Inc - How to Sell a Second Product

So we’ve had a ton of great conversations over the years on SaaStr on when and how to go multi-product. And you can see some great deep dives here from some of the top leaders in SaaS:

• How, When and Why to Launch a Second Product: A Deep Dive with Dharmesh Shah, CTO HubSpot
• The Secrets to Going Big, Going Multi-Product and Going Public with Amplitude CEO Spenser Skates
• From $5M to $100M: How to Scale a Multi-Product Startup with Lattice Founding CEO Jack Altman

I wanted though to do a deep dive on just one piece — a few thoughts how to sell that second product.  It’s hard enough to build a second product, with all the constraints on product and engineering.  Then how do you actually get anybody to buy it? :). Too many sort of think it will sell itself with the same team, motions, etc. It so rarely does.

A few thoughts, really a 3-part test.

In today’s world, there’s a clear shift in what founders, boards, and investors are all after — scalable, low-CAC (customer-acquisition cost) growth strategies. 

In a panel, Guillaume Cabane (G) and Martin Gontovnikas (Gonto), co-founders of HyperGrowth Partners, Axelle Heems, Senior Director of Growth Operations at Gorgias, and Morgane Palomares, VP of Marketing at Vercel, share real-life examples of how demand generation, growth, and marketing strategies have been executed to scale beyond 2x ARR each year, even on a low budget. 

SaaStr is the largest community of SaaS executives, founders, and entrepreneurs in the world and we bring them together each year at our flagship event—SaaStr Annual.

If you want leads, you want brand exposure, and/or you want to connect with your customers -- the SaaStr Annual is the #1 non-vendor event in the world.  Period. 

And importantly, we understand how much work "doing a show" is. We have designed the event so you will not just be exhibiting at the #1 event in the industry, but just as importantly, will have constant traffic. 

So Atlassian has cruised past $4 Billion in ARR, still growing a steady 21% in a very efficient fashion. It’s raining cash, with 27% free-cash flow margins.

The markets like this combination. Even with a few bumps, Atlassian is still trading at a $55 Billion market cap, so over 12x ARR.  That’s twice the average of 6x ARR for public SaaS companies.

Efficient, steady, profitable growth at scale. The markets say Yes to Atlassian.

You’ve got two good, different questions here.

Question #1: How should you divide shares up between 4 co-founders?

• First, whatever you do, make sure the shares vest — for all of you.  Ideally over 6-8 years. 4 co-founders is a lot, and it’s likely 1 of you will leave. Make sure it’s fair to the rest. 4–5 years, or ideally longer, protects the most committed.
• Second, the ratios just need to be fair. Usually with 4 co-founders, 1 or 2 are doing more, or adding more value. If so, a 2:1 or 3:1 ratio is common for their shares. If everyone really is equal, you can make all shares equal.

Here are the founder equity ratios at a bunch of SaaS and cloud leaders.  You can see the vast majority (85%) are not equal.

In 2024, for customer success in SaaS, what’s “good” NRR? What’s a “good” NPS? Who should Customer Success report into?

Questions like this and many others are the most common questions asked of SaaStr Fan Fave and expert on Customer Success, Gainsight CEO Nick Mehta, and SaaStr CEO and Founder, Jason Lemkin. 

While we recently held a live workshop on what will change for Customer Success in SaaS in 2024 with Jason and Nick, we ran out of time to answer some of the top questions both get and what their answers would be now in 2024. So in the latest installment of SaaStr’s Workshop Wednesday, we did exactly that.

I’ve been through it 3 times. Once as a start-up exec, and twice as founder.

• The first time, the answer was price. In my first start-up job, we were acquired for $1b with < $10m in revenue. It would have taken so long, with so much risk, to ever get to $1b in value, it’s tough to argue with. Although looking back, it was still maybe a mistake, as we picked the wrong acquirer.
• The second time, the answer was time & risk & dilution. I sold my first start-up for $50m after 12.5m months. That sounds great, but we had to sell 60%+ in the seed round to get it done (tougher times), and we were likely 5 years away from market, with a ton of regulatory and other risk. And we took so much dilution in the first round, the math on 3 more rounds was intimidating. (The VCs were too greedy here. It backfired on them.)
• The third time, well, most of the team was a bit tired after 5+ challenging years. And no one quite saw how big Cloud would be. Not this big.  Not $200B+ a year big. This was the most lucrative time of the 3, but looking back, the team being tired is both the most logical and the worst reason to sell. Push on, bring in that extra VP, get the team more help. The team is often the most tired just as things are getting good, or even, getting better.

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