At SaaStr Miami, former Founder’s Fund Partner and CRO of Brex Sam Blond — host of the SaaStr CRO Confidential Podcast — sat down with SaaStr CEO and founder Jason Lemkin for a fireside chat about finding success as a SaaS company in 2024.
They discuss Sam’s learnings at Founders Fund, what the 2024 playbook looks like, hiring and motivating sales teams, and a handful of audience questions.
Sam just finished 18 months at Founders Fund after joining in mid-to-late 2022. We were coming off an environment where startup funding was as fruitful as ever. With personal experience from EchoSign and other high-growth companies, he was spoiled when it came to those companies raising money from exceptional VCs.
What he’s learned on both sides of the VC table is that the bar is really high for most VCs. Higher than he imagined in terms of the founder quality bar and, the stage of the business, and growth and efficiency metrics.
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You never know exactly what will happen.
However, at a practical level, I think you should plan on maybe 50% of the management team turning over if your company brings in a new CEO. Maybe more.
It just makes sense. The new CEO is coming in (x) first, to do “better” or at least new things and (y) to do it their way. Most of the existing management team is likely used to doing things the old way, and their way. So, the new CEO is going to change them out, and often very quickly. Often almost immediately. Especially if he or she believes they can bring in replacement resources that are good and will do things the way the CEO is used to doing them.
Yes, this is unfortunately potentially a large loss to the organization. But the board understood this (hopefully) when they made the change. And if the new CEO is very good, they will work hard to keep whoever is good and is 100% on board with whatever changes he or she plans to make … AND is willing to work the new way. The best new CEOs always work incredibly hard to keep their top executives and ICs when they start.
And generally, expect little to no changes in the rank and file in most cases. Most new CEOs focus on the management team first, and empower them to figure the rest out.
Still, expect half the management team to be replaced, gone, or at least topped within 6-12 months. At least, this what I’ve typically seen.
With the New CEO, it’s Their Way or the Highway. It has to be this way. There’s no time usually for anything else. The new CEO has to put points on the board pretty fast. And so, things and management especially will change.
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This edition of the SaaStr Daily is sponsored in part by Cisco
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So of the beloved leaders in Cloud and SaaS, few have been hit harder than Hashicorp by the “downturn”. At $400m ARR, they were growing 50%. Now at $600m, ARR, growth has radically slowed to 17%.
Some of it may well be some of the challenges in commercializing open source. HashiCorp’s competitors sell a variant of some of its own open source-based products for less. Some of it may be that the move from onprem to Cloud has evolved. But it’s been a lot of change in 18 months, that much is clear.
There’s room for optimism, too. New customer count is up an impressive +19%, and new bookings are up +40%. 2024 might just be a transition year for HashiCorp.
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So Carta put out some recent data I found very useful on how many startups raise another round, and how many sort of quietly wind down, in the first 5 years or so after being founded (from 2018 to early 2024).
Almost none IPO’d in the first 5 years, but that just makes sense. It takes at least 8-10 years, on average, to IPO these days. And half the Seed stage startups had shut down by Year 5. That sounds about right to me.
But if an IPO is almost impossible in just 5 years, what about an acquisition?
This is where we have some good data, albeit not enough. About 5% of startups on Carta were acquired in the first 5 years.
What’s less clear is how many were acqui-hires or acquisitions for a very small amount. I’m going to guess based on my experience that at least two-thirds have a very modest exit. And only 1/3 of these have an exit for 3x-10x the price of the last round, i.e. enough for anyone to make any money.
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So we recently did a SaaStr survey on if folks would pick the same VCs if they have to do it all over again.
The learnings aren’t surprising, but they are interesting: only 23% would pick the same VCs for sure.
Now there is a lot of nuance beyond this poll. The relationship between investor and founders should be supportive. Interests truly are aligned, at least 90% of the time. But there are frictions.
Many are natural, e.g.:
- Some founders are way too wasteful and spend too much, too quickly. Sadly, this became commonplace in 2020-2022. The “go down with the ship and spend it all” mentality can lead to a lot of friction.
- Some founders expect their VCs to bail them out. It doesn’t work that way. A second (and third) check has to be earned.
- Some VCs just are way too patronizing. Many. This rubs almost everyone the wrong way.
- Some VCs are manipulate around outcomes. Pushing founders to sell, or not sell, or raise more, or not raise more.
- Many VCs now are grinfrackers. They tell you everything is great, or fine. No VC wants to be labeled un-founder friendly now. This leads to tough conversations happening far later than they need to.
- Etc. Etc.
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This edition of the SaaStr Daily is sponsored in part by Cisco
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The VC makes the fund — but it’s a little more nuanced than that.
Only 2 things matters for VC until it’s late stage, and maybe even then:
- Getting the best founders to pick you; and
- Picking from the best founders that do pick you.
Everything else is just an input. Deal flow is just an input. You need enough deal flow so the best founders pick you. But deal flow alone doesn’t get founders to pick you. IQ and pattern matching are important, but are just a filter. Plenty of super high-IQ VCs just criticize A+ deals to death. Plenty of super high-IQ VCs stay on way past their primes. In the end, you have to find a way to pick well, period.
So at the end of the day, like most services businesses — it’s mostly about the individual.
If that’s so … how does a “great” fund help?
Four ways:
- Brand. Individual brands matter too (e.g., far more people knew Mark Suster than the name of his firm before it was Upfront), but having both a firm brand + an individual brand does help. Why? Just like anything else… respected brands are a very imperfect sign of quality, but they are a sign. Given how many new (albeit smaller) funds have been created lately, one could argue that while important, brand is pretty overstated, or at least, over obsessed on.
- Collective Decision Making. There is so much risk in early-stage. Keeping folks out of trouble, or even more importantly, helping them make the call, can help. Usually though this only hurts. It’s very rarely done well. But in theory it could be.
- Collective “Closing”. Done right, having 3-4 partners tell a founder they really want them really does work. The non-sponsors may play a trivial role post-funding, but having 3 VCs tell you they love you, especially if they are “known” VCs … does kinda work.
- Better Optimization of the Fund. Most VCs only allocate 30-40% of their fund to “first checks” into start-ups. The majority goes into subsequent rounds. Most VCs don’t do a great job of optimizing how they invest in later rounds, which often are at much higher valuations. Doing this right can have a very large impact on returns. Doing it wrong not only directly depresses returns, but it forces you to say No to other good deals you could have otherwise gotten into the fund. Which is a tragedy.
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