Inc - What it Takes to Get Funded in 2024

What does it take to get funded in 2024?

Jason Lemkin shares the answer during Workshop Wednesday, held every Wednesday at 10 a.m. PST.

Some of this stuff you’ll know, and some of it you won’t. What’s driving VCs today? Let’s find out.

Venture capital is the same as before but different. It’s a weird world where seed valuations are at an all-time high. It’s always been hard to raise venture capital, but if you’re in the group of folks VCs do want to fund, it’s like 2021 in some ways.

You won’t see a new unicorn a day, but insiders are writing their third or fourth check. These unicorns are often different from the 2021 unicorns. We all mocked those 100x revenue deals as the market crashed, especially when the average public company was trading at 5-6x. But those kinds of deals are back and only in the segment of AI.

Why are they being funded? VCs aren’t dummies. They’re bet-makers.

Here’s my experience directly and indirectly for inside sales AE, from about $1m to $50m in ARR or so. (In the very early days it will be different):

• Generally, almost 0% of time on cold calls and cold emails once the engine is running, especially for inside sales reps. A lot of folks talk about “full stack reps” that do all their outbound themselves, and do inbound, and do whatever it takes. Those do exist for sure.  But 90% of SaaS sales reps aren’t that. They mostly just work on leads given to them. (Don’t shoot the messenger here). For most reps, if any cold calling is done, it generates at best 10-15% of the revenue, and is often done by SDRs, not the inside sales reps. Also, once you have scale, lead qualification for smaller (and sometimes larger too) deals is generally done by entry-level lead qual reps, not account execs.
• Probably 40% of the time is spend managing existing leads. This is emails and reachouts for next steps, demos, follow-up on leads, deep dive calls (see below), sometimes flights, trying to increase the odds of a close.
• Probably 40% of the time is spend with new leads from that month, from qualification to moving them down the pipeline. Demos, learning calls (what are next steps), selling to power, etc.
• Probably 20% is administrative/internal/non-revenue works for them. Working on / negotiating terms. Putting together a pitch. Managing their CRM inputs (reps hate this). Helping out their peers with questions. Learning about new features. Helping on billing, renewals, etc.

So we’ve finally got another SaaS IPO gearing up — OneStream. It’s SaaS for CFOs and financial operations, a large but somewhat under-discussed category. SAP and Oracle are very strong here.

Founded back in 2010 (SaaS takes time!) with first customers launched in 2012, the metrics today are very strong:

• $480,000,000 in ARR
• Growing 34% (strong)
• 98% GRR (!) and 118% NRR
• 11% Free Cash Flow Margins, 20% the past 2 quarters

Some are reporting Google may buy SaaS security leader Wiz for over $20 Billion — just a little over 4 years after founding! That would be a record.  Whatever happens, Wiz’s growth is already a record to $100m, to $350m ARR … and beyond. It may just be the fastest growing software company ever.

CRO Emeritus Colin Jones took Wiz from $0m to $100m ARR and beyond, and Sam Blond did a deep dive with him on the learnings here.

There is no magic answer here:

• At Shopify, Tobi Lutke wasn’t the original CEO, but he stepped up and became the CEO when the original CEO … quit.
• At Github, Chris Wanstrath never did find a replacement CEO. Instead in the end, they sold to Microsoft for $7.5B.
• At LinkedIn, Reid Hoffman hired Jeff Weiner as a very successful outside CEO, leading to a $25B acquisition by Microsoft.
• At Salesforce, Marc Benioff was the founder, but not the original CEO.  Marc hired an outside CEO to run it. But he quickly stepping in when it wasn’t working and most of the cash was gone.

Having said all that, for any promotion, the “50/50” rule likely applies. 50% of the time, that executive you want to hire … already works for you.

Make sure you at least consider all the internal candidates. For a Director, VP … or even CEO.

And also note that a lot of successful SaaS CEOs that have brought in an outside CEO, or another CEO … have come back. Therese Tucker is back as CEO of Blackline, Eoghan McCabe is back at Intercom, Josh James at Domo, etc. So whether you find a successor inside or outside your org … bear in mind you may just need to come back some day.

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