get the most bang for their buck. As you decide which ideas to implement, remember you don’t have to do all of them. Pick one or two and do them well.

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

Learn how to bring payments in-house without taking on extra costs and risks and create a better payment experience.

We’re less than 7 weeks away from SaaStr Europa in London, June 6-7!

As always, we have an amazing agenda for you! Here are just a few of the top SaaS leaders that will be speaking.

In the early-ish days, maybe even as far as $10m-$20m in ARR, as you talk to larger prospects you’ll have a lot of “Build vs Buy” discussions. 

We didn’t hear these as often in the peak crazy times of late 2020-early 2022, when budgets to buy SaaS exploded. 

But the pushback is back in force again.

•  “Oh, our IT team could build it.” Or
• “We’ll try to hack the functionality using a product we already have.”
• “We’ll see if we can do it ourselves first.”

You’ll hear somewhere between a little and a lot of this until (x) you have a very well-established brand and (y) an extremely feature-rich product.

No doubt, in the early days it’s often sort of true.  If your three engineers spent 6 months building a hack — of course, another 3 great engineers could do the same.  In fact, they can do it faster and better than you did.  Because you’ve already built a roadmap to get started in your app.

But ultimately, it’s a false choice.

I’ll share my stories.

In my first start-up, we raised $9m in our seed round — a large first round, but the times were different.  The VCs set my salary without discussing or consulting with me (a different time, indeed). 

My prior salary as a VP before the company had been $150,000, and they raised it to $180,000, with a performance-tied bonus.  On a monthly basis, that was a pretty small % of $9m for the guy that closed $6m in revenue in Year 1.

The second time, at Adobe Sign / EchoSign, we “only” raised $2.6m in our first round.  There, each dollar mattered more … and also, I had a few nickels in the bank from the first one …

So the second time, when it was up to me, as CEO:

• My salary was $120k for the first 8-9 months or so.
• Then, I took $0 for another 18 months or so until we raised the next round because we almost ran out of money.
• Then once we raised $6m, we raised my salary from $0 to ~$150k.
• Finally, for our last little stretch before our acquisition, we raised it to $175k, once we were cash flow positive.

It varies.

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

Secureframe makes it easy to get SOC 2 compliant. With guided workflows and one-click integrations, the entire process is automated.

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