Hey SaaStr Community,

So much has changed the past few years on the people side in SaaS and tech. Perhaps the biggest change though is how many folks want to manage a team, versus do the work themselves.  The 1000+ unicorns of Covid fueled this, with ample capital to hire, hire and hire.  

And so did a bit of laziness that creeped into many of us during the past few years. Things really were easier for many of us in 2021.

The other day I interviewed yet another other great AE who had recently become a Director of Sales. He said he really, really wanted to “go for it now”, get a big house, a new car, and more. I pushed him and pushed him on the role, though. “You know you’ll have to actually do sales yourself at this startup? Not just hire and manage people?”. He finally got it. He took a pause and said, “Yeah, I just don’t want to work that hard."

Then yesterday I talked to a very talented director of customer success who really, really seemed to want a role.  I explained to them the job would entail going really deep with customers, meeting them, and owning the deliverables.  “No thanks,” they said.  “I just want to focus on process.”

I hear this story and this exact phrase again and again these days.  Constantly.

And I also see so many VPs and Directors and Managers flame out when they take a start-up role … and don’t really want to do all the hard work themselves.

I think my best advice is this, in 2024:

Make Sure Any VP You Hire Does The Job Themselves First. Before They Hire Anymore. Period.

So some of this post I’d hope would be blindingly obvious.  But it isn’t, so I’m going to try to help by being brutally direct:

No VC on Planet Earth Wants to Invest in a Startup with Mediocre Growth.

None.  No one.  Zero.  I can’t tell you how many emails a week a month that go something like this:

• “It’s been a challenging year with 30%-50% growth, but with some funding, we can grow much faster next year!” or
• “Our customers love us.  While growth has slowed the past few months, with just a bit more capital …” or
• “We’d be growing faster, but we don’t have the capital” or …

Well you get the point.

I get it, I hear you. and trust me, I’ve been there.  I’ve had a Year of Hell.  So have most of us.

But listen, to save you energy and some breath: literally no VC wants to fund anyone with mediocre growth.

What’s that?

• From say $100k-$1m ARR, growth less than 200%
• From say $1m-$5m ARR, growth less than 125%
• From say $5m-$15m ARR, growth less than 100%
• From $20m-$40m ARR, growth less than 60%-80%
• From $50m ARR, growth less than 60%
• From $100m ARR, growth less than 40%-50%

So we haven’t checked in on Procore since after its IPO, when it was at $500m ARR.

It’s a true vertical SaaS leader — “Cloud for Construction” — growing an impressive 33% at $1 Billion (!) in ARR now. And it’s a great story of going long. It took Procore years to really take off, and it didn’t take off at all until mobile became the accelerant. Procore in fact was founded way back in 2002.

Today though, it’s worth a stunning $10 Billion. That’s 10x ARR, even in today’s tougher environment and a world of 6x multiples even for many of the best in SaaS.

Why? Strong growth, break-even margins, and very high quality revenue.

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So a question I get a lot from folks is “How Will 2024 Be?” — mostly from folks who had a tougher 2023.

Now let’s be clear. 2023 wasn’t hard for everyone:

• First, it was mainly hard for folks that sold into “tech”, broadly speaking:  Monday sells mainly outside of tech — it crushed 2023.  Asana and Atlassian, competitors who sell more to tech?  A much tougher year.  ZoomInfo saw it’s non-tech customers grow 20%, but overall growth slowed to 9%.  That means tech customers shrunk their spend.
• Second, the top public SaaS companies had a great year in their stock prices, even in growth slowed.  Shopify was up 128%!  HubSpot was up 104%!  The average public SaaS company saw it’s stock price up 40%.
• Third, AI exploded.  OpenAI apparently got to $1.4 Billion in ARR — most of that in just 1 year (!)

So somehow, “Product Led Growth” became a seemingly magic savior for many struggling SaaS companies. Or at least, they hoped so.  A magic cure for sales costs that are just too high.  What if we just add a Free edition?

Sometimes it does work. I mean, Canva’s metrics for example are just awesome. $500k in revenue per employee at $2 Billion in ARR, and profitable.  Now that’s a solid PLG motion.

But just as often, if you were any good at “PLG” — you’d already be doing PLG. Still, if you go all-in, truly 100%, add a free edition and a true hands-off free trial if you can. It will make your product better and easier to use, if nothing else. If it doesn’t magically change the trajectory of your startup.

But with everyone discussing PLG, there just isn’t enough discussion in B2B of Product-Led Retention. In fact, I can’t think of a single board meeting where I’ve even seen a slide on it.

Ok, hopefully you’ve built a careful, thoughtful financial plan for the year.

You have your base plan, your stretch plan, a thoughtful approach to spending and burn rates, and more.

And yet … I know many of you haven’t started, or have only done a cursory job of financial planning.  That’s a mistake for several reasons.  First, without a strong, data-driven model, your goals for next year will be much harder to hit.  Second, even small amounts of mis-spend and over-spend can compound over the course of the year to a much higher burn rate. And third, and most importantly, you need to know how far to stretch.  Without a strong plan, doing even better is just … a hope.  You won’t know where to spend, how many to hire, and what the plan for each month should be.  Your team won’t know, either.

And in fact, you need three plans to run your SaaS business for next year.  Especially these days, when venture capital is so much tighter.

Is it the end of an era for customer success in SaaS? 

We’re now in the age of efficiencies, and we’re rethinking whether we should put more people on it or tolerate more churn and issues because we want to be cash flow positive. SaaStr CEO Jason Lemkin also wrote how Customer Success has now morphed into part of the sales team and that the 2024 trends in CS include everyone wanting to eliminate humans from support to replace that headcount with AI and bots.

The world has changed. We still want to drive retention and growth and make money. Yet, we don’t know what the new world is, but it won’t be the same. 

So to go a bit further in on this topic, we thought we’d also bring in SaaStr Fan Fave and expert on Customer Success, Gainsight CEO Nick Mehta, together with Jason to share their predictions for the future of customer success in 2024. Let’s dive in. 

• SaaStr 716: The Future of Customer Success in 2024: Insights and Predictions from Gainsight CEO Nick Mehta and SaaStr CEO and Founder Jason Lemkin         

• SaaStr 715: The 7 Biggest Mistakes CMOs Make (And How to Avoid Them) with the CMOs of Databricks, Zoom, and Okta                            

• SaaStr 714: From Zero to Hero: How to Dominate Outbound SaaS Sales with Rippling and Founders Fund on CRO Confidential                

Listen on Apple Podcast, Spotify or Google Podcasts

One great lesson from @rabois going back to Khosla Ventures:

-> Don’t close doors on the way out

I see this way, way too often these days: 

- Folks quit with 0 days notice

- Folks ghost quit

- Folks rage quit

I get it

It just never pays off

The big winner in all of this was Slack at $27,700,000,000 at 

$1.X Billion in ARR

When they were still just single product

Well played

If it seems hard in SaaS,

just remember if you can get to $25m-$30m 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

© SaaStr 2024

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