2025 SaaS +AI Vibe Check: AMA with Jason Lemkin

Mr. Um, just having a little fun. We're going to do an AMA mostly today, so come with your questions, put them in your chat. Um, that's most of this session, but since I had everybody, I wanted to take a minute and do a 2025 vibe check, a vibe check. And, um, you know, I don't know where folks are based. Um, if you're in San Francisco and you're in tech and you're even at the edge of AI, you probably feel that things are sometimes they're just crazy. I mean, founders are everywhere. Y Combinator has 4 batches a year. There's AI events left and right. Things feel fast and furious. Outside of that ecosystem, it can seem strange. What's going on? And many folks are still struggling today after a few tough years. So I thought I wanted to spend maybe 10 or 15 minutes doing a vibe check, which we can chat about, and then we can chat about other things as well. and I think we should be good, but the Saastr team is remote this week at a mini team meetup. So once in a while the Wi-Fi has been suboptimal here. On the off chance you lose us, just chill for a minute. We will, we will get back into the Wi-Fi. Probably won't be an issue, but I'm giving it a 7.3% chance. So let's start with the vibe check, and hopefully this will be helpful. Again, feel free to ask as many questions about this or whatever you want when we get through it. I'll try to get through this in about 15 minutes. But maybe the thing that, and mostly I'm going to use this to challenge some of the things I see from both Debbie Downer people on LinkedIn, content producers, course sellers. They're just saying a lot of things that are not really actually consistent in my experience, which what's, what's, what's happening in cloud AI and SaaS today. So maybe the weirdest thing, and I think these charts from EY and I put them up on SaaS for a couple of weeks so you can search on 2025 VC-EY, and you'll see a write-up of this. This is the weird thing. This is the weird thing, and it's going to explain a lot of things, these two charts. I know they're a little bit hard to see, but I'll explain them. If you are connected to tech, if you are in venture capital, if you are in the Bay Area or other things, it's like 2021 but totally different, but a lot like it. There is mania, mania back. I can tell you at Saastr Fund, I've got 2 super hot startups that are sort of coming up on unicorns and a bunch of VCs emailed me. They're like, I don't even know if I want to meet with them because I don't want to have to make a decision in 5 minutes on a huge investment. I actually want to do 5 minutes of diligence. I want to talk to a customer. I want to actually meet the rest of the team. And that's what the vibe felt like at the peak, at late 2020, early 2021. Literally, VCs would email me. They're like, oh, I'll just invest and do the diligence after the term sheet. Because it seemed like in 2021, when the average public— this sounds crazy today, but the average public SaaS company was growing over 70% in 2021. It, it was such crazy, uh, pandemic-fueled buying that honestly you could almost make money in venture, just invest on anything with good growth. You, you, it felt like you didn't have to meet the people. And that has come back to an extent. It has come back to the extent because for the best AI-fueled companies, the growth's just insane again. And so people will take more and more risks. So it feels like it. Um, But these two charts show where, where, where the, where the froth really is, because the froth was more evenly distributed in 2021. In 2021, if you were growing at top 5 or 10% rates, seed A, B, C, D, E were easy. Even SaaS was easy, but even pseudo SaaS, real estate agents pretending they were SaaS, communities that were pretending they were SaaS, things that weren't even recurring revenue that felt like SaaS. People want to invest in everything. Today it's very, very narrow. And there's two things happening. If you look on the bottom right here, you'll see that the majority of investing, 44% in 2024, already the majority in 2025, is into AI and AI-native investments. Every VC you talk to wants to be AI. You can AI wash your app and pretend it is, but you really need to be either have a true generative AI-first solution or have something that's very related to the parts of AI infrastructure that are scaling like mad, right? Just because you, just because you add a little ML or add a little chat that widget, if it doesn't change the trajectory of your, uh, company, I don't think VCs are that stupid. They may be taking a lot of risk, but they're not stupid. So realize the majority of the VCs going into that. And so if you're not in either AI SaaS or certain parts of vertical SaaS, it's harder to fundraise than it has been in years. Look, take that chart at the bottom right and, and invert the colors. And sorry, I'm a little colorblind. What are these colors? What's the darker one, Amelia, that says 44%?

Lighter purple and then a darker purple.

