It’s Not Just You: Founders Worry More About the Competition as They Scale, Not Less

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

VC firm High Alpha and Paddle did a survey of … what keeps founders up at night.

One that surprised me a bit was that founders worry more about competition as they scale.

22% of founders worry about competition in the early days, but the swells to 50% at $50m ARR.

It probably makes sense on many levels.  The bigger you are, the more competition you have. And the more places you have to fight for growth, vs. just staying in your niche or lane. But at the same time, once your brand becomes dominant, the competition can’t really kill you.

In any event, it’s not just Marc Benioff that’s still fighting the competition all the time.  It’s everyone at scale, apparently.

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So some folks are going to disagree with me on this post, but I’m close to 100% right on it, and it will save you a ton of pain and time and money.

Never hire someone who describes themselves as a “Strategist” unless that’s what you really, really want. Especially today.

So many folks want to be strategists, do audits of what you do, and give you ideas. As consultants and fractional execs, for sure. But also as full-time folks.

If you hire a strategist, they won’t do the actual work. They might say they will, but they won’t. Not much of it at least. They might hire a team to do the work under them. They might hire 4-5 folks to do the work. But mostly, they just want to do strategy.

You may be tempted to hire The Strategist. They often know a lot, and come from good companies. Their ideas often aren’t super deep, because they usually don’t really dig in, but they usually sound smart and thoughtful.

They just won’t do the work.

Three ways to simplify the answer here, especially in the early days:

• In the end, in base salary AND commission, most sales reps take home about 20%-25% of what they close in first year deal value. So if your ultimate model sums up to that or close, you are in the zone. But, you often can’t start there.  It’s often not enough comp for your very first rep, not to start. So:
• You have to pay a living wage. No one in sales wants to work just for the fun of it. This may mean in the early days you have to pay out more than 20% of the deal size of the initial deals. Maybe even 50%-100% of the deal size in the very early days.
• Your first rep doesn’t have to be magically profitable on Day 1. It may be enough to break even at first, just to prove out non-founder sales even works. It can often makes sense to pay a much higher commission for an introductory period for your first sales rep or two.  I paid my first reps 100% of what they took home the first 60 days, for example, and then 25% thereafter.
• You probably have to pay a competitive “OTE” (On Target Earnings), or base + bonus. Or else, they will do the same work at a company with a market OTE.

Back solve for these 3 points, and you’ll have the start of your first sales rep comp plan.

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

Read how Duro Labs increased integration adoption, reduced engineering time for integrations, and launched them 10x faster.

So does being a solo founder … work in SaaS?

We’ve dug into this topic several times at SaaStr.

Of the post ~40 SaaS IPOs, only 5 or so had solo co-founders. So let’s call that 10%-12% or so. Still, they are some good ones: Zoom, Scaler, New Relic, Elastic, etc.

But that’s of SaaS and Cloud companies that IPO’d. What about across all start-ups, and what about bootstrapped start-ups that have to be scrappier for longer?

The data is interesting. Overall, 17% have a solo founder, vs. 12% or so of public SaaS companies. But 38% of bootstrapped start-ups have a solo founder.

The tough truth is from 0.5–1.5 sales cycles. And yes this is true even in tougher times.  Probably even more so in tougher times.

• Sales is tough. It’s a lot of Nos to get to a Yes.
• And while sales is pretty similar in SaaS at a given price point / ACV, different products are still different to sell. A rep good at one product can fail at selling another.
• Training and support matter. Not all reps can work with the limited support, onboarding, and training you get at a start-up.

The best reps “get on the board” fairly quickly. They may not immediately hit quota (few do).  But they find a way to close something relatively early.  At least, 1 or 2 deals. If you don’t see that in 0.5–1 sales cycles, it rarely works out. They lose their confidence. They haven’t been trained properly. They don’t have the right types of leads and prospects.

Over the past years at SaaStr, we’ve summarized a lot of VP-level hiring decisions down to one strategic choice: do you (x) pick a Stretch VP, one that hasn’t quite done it before, a Director of Sales to be your VP of Sales, etc. …. or (y) do you pick someone that has the Perfect LinkedIn, and has seemingly done it all, a proven VP of Sales to do it once again (again, seemingly), at your startup?

The choice, in reality, is often not a choice, but rather an illusion. Because the perfect candidate, even if they really exist, isn’t going to join your start-up. Not until you are OpenAI, or Canva, or Databricks, or whatever the next super hot startup is. So that perfect LinkedIn, that seemingly perfect VP experience … well, that candidate, if they’ll join you, is usually either a wash-out or someone that never really did it.

So for 90% of you, a Stretch VP of Sales is better than someone that is or seems more seasoned but hasn’t really done it. Not at your stage at least.

I’ve discussed variants of this question with so many CEOs and also CROs and VPs of Sales.

I think most agree, behind closed doors, there’s only one answer: start over.

• You can’t get folks used to working from home to embrace coming to the office
• You can’t get folks used to selling 15–20 hours a week to start working 50–60.
• You can’t get sales reps used to only doing inbox to magically start cold calling for real.
• You have to start over. You have to start with a certain set of expectations, and hire folks that want to meet them.

Sam Blond, ex- CRO of Brex and I talked a bit about this at our Miami meet-up:

Can you get sales reps to be “full stack” and do outbound as well as inbound if they don’t really want to? Can you have them start doing outbound when they haven’t had to before? His answer, too:

No. You gotta hire those folks from Day 1. Or .. start over.

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