SaaStr AI Live: VC in the AI Era -- Exactly What's Getting Funded, Why & When

I thought I would do something pretty simple this week, show you some data and then open it up for AMA about venture funding. Certainly what I have learned talking with a lot of founders this year running, we've actually launched a new tool on Saastr.ai where we can review your pitch decks. We'll, we should cross 1,000 VC pitch decks reviewed this week and almost 400,000 startup valuations on Saastr.ai. What I've learned from that, what I've learned from companies I've invested in at Saastr Fund that are raising money or have raised money, and a lot of stuff I've certainly learned doing the new 20VC with Harry and Rory, which is a lot of fun. It comes out every Thursday if you guys want to watch. So I kind of wanted to talk about just what's happening in VC funding so folks could know. I'll try to keep my slides to about 20 minutes or 25 minutes. And then please ask any and all questions. Some of this may be Captain Obvious. Some of this you may get if you read Saster content or watch our pods or others, but I, I thought I would just summarize everything happening in the market. And again, this is not profound, but I do think it, it, it is important. So ICONIQ's one of the leading growth funds originally funded by Mark Zuckerberg's money and others, but it's got many, I think tens of billions under management. They just put up a great set of metrics as of September 30th. I just wrote them up on Saastr this week. Emilia will probably have them out in a newsletter this week. It's pretty good. I summarized a 70-some-odd-page report and just a few key points to them, but I pulled out a couple slides for folks to understand what VCs are thinking about. So, and I know almost everyone knows this, but I think this is just, it's good to summarize this to understand what's in investors' heads and why it means A lot of B2B VCs, a lot of classic SaaS investors, B2B investors that might have been interested in investing in you 18 to 24 months ago will not be interested today. They're just not interested. I would say 80% might not be interested in you that would've been interested 18, 24, 36 months ago. And this chart kind of summarizes it. So I'll show this, these benchmarks in a minute so you know them. And then we've actually built a new tool on Saastr that will do it dynamically for you. It's pretty cool. Hopefully it'll come out in about a week. But if you look over here on the right, top quartile SaaS benchmark. So this isn't all SaaS companies. This is all the venture funded ones in ICONIQ's universe. So this is already, these are pretty good ones, okay. That have gotten in most cases to the growth stage. So the very best ones, the top quartile, these are basically the ones folks want to fund, have gotten from $1 to $100 million in 20 quarters, 19 quarters, 19, 20 quarters. So 5 years. It's pretty crazy to get from $1 to $100 million in 5 years. It is far better than I did, and it's far better than most of us will do. But look at the folks, folks want to fund today. Glean, AI enterprise search, got there in almost half the time. ElevenLabs, we use ElevenLabs, you probably use ElevenLabs for AI, AI speech and more. They went from $100 to $1 million in 2 years, 8 quarters. Perplexity, faster. Cursor, we all know Anthropic and lovable Replit. They can do it in less than a year from 1 to 100 million. And so it's not the same as we'll chat about in the next slide or two. Some of these hypergrowth AI-native companies don't have the same margins. They do have token costs. They have other issues, but they are just growing so quickly that if you are a VC, especially a post-seed stage VC, and you have $100 million, $500 million, $1 billion, $2 billion, $8 billion, like Andreessen Horowitz's new growth fund to invest. Where on this chart are you going to put your money? Where are you going to put your money? You're going to go on the left. And it may not be fair to folks that are already in the top quartile on the far right. It may not be fair, but just think about it for a minute. These companies just didn't even exist 24 months ago, so you couldn't invest on the left side of the chart. It just wasn't possible to invest over here. So the ones on the right were about as good as it gets. And so, you know, I started having these meetings with a lot of the VCs that have come to SaaStr events over the years about 18 months ago. And I, and I kept saying, you were like, why are you doing anything but invest in the companies on the left? Why are you even bringing them to your events, even talking to them? And I challenged it and I disagreed with it. And so do many. I mean, you know, what does— if it takes you a decade to get to $100 million or it takes you 3 years, what really matters is how quickly you scale after that. But this is where all of the money is going to the left. And you can see why. You can challenge it if you want. You can pick at it if you want, but at the end of the day, it doesn't really matter what you or I or anybody thinks. This is where 90% of the revenue is going. And in fact, why you can see a massive amount of revenue is really only going to, tens of different startups, the ones that