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Hey SaaStr Community,

So the news is mixed out there in SaaS and Cloud land.

On the positive side:

• Datadog blew out the quarter growing 25% at $2.2 Billion in ARR and had its best day ever, popping 30%
• Shopify exceeded expectations, growth reaccelerated to 31% (!) at an almost $7 Billion run rate, and it popped 20%
• Wix went from basically 0% growth 12-18 months ago to double-digit growth again
• HubSpot exceeded expectations, growing 24% at over $2.2 Billion in ARR
• Micorsoft is at an all-time high on the back of AI and Cloud growth
• Nasdaq overall is up a stunning 40% for the year, and the BVP Index of leading SaaS and Cloud stocks is up a more modest but still impressive 15% this year

But that doesn’t mean it’s actually any easier for them, or for most of us.  And for many, their growth rates are still materially lower than in 18-24 months ago.

The underlying trends aren’t necessarily rosy per se. 

Few if any SaaS leaders are saying things are harder than 6 months ago.

Almost everyone agrees that things have at least bottomed out.And some are seeing a rebound for sure. 

Datadog noted it saw better usage growth in Q3 from existing customers than it did in Q2, and that the start to Q4 was the healthiest it had seen in some time.

Two top SaaS leaders were clear that things aren’t worse but they also aren’t any better than they were 6-9 months ago:  HubSpot and ZoomInfo.

I was curious a ways back how many 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 3 of the most recent ~35 SaaS/Cloud IPOs I looked at had truly equal founder ownership at IPO, Atlassian, Pagerduty and (close enough) MongoDB.  ZoomInfo, Toast and Amplitude weren’t far off, too, so maybe we can call it 5-6 of them.

So Zoominfo is one of our favorite SaaS / Cloud leaders at SaaStr. Why?  Basically bootstrapped.  Incredibly profitably — amazingly so. Great founder-CEO. Won big in a category that’s complicated (data).

And also, because it’s one of the Cloud leaders at scale ($1B+ ARR) that’s sort of canary in the coalmine. They sell sales & marketing tools. So do many of you. When they are doing well, we’re all probably doing well. And when Zoominfo has harder times, many in sales & marketing likely are, too.

And ZoomInfo’s seen big headwinds the past 9-12 months. It’s gotten a lot, lot harder for them. So it’s not just you.

As it came up on $1B ARR, Zoominfo was growing a stunning 59%.  And then the headwinds of the past 12+ months hit.  And Zoominfo radically decelerated to 9% growth at $1.3 Billion.

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No. They can’t, unfortunately.

Well, the very best can — up to a point. And even there they have limits.

A few learnings over the years:

• Only the very best reps can sell something more complex or harder to understand than the prior products they’ve sold. They just tend to melt when they have to sell a much more complicated product.
• Only the very best reps that have sold sales or marketing tools, which are very similar to the tools they use every day already, can sell vertical saas or developer tools. They think they can hack it, but they can’t. They never learn the industry or the buyer. Sales reps mostly know how to sell sales and marketing tools. They use them every day, after all. Be wary hiring from these companies if you don’t sell something pretty similar.
• Only the very best and most driven reps that have sold solely with a brand behind them can sell well without one. A related point. Sales is always hard, but it’s just very different at a top brand. The prospects come in mostly knowing you, and what they want. It’s radically different at an upstart without a brand. Much more different than most reps expect.

My list of some bad ones:

Sales:

• Hiring any reps you wouldn’t buy from. This never works out in the early days. Later, once you have a strong VP of Sales, it’s fine though.
• Hiring a “VP” of Sales before you have 2 scaled reps and a repeating process. Never works out.
• Crazy quotas. You can’t set folks up to fail 100% for sure. Especially the first few months, maybe even make their quota simply equal to their salary. Your sales reps need to eat.
• Expecting a closer / in-bound rep to do out-bound. They can’t. You have to hand in-bound folks leads. They are no good at generating them.
• Expecting an SDR to close. Hire stretch reps if you want, but someone without any closing experience likely can’t close at your startup no one has ever heard of. Unless the product is very cheap and the prospect is close to closed already.
• Hiring just 1 rep. You can’t A/B anything and won’t have any idea why anything works.
• Hiring reps before you close 10 customers yourself. If you can’t …
• Hiring for the logo. Hiring someone from Salesforce, Box, Twilio, etc. not only won’t save you. It’s a negative. Those companies are way, way too big. With way too strong processes and systems in place. And, most importantly, infinitely stronger brands.

Adobe has been developing with AI in its tools for almost a decade. In the last couple of years, it’s been clear that something cataclysmic is happening in the creative industry.

At this year’s SaaStr Annual, Adobe’s Chief Strategy Officer and Executive Vice President of Design & Emerging Products, Scott Belsky shares the 5 waves of change we can expect from AI in creative spaces and how this will change how brands of all sizes will create and deliver content at scale.

The new age of creativity will change how people do their jobs, how they learn, and the competitive dynamics of brands and entertainment. We live in a world where every brand is only as relevant as its latest content. You increasingly have to tell a very relevant story at the speed of social, which is constantly moving and has a different pulse to tune into each day. The traditional tools and machines aren’t made for this world.

So, let’s see what’s coming.

“I don’t know about you, but I fail a lot,” Nick Mehta, CEO of Gainsight, says as his opener at SaaStr Annual 2023.

In SaaS, we talk a lot about hyper-growth, uber-successful companies, but many founders, including hyper-growth founders, make mistakes over and over.

In this talk, Nick shares his top 10 failures as a CEO while getting to $200M ARR.

Maybe you feel SaaS is crushing it this year, but it’s not easy for a lot of folks. Being open about mistakes helps others see that you can win at business while still being human-first.

• SaaStr 699: CRO Confidential: The Proven Customer Acquisition Strategies Behind Toast's Record-Breaking Growth with Toast's CRO, Jonathan Vassil and Founders Fund Partner Sam Blond

• SaaStr 698: How to Navigate Strategic Change for Growth with SaaStr CEO and Founder Jason Lemkin                               

• SaaStr 697: What SaaStr CEO and Founder Jason Lemkin Really Thinks About AI, Sales & Lead Gen In 2024

Listen on Apple Podcast, Google Podcasts or Spotify

If it seems hard in SaaS, just remember if you can get to $20m-$25m ARR, growing at even a modest clip, and your burn is low ... someone will buy you Just don't raise at a crazy valuation, that's all

Be kind

To your coworker that made a mistake, even a big one

Be kind

To your cofounder that was great for a while, but just can't go much further

Be kind

To your boss that did great things for you, even if later they took advantage

Be kind

To the ones that tried

At $50m ARR you need to hire 30 people to do what 3 did at $5m ARR

It's just how it works

© SaaStr 2023

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