The lighter purple and darker purple. So if the, uh, you can see that the, the darker, sorry, the one on the bottom is a lighter purple. Your odds, if you're non-AI in SaaS of getting funded are going down. They're going down. So, so be thoughtful about that. The other thing that's happening on this upper, in this top chart, and this is, this is obvious from the media, but, but, um, but, but this, this chart really shows it is that yeah, there's massive amounts of money in venture, but it's going into these epic growth rounds. It's going into Anthropic and, and, and OpenAI and Level 11 and all of these cool things. And Harvey today, Cisco, I mean, Sequoia putting $300 million into Harvey for legal, Harvey AI. That's $300 million. It's these growth rounds that are absorbing massive amounts of capital, especially because in some cases like a Databricks, OpenAI, others, the valuations are $50, $60, $100, $300 billion. So they can absorb massive amounts of capital. So all this and what you can see on this chart, on the top chart is The line is the number of deals, and the number of deals actually continued to fall at the end of last year, even as the amount of money went in went way up. Okay. Went almost back up to 2022, 2021 levels at the end of the year. So the money is back, but instead of going into tons of deals, it's going into AI and growth, later stage stuff. So realize where you are. If you do— listen, I don't think most people should fundraise. This is not all about VC. VC is not the right choice for most people. I firmly believe that even if you do raise VC, for most folks, a one and done is the best approach. Raise a little bit of seed money and then call it a day. Don't, don't take the stress and pressure. But if you are thinking about fundraising or want to learn, realize in the 2x2, people want AI and growth and everything else is hard. It's harder. It's harder. So it's a weird world, but it means overall VCs are working super hard. Tons of deals are happening, term sheets, meetings, but it's just for that one little part of the 2x2. Okay, and the other thing I wanted to highlight is just, you know, I think a lot of B2B founders are of three minds on AI, right? One, they wish, they wish they were growing as fast as Cursor or Harvey or others. They wish they were getting to $100 million in 2 years or 1 year or less. But other than that, they're a little skeptical. They're like, you know what, I, I've tried this stuff. It, even as great as the new models are, they're still hallucinating. I can't get, it's not enough for my customers. It doesn't work. I, I I wanna wait and see in my category, especially I hear this a lot in vertical SaaS where it's very specific. In my category, I'm sort of waiting to see what's gonna happen. Uh, maybe, maybe that's okay, but if nothing else changes everywhere. And my biggest worry, my biggest vibe check is move faster because everyone is excited. Everyone is building more software. Everyone is shipping more software and you gotta move faster. And I compared to, to just classic SaaS players here on the right. Shopify yesterday announced they crossed $11 billion run rate, $11 billion from Shopify, and it's accelerating. It's growing 31% at $11.2 billion. That's even better than it sounds because that means it's adding over $3 billion of new revenue a year. But most importantly, it's the fastest it's grown in 3 years, the fastest it's growing in 3 years. Shopify, Shopify is accelerating. It's accelerating at 31%. It was in the 20s. A year ago. It's accelerating. It's more profitable, higher free cash margins, and it's accelerating even though it's crossed into double-digit market share. It's just accelerating. Um, tripled since 2020. On the, on the bottom, um, I, I pointed out a company that I do love, but, but its growth has slowed, is PagerDuty. PagerDuty is coming up on $500 million in revenue, a lot, a lot, but growth has slowed to 10%. But the toughest number, and there's more companies like this out there today than is discussed, 0% net new customer growth. This last quarter they announced that 15,050 customers. A year ago they had 15,049. They added 1 in a year. You can laugh, you can say that's funny. It's not funny. It's a lot of hard work. They're growing through the 107% NRR. They're growing through going more enterprise and they're growing through price increases, which is the playbook of a lot of folks today that don't have new products, that don't have new moves, that aren't adding to their TAM, that aren't adding to their playbook. They're somewhat out of ideas. So what do you do? You raise prices again and again and again. And you push more and more enterprise and abandon your smaller customers, which may help you make the quarter, but oftentimes is abandoning the future to hit your present goals. But this is too common. If you don't do anything, so many folks are ended up in this frozen moment where they're still going to grow with upsells and going more at market, but the customer count is frozen. It's frozen. And this is more common. I see it across— there are many— if you talk to VCs, they have many startups, hundreds north of $100 million where the customer count is frozen. So what do you do? You can complain about it. You can raise prices. You can threaten to sue customers if they leave. Like, that helps a little bit, I guess, like 1 or 2%. But you know what the real problem with anyone in this? They didn't ship enough new amazing products that people want to buy. It's that simple. And then the world is accelerating. And I know it, it sounds nutsy, but if you're in the Bay Area, you will meet so many founders today that are working 7 days a week, 12 hours a day. Right? Brian Halligan, who co-founded HubSpot, he wrote this up on, on LinkedIn, on social media. He's like, I can't believe how hard founders are working today compared to when I built HubSpot. HubSpot's worth $40 billion, but they— he and Dharmesh, as hard as they work, they didn't work as hard as folks are working today. And we can talk about work-life balance, and we can talk about quality of life, and we talk about why we're doing it, but the reality is, since, since the dawn of software, it's been competitive, right? Gates and Jobs, everybody, right? And Be aware, if your product is basically the same product as 2 years ago, you may be left behind. That— this is the biggest vibe check. I'm seeing folks left behind and I'm talking to founders and the consistent message I'm telling to them is it's not too late. We're early in this, still early in this wave. We're early in AI for B2B in many use cases. But you better get ahead of it now. You better find a way to build 50%, 100% more product this year and be ahead of it rather than being frozen in time because there's 1,000 competitors out there that are going to— that want to steal your lunch. Again, the last one, I know folks know this, but this is why, just for a vibe check, I thought I would throw it out, is like, this is why, like, it's like 2021 but different all over again. There are many folks that aren't growing at all. There are many folks whose customer count is the same for the last 2 years. But man, when you're, when you're hitting it today, you're hitting it better than ever. So here at the top, now this isn't all software or SaaS revenue, but Deal announced that $800 million is growing 70% last week. That's pretty good, guys. And that's pretty good in a space where they compete with like 10 other customers, like directly or indirectly. They're competing with Remote and Rippling and Gusto and so many others. They're not, they don't own this market even. They don't have about an 80% market share and they're still growing 70% at $800 million. And look at Cursor and we could talk about Cursor. Here's Cursor, Wiz and Deal and a few others. You know, we're talking about folks that can go to $100 million in a year or two. And on the right, it's just look at all the money going into cloud infrastructure. So I'm not saying that this is you. I'm not saying that you are Cursor or Wiz or Deal, but you gotta objectively learn from them. And what's happening today is the CIOs are still trimming apps. In many enterprises, the app count is still flat year over year over year. The app count is flat. They are trimming. They are forcing folks to standardize on fewer vendors, on the same vendors, to just forget about that cool, like, just use what we have. That's happening. But on the other hand, budgets overall have grown about 50% for AI. So you've got to calm it, calm down, listen, and find the budget. Maybe you think copilots are silly, but if there's budget in your space, go build a copilot. Okay? Maybe you think it's crazy that Salesforce is charging $2 for Agentforce, but if it's working for them, maybe it'll work for you. There are, there are different sources of budget in AI, and I'm not suggesting be cynical. Maybe I'm suggesting be a little cynical. Because it's all— a lot of this is an experiment budget, but go find it. If you sit here and you don't tap into this budget on the bottom right, you're wasting an opportunity. You're wasting an opportunity to tap into this massive spend that is AI fueled. And that AI at the end of the day is fueling applications. It's fueling B2B applications. So go, so go get off. If you're feeling sorry for yourself, if growth has slowed, go find it because hypergrowth is crazy. So it's also the vibe check. It's why some folks in venture are morose because they don't have any players on this chart on the bottom left, and