The Latest from SaaStr: 5 Interesting Learnings from Squarespace at $1B in ARR

Squarespace produces amazing websites for SMBs — we are a big customer at SaaStr.   And that’s powered it all the way to a $1B run-rate with 28% EBITDA.  Self-serve products can and should be quite profitable at scale.

But it’s also a story of hitting some limits on TAM, and growth has slowed to 10% at $1B ARR.  And subscriber growth of only 3%.

5 Interesting Learnings:

#1.  Only 32% of Revenue From Websites.  68% From Ecommerce.  You may think of Squarespace as a website builder, and it is.  But really it’s become a low-end Shopify and Woocommerce competitor.  The majority of its revenue comes from ecommerce.  Their pure website revenue, which they call “Presence”, is just 32% of their revenue.

There’s an issue I see blow up several times now as an investor. 

It’s when a founder takes a so-called standard SAFE … and modifies it, and doesn’t really tell the investors it is sent to.  Here’s what I’ve seen over the years:

• Removing antidilution protection
• Converting to last round security, not next round
• Converting to common, not next round security / preferred
• No premium / no return if company acquired before conversion
• Allowing unilateral amendment of the terms by the company
• Etc. etc.

A standard SAFE note isn’t all that safe, for founders or investors — but it is fast and simple.  That’s its beauty.

But with that comes a large degree of trust.  Trust that the SAFE at least is “standard”.  Especially because investors rarely review a SAFE, and almost never get a redline of any changes made.  If you change the standard terms, most investors will never know.

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The customer marketing journey in SaaS is like rock climbing minus the risk of potential death. But you’re falling, dodging, climbing, and hoping to scale the top of a mountain. 

Jason Lemkin, CEO and Founder of SaaStr, said, “How much do you talk about Customer Marketing? Be honest. It’s the #1 thing SaaS companies do the least of, that they should be doing far more of. It’s often an afterthought in the chase for new names, new leads, and new logos.” 

Tara Robertson, CMO at Bitly, says there is no playbook for customer marketing. Many people believe marketing equals generating demand, but Robertson doesn’t think so. 

Marketing is about generating value, and when you create value for a person on the other side of the funnel, you create demand. 

Keep reading to learn Robertson’s five customer marketing strategies guaranteed to grow your business. 

While many of the companies on SaaStr are based in North America and then expand to Europe and APAC, we’re seeing more and more expansion going the other way. Celonis started 12 years ago in Germany and recently began its move into the U.S. market. This has resulted in amazing hypergrowth.

In last week’s Workshop Wednesday, President Sales & Field Engineering Chris Donato and SVP Business Development & Ecosystem Shelli Vivona shared how to scale out a go-to-market org.

A little while back I was walking on the streets of San Francisco and bumped into a terrific public company CEO. A beloved CEO of a beloved SaaS company several years post-IPO.

We caught up briefly, and I asked if there was any way I could help. He said, “I’m looking for a great VP of Marketing.”

Oh goodness, I thought.

It really never ends or gets easier.

And it’s true … it probably doesn’t. Hopefully, you’ll have one or two great VPs that do stay forever, and go the distance.

But if you look at Carta’s report analyzing stock option plans, the median tech employee tenure is less than 2 years and there’s an ~50% chance any given employee will stay for 3 years (yes, those two metrics are confusing to see side-by-side).

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In SaaS, I nominate 3 for The Best Bootstrappers Ever.

First, Atlassian. While eventually, it did raise $100m in secondary, it never raised any “primary” capital at all. The founders owned 78% at IPO, and today Atlassian is worth $40B. The ultimate win here.

Second, Mailchimp. The founders never sold a share, primary or secondary, and sold to Intuit for a stunning $12 Billion (!).  The #1 most successful 100% self-serve bootstrapped SaaS story out there.  Wow.

Third, Qualtrics. Like Atlassian, it later raised some secondary capital, but never sold any shares directly. Like Atlassian, it took longer, too, because it was bootstrapped. But Qualtrics was then acquired for $8 Billion by SAP just before its IPO … and then IPO’d later again for $12B … and now is going private again.

It’s rare for the mega-outcomes in SaaS and Cloud to be bootstrapped. But for sure it happens. Especially in categories that can evolve a little bit more slowly in the beginning.

It varies widely.

First, are you talking about cash or “carry” (i.e., share of the gains)? The partners in a fund generally keep 20% of all the gains — once all the fees are paid back (this can be higher at top funds). But how that carry is shared varies widely. Partners in smaller firms often share carry (gains) fairly equally relative to seniority.

But carry in larger firms is rarely equal, and in very large firms, “partners” often can have 1% carry or less, or sometimes, only carry in their own deals in very large firms. 

Here, let’s just talk about how salaries (cash) are paid out.

Second, note many partners have to buy into VC funds with real $$$. The amounts vary, but the buy-in often can be pretty high and sometimes exceed, on an after-tax basis, any salary the partner might make. Funds vary from 1%-5% of the capital investment coming from the partners themselves.

Say a 3% GP commit (what the buy-in is called) on a $250m fund is $7.5m of after-tax dollars that the partners have to put in themselves. The latest $3b Founders Fund raise had a full 10% of the capital coming from the partners.

Third, generally, 2%-2.5% of the fund size each year for up to 10 years is set aside for costs and salaries. That’s what you’re dividing up among expenses (rent, travel, etc) and salaries.

So roughly 20%-25% of the fund size is, over the life of the fund, set aside for costs and salaries. (I’m ignoring recycling here, it doesn’t matter for the answer).

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