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So Carta recently put together some data on a topic I’ve wondered about:

Just how many startups allow option exercises beyond the traditional 90 day window?

The answer:

The general trend is just over 10% of startups have extended windows beyond the traditional 90 days for departing employees to exercise stock options.

 But that is extended in tougher times, like just after lockdown in 2020 … and in 2023.  In Q1’23, 20% of startups allowed longer exercise windows, twice the normal average, tied to in large part a local maximum in terms of layoffs.

As someone that’s been a founder, an investor, and a student of startups and SaaS for a while now, when I look back at my top mistakes, leaving any relationship broken is high on the list.

Nick Mehta, CEO of Gainsight, put this high on his list of Top 10 Mistakes as well in his look back the other day.

Mistake #6: Not parting ways well always

In startups, relationships end. Teammates and clients will leave. It’s tough, but it’s part of the circle of life.

Over the years, I adopted the philosophy that I want to treat people well in all phases of our relationship, aligned to our Purpose “to be living proof that you can win in business, while being Human-First.”

But I can remember two situations (early on) with teammates and two with clients where I didn’t practice what I preach.

In the teammate case, I made the folks leaving feel guilty—“How can you do this?” In the clients’ case, I didn’t take it well and burned two relationships in the process.

Lesson: End every relationship in a Human-First way.

When a teammate leaves, my only reaction is (1) thank you for what you’ve done here, (2) congratulations on what’s next and (3) what can we learn to continue to get better. When a client leaves, we want to help them on the way out, because they often come back.

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We’ve talked on SaaStr about leaning in on Customer Success as much as possible since the very beginning:

• We’ve walked through why Second Order Revenue (i.e., the revenue ultimately generated or supported by Customer Success) is the key to growing a SaaS business.
• We’ve talked about how all the Second Timers are hiring in customer success way early, ahead of sales, ahead of revenue.
• We’ve talked about The Right Metrics for your customer success team

And it’s been fun to see lots of startups and bigger companies internalize this. 

Yet still … people wait.  They wait too long.

To hire in customer success.  Even when they know they shouldn’t.

They wait for two reasons:

• first, it’s another headcount, which costs money, which can seem expensive when you have, say, just $5k-$10k a month in MRR and 6 months of runway left before you’re out of cash.
• and second, it can be hard to find someone good, especially in the early days.

Ok, let me help.

First, let’s make a rule, a compact, and a commitment:  You Must Hire your First Customer Success Manager as a “Single Digit” Hire.  I.e., before you get to 10 employees.

We’ve hit some of these points before, but what are the Top 10 things I’d tell myself to do better, if I could go back in time?

My top list:

Slow down big decisions — when you aren’t sure. You have to move fast and break things, but if the pit in your stomach says, “Maybe don’t do that” — slow that decision down. My biggest mistakes have been where I quickly said, “Roll the dice,” but my gut wasn’t sure the downside risk was worth it.

Budget an extra 6–12 months beyond the longest timeframe you have budgeted. We raised 18 months of seed money. We needed 30, or at least 24, months to get to a true business. It always takes longer.'

Slow down the initial team formation phase if you don’t have it right. Fire fast doesn’t work so well with co-founders. No one has a perfect team to start, or ever. But if the initial team’s goals aren’t aligned … that never gets fixed. It’s OK to wait another 3 months to say GO if that means the team is stronger.

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More than you probably would think.

You can back into how many sales reps you’ll need in SaaS.

First, figure out how much revenue you need to close in the next twelve months. Because that’s more than now.

Second, calculate a reasonable attainable quota for your closers, your Account Executives. This is generally derivate of your deal size. If you do small deals, reps may struggle to close $400k a year. Middle size deals, $600-$700k. Bigger deals? Maybe $1m+.

Third, multiply a yield factor. Not all reps will work out. And they will take at least some time to scale. To be conservative, assume 75% yielded quota.  I.e., that only 75% of your reps, as a group, hit their quota.  That may actually be high, especially if you are scaling quickly and make a few hiring errors.  60% is OK, too.

Fourth, add “load”. Your VPs and Directors of Sales and sales ops and rev ops leaders and sales engineers are cost centers here. Assume 1 sales manager for each 8 sales professionals.

Fifth, the more specialized the sales process is, the more folks you’ll need. SDRs, BDRs, SEs, etc. In theory, higher quotas should “pay” for specialization so in theory, and this wouldn’t impact headcount too much. But in practice, you can’t ask AEs to pay for the help they can closing.  So it often adds at least 20% or so to the model.

A big market is better than a small / niche market. This is the reason 70%+ of SaaS companies that IPO are just new version of old, successful things.

But … but …

Small markets can grow into large markets if you change the market or there is otherwise disruption in the market.

If that’s the case, it can be wonderful. A good example below in e-signatures.

Small markets are often, though not always, less crowded. If that’s the case, sometimes starting there and then expanding into a larger market segment can work out well.

A small segment of a large market is often where most of us start. That can be the best of both worlds, so long as each year you keep expanding the segment of the market you serve.

Going global has always been a big part of SaaStr.  Almost 50% of the attendees to SaaStr Annual have been founders from outside the U.S. — coming to the U.S.  So much SaaS is now global, too.  25%-30% of the average public SaaS company’s revenues are outside of North America.

But the world has changed.  Do you still need an international office these days?

Can’t we all sell over Zoom now?  And do traditional offices themselves even make sense anymore?

My general rules for years in SaaS have been be thoughtful:

Opening an international office is distracting.  You have to talk about it.  A lot.  Hire someone.  Who do you hire?  Someone from here?  Or there?  A GM / jack-of-all trades?  Or a regional VP of Sales?  Or a customer success lead?  And it’s expensive.  You have to tour offices.  You have to go there.

You can service many international customers just fine without an office.  Inside sales works fine, if you adjust for time differences.  You can hire people here that speak French if you have to.  They can wake up early, or late, or whatever.  Yes, you can’t go there in person.  But a lot of times, that’s fine.  And support can work fine from any geo, too, if you do it well.

If you have a mini-brand, int’l customers will buy from you even without any local presence.  Buyers in the U.K., in Australia (key early local markets) are used to buying from U.S. vendors.  They’d rather buy the best solution for them rather than one that just happened to be built in Sydney.

So you can go quite far without ever opening an international office.

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