Inc - 65% of You Pay Your SF and NY Reps More

So I wondered how many of us still pay sales reps in SF and NYC more than the rest of the country.  Or put differently, pay reps outside of the top most expensive tech centers … less.

There are arguments on both sides on whether to pay reps the same everywhere across U.S. … or not:

• SF and NYC are much more expensive in terms of cost of living.  State taxes alone in CA are the highest in the country.  Versus zero or very low in other parts of the U.S.
• SF and NYC are the most competitive for sales talent.  This is still true today, even with folks living everywhere.
• And importantly, SaaS sales teams have traditionally scaled using “lower cost” centers like Atlanta, Phoenix, Portland, etc. to find a way to more cost-effectively scale sales.

But …

• Shouldn’t you pay the best the same, wherever they are?
• If it’s an inside role primarily on Zoom, and the rep can hit 100%+ of quota from Las Vegas, or Miami, or Tulum?  Why pay them less?

It’s complicated.

To close out SaaStr Europa 2024, Jason Lemkin, SaaStr CEO and Founder took the stage to answer the audience’s most burning questions. AMA’s with Jason are wildly popular for his expertise and no-holds-barred delivery. Let’s find out what people are asking in H2 2024.

How do you raise funds beyond Series B? If you’ve made it that far, congrats! You’re one of the lucky 15% that raised seed funding and made it to Series B. It also means you’re highly likely to get an exit at some point.

There’s only a small chance that it’ll be an IPO exit, and Stacey Bishop with Scale Ventures shares what it takes to get to that next level of funding.

Scaling to $150M ARR and beyond is no simple task. Grafana Labs co-founder and CEO Raj Dutt and Partner at Lightspeed Alex Kayyal answer the most popular questions about Grafana Labs’ rocketship growth journey at this year’s SaaStr Europa.

First, don’t sweat it. Don’t chase prestige here for the sake of prestige. You will regret it.

Raise money from the best investors you can, that can add the most value, AND that you trust — for each stage of your company’s growth. And this will change. The best investor to help you when you have 50 customers and need a few million dollars won’t be the same one to help you when you have 5,000 and need $100m.

And you will almost always regret taking money from a VC you don’t trust over one you do. Not initially. But later.

So … let’s talk prestige in VC.

If you raise money from a “prestigious” partner that is ALSO at a “prestigious” firm (note you need BOTH), then the Next Round investors certainly will initially be more interested.

No question.  Future fundraising will be easier, as long as you also do reasonably well. It will be easier to get meetings. And you can probably raise with a little less traction, and a little more promise, at the same or even — a better price.

AND

IF you raise money from a less respected VC firm, or a less respected partner even at a “prestigious” VC firm, the Next Round VCs will indeed initially be less interested. You’ll need a bit more traction to get that meeting. You’ll have to prove yourself a bit more. Your effective valuation may well be lower.

BUT

So what? What can you do?

I’ll share my learnings as a Managing Director at a VC firm, running my own $150m fund (SaaStr Fund), and as compared to founder/CEO for 10+ years:

Overall Learning: 

Successful Start-Up CEO > Successful Start-Up VC > Successful Start-Up VP, both financially and otherwise.

Micro-learnings:

• Working at a VC fund vs. being at a start-up of even 50 folks … it’s working somewhere very small. Most funds have just a handful of investing partners, who are often “in the field” and only get together a few times a week on Zoom or in person, if that. This actually feels smaller than even the smallest start-up. Even if you have just 3 folks in your start-up … you’re working together all day long. A VC firm really is even smaller in “feel”, at least a non-billions-per-fund VC firm.
• Slow-boil stress like grad school or some classes in college. There’s no short-term stress working in VC like a pre-traction start-up. You aren’t going to run out of money.  Any given month doesn’t even matter per se. But you do need to get 1, 2, 3 (whatever the # is) good deals done a year. It feels a bit like the weeks in a semester running up to final exams, if you haven’t gotten a good deal done yet this year. You feel it, but on any given day, it doesn’t really impact you or matter. It’s a slow-boiling stress, but it’s always there under the surface.
• Relatively quickly, your best CEOs surpass you. It hasn’t been that long, but already, there are a few CEOs I work with I really can’t help at all. They’re already beyond me. It makes you proud. Not sure it’s gratifying. But does make you proud. I try to always ask “How can I help?” But now, there are a few … just after 16 months … I have to hold my tongue. ‘Cause I can’t.
• Probably, nothing matters but Getting Into a Couple of True Billion+ Investments. VCs can add value. I think I’ve added a lot. Or at least, some. You can be an amazing, unique partner to founders in a way others can’t. But, probably all that matters is getting into Uber early. It doesn’t matter how, or if you were a jerk, or if you never helped at all. You’re a financial product, after all.
• You don’t have to do all the work. To me, this is the “best” part, at least for now. It’s fun to be able to pick a great start-up, help them recruit the team, avoid some mistakes … but not have to do all the day-to-day work. I’ve done that twice, to some success. That’s enough for me. Yes, you don’t get the same psychic, team, and financial rewards as a Great CEO / founder. But I’ve recruited the team, done The Impossible, already 2-3 times. I can’t personally do it again. It’s just too hard. I’m done there.
• It’s kinda gossipy. Everyone is judged on their individual results, even though the firms are judged on joint results. Yet, you don’t know how most VCs are doing. And even if a partner had a Home Run, if the rest of the fund was full of dogs … they might not even make any money. One way or another, everyone is judging everyone else’s results, especially since they don’t know. I can only hang out with the non-catty VCs.
• A lot of your “bosses”, the LPs, treat you like an ETF. Limited Partners (LPs) are the folks that give VCs the money to invest.  They include university endowments, sovereign wealth funds, wealth families, and more.  Generally, folks with billions to invest.  Some LPs are amazing to work with. I’m insanely grateful to ours. But to the vast majority — you are just a financial product. Like other financial products, just an illiquid one with limited proof points. If you’ve never been in the financial services or investment business … this at first seems … odd. You are just the sum of your past results and the best guess at future results. Nothing more. Nothing less.

Just a few so far.

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