Hey SaaStr Community,

So the other day I did a 20VC with Harry Stebbings, and one of the topics that came up was the Hopin founder‘s $100m+ secondary that the CEO took out of the company. While the company is still around, the Hopin product was subsequently sold for pennies on the dollar to RingCentral. And in fact, the product was already in decline by the time the CEO took $100m+ out.

The investors make nothing, the product is in trouble, and yet the founder cashed out $100m+ and moved to the beach in Spain. Some see this as a hero move. But It always bothered me.

But why? I didn’t really know why until I dug in with Harry.

If VC’s were willing to hand a founder $100m to buy some of their shares, what’s wrong with that?  Doesn’t everyone go into this as adults?  Weren’t those sophisticated VCs?  Isn’t venture capital, well risk capital?

For sure.  And look, I’m all about Founder Power and I firmly believe, and have for many, many years (and written about it on SaaStr), that founder secondary done right is a great thing.  If founders have been at it for 5+ years, and the business is truly at scale, and past the risk stage, then helping them sell some shares can be just the right thing to help them go long.  I believed it then, I believe it now, and as a SaaS founder, I wish I’d taken some of the founder secondary offered to me.  It would have pushed me not to sell.

But … but … here’s the thing.  Traditionally, founders came last.  Even in secondaries.

So in the era of 2021, the time of 1,000 unicorns, it seemed like everyone and anyone someday, just might be a decacorn someday.  And then in 2022, the markets crashed hard in SaaS.

Since then, overall, SaaS multiples have stayed relatively low, at 6x ARR on average — for public SaaS companies.  For really, really good companies at nine figures in ARR.

But then in 2023 and into 2024, three things happened:

• First, almost everyone got much more efficient.  Almost every public SaaS leader has strong, positive operating margins now, often approaching 20% or more.
• Second, folks just kept on growing.  HubSpot crossed $2B in ARR, Monday and Confluent are crossing $1B ARR, and so on.  Sometimes, growth slowed a bit from the crazy pace of 2021.  But growth continued for many leaders.  And some like Cloudflare and Mongo hardly saw growth slow at all.
• So, a subset of SaaS and Cloud leaders have gone on a public market run lately.  Not everyone.   Many favorites from Zoom to Twilio have struggled to grow, and others like Bill have done well but suffer now from low ARR multiples.  But many of the best now trade at 10x-15x ARR, or even more.

So 3 years of strong growth, combined with 10x-15x ARR for the Best of the Best in SaaS has lead to … a revivial of the decacorn.

Many folks are saying everyone from our kids to our SVPs and CEOs can’t take criticism anymore. It does seem to be more true, in my experience.

VCs are reluctant to be critical of founders, even as they run out of money. VPs of Sales are reluctant to push reps missing quota, again and again. Customer success reps are defended, even if their top customers churn without there even having been a conversation.

Everyone is worried they be called toxic, or things will blow up, if they’re critical of almost everyone today. It’s probably true, to a large extent.

I can only share one life learning:

Criticism stings. It stings me too, even today, albeit less than before.

The criticism that stings the most is the advice you actually need to hear.

The “criticism” that’s just mean? That isn’t actionable? That’s truly unfair? That annoys, but in the end we brush it off.

No, it’s the painful criticism that’s right that stings the most.

That yes, we have to sell even harder.

That yes, if we don’t make changes, we may run out of money.

That yes, our churn rate is too high or our NRR too low.

That yes, maybe we’re not as competitive as we used to be.

I needed a good arse kicking a few times as a founder. Not every week or every month, but a few times especially when I was feeling a bit sorry for myself.

This edition of the SaaStr Daily is sponsored in part by Adyen

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One of the most powerful things in SaaS is having a visionary founder-CEO.  Nothing against an outside CEO. Sometimes, the time comes to hand the baton to someone else.