others think it's the best of time, and others are performative and pretending their customer— their investments are doing this well. But it's driving lots and lots of froth and excitement. Okay, just a couple other points and then we will open up to questions. I just want to make something super clear to folks. I've said this so many times on SaaStr, on our LinkedIn, on social media. But profitability, efficiency is great. It may be necessary. It may be necessary if you don't have capital, if you're bootstrapped, if you've spent all your money. The public markets are demanding that everybody be more efficient, but it's not enough. So profitable, hooray. No one cares. No one cares. Yes, Shopify, we talked about them accelerating it at $12 billion. They are getting more efficient. They're getting more efficient because they're growing 30% and they're increasing spend. In the teens, like sales and marketing. I just wrote it up on SaaS on 5 Interesting Learnings. Sales and marketing, product, G&A, they're all growing in the teens. They are hiring, they are spending more, but in the teens while they grow 30%. So if you, if you hire, if you hire, but at a rate lower than your growth rate, you will get more efficient and more profitable. Public markets want that. Monday blew out the quarter. They're more, much more efficient than they used to be. Yes, but it's not the end goal. It's necessary but not sufficient. And if you look, I inverted, sorted the Bessemer Cloud Index public companies by the lowest revenue multiples. If you look— sorry, if you look at that chart, EV divided by annualized revenue, that's the lowest multiples. The sort isn't perfect, but it gets you a sense. I mean, some of these folks are super lean and efficient. Who cares? Poor RingCentral trading at 1.8x revenues. It's profitable, right? PagerDuty, we talked about 3.4x. Build.com, who I love, one of the best of the best, but still 4x. Zoom, massively profitable. Zoom's at 4 billion in revenue. Half of it is free cash flow. Zoom is generating 2 billion of cash out of its 4 billion. No one cares. It's worth 3.8x revenue. I mean, they care a little bit, but they don't care too much. So I still see too many conversations of founders, uh, folks of revenue executives blaming other people, saying it's all about efficiency. This is the age of— it's not. We are back to growth. Look at that chart. Look at Cursor. Look at Wiz. This is what the— this is not only what VCs are hunting. It's tough. This is where your recruits want to work. Now that, now that there's so many fast-growing startups, where do they want to work? They want to work at these places. So it is challenging, but profitability may be necessary. As a founder, I went profitable at $4 to $5 million because I didn't want to raise any more money. It was great. It was freeing. It was liberating. I didn't have to. Work for the man in a sense anymore. I didn't have to listen to my VCs too much. A little bit. Be respectful. They bet on you, but I didn't listen to them too much. I went profitable, but it didn't matter beyond making the business model work for me. I didn't need to raise, but I didn't get much credit. And you're not getting much credit today. So don't listen too much to folks that, that say profitability is the end goal. It is really not. But it may be necessary. It may be necessary in today's world. And then I think two last points and then we'll break. This one I wish I could— we're going to talk a lot about this at SaaStr Annual in May. Please come. It's going to be great. It's something I don't have all the answers to, but I can recognize the flags, which is, man, and you guys know this, it's just part of the vibe check. These older sales playbooks, marketing playbooks from 2020, '21, 2022, they're feeling mighty creaky. Mighty creaky. I put these small bullets at the bottom. Too many folks I talk to that have been around for a while, they're just apathetic or jaded. They are. I can't tell you how many interviews I've done the last month or two where folks bailed when they found out they had to do the work themselves. They bailed when they found out there were KPIs. They bailed when they found out they couldn't just— the job couldn't mostly be about them LinkedIn-ing or making videos about themselves. People are apathetic. They're jaded. Things, even basic things. You can look at what HubSpot and others have talked about, how SEO is down because of Google's changes in generative AI. Even tougher, there's like 1,000— there are categories that used to— one of the weirdest things of AI is categories that used to be boring are now exciting. They're now exciting. I mean, when I invested in— I co-led the A round in Salesloft, and, you know, there were like 3 vendors in that whole space at the time, and people were like, who the hell wants to invest in sales tools? I mean, this space sucks. People would laugh at this. Now, like, every kid in the world has a— there's like, how many How many AI SDR tools are there? I count 7,843 on our tracker. Okay, maybe it's less. Legal, legal. Oh my God. I, I, I led the first investment in a company called Logical. Andy did our workshop Wednesday. He sold for $300 million last year to private equity. People were like, why would you invest in legal? Like, that's nichey. It's tiny. They don't have any money. The sales cycles are long. All true today. Um, and then boom, you know, Sequoia, $300 million in Harvey AI today. There are, Hundreds and hundreds of AI-focused legal startups. Now, there are obviously reasons, right? What these things can do for reviewing an NDA, for collaboration in legal are epic. And most of these AI SDR tools are not great today, but I believe in a year they will be. So there's a reason. But what it means is your category may have been sleepy 12 or 18 months ago. It may have 5, 10, 1,000 times more competitors than before. So it's just creaky and I don't have all the answers, but I'll point you to two things. One, we put up on our YouTube, Kyle Norton, who's CEO of Owner, where I'm on the board. They're adding 100 sales reps this year. And he did this presentation on his secrets to scaling. He's done a Workshop Wednesday too. He's done a lot of content with us. He's— I love how he thinks about stuff rationally, state of the art. He'll share the AI tools he uses. He'll share how he's managing his team today. He'll share that the sales team's going back to the office. Interestingly, a remote team going back to the office together. He'll share all these secrets to scaling. It's really good. Watch Kyle. You got to hire someone like him today. You can't hire the bitter CRO from 2021 that's complaining that outbound doesn't work anymore and doesn't have any solutions. I just see that left and right. Outbound doesn't work. Well, Kyle, it's working pretty good at Owner, but listen and learn how he does it. Okay? Yes. Look at this awful email I got from Slack the other day. I wrote this up on SaaStr, if you can read it. Just the people are still running this old playbook. It's terrible. Greeting from Slack in all caps. They're telling me it's a pioneering product for collaboration. Can we set up a 30-minute call? I'm given 2 time slots that are good for them. It doesn't say anything about me, nor do they know we're already paying customers. We're already paying customers for Slack and Salesforce. They don't even know it in their own CRM. This is literally a terrible AI. So we're still running this playbook and maybe it works a little bit for Salesforce. For the mega brands, for the mega brands, we're just being in the game works at least a little bit. I don't think this works for startups anymore. So just, I just wouldn't hire anybody who's all, who has no new ideas for their playbook or their ideas are gonna bring in Clay. Okay, great. Amazing app. That's not, that's not gonna do it in today's world though. The, it is working like the best ones are growing faster than ever, but it's not by running the old, old creaky playbooks. I'm just seeing them fail. Close to 100% of the time. So I think that's just about it. I'll highlight one more thing and then we can open it up to any questions. But we just announced if you're coming to SaaStr Annual and you have an AI-first product or even an AI-first feature, apply to pitch it at the AI demo stage. Go on SaaStr Annual. There's a link and you can come. The slots are super short. They're going to be like 2 minutes. Part of it's going to be for fundraising. Mayfield is going to invest in the number one pitch. From $500,000 up to $5 million. So that's going to be fun. So there'll be a, there'll be a pitch part of it. If you have not raised money before, venture money, you're eligible to win for this pitch. But it's also just demos. Anyone can demo that's at scale, that has revenue. We'll pick the best ones, but we'll give you a slot. You can come demo yourself in front of thousands and it'll be tons of fun. We'll have the best folks there. There'll also be hundreds of other VCs. There'll be thousands of sales and revenue and marketing leaders. Just come pitch your app. Just apply to come pitch your app. It's going to be really fun. We're going to run it for 3 days straight, right in the middle Saastr Annual. So you got to do it in 2 minutes, um, but we'll— anyone that, that passes the bar, as near as we can tell, will be able to, to, to pitch their app for 2 minutes live at Saastr. And it'll be a lot of fun too. So apply to that. And with that, Amelia, I will, uh, I'll open it up to, uh, any questions that we have.

