Recently at Pavilion’s CEO Summit, SaaStr CEO and Founder Jason Lemkin, took the stage to addresses the audience with what’s most top of mind for him at the start of 2024.
“2023 was nuts, right? At first, it seemed like the world would end for all of us. We’d all be bankrupt. That lasted about seven weeks, and then all of a sudden the world exploded. The backup of 2020 was great, 2021 comes in and somehow we have 600 unicorns and everyone can burn 500 million a year or have huge sales teams. And then at the end of 2021, all of a sudden the music stopped. HashiCorp went public but it all stopped after that.”
There were no IPOs from December 2021 until Klaviyo a couple of months ago, but even Klaviyo still barely IPO’d at almost $800 million in ARR.
In 2022 we were all playing catch-up and in 2023 we all had to become radically efficient.
So what does all that mean for founders and leaders heading into 2024?
|
|
|
In SaaS, there are a lot of great “rules” that do make sense overall but can be confusing or borderline misleading at times. E.g., Sales +Marketing Expenses < First Year ACV = Success? I.e., keeping the Magic Number at or above 1.0.
Great rule — if you have the capital to fund it.
But maybe not while you are scaling, you can often afford to invest more if you have funding. And you may not be able to afford this if you are bootstrapped or running lean.
E.e.g., if Churn > 2% = Bad, Just Terrible. Well — Maybe. Especially if you are mid-market or enterprise. But with very small businesses in the early days, it may be OK. And even in the enterprise, losing one big customer can swamp you here in the early days. What most matters is that churn is going down, rather than the core absolute value, IMHO.
|
|
|
I remember my first embarrassing sales meeting.
I knew an SVP at a Top 20 Tech Company, and really as a favor, he told me he’d do a $100k+ deal with Adobe Sign / EchoSign in the early days. I just needed to pitch his entire team.
My co-founder who was our product guru was supposed to join me. But he simply ghosted the meeting, and I was alone in a parking lot in San Jose, waiting for my product wingman to show.
I walked in alone.
I first did my standard demo of our web product, and I was good at it. But then — they asked me to demo two more things. First, our new Salesforce integration. And second, our LDAP integration.
I tried to do the Salesforce demo, but I actually had never really used Salesforce before. We had 1 sales rep, so I didn’t see the point of learning it. So — I failed the demo. It didn’t work.
And then they asked for “the LDAP Demo”. Well, I had to admit I had no idea what LDAP was.
And that $100k deal, that great logo we really could used in Year 1 … was lost. Poof. Gone.
|
|
|
The fifth SaaStr Europa in London will attract 3,500+ SaaS executives and investors, a superb selection of speakers, and endless opportunities to network in June of 2024.
As part of the SaaStr community, our partners are an integral part of what makes SaaStr the top resource to help companies of all sizes scale and grow their businesses. We would love for you to join us in London!'
For Europa, we are offering a wide range of exciting opportunities for our partners. Download our prospectus today to learn more about our exciting sponsor opportunities.
|
|
|
First, note it isn’t easy to get fired as a founder CEO. Especially if you haven’t raised all that much money. I’ll leave the legal and contractual answers to others. But it’s tough to be fired if you control the majority of the board, voting shares, etc.
More importantly though, the answer to me is transparency + don’t run out of money.
The last thing 98% of boards want to do is fire a CEO. It’s way too much work, and way too risky, to try to find someone new to come in. That won’t know the business, the customers, the codebase, etc.
And everyone knows startups are tough, and have ups-and-down.
- Where boards get so nervous as to want a fire a CEO is when the bad news is a big and potentially fatal surprise. Missing a quarter is tough. It happens all the time, though. But when a CEO tells you everything is Daisies and Unicorns, going great, and then you get an email later saying the quarter was missed hard … that creates some panic.
- Similarly, many founders hide from bad news. They stop sending out investor updates for a while. They hunker down. That’s natural. And a terrible idea. Investors are prepared for bad news. Share it as soon as you have it. Actually, share it as soon as you sense it.
- Finally, the worst bad news to hide is that you are running out of money. Don’t hide the burn rate. Share your “Zero Cash Date” every month. Don’t run out of cash a lot faster than you’ve led your investors to believe. That freaks everyone out. Then, they feel like they have to make a change. Even if that’s a bad choice — there’s no better choice.
So my quick tips:
- Send out a monthly investor update, every monthly, ideally the first week of each month. It’s OK to send a “Flash” update that is draft, and then follow with the final numbers later. Better to send a 95% complete update on Jan 1 on the the last year, than a 100% accurate update on March 31 …
- Share your top 2-3 concerns in each board meeting, along with the top 3 highlights. Just put them out there, so everyone’s tracking them.
- Share bad news quickly, and really, before it happens. As a founder, you know. You know when you’re over your skis. You know when the burn is too high. You know when that fancy VP of Sales you hired isn’t going to work out. You know. So share it early, before anyone else can even see it. That builds more trust than you can imagine.
|
|
|
As companies scale, they evolve, so how should marketing evolve accordingly to add maximum value? Kady Srinivasan, CMO of Lightspeed Commerce, has been through every stage of marketing growth at companies like DropBox, Owlet, Klaviyo, and now Lightspeed Commerce.
In last week’s Workshop Wednesday, held every Wednesday at 10 a.m. PST, Kady shares the ten things that change in marketing as you scale.
The most basic principle in marketing is that it should never be a static function. So, the question founders and marketing leaders often ask is which lever they need to activate at certain points in the lifecycle of the company to maximize marketing’s effectiveness.
The answer isn’t simple. All companies don’t scale the same way, so it’s all about finding the right set of tactics to implement at the right stage of the company.
|
|
|
The ideal size of a SaaS marketing team until you are at $10m+ ARR is the size that is accretive.
The last thing you want is a bunch of “marketers” whose ROI you don’t understand. That’s where things break quickly, and costs spiral out of control. It happened almost everywhere the past few years
But marketing is your future. Done right, it’s accretive. Sometimes in the short term, sometimes in the medium term, but it at least makes its money back and more:
- At even $20k in MRR, you’re ready for a head of demand gen and maybe even a true VP of Marketing (as long as they’re hands-on). You’re ready to cost-effectively pay for more leads, and more effectively managing the ones you do have.
- As soon as you know how to do events and make them ROI positive, you’re ready to hire someone to manage events for you and do “field marketing”. Done right, it’s a top revenue-generating and pipeline accelerating strategy.
- As soon as you have enough marketing-generated leads to justify a marketing-led lead qual team — hire them. The best growth and demand gen marketers earn their own BDRs as they scale.
Later, you’ll end up with more “soft” marketers whose ROI will be opaque to you.
But from $20k in MRR to $10m in ARR … hire every marketer that is ROI positive. And for now, skip the ones that aren’t.
|
|
|
This edition of the SaaStr Daily is sponsored in part by Auditwerx
|
While GRC tools can offer convenient features, did you know a CPA is necessary to sign off on a completed SOC report? Your CPA auditor is responsible for the validity and completeness of the evidence gathered, meaning working with a CPA firm like Auditwerx can help save your organization time and money.
|
Want to partner with SaaStr? Click here to Sponsor our events, podcasts, newsletters and more.
|
|
|
© SaaStr 2024
644 Emerson St. Suite 200, Palo Alto, CA, 94301
If you'd like to stop receiving the SaaStr Daily, click here
|
|
|
|
