The pace of VC investing today is faster than ever.  Investing over Zoom, and the incredible rise of SaaS unicorns and decacorns, has changed everything in the past 18 months.

But not for everyone. 

For most of us, raising venture capital is still hard.

It’s really only easiest for the hottest and most obvious startups.  And I see founders make one key mistake. 

They don’t derisk things for VCs. 

This is even more important today.  Because VCs are expected to make decisions in days, not weeks and months like before.  So they have to make quicker decisions, with less information.

Remember that investing in start-ups is very risky — and why. Not only do most start-ups fail, but it is more than that. It’s really hard to do enough diligence in enough time.

Ray Wang of Constellation Research and Vala Afshar, Chief Digital Officer, had me back after a long time on DisrupTV.

It was a really great deep-dive on where venture is right now:

• Multiples have fallen back to 2015 and 2016
• Why VCs can’t justify investing at $100m+ valuations in many cases today
• How optimism is bleeding out of VC, and realism has seeped in
• Why the “next round” often isn’t coming anymore, and how everything got inverted in 2021
• How you actually get cash-flow positive in SaaS

And following me in the above video was a great interview with the CEO of DevRev and founder and CEO of Nutanix, Dheeraj Pandey.  Stay for that one, too!  I loved his discussion in particular on how they spend $1 Billion total on sales & marketing at Nutanix, and how they could have easily done it just as well spending 25% less.

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

Get audit-ready, prove compliance, and speed through security reviews with Drata. Save hundreds of hours using Drata to automate compliance.

In a Big Company, in my limited experience, I do think you need to be thoughtful here. There are rules.

You can threaten to leave once and often get a raise to stay.  But only once. And in a BigCo, it’s really hard to get a raise “out of band”, i.e other than during annual reviews.

But what about start-ups?

They’re support to be more merit-based, and more flexible. And oftentimes, they are, especially when they are smaller. If you’ve truly done a good job — if your boss and everyone agrees — then:

1. If you are underpaid, just politely bring it up. Share you feel this way, directly but without drama. You may or may not get a raise, but in my experience, if you are truly a top performer, it’s fine to bring up if you feel underpaid. The reality is, Big Companies have better processes around comp and comp bands. This doesn’t make their comp more fair, but it does mean it gets more scrutiny. The best founders want to know if they’ve inadvertently underpaid their top performers. It happens. They often don’t really know.
2. If you think you deserve a promotion, just politely ask what it would take. Maybe don’t make anyone feel blackmailed, but ask the question. I’d love to get promoted here. What would it take?
3. But … if you haven’t really crushed … it, maybe go crush it first. In a startup, folks that ask for a raise than have underperformed … tend to just highlight that they’ve underperformed.

So we're just about a month out now from the 4th SaaStr Europa.

After two incredible years in Paris, and our highest NPS event ever at the beach last year in Barcelona— many of you have asked for it so this time SaaStr Europa is coming to LONDON.

And we're already trending upwards of 4,000 of your fellow SaaS CEOs, Revenue Leaders, Executives, and Investors joining us for 2.5 days at the Tobacco Docks on 6-7 June. 

Here's a sneak peek of everything this year's event has in store.

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

Free trials and freemiums can be a powerful sales strategy. But it’s not a one-size fits all! Learn how to increase conversion by leveraging other PLG modules, such as sandbox product experiences, and show prospects how your product can solve their challenges. 

Approaches vary here.

First, what you pay on vs. quota retirement can vary.

On commissions / pay-out:

• For start-ups where cash matters, I strongly suggest compensating the reps mainly on cash brought in. E.g., a multiyear contract where only the first year of cash is paid up front is of limited value.
• Later, or for start-ups where upfront cash doesn’t matter so much, you still want to incent multiyear deals even where all the cash isn’t paid up front, but you want to be careful about the trade-off on the discount. If it’s too high, it’s not worth it in many cases, unless your churn is high. But if your churn it high, incent these deals even without all the cash up front.

The second question is quota. There, you have to be much more careful what quota you retire for multi-year deals.

95 times out of 100, I strongly recommend against giving quota credit for any year beyond Year 1 — even if you pay out a full commission. Pay the rep by all means for multi-year deals, especially for cash up front.

Cash is king. But your ARR goals for the year will become highly distorted if your give quota credit for revenue that can’t be recognized that year. I’ve seen this multiple times.

Up today: Wednesday, May 10th @ 10AM

Topic: Back to Basics: The Playbook to Investor Relations 

Speaker: Jay Levy, Managing Partner at Zelkova Ventures

Workshop Wednesdays is popular SaaStr series where we’ll be bringing some of the best SaaStr speakers to you LIVE, every Wednesday. 

Each workshop is hosted in a live, interactive 30-minute format at 10am Pacific each and every Wednesday. This workshop will be 100% LIVE, not pre-recorded, and will be hosted in an, interactive 30-minute format, including Q&A.

We’re excited to be hosting this workshop today with Jay as he shares his insights on investor relations with Founders and executives, especially in today's market.

© SaaStr 2023

644 Emerson St. Suite 200, Palo Alto, CA 94301

If you'd like to stop receiving the SaaStr Daily, click here