Yes, you have a lot of comments and AI note takers.

Good, I love the note takers.

I think I know there's a lot of—

Few things have increased productivity more than that.

I know Alex had a question, but there's more than one Alex. But Alex, if you want to unmute, we'll bring you up.

Yeah, hey, is that better? Can you hear me now?

We can hear you now. Let's go with Alex L first, and then we'll go Alex.

Sure. So my question is just very high level. What, you know, for new venture capital raises, what are best practices? What are you seeing out there that's, you know, hitting you especially hard and getting your attention? I mean, look, I don't know that there's any— I'll give you, I'll give maybe just a couple off-the-cuff answers. First of all, we did, we had our Digital AI Day the other day and our opening session was Tomasz Tungus, who was at Redpoint, is now at Theory, and the CEO of Synthesia, which just raised $2.5 billion. And I asked him, I mean, I have my own opinion, but I asked Tomasz the question to get his thoughts, which was, in SaaS, is triple, triple, double, double good enough today? Triple, triple, double, double. Most folks know this. If you don't, this was, this is how I grew up thinking what the bar was as a SaaS founder. It's how I grew up learning to invest, which is the idea that from you to, to, to be able to IPO, to hit the velocity to IPO, you need to triple, triple, double, double at least 1 to 3, 3 to 9, 9 to 18, 18 to 36. Like if you could triple, triple, double, double, not only would that compound— just do it in your math— if you have triple-digit ARR, not only would that compound continue to compound because you've proven it for 5 years, but that would carry you to the amount of revenue you needed at $100, $200 million to IPO. The reality is the bar at the moment to IPO is 50% growth at $500 million. 50%. That's all the IPOs we've had since 2021. Klaviyo, OneStream, Rubrik are all 50% at $500 million. And so the tough part is triple, triple, double, double. Sometimes what we've learned is it doesn't always get you there. Sometimes they do slow down. No, back when I did it, When I did it, when I was a SaaS CEO together with Rene from Bill and the founders of HubSpot and Rene and Peter Gassner from Viva, if you hit triple, triple, double, double, you were golden. Like everybody got to 9 figures in revenue and good growth. Now we've learned it's not, it's not, it doesn't always happen that often. So, so even that growth, VCs are more skeptical unless the NRR is super high, something special, or they see AI magic that's going to fuel the growth really big. Right? So the, so the bar is higher is what I can tell you. Uh, I wouldn't be intimidated by it, um, especially in the early stages, but I would be cognizant of it. Like if you can't promise that kind of growth, if you can't promise it, maybe don't raise money unless, uh, if you don't need to, because the bar has gone up. Um, that's the main thing I could tell you. The other thing, the other thing related to the earlier data is, um, if you are planning to fundraise and you're not Harvey or Cursor or Wiz or whatever. Just be really careful about the advice you hear because as that first slide suggested, um, if you're not growth and AI first, it's harder than it was. And I see too many founders early stage seed, nay, playing games, not sending decks, telling people they have 3 hours to invest, going in too hot. A lot of like self-serving VCs will tell you to go in hot. I've never once given this advice to anybody ever to go in too hot. Ever, ever. Um, sure, very cynical VCs will tell you, herd the cats, run a process, get 5 term sheets at once. And many of the most successful VCs will, will tell you that. But the problem is, unless you are the hottest product on planet Earth, you will turn people off. You will literally turn people off. You will put people who want more time, more importantly, people who are on the fence, they're on, they're like, it's interesting, but I'm not sure. You people will say no, there's too much going on, there's too much noise, there's too many startups. There's always another batch. There's always another batch. So slow it down.

Be—

tell folks why you're going to be on this triple, triple or double door path and give people time and play less games and get to know people. It's classic advice, but I just see too much counter-advice and I see it lead to tears. I see it lead to folks running these hyper-aggressive super short processes, and then you get an email 3 months later, oh, we weren't able to raise, are you still interested? I mean, I'm sorry, but like no one, like no one wants to take that meeting in venture when you get the email that we were unable to raise. Like once in a while you take that meeting, but you just assume it's worse than you thought, not better, is the problem. You assume it's worse than you thought, not better. So those are my 2 best pieces of feedback for today. Thank you. Cool.

Let's go Alex S.

now.

We can't hear you, Alex.

Billy's got a good question.

Yeah, we'll try and, uh, okay, we can come back to you, Alex.

Sorry. Yeah, so Jason, let's say that people have been listening to you for the last year and they identify that they're— longer, longer, right?

Longer. Yeah.

And they realize that they're not— their company or whatever, we're not on the crazy awesome trajectory that's going to IPO.

Yeah.

Turn it around, right?

Yeah.

We're like, okay, look, the product's not there right now. We get we have to do multi-product. Everybody's somewhat defeated. Like, let's say people are somewhat jaded now. Like, how do you turn the company culture around? Like, what do you do tactically? Um, yeah, I'll tell you, I, I, I asked that question to many leaders.