are furthest to the left and are growing the quickest. Bessemer, another, another great classic SaaS and cloud investor now doing a lot in AI. They put this together maybe a month ago or so ago. It's on their website. You can go find it. Just search for Bessemer Venture Partners AI. And they kind of broke it down into the two types of startups they're investing in. And these are, it's a high bar here. Okay, guys. And again, don't shoot the messenger, but it's helpful and pragmatic to see this. What are the two types of customers that startups that Bessemer wants to fund? They really talked about two types, shooting stars, which in many cases are classic software companies, as you note on the bottom right, with gross margins of 60% or higher. This is a lot of classic B2B stuff, high margin stuff. We write a little bit of code. There's not a lot of token or other AI costs. Even there, they want to see you go better than triple, triple, double, double. They want to see you go from, uh, $1 to $100 million in, interestingly, in about that, that same 5 years as Iconiq has. And that means going from something to $3 million then to $12 million, quadrupling, then $12 to $40. Okay, that's 3.5x. And then more than doubling from $40 to $100 million. That's what they think best of breed is. And still somewhat interestingly, somewhat inefficient, $164,000 of revenue per employee. That's the bar to get them excited to invest in. It is for a classic software company, and that is as high as it's ever been. It is much higher than triple, triple, double, double, which was, which was always high. But then on the left, they're like, this is how we think about AI native companies where they really want to put their money in supernovas. You'll see the gross margins are often 25% or even negative and even negative. I mean, even OpenAI is burning far more cash than it's bringing in. So is Anthropic. So are Lovable and Replit, as they've been clear on. I don't know if their gross margins are this low, but, but they're burning a ton of cash to build these cool tools for us. But in one year, going from 1 to 40, and in year 2, $125 million, some of them faster. All right. Gamma, which we use for our slides, they already hit $50 million in one year. Replint, Lovable are others. And so you, again, you can pick at these and you can say, oh my God, these are just wrappers around AI tokens and these models aren't sustainable. Maybe, maybe, maybe that's true. Maybe it won't be true, but this is what people want to fund. Okay. They want to fund one of these two categories depending on where they are. And just as a side note, what's really interesting, and I'm writing more up on this on Saastr, and we're actually gonna talk about this on the 20VC this week with Harry and Rui. But yes, these super fast AI companies, their gross margins often aren't as high as software companies, at least to start. But interestingly, they are efficient. The ARR per employee, over $1 million in revenue per employee, right? A lot of these companies are well under 100 employees as they approach $50 or $100 million in ARR. Um, which doesn't necessarily mean they don't burn a lot of cash, but it does mean that they're rev— they're, they're pretty, they're pretty headcount efficient and something to reflect on. So these are two very different flavors of B2B and non-B2B startups on the left, but this is how VCs are looking at it. I know it's soul crushing, but at the end of the day, VCs basically distill you down to the quality of the team, the traction, and the market, and that's it. And this is the middle section. This is traction. Okay. Next slide. And this one is a bit of a, it's almost a bit of a paradox because it's interesting, even though VCs, maybe it's not a paradox, but VCs only want to put the money into these even faster growing companies today because they can, because they exist. What's interesting is that in some ways for the public companies, the public B2B companies, the bar's gone down. And what do I mean is, um, the, the growth rates on average, two interesting things. The, the second one you wouldn't expect growth rates on average for public software companies, B2B software companies are the lowest they've ever been. Fallen lower. Now, there is some reacceleration in 2025, not just for, you know, OpenAI and Anthropic, but for B2B companies that are getting with it with AI. Palantir is the most extreme example in terms of its growth rebounding, but we've seen it at MongoDB. We've seen it at other leaders as well, that other folks are growing a little bit more because of AI pull, Twilio and others. But still, it's pretty low. So for the public companies, now, Obviously for startups, you have to go faster. The fastest growing bucket's 30% growth. The middle bucket's 20 to 30, and the lowest is -20. We actually calculate this now for you in real time. If you go to SaaS Story.ai, you can just click market data in our nav. It'll show you the real-time multiples and who these companies are. But what's interesting is high growth is only 30% for a public company. It was twice that in 2021, more actually, more than twice that at about 70%. But they're tr— you get 20x ARR multiples. You get really, really high