Hey SaaStr Community,

After the recent events this weekend at OpenAI, I thought it might be a good time to update this classic SaaStr post on “revolts”.

My lesson learned: when the full team revolts (or a big part of it), you have to act.  You may not be wrong — but hey are “right.” 

Start-ups aren’t democracies, no matter what some employees may think.  The CEO is the CEO, and the founders are the founders. And the board — well as quirky as boards sometimes can be — is the board.

But start-ups also aren’t IBM or Cisco. Or even, anything like DropBox or Slack or Box orS, not organizationally at least.

From 1-10 employees, it’s a family. After 150 or so, somewhere in there, it starts to become a traditional hierarchical structure.

In between … from 10ish employees to 1X0ish … a start-up is something unique.

 Something organic. A couple of platoons. An organization that has come together voluntarily to take on a mission, at least in part.  Later, it’s just a job.  Maybe a cool job, but just a job. But from 10-150, it’s no longer a (squabbling?) family, but for many of your team, it’s more than just the best way to pay the rent.

And in this phase, most likely, at least once — the troops will revolt.

So the IPO market sort of, kind of, reopened a bit in 2023 — after being closed for 2 years for the most part.  Kalviyo, Instacart, and ARM all 3 great leaders, IPO’d in a short window, unfortunately, to a bit of a quiet thud.  None really traded up, and for the most part, I think folks view their IPOs as a test around a brief market up-tick that didn’t taken.

No on else really followed them in tech, and in the end, 2023 will still end with an IPO Whimper, low public multiples, and limited liquidity for Unicorns.

Having said that … it looks like 2 Really, Really Good Ones Are Ready to IPO in 2024.

That 2 SaaS / Cloud Leaders could be ready to IPO in 2024 at $2 Billion+ ARR, growing 50% or more.  And both, importantly, with strong brand names (even in consumer, With Canva).

If both trade at say 15x ARR, even in a 6x world, that would put both at $30B+ market caps. Now, maybe they both wait for 2025.  We’ll see.  

But both look strong enough to go in 2024. That will get folks excited again.

So I see a lot of folks give the same piece of advice, which I do think has a lot of truth in it:

“Be careful with titles. They’re almost impossible to fix later.”

Almost every successful founder has a story where they made someone a VP or even a CRO or CMO that didn’t really deserve it and it just created headaches down the road. They weren’t ready to be a real VP, and/or they needed to bring in a “true VP” a few months down the road, and the hire quit.

A common hack is to start someone off as “Head of ______” and see where it goes.  IMHO, if the candidate is OK with that, go for it.  The best don’t mind proving themselves.  The rest push back, however..

But as with many things, my views have gotten a bit more nuanced over time.  I’ve observed, for example, a lot of “go-getters” really, really want the CRO title now.  Maybe it’s worth it as a prize.  And a lot of folks who really are VPs of Marketing want to be CMO.  Does it matter?

I’ve learned to flip this around.

The biggest perceived issue is that you have to top someone with an inflated title later. I.e., it’s hard to bring in a CRO above a VP … if that VP already has the CRO title ;). 

But the reality is, this is fixable.  That’s what “SVP” was invented for.  Or you just, as painful as it may be, change someone that is a VP now into a “VP of Commercial” or something similar.  It’s painful to fix, but it can be fixed.  You top who you need to top.

No what I’ve learned is a much bigger issue is when they can’t do the job.  The sales leader that can’t really build a team that wants to be VP.  The marketing director that wants to be VP, but can’t really own the commit.  Etc. etc.

So if you think they truly can quickly grow into the title, and that’s the only issue in the hire, I say maybe give it to them.

It's a big shopping weekend here in the states, so we've brought back the super popular discount wheel for a chance to save big bucks on tickets to SaaStr Annual 2024 — the world's largest community gathering for SaaS and Cloud professionals — from Sept 10-12 in the San Francisco Bay Area.

Head to the SaaStr Annual 2024 site and play our spin-to-win game to unlock your discount, including the chance to snag a free ticket! 

SaaS products and services like Pilot track the finances of 1,000s of SaaS and other startup so they’re an interesting source of hard data.

What does Pilot’s latest data say? Something that’s both not surprising but also pretty impactful: 57% of venture-backed startups will have to go “back to market” in 2024 to raise more capital.