I ask it on a lot of the podcasts I do, in the interviews I, I did. And the truth is, most driven founders and most sales leaders that are really trying hard, that they're really, they're really going for it, they're going to tell you You can't. You got to bring in new blood. You can't turn it around. No one thinks you can, right? Nobody really. There are certain things I talk with leaders and founders behind closed doors and every— there's certain things they don't say aloud that they don't say aloud that we need people to return to the office because half our company doesn't work. The reason everyone's doing return to the office is because the mediocre don't work. Okay? It doesn't— you don't need return to office for high performers. The best people will get it done. They'll get it done from Antarctica. Or they'll get it done in the office, right? Um, but the mid-performers just don't work from home, right? They barely work. And so they want to supervise them for 40 hours. It's not about collaboration, it's about getting any work done. So you can't talk about that, right? The other thing you can't talk about is like people that are jaded or broken. A little training isn't going to help. Like a team trip to Miami is not going to help. You gotta gently move them out like now. You're better, you're better with half the employees as smart as you are that all want to be there than folks polluting the culture, right? So that— so you got to start over now. And so usually, listen, if growth is slowed and no one believes in your vision except for you, it's a tough— you have a tough, a tough, a tough, a tough situation. It's still fixable, but you need 100% new DNA. What often happens when you have a mission-based startup right, is that a handful of the folks still are really into it, right? Because of what you're doing, they enjoy it and they see the challenge and they see the ability to get traction throughout. Not most, maybe not most, or maybe not some, but then you just got to line up the folks that believe and get rid of the rest. It doesn't mean fire— maybe it means fire them tonight, maybe it moves them out. Maybe the gentler thing is just to go hire someone else and transition them out when you have new resources. But they all got— you can't turn people around like this, right?

It's a funny—

you can't.

Yeah, I think what you said is so true. Funny enough, so we brought in a VP of customer success from Gorgeous that you might know. Great. Her name is Elise. She's great. And she came in with such different energy and just like a passion, but it jolts like the rest of the jolts the organization. And so you have like this split of like, hey, you've got new people who are crazy passionate or like we can do something. And then this like old culture that wants to keep the norm. And it's definitely.

Yeah.

We're, we're seeing that balance.

But the tough part is so, so that, so that's the real answer is go find that new energy. And you may be, if, if you're a charismatic founder and you believe in your vision and you have something like, I'm not saying you can get everyone that wants to go work for Cursor, but you'll get somebody that wants to come on that mission with you like you have, right? The real, the real, it's obvious, but the real follow-on problem is once you have that jolt of energy, this is tough. You've got to get rid of the rest fast because otherwise the folks that are working 3, 5, effectively like these jolts of energy, even if they don't work the same amount of hours, they really work 10 times as hard because they get so much done, right? They're 10 times as effective. They'll, they'll stop in a couple of months. They're not going to do this for a year when they're the only one. It's soul-crushing, right? So it's tough when you have— you got to get those changes in, you got to get the energy in. And I guess you can see for a month if the other— if it inspires the other executives, but either they're threatened by it or they don't change. And so you find you got, you just, you got to do more of it. Unfortunately, you want that energy to infuse the team, but it might only infuse 30% of the team, unfortunately. Right. As founders, like, oh, this is so great, all this energy. But the folks that have already, that are already phoning in or given up, it doesn't, you know, it will, it will infuse some. But anyhow, that's the challenge. So you've got to one way or another, you've got to cycle through these teams. Right. And I think, you know, I, Sometimes I say it, it doesn't sound humane. I think I'm, I'm pretty human. I've actually almost never fired anyone in my entire life, right? I, I've given people transition periods, let them find new things. I, I, I'm black and white to help, right? But I, I try to be humane. But the fact, at the end of the day, if people still are not believers, you'll always wish they were out sooner. We know this, right? So thanks for the questions. Cool.

All right, I'm gonna bring up Arjun next. Sorry if I mispronounced your name. Ask your question.

It's Lemkin. It's okay. But we have worked together a long time. I forgive you, though. Ibra.

Yeah. Hi, Jason. Thanks for that, Amelia. Just a question about fundraising as a non-AI-first company.

Yeah. What are you—

what are your thoughts there in today's market? And as you rightly pointed out, if you're not AI, it's becoming a lot harder to fundraise. So It is just—

I would just, I would just say two things. First, assume maybe only assume most investors aren't interested. It's just a fact. It's the— this— it's true. They're just not— most are not interested, but some are right. Focus on folks that have been doing it a while. Okay. That have been whatever. I don't know what your company does, but if you're in fintech or if you're in a certain type of vertical SaaS or if you're in a certain type of pain. Focus on folks that have done it before because they're not— they will still see— they'll also be folks who have done it before. Don't— sometimes they don't want to do it again. Like, the last thing I want to do is more like e-signatures. Oh my God. But, but they'll also— they'll also will lean in when folks that are just doing trendy investing won't. So look for folks that have done it before. Assume the majority will not fund you, right? And then sell, sell, sell why it's big. At the end of the day, it's still about big outcomes, right? And then the last point I'll just make is there is a reason on social media and otherwise you see how interested folks, VCs talk about vertical SaaS. To me, like vertical SaaS is nothing new. It's like we've been doing this since the beginning of software. It's just that overall cloud spend got so big that vertical SaaS used to be too niche that folks could see supporting IPO. But now you look at Toast and Viva and all these others, you're like, We like vertical SaaS because not only are the markets larger, but you can get more market share than you can in a horizontal, right? And you don't see this variability. You don't see all these ups and downs. You don't see this deep dependency on, on fadism because you can, you can own a market, right? You can own a market like Procore or Viva or some do. So my point is, if you can, if you're in vertical SaaS, there'll be a lot of— if you're not AI, position yourself as vertical SaaS or vertical SaaS with a hint of AI. With a few sprinkles of AI and a lot of folks that is subtly trendy as well. You'll get more folks interested if you position yourself as vertical SaaS than you would in general. Those are just the realities of today. Thank you.

Yeah, thank you. Yeah, just like a small follow-up is that should, like you said, sprinkles of AI do attract some people. So should we be focusing on like developing some more AI features and trying to incorporate that into our product somehow?