multiples. So, so the public, actually the public markets, as long as you're profitable at these numbers, they're actually not expecting extreme growth. So there's some irony here. It's hard to figure out because some of our public comps, we're looking at their growth. It's, it's good, but it's not that impressive. I mean, HubSpot's growing 19%, which we all use HubSpot every day. It's not growing at, um, these insane rates. Now it is approaching $3 billion in revenue. But there's almost a paradox here that we're expecting less from our public companies, but giving them higher multiples, but we're expecting even more from our startups. So it's, it's, it's, it's almost a paradox, but it's something to be aware of that will confuse you. You might be like, well, goodness gracious, you look in the middle of, if a Datadog's growing 20-something percent, why do I have to grow 250%? Well, them's the breaks. Okay. Them's the breaks. Okay. Next one. And this is just another way of looking at some of the data, but I think this is one to, to freeze on, and we'll share the slides and we'll publish them to SaaStr. Again, from this almost 100-slide iconic report, this distills all the top B2B companies they've invested in. And what is the top quartile? And of course, we'd all love to invest in the top 1%, the top 10%, but this is of the good ones. Okay. What does top quartile look like? And I really like this chart because look at these columns, figure out where you are, less than 10, 10 to 25, 50 to 100, et cetera. Figure out where you are. And just go down this and realize this is— if, if probably if you're above this, you're going to get funded. This is, if I could simplify all of VC funding today, I think this table is maybe even, even better than Iconiq realized because this really ties to all my data. So let's, let's just slow this down for a minute. And this is a high bar. Again, the whole point of this convo, this is a high bar to get funded today. If you're in the $50 to $100 million phase, this is sort of beginning the growth phase. Top quartile is 90% growth. And 120% NRR, 120% NRR, and fairly efficient payback, 1.5x magic number. I won't go into all of that. $220K in revenue per employee. You can see this, um, and you can see that scale. That means as you get into this growth phase, VCs are still gonna be wanting you to grow almost 100%, and at 25 to 50, over 100%. And I see plenty of really, really good B2B startups that are just dancing below this line. They're at 25, $30, $40 million growing 60%, 70%, 80%. And look, maybe you can raise venture capital from a lot of the funds that we know and come to SaaS events, maybe. But I think it's tough today. It's just gonna be really tough. You better talk to every single one because this is what they're gonna be one or another. They're either literally looking this in their partner meetings or this is how they approach the world. This is the line to get funded today. And look back below $10 million. This is just top quartile. Again, this is not top 1%, but top quartile of venture back. 515% growth below $10 million and 170% from $10 to $25 million. And I can tell you my own portfolio, it's Astrofund. The folks that are above this, like no matter what anybody says, if they have good founders in an interesting space, they get multiple term sheets. Below this, it's really, really hard. And there is a zone if you're below some of these numbers, but you're doing something really important or you have really strong market share or you have insane NRR or something, there is a zone below this where VCs will, they'll lean in. They'll lean in. You'll be at $50 million ARR, not growing 90, but growing 70, but you're dominating an important market. It— and they can see that you could grow faster. They, they will lean in if there are reasons to lean in, but there better be some special reasons to lean in other than you being likable if you're not meeting, uh, the numbers on this chart. So slow this down, we'll share it, but I think this summarizes so much. This is the bar that you have to meet to get funded by most, maybe not all, but by most VCs. And especially to get the kind of valuation expectations which founders have, which is a topic we may not get into today, but we can. But it's not just that these numbers have gone up and the bar has gone up, but founders' expectations are higher. Like founders want higher prices too. Not always, but often some of the expectations, if you talk to folks that have been around for a little while, are utterly insane, right? A lot of the founders in the latest Y Combinator batches, have had revenue for days and are raising at $25 or $30 million post-money valuation, sometimes as high as $60 million post-money valuations, and then hoping to triple that in another round within a year. Like, if you think about it from the other side, that's a big ask to your VCs. Maybe it's market, maybe you can do it because YC's a hot brand or you're a cool AI startup, but for VCs to make money off that, that's pretty hard. So not only have VCs' expectations in general gone up, even though the public companies are growing more slowly, Founders are asking for higher prices and lower ownership, which pressures the VC