And 38% have 12 or less months of runway left. Many have already raised a bridge round. And realistically, most won’t have the metrics to pull off another round.

So AppFolio is a big vertical SaaS+ success story I frankly don’t know as much about as I should. There are several big leaders in property management software, and AppFolio is one of them.

It’s doing well, especially in today’s markets.

At $660m in “ARR” (a lot of that isn’t software, as we’ll see below), it’s trading at a $7.2 Billion market cap, even with lower than standard gross margins.

That’s pretty healthy. Growth is strong if not crazy, at +29% at $660m in “ARR”.  Importantly, it’s efficient growth as we’ll see.

Appfolio was founded way back in 2006, and they never quit.  10 years later, they hit $100m ARR in 2016 and growth just compounded from there.  Today, at a $660m run-rate, they are growing 29% a year, with substantial free-cash flow.

Once you hit Initial Traction in SaaS, say that first $1m-$1.5m in ARR, you’ll finally find somethingthat works.

One channel, often.  E.g., partnerships.  Or Facebook ads.  Or an app store.  Or a specific outbound strategy.  Or blogging, or podcasting, or something.  Or paid webinars.

A channel that works.

Once you do, one thing I’ve learned, both as a founder, an investor, and now again at SaaStr: every marketing initiative, and almost every channel, plateaus.

There are limits.

There is only so much you can spend on Adwords in SaaS. There is only so much reach on FB.  Perhaps this isn’t true as much in B2C. If TikTok really spent ~$1 billion in ads (per Wall Street Journal) to become a dominant social network, then clearly the limits are high in B2C.

But in B2B, the world you are trying to reach is customers, not users.  At least usually.  And that world, while large, isn’t infinite.  And you can reach only so many on any given channel.

Despite economic headwinds, optimism remains for the future of B2B SaaS. Klaviyo’s IPO was one recent bright spot, but what will it take for this type of activity to become a trend?

SaaStr's very own CEO and Founder, Jason Lemkin, will lead a panel of investors, exploring the current state of investments, the trends fueling growth, and what they anticipate for the years to come.

Jameson Yung, SVP of Sales at Gong, and Sam Blond, Partner at Founders Fund and previous CRO at Brex, share five tactical ways to get back to growing and hitting revenue targets. 

The days of working a little for big returns are behind us in the Boom of ‘21, so what can you do to start hitting revenue targets? 

Mapping back to a period of time known as The Party, 2021 was full of people, in sales especially, who were making twice as much money while working half as hard.  When everyone went remote, they worked remotely from the beach while their companies were growing. 

Then, in the post-2021 hangover phase, two things happened:

• People stopped making as much commisions on the sales side
• People were still working half as hard

The macro-environment has gotten harder, and the buyer had changed.  Previously there was a lot of focus on inputs and ensuring people felt like they were accomplishing something, even though the revenue might not have been there.  

And now, suddenly, we’re back to looking at revenue, and it’s not about only trying your hardest.  Now, it’s “try your hardest doing work and actually impact the numbers you need it to.”

• SaaStr 702: Hitting Hypergrowth: How to Take Your SaaS Company from $25M to $100M+ and Beyond with Amplitude CEO, Spenser Skates         

• SaaStr 701: The 5 Ways AI Will Transform Creativity with Adobe CSO & EVP Scott Belsky

• SaaStr 700: My Top 10 Failures as a SaaS CEO & What I've Learned with Nick Mehta, CEO at Gainsight

Listen on Apple Podcast, Google Podcasts or Spotify

What I see CEOs at struggling start-ups do: 

- Go dark 

- Hide

- Lash out

- Tweet about lots of things non-work

- Invest time on tiny expenses

- Argue internally

What should do:

- Be Present

- Be Honest

- Be the Rock

- Be Realistic/Optimistic

You just plain grow faster that way

I have zero positive experiences with replacing a founder CEO 

Now if they raise their hand and say it's time for someone else to

carry the load, that's different

You are almost always better off with no VP of Sales than a mediocre one

At first you don't think this is true.

You need someone! 

But then, sales go down, and burn goes way up And finally, you see it

I’d like to go on the record after the past week on one thing:

Google Meet is a pretty good product:

- Can force true HD (vs often 380p on others)

- Auto-save to Cloud works elegantly

- No client

It’s a bit feature poor for sure but credit where credit is due

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