I would, I would. I think everyone should, because here's why. Listen, for sure there are some categories of software where there is no benefit to AI, but here's the real— there's two reasons you should be— if you want to fundraise or even honestly recruit, you should have some AI in your product today. There's two reasons. Um, one is, um, I mean, it is— the tools are getting so good, there's got to be some way it can help your product, right? Um, And, and then, and then because of that, where I get, where I immediately write startups off, instantly write them off, is not if they're early on the AI journey today. It's that if they're not AI curious, if they're not AI curious, right? I mean, I literally talked with the founder the other day. Uh, they're doing great. They're coming up on $10 million. The numbers are good. And, and, and the CTO's arguing that AI is not, is not relevant. It's too early and too expensive. First of all, it's not too early. Second of all, everything's an order of magnitude cheaper than it was 9 months ago, and it's going to be an order of magnitude cheaper in a year. So it's not— that's a dated view. Just being— I think good CTOs sometimes are a little cranky. The best ones, it comes with the territory. But he wasn't curious. And so what that says is your competitors that are curious are going to lap you because when the day ends, instead of— they're going to talk about AI and they're going to have a hackathon and they're going to play with it and they're going to build cool new things and they're going to say, you know what? That brand new model that Chip finally works for us, right? Or maybe it's a small model or whatever, but I find that all the best product folks, engineering or product or otherwise, they're AI curious. They're talking about what they can do. Sometimes they're at the bleeding edge, sometimes they're still learning, but when you don't see it, it's a flag. And so to tie that back to what investors want to see, yes, investors would love it if you're Cursor or Arvi or whatever. Um, but if they're leaning in, if there's other good stuff, if they like the team, there's early traction, there's something good, they at least want to see you're on the journey, even if it's early. Like, I'd love to see that, like, you know, here's what we're doing. Yes, we're not it, but, but, you know, we're— and we're— and, and, and, you know, our, our AI 1.0 has enabled XYZ. It's enabled XYZ, even though it's early. That shows you're on the journey and you're not going to get lapped by the thousand competitors. That's what— that's what you worry about. So I don't think you should pretend you're AI native if you're not. I don't think you certainly shouldn't pretend you're GenAI if you're not. But showing that you've rolled out some features and that you're on the journey is reassuring to folks when they see the jaw-dropping amount of money going into it, right? Just unprecedented. So thanks for the question.

Yeah, I'm going to bring up Ali next, whose hand is hand-raised, I think, as a question.

Yes. Hey, thank you very much for the conversation. Uh, quick question. Uh, I get it that you talk about expansion and growth and everything, but what I can't understand why the end goal should not be profitability. Isn't the goal of the business is make more money than you spend? Well, look, it absolutely— I have in the past run cashflow breakeven businesses. I've run businesses that were reliant on venture capital and I've run businesses that were very profitable. I've run businesses that made millions of dollars in profits per year. And so I'll answer the question twofold. If you can create a business that generates millions of dollars per year in your pocket, that's something to think about. Like if, like in the DevOps tools, like for a while a lot of folks kind of made fun of Basecamp. Okay. Because Atlassian and Basecamp and others in the early days were huge competitors. Atlassian's worth what now? $60 billion, right? And people like to say, oh, this Basecamp idea of being profitable. And lean, like those guys are losers. They don't say that anymore, right? Because every year Basecamp has made the founders like $20 million a year for 20 years. They own, like even 10 years ago, they bought a villa in Italy to race their Paganis. Okay, what's a Pagani? Like $4 million? I think they like bought like the first 4 street legal ones and then they bought a villa to race it in because Basecamp made so much money. Okay. So like that can work, right? And so can, and listen, making a lot of money in your own company can work, right? But it doesn't, first of all, the math doesn't pencil out for VCs. They can't invest looking for 100 or 1,000x returns for a share of the profits, right? It, it just like, you're not venture backable if you're profitable. That, that's, that's just one obvious thing. And if you, you just, if you don't understand, just understand VCs want to, need to invest in. Multibillion-dollar outcomes, not millions of profits, multibillion dollars of market cap. So that's a simple answer. The subtler answer is, listen, running Basecamp and making $10 million a year, that, that, that is a dream for 99% of folks. Okay. Only a few folks want to go differently because I want to go bigger than that. But realize that the reality is we can talk about net present value and we can talk about discounted cash flow analysis and all the stuff that economists look at and blah, blah, blah, blah, blah. The reality is the way to make a lot of money off a startup often is for someone to buy you for a lot of money and you are purchased on a multiple of revenue. So you're not purchased. Listen, there are small private equity firms that will pay you 3 times your cash flow. So if you spend 10 years building a business that makes $1 million in profits and someone wants to buy you for $3 million, you think that's a great deal after a decade of your life, take it. Okay. But if you're in a hot category today, you might get bought for $200 million with $1 million in revenue. What's the better outcome, $200 million or $3 million, right? The reality is, and you could debate it, some, you could say it's shenanigans. You could, you could, you could mock how it works, but until a certain terminal point, tech companies are valued on a revenue multiple until a certain point. And so if you're, if you're not playing that game, you might make a hundredth a thousandth of what you might make if you could lean into it, right? Um, that, that's the reason, right? So there's lots of theories. I'm not an economist. Ultimately, once you're public, you can do these DCF analysis and you can stop looking at ARR multiples and you can start looking at EPS multiples. But it's a long time until it happens. So thanks for the question. It's a good one. Thank you.

Awesome. Uh, let's try and do a few more before we run out of time. I'm gonna try and Salim asked a question.

Hi, thanks for this presentation. One question about getting to the triple, triple, double, double, double with just a one-and-done financing. Is that really practical or is it just a different outlook on growth and the end payout? It's practical. It's certainly practical, but I want to split into two issues. When I say consider raising one round, there is an essence, there is an essence in some cases, a trade-off there that growth may slow, be slower because of it. Right. Um, uh, acknowledged and, and agreed. Um, so the one and done is, there are many folks who make that work. Um, Viva went public, Klaviyo almost did a one and done. They're worth $12 billion. They didn't raise a ton of growth, but in the middle they didn't raise very much. Okay. So Clayville maybe is a 1.5 and done in the earlier days, 1.8. There are plenty of folks that are, that are super capital efficient. It's more just it even if you sacrifice some growth, 20 or 30% growth, it still may be worth it to not have all the other stress and drama and maintain your optionality. It still may be worth it even if instead of triple, triple, double, double, you're on double, double, double, double, double, or you're on your growth slower. But the reality is if you have a great product and a great team, and you don't raise too much capital, to some extent, especially in the early years, slow growth is annoying but not the end of the world. Our next podcast, Astro Podcast, I think comes out soon, is with the CEO of Procore, Tui. I mean, they were 8 years until they had any material revenue, and then the great financial crisis came, and for 2 years they had almost no revenue. And then finally mobile took off and they grew, and now they're growing at very healthy rates at $1.3 billion in revenue. There are many, many stories of leading B2B companies where it was slow in the early days. UiPath took 10 years to get to a million in ARR. There are just as many where they don't even talk about those early days. So I'm not saying there isn't some tradeoff, but it's worth thinking about before you over-dilute, over-fund over the company. It's just, it's just worth thinking about to say, hey, listen, if I'm lucky enough to raise $2 million or $5 million or $1 million or $8 million, Could I go pretty far on that? And it's a construct. How far could I go and not have to be addicted to venture capital, which once you get into the double digits, you're starting to truly commit to a billion-dollar outcome, which is a bigger deal than most folks think. So, but it does— you don't have to stick to it. It's, it's like a diet. You know, you can go, you can cut and you get really lean and then you can decide exactly how fit you want to stay after you, after you hit your target weight. Bad analogy, but I'm going to stick with it. Thanks for the question.