But, but — only a founder CEO can execute a vision over 20+ years. Only a founder CEO knows the why. Only a founder CEO is always, forever, a founder.  Jobs come and go.  But whatever company you found, you are its founder forever.

So an interesting case study is Blackline. After an incredible run as a solo female founder, Therese Tucker moved to the board a few years back.  But when they needed that founder DNA, Therese came back last year.  As CEO again.

Blackline is one of the leaders in accounting software and invoicing-to-cash. But the ACV as we’ll see is small, and the competition is real.  Growth got tougher. They needed Therese back.

It took me about 18 months to close Google, for example. And that was just for the initial group of users:

• Need identification and discussions with project manager over several months
• About 6 on-site meetings to review need identification and discussion with a broader group
• RFP
• Prototype of workflow
• Ensure integrations could be connected to custom apps
• Wait for new feature to ship
• A 90-day unpaid pilot (sometimes, you gotta do one)
• Get through security audit
• Procurement cut deal size by 90%
• Throw up hands
• Sales saves the day, closes deal

That’s 18 months to first revenue. Then, another 18–24 months to scale up the number of seats, grow core deal size, etc.

You’ll get better at this over time, as your brand grows (=trust) and your sales team gets better at enterprise deals.

But there are limits to how much you can shrink sales cycles in six and seven-figure deals.  Especially in bigger deals that are budgeted. 

So you can make fun of the Old School Enterprise software vendors if you like, the Oracles, the SAPs, the IBMs, etc. Yes, they aren’t growing like the Cloud leaders, although actually, most are doing pretty darn well right now.

But they do know one thing: what’s important to enterprise buyers.  Even if they don’t always have the most current state-of-the art products.

98% of start-ups just don’t get this right. If your product is in a brand-new category, then maybe it’s not a lot of work to rip out an old system. But most of you are displacing an existing solution.  If that’s paper, then there will still be onboarding costs.  If that’s Excel, again, real costs too.

MARCH 6, 2024 / WYNWOOD

SaaStr is coming (back) to Miami for an epic evening of networking and community to kick-off a year of events. Join 300 SaaS execs, founders + VCs. 
Grab your ticket to join us on Wednesday, March 6, and get ready to meet some incredible SaaStr speakers and talk about all things SaaS!

Featuring Amazing content! with:

• Jason Lemkin, CEO and Founder of SaaStr
• Sam Blond, Partner at Founders Fund and Host of CRO Confidential,
• and Adam Gross, CEO of Vimeo

Welcome to the latest installment of our “What’s New” series where SaaStr founder and CEO Jason Lemkin sits down with some of the top leaders and founders in SaaS and Cloud to discuss What’s New and what should be top of mind for fellow founders.

In the new episode, Jason sits down with Drata CMO Sydney Sloan to talk about what’s new at Drata, the role of CMO at Drata vs. Salesloft, partner marketing, customer marketing, and more. 

• SaaStr 726: How to Build Out Your SDR Function in 2024 with Sam Blond, Partner at Founders Fund

• SaaStr 725: Mastering High-Volume, Low-CAC Marketing: Strategies from Gorgias, Vercel, and Hypergrowth Partners

• SaaStr 724: CRO Confidential: Bringing Product-Led and Sales-Led Growth Together For Go-To-Market Success with Giancarlo Lionetti, CRO of Zapier. Hosted by Sam Blond, Partner at Founders Fund

Listen on Apple Podcast, Spotify or Google Podcasts

Jobs will come and go.

Even CEOs come and go.

But, but --- only a founder CEO can execute a vision over 20+ years. 

Only a founder CEO knows the why. 

Only a founder CEO is always, forever, a founder. 

Jobs come and go. 

 But whatever company you found, you are its founder forever.

Special days:

First $1m month

First $1m deal

First $1m week ...

First $1m day

#celebrate

Great founders don’t time the market 

Great founders often don’t even check the markets at all

They just start up when they see white space, and are ready to go

So … Every year is a good year to invest

© SaaStr 2024

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