Hey SaaStr Community,

Here’s How Much Your VCs Actually Make:

The truth is, 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. 

Creating urgency is an art.

Most founders are great “middlers”. They are great at explaining not just what the product does, but what it can do to solve your problems. No one is better than a founder at this.

And then … the deal often never quite closes.

The prospect got interested, took the call and the meeting, but … didn’t ask for a contract. Or sign up herself.

What a great sales pro will learn is how the heck to add thoughtful urgency to a sales process. When really, almost any SaaS purchase can be put off a month or two.

It’s not easy. But the tricks include:

• Discounting. Easy to do wrong, but done just right, creates urgency. Done wrong, it just devalues the product and/or leaves you with less revenue than you’d otherwise have.  Or even slows down the deal, if it looks like desperation or a used car salesperson’s attempt to create urgency.
• Asking. If you don’t ask, you don’t get.  But this only works if you’ve truly added value to the prospect during their discovery and trial process.
• Asking — After Having Provided a Ton of Value. The prior point. If you have helped your prospect plan, upgrade, and even pilot an important and valuable change to their business process, they you have added value. Ask for a favor back after (“Can we get it signed this month? It would help me a lot.”). It often works.
• Getting Used to No. Sales is hard. You get a lot of Nos.

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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.

We’ve written a lot on SaaStr on how to find a great VP of Sales, what the risks are, what risks to take, etc.

We’ve also summarized a few critical factors that will tell you, within 30 days, if your VP of Sales won’t work out.  This post was pretty controversial originally, but I think most folks now agree with its conclusions.

But given how often folks still don’t pull the plug on a bad VP of Sales hire for up to a year … I wanted to bullet out a longer, 10-point checklist of Warning Signs.  That she or he just isn’t going to work out … at your start-up. 

Maybe at a different one, at a different time, or stage, or subject matter, they might be successful. But not at your start-up.

#1 The Blame Game – Down.  As soon as you hear a VP of Sales start to blame their own reports for missing a number, it’s over.   These are their hand-picked team members, after all.  When a VP of Sales has lost confidence in their ability to hit a number, it’s always easy to blame someone on their team.  But a great VP of Sales never does.  They just … take care of their mishires.  In fact, if the issue really is a mishire, that person is gone before the issue even needs to be discussed.  So the Blame Game – Down is an almost 100% clear sign your VPS isn’t going to make it.

I was curious the other day how many of the recent Cloud and SaaS IPOs had founders that were equal co-founders from an equity perspective.  That was how I was brought up (the first start-up job I had, the founders were equal shareholders).  And I generally thought that 50:50 was the default, albeit with many exceptions.

Well, I was wrong.

Only 4 of the most recent ~30 SaaS/Cloud IPOs I looked at had equal founder ownership at IPO, Atlassian, Pagerduty, and (close enough) MongoDB and Amplitude.

This edition of the SaaStr Weekly 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.

Former CEO and founder of Yext and current CEO and founder of Roam, Howard Lerman, shares successful strategies and lessons learned building two successful startups with Sam Blond, Partner at Founders Fund, in this week’s episode of CRO Confidential.

“Always trust your gut. There are a lot of experts out there. They know what’s best for them, but only you know what’s best for you,” says Lerman.

Salesintel is looking for an Account Executive who can communicate directly with clients and prospects, understand their individual needs, and recommend products or services that maximize value.

Celonis is seeking a Strategic Account Executive who will be responsible for generating new business opportunities in enterprise accounts across a variety of industries to support your region.

The 4th SaaStr Europa is finally coming to London on 6-7 June. 3,500+ of us will get together there to share, scale and learn. Tons of VPs of Sales, Marketing, Product and CS come to Europa.  But as a percentage, it’s most highly concentrated in CEOs, founders and VCs. Grab your tickets here.  

SaaStr Annual is back in the Bay and is the world's largest SaaS conference on the planet. Join 12,500+ SaaS CEOs, Founders, Revenue Leaders, Executives and Investors on September 6-8. 11 stages, 500+ Braindates and mentoring sessions. It’s literally all at Annual. Ticket prices go up at midnight.

• SaaStr 655: SaaStr CRO Confidential: Howard Lerman, Founder & CEO @ Roam On Roam's Unconventional Approach for Acquiring Their Early Customers
• SaaStr 654: Customer Marketing Strategies Guaranteed to Grow Your Business with Bitly CMO Tara Robertson

• SaaStr 653: 10 Things That Always Work in Marketing with SaaStr Founder and CEO Jason Lemkin: Part 2

Listen on Apple Podcast, Google Podcasts or Spotify

Top issues you face as a startup, in chronology:

- No great cofounder

- No real PMF yet

- Running out of money

- Too feature poor

- Can't close strong 1.0 mgmt team

- Competition bigger / faster / strong

- Can't close strong 2.0 mgmt team

- No strong second product / vertical

How much time should you spend meeting VCs when you aren’t fundraising? Or if you don’t need money at all?

My advice from 2012-2023: Meet 1 VC a Week

Meet the best one that wants to meet this week:

- Get better pulse market

- Learn something

- Low effort

- Simple cadence

I’m not sure who decided the renewal should be a time of high tension with your customers.

But it has become that. An NPS damaging moment each year.

Really, it should be a non-event, done right.

In fact, it should take no work at all. Done right.

Having a truly great cofounder is rarer than anyone realizes

You can just go so far, for so long

And no one can really stop you

Remember to tell them a couple of times this year. Maybe even today.

© SaaStr 2023

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