Got it.

That makes sense. Thanks.

Awesome. I'm going to bring up Coleman next.

Great. Thanks, Jason. Similar question to Salim's regarding the one-and-done approach to VC. Do you think that VCs would be inclined to work with founders that were transparent about having this fundraising strategy because it does imply lower growth or kind of a paradigm shift?

Listen, I think implying lower growth is not appealing to any VC on planet Earth. Okay. I mean, there are a handful of exceptions, but when you imply that, the valuations get so low, you would be shocked. Okay. So I wouldn't, I wouldn't approach like, I, I, one and done and low growth is not appealing to investors. Telling investors, showing investors that, hey, listen, we're already growing quickly. We're only burning $10K a month. We're going to raise X millions today and we're going to see how it goes. We may actually not need more money. That's a great way to put it. We may not need more money. I wouldn't say, hey, we're committing to slower growth to raise less money. That's an instant delete. But everyone— like, I don't believe in the one-person billion-dollar startup, the Sam Altman version, but there's plenty of folks now that— like, if the Bay Area vibe definitely is a version of this, the Bay Area vibe is, is like, raise a big seed, maybe even rip people off to some extent in the Bay Area, but keep the team as lean as possible. It— we talked about this presentation is a vibe check. It is a vibe check. So actually, if you talk to VCs, we're seeing this more and more often that founders are committed to smaller, better teams, really engineering and PLG focused. And so VCs get it. Like, listen, no one wants to— at the end of the day, there are different goals in VC. We could chat about it, but most earlier stage VCs are super dilution sensitive. They're super dilution sensitive because typically in these days a CVC will see 50 to 70% dilution. On the way to an exit, 50 to 70, much more than founders realize. So if they think they have a good one that can, can still be off the charts, but without, without raising 11 rounds in the next 24 months, it's a positive position that way. And so I would just say, listen, this is plenty of capital to get where we're going to go. We'll see how it goes. But we think this might almost be enough to get us to— I wouldn't say profitability. It's a weird sound. I would say cash flow breakeven. This might even get us to cash flow. Like, let— we'll see. That's a great way to, to sum it. That's what I would say. Thanks for the question. Awesome.

All right, I'm gonna try and sneak in a few more here just before run out. Um, Alfonso, let me get you in the chat here next. Do you want to unmute and ask a question? He's trying.

Trying to. Sorry. Thank you, Amelia. Hi, Jason. My question— I cannot scroll back to it. Apologies.

We can hear you.

What are good channels for finding angel investors? So even before you get to the VC part, is that still a viable strategy for SaaS? And is AngelList still good? And what about crowdfunding?

Or—

it's a good question. I'm getting through the— I'm gonna— I don't think AngelList is like a great platform anymore. I mean, its peak was many years ago, as you can probably surmise, right? There's still— you can try, right? But, you know, I mean, The first company I invested in, I was, I was the first venture investor in a company called TalkDesk that's worth $10 billion in the cloud contact space. Their first investor, the guy just found them on AngelList back in 2013. Like, that was a vibe back then. Okay. Anyone could invest in Uber back in the day. It's just a different platform. And I'm not an expert. It's been a long time since I've seen anybody successfully use AngelList that way. It is much more a full-service platform for many great things for startups. But I haven't seen it. But let me answer a version of the question. If you really want an angel, like you have no revenue, no traction or anything, I don't know anything about that world. Those are true angels. Bless their souls, folks that will invest before you have anything. When you, when you're not the top team out of Stripe or Databricks, right? When you have nothing, nothing to distinguish you, no customers, no revenue. Those are— that's where the term comes from. They're angels. I'm not an— I'm a— I think I'm a good human. I'm not that kind of angel. Okay? I'm not smart enough to be one. Okay? But let me just make one point. If you have something, if you have a little bit of traction, okay, a little bit, $5K a month in revenue, $3K, $2K, and you're growing and you have a decent team. I don't know whether AngelList will work, but I'll tell you what does work in some founders. I'm surprised how many founders don't think this works is just use social media, use Twitter and others, create a list of all the VCs you follow or that you might follow on social media that look like they might be interested in the space and just send them the world's best email. They'll all read it. 100% of early stage VCs will read cold emails. And if the email is really good, I'm not talking about the fonts or the colors. I'm talking about you got the goods, right? If you have the goods, even as early, they will read all of them. If it's a great email, all of them. So just find 100 that look interesting and slow it down and spend an hour per pitch and look at the other companies that invested in, look on their website, see what's similar. Reference a tweet. Like so many founders when they pitch me and I read every inbound email I get, I don't respond to all of them. I read every single one. Even I do. And I love— sometimes people will put in a tweet I said and they said, this is just like what we're doing at our startup. Like, yeah, that's pretty good sales, right? I still need to see the goods, the growth, the numbers and the rest, but connect it instead of sending a spam email that says, hey John, instead of Jason or Jason M. Lemkin, like treat it like super high-end outbound. And if the email is great, I guarantee you close to 100% of VCs, seed VCs will read it close to 100%. And there are certainly some very early stage VCs that do not want, that will not invest on outbound. I mean, on cold email, there are some, right, who have a certain playbook. Um, but man, so many of the best investors have invested in at least one winner, one big winner on a, on a cold, cold email, right? Just make it great. That's my advice. Um, but that's really for like early seed when you have something. If you got nothing, I don't know. I bless these angels. I just don't know. I'm not one of them. I don't know them, but thanks for the question.

Thanks, Alfonso. Okay, I'm gonna go to Tomer for the last question. Cool.

