83% of SaaS Companies Don’t Really Expire Discounts

So discounting is such a surprisingly nuanced and complex topic in SaaS.  While a few leaders like Atlassian do pursue a mostly “no discounts” policy for the most part — that just doesn’t work in practice for 99% of us.

As much as we’d all love to have a No Discounts policy … it’s tough in practice.

First, it’s often impossible to get through many procurement departments without one. Second, many enterprise customers are simply used to them, and feel ripped off without one. And third, it’s a tool to create urgency.  Sort of.  But only when used properly.

So I was curious — how many of you really “hold the line” on those end of month / end of quarter deals?  It turns out, those deadlines are quite so … deadly.

One of the worst ways to deliver bad news to a truly high performer is via a S**t Sandwich.

But I see it being used more and more these days by founders.

What is it?

Well, the classic s**t sandwich is first leading off with something nice or some good news, often droning on a bit too long. And then dropping in some tough news, then wrapping it up with a generic “good stuff” comment.

The s**t sandwich.

It remains a decent management tactic for low performers. It calms them before they’re fired, or demoted, or moved off a project, etc. It then relives the stress of the moment by ending with a nice word or two.

But it always backfires with a top performer, especially with someone that has 100% given their all for you.

They don’t need to hear the fake “good news” that starts the sandwich. They just need to hear the honest criticism.

I worked so hard for you. Every day. I gave it 110%. If I did something wrong, get it out. Get to it. Tell me.

The s**t sandwich breaks trust with a true high performer. It’s manipulative and the high performer sees right through it.

Use it with low performers, but realize it breaks trust with top performers.

We just released a brand new episode of SaaStr Podcast where SaaStr CEO Jason Lemkin sits down with Aaron Levie, CEO and Co-Founder of Box!

In this episode, they discuss:
* How to go long as a CEO and Founder in SaaS
* Overhauling operating margins at Box to a top-tier 25%
* Macro issues on the horizon for 2024
* What’s new at Box

Listen on Spotify, Apple, and watch here.

Hear the latest insights on AI from leading investor and SaaStr fan-fave, Tomasz Tunguz of Theory Ventures. At SaaStr Annual, he was joined by Jordan Tigani, Founder and CEO of Mother Duck Maggie Hott, GTM at OpenAI, and Sharon Zhou, Co-Founder and CEO of Lamini to discuss the new architecture for building Software-as-a-Service applications with data and machine learning at their core.

Together they explore the transformative role of data, which has become an integral part of the production stack, and delve into the implications of this shift and explore how leveraging data within the architecture empowers developers to create more robust, intelligent, and scalable SaaS solutions.

LLMs are transforming the way people use software, and these AI and data-driven companies share first-hand how they’re seeing this change take place. 

A founder gave away too much equity in the early rounds and will become a minority holder in the company before series A. How can this be tackled?

Don’t raise venture capital.

• Venture capital is not a gift. Your VC investors are looking for 10x returns.
• Venture capital is not an accomplishment. It’s a means to an end. A way to either get your company off the ground, or to grow faster.
• Venture capital is not free. In fact, it is very expensive (i.e., dilutive) in the early stages.
• Venture capital is not a tap. You cannot expect your VCs to write you a second and third check. Do so at your folly. The next check is earned.
• Venture capital is highly dilutive.  Highly.  The average founder-CEO owns 15% at IPO.

If you don’t want to be diluted to a minority holder, whatever you do — don’t raise venture capital.

“Doubling Down” is a new series where we hear from top B2B SaaS investors on their most recent activities and takes on the current market. Kicking us off is Jay Levy, Managing Partner at Zelkova Ventures.

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