The Top 10 Mistakes Founders Make After $10m ARR

So the other day I looked back at about 25 SaaS seed investments I’d made that had scaled well past $10m-$20m and reflected on the top themes.  Including — the top mistakes founders make again and again as they cross $10m ARR. Trust me.

Here they are. They are all avoidable:

#1:  Stepping Out of Sales

Ok really this is mistake #1, #2, #3, #4 and #5.  I see way too many founders, in the transition from founder-led sales to their first (or second) VP of Sales, look to get that time back.  This almost never works.  Founders never get that time back.  Instead, how they spend time in sales changes.  You spend more time in the middle of deals, and less at the beginning (qualifiying) and end (closing).  But you still have to do 10+ customer calls a week.  Are you doing that?

#2:  Not Taming the Burn Rate

I know this one may sound obvious, and yet, it’s not.  Way, way too many founders never quite tame the burn rate as they scale past $10m ARR or so.  The teams all get bigger.  You start hiring faster.  It starts to feel more like a “normal” company.  And these additional costs just compound, and stack on top of each other.  Pretty soon, that $300k burn has turned into $800k, and then … it never declines.  It grows to $1m and beyond.  Burn rates never seem to decline unless you take serious, and often radical,action.  No matter what the model says.  Whatever you do, at least do a rolling L4M model.

#3:  Getting Less Competitive (Sneaks Up On You)

Once you really start to scale post $10m-$15m, the “internal” stuff starts taking up a ton of time.  Keeping existing customers happy.  Fixing long-standing product gaps and technical debt.  Scaling DevOps and TechOps and FinOps and AllTheOps and HR and Recruiting and the SKO.  Again, you’re finally building a real company.  What can happen with all that internal focus is you lose a little focus on remaining ruthlessly competitive.  Especially if your space is evolving.  You might be the #1 vendor in your niche, but if that niche no longer is quite enough on its own, without more functionality, you can quietly fall behind.  I’m constantly surprised how many founders are less close to the pulse of the competition once things start to scale.

Each week, we round up our most popular content so you can catch up on anything you may have missed. Check out this week’s top blog posts, podcasts, and videos:

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So the open question with any great SaaS business is the Rule of Large Numbers.  Most SaaS businesses will grow almost forever, but you do exhaust your customer base, and then your ability to upsell them, and then even your ability to effectively add and acquire other products and businesses.

At least most do. And when you do, things change, and profits trump growth.

Salesforce seems to have finally gotten there — albeit at a stunning $31.4 Billion (!) in ARR.

“My App Stack” is a new series where we dig in with top CMOs, CROs, CTOs and CEOs on just what apps they’re really using to run their business.  I always learn a lot from these — they are in essence a best practices list from each leader.  Last week we had a great one with Luca Penati, CMO & CCO of BEE, check it out here.

This week we have Shrav Mehta, Founder and CEO of Secureframe!

Here’s what I look for to try to get a sense if they’ll perform:

• Do they call out top performance with metrics? The best reps are often quite precise. E.g., hit 152% of Quota last year, 143% year before, etc. Maybe they are exaggerating, that’s beside the point. The question is, do they love to win and have a history of it? Metrics are a good indicator here.
• Have they sold at your core price point? This may be a little work, but look at where they worked and see if it’s a fit for your price point. If not, maybe move on.
• Are their LinkedIn recommendations solid? Yes, of course these can be gamed a bit. But I don’t mind that. That’s part of sales. Most top reps and top leaders have 3+ glowing LinkedIn recs. I just want to see them there. Tablestakes.

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Up Next: Wednesday, September 13th @ 10AM

Topic: SaaS is Growing Up: 4 Business Model Changes to Adopt with Notion Capital

Speaker: Stephanie Opdam, Principal at Notion Capital

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

Each workshop will be 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.

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