Thanks. Uh, so Jason, we just got to 1 through founder-led sales, and now this year we're gonna try to get from 1 to 3. Attaboy. So the SMBs, hiring my first account executive now. Okay. Any, you know, any pro tips there in terms of— You got the company to $1 million yourself as the salesperson? Pretty much. Yeah, mostly. And what's the deal size and who's the buyer and what's the deal size? We sell to a similar buyer like Owner.com. We sell to restaurants, coffee shops. Average deal size, $5K ACP. Well, $5K is still enough that someone can make money off the sale, right? Right. And so, I mean, look, I will give you— if you're where you're at, I'll— I've said this so many times, but yet so few listen. Just listen. At your ACV, you probably need to hire a kid. The kid could be 60 or 16, right? But you need to hire— this is a high-velocity SMB business, okay? I don't know whether it's outbound or inbound, but you're probably not— you're probably not sitting in restaurants yourself, are you? Is it door-to-door or is it— or is it— okay, so you need it. So, so interview 30 kids. And again, this is not a chronological thing. This is more spirit. Okay? You don't need a grizzled veteran. Okay? Interview 30 kids of any age and be religious about this. Just only hire one you would buy your own product from. Don't give on this. I don't care whether they worked at Toast. I don't care if they worked at Owner. I don't care if they, if they were the first person in at ServiceTitan. Those are almost the worst because they're full of themselves, okay? Or they, or they're not willing to do the work. Slow it down. And if you interview 30 or 40, you will usually almost always find one, often from a unique background, because like you're not as well known as Toast or Owner or Shopify, right? So don't expect that they're going to have the— they may have a quirky background, okay? They may have gotten fired after 2 years. It's not— or they may have joined 3 startups that all failed. Okay, who cares? My point is, go in, don't be prejudiced, don't be biased too much. Screen for a little bit of product IQ. Okay? They don't have to be like super the smartest kid in the world, but they have to have product IQ. They have to— before you even meet them, I would make sure by email they understand your value prop for real. Don't just take dumb meetings. Like, why, why do you think some— just, I just got one question before we get on the phone. Why do you think a restaurant would use us? If the answer is terrible, do not take the meeting. Do not waste your— you have not enough time. If they give you a good answer, no matter what their background is, don't be prejudiced. Don't be biased. No matter if they give you a background, that's a hint. Then take the call and over the next 2 to 3 screens, ask yourself, would you buy from them? Would you buy from them? And I've written this post a couple of times at SaaStr. Everyone has this magical first sales rep, okay, that somehow out of all the folks there, the one that could sell the product in the early days. Okay. And there's different versions of it. But if you talk, if you want to have fun, anytime you talk to a founder north of $10 million ARR, ask them if they had a magical sales rep and what the secret was. Okay. And you'll hear all different backgrounds. I could share the background of mine, but the one thing is they're usually product savants, right? And they just, they just love the mission. They know the product and they know the mission. They're often mediocre at sales. Not always, but they're often mid-pack. They're not— they don't have all the great tactics and the games, and they, they, they— but, but man, um, and I had this guy, his name was Joe Coletti, um, of all the guys I interviewed. I didn't get it at the time, but my co-founder came into my office almost yelling. He's like, you gotta hire this guy, Joe. I'm like, I don't know, man, like, his background's kind of weird, and it's just there's some, there's some I mean, he seems like a nice guy, but I don't get it. He's like, no, this is, this is the best. I didn't get it at the time. It's because he knew, he already knew the product, the mission, the value prop cold. No one else could in the first 30. And then I'll fast forward to that next year at Dreamforce. Not that much longer. I was at Dreamforce. There's just Salesforce's big thing. We were exhibiting there and this huge sales guy, it must have been like 6'5", huge, bulky. I think it might have been a Kelsey cousin or something like that. Big guy. He grabs me walking into Dreamforce and grabs me by my shirt. He's like, because I had, I had a, I had like a, you know, a company sweatshirt, EchoSign. He grabs me by the arm. He's like, do you work at EchoSign? I'm like, yeah, I'm the founder. He's like, do you know Joe Colletti? I'm like, yeah, he's our, he's on our sales team of one. He's on our sales team. He's like, I love Joe. I love him. That's who you want. Okay. And it's not so much that Joe was lovable. It's that he knew this product cold. Right? And so when the, when, when, when you finally get a prospect and you don't have enough leads in the early days, you don't have enough, you're not overflowing with them, right? You need that sales rep that the customers are going to not just love, but trust. Like they trusted Joe. They trust to architect a solution to their problem. And you've already closed $1 million in revenue. So I'll end it saying, oh, forget— I don't care where they came from, if they graduated from high school, whether they dress weird, whatever their problems are, if they don't bathe often enough, that one that you would buy from, Hire her or him and don't, don't hire anybody else or they'll be gone. They'll close nothing. They'll close nothing. And even worse, what will happen is you will quickly not even give them the leads because you'll see revenue go down. You'll see revenue go down, right? So I hired that one guy, Joe. He, he and I got to $2 million in revenue. And then I hired my first VP of sales from Salesforce. He hired 10 people, all of them except Sam Blond, who have done a lot with them, became Brex. All of them, all the other 9 closed nothing. And with 10 people, that VP of Sales closed less than me and Joe did. They all came from the right places and they all checked the boxes, and many of them are reasonably attractive and fun to go out for drinks with, but they never knew the product. And so we lost all of them except Sam, lost 100% of the deals to DocuSign back then, 100%, because they didn't know the product. This was too early in the space. The space was not mature. They're not going to buy from someone that they don't know. We didn't have this great brand, right? But when it was me or Joe, we closed them. And then when Brendan came back in and Sam did it, then we could, we could beat them in most deals, right? But they lost zero. They closed nothing, these 9 reps, nothing. And I wouldn't have bought from them. I wouldn't have bought from them. But later when you scale, and then we can break. When you scale, you need a more heterogeneous team. You need folks you wouldn't buy from. Go talk to a toaster rep. You wouldn't buy from most toaster reps. Okay. But Toast, how many reps does Toast have? 1,000 or something? Like, you, your sales team will figure out how to train and onboard, and then you'll have a brand, and the brand will do a lot of the work for you and stuff. But you ain't there. Triple redundant. Interview 30. There's probably only one you'll buy your own product from. Make them even do a demo. Hire her, him. You will not fail. Thanks everybody. See you next week on the next Workshop Wednesday.