model. You just need to be aware of it. It just is a reality. You don't need to have any pity for VCs, but realize when, you know, in many cases startup valuations have doubled over the last 4 to 5 years and maybe tripled or quadrupled for AI companies, it's not free. Like you might get the term sheet, but the expectations are equally as high. And just lastly, and then we'll move on to the next slide. It just is interesting. Across all of the iconics, it's just interesting to watch how efficient the companies are getting. So they're going from $90K in revenue per employee up to $400K, which is kind of the standard to go public. But I do see a side note, but for folks that just want to get funded or otherwise, I see too many folks as they're scaling these days that still have too many employees. There's just too many. I think the number one root cause is they bring in new VPs, new CMOs, new CROs, new C-whatever-ohs. And they bring in folks from the 2021 era that who, who, who want to just have large teams, teams of 10, 20, 30, 40 million to 40 people, not million to, to, to build out their function. Uh, they need 12 people in finance and, and 21 people in demand gen. And it's just, that's becoming increasingly, increasingly dated and, and hard to support. But it's interesting to see, see the ramp here. But yeah, this is the bar, like it or not, to be in the top quartile. And a couple other quick things and then we can open it up to questions. So on Saastr, Saastr.ai, which is our new platform, saastr.com still hosts most of our content, but Saastr.ai is where we're building all of our tools. There's so much stuff if you click on this little AI VC at the, at the top right. And one of them, I'm gonna put, promote this more, but we've, we've taken, we've done 300 and something startup valuations, which we, you can get for free in our tool and almost 1,000 VC decks. And we have so much data, aggregate data We don't retain the debts, but we retain the aggregate data that we can show you trends. And so I think the iconic slide kind of summarizes it all. If you want to get funded, you want to hit that. But do you want to see how you really compare to your peers? You can go to AIBC and just compare it across here. It's 108.5,000 calculations. And so across everyone that's used our AI calculators, What— how do they look at Series A? So this chart's just a little bit interesting. On the left, you can see traditional SaaS, AI-enhanced SaaS, and AI-native. Um, their average growth is 180% at about $5 million for AI-native, 100% for AI-enhanced, and 75%, which means you're not going to get funded for traditional. They're all around $5 million ARR, $5 to $6 million ARR when they go out for the Series A. A lot of folks, you know, will do a Series A at $2 to $3 million. We can answer that in the Q&A, but this is an average number. Some folks will take longer, but the average B2B startup's at about $5 to $6 million when it raises a Series A, but the AI ones are growing 180% and the non-AI are growing as low as 75%. It's just the reality out there. It's different worlds and you can see why the VCs want to invest in the ones with the higher growth. Okay. And maybe just two more things, then we will, again, we'll open up to questions. We have another tool. Which, uh, we, you can get all the data that you just saw on SaaS Today on AIVs. And then we have something that I think is pretty cool. It's been used again, we'll cross 1,000 times. I think later this week we just launched it where if you upload your VC pitch deck, we'll give you an incredibly deep amount of feedback. These are just the summary scores. We'll tell you how a VC will see your traction, how they'll see your deck, and overall we'll give you a grade and your odds of getting funded. We'll compare you with all other founders. We'll tell you what looks good in your deck, where you should improve, what you should edit. And if you want, we can— not only can we give you incredible detail, but we can even write an entire— use AI to write an entire investment memo to see— tell you how VCs will see you. Like, it's pretty cool if you go to AIVC. Um, and just upload your deck. Look, you could— maybe don't do it like 500 times because it costs us like 10 cents each time you do it, but do it as often as you want. I, I, I, I don't— we don't literally see them, but we see the activity. I know multiple folks use this again and again. Like, they'll upload their deck, and they'll get a B and, you know, what do you want? At least a B+ or an A- and they'll, and they'll tweak it or they'll go next month or others and don't go into— I see way too many founders confused, optimistic, ignorant, getting bad advice. Don't. We will do this for you. We have incorporated all these valuations, all these decks that we've dragged in 800+ VCs that have spoken at SaaStr. And in just a couple of minutes, we can tell you, we can give you an honest You don't have to tell anybody, you don't have to share it with anybody, score of how your pitch deck looks and how your company looks for funding. So don't go in blind, just use our free tool. And then, yeah, use the metrics and you can see this is interesting on our tool. We've graded 932 decks in 2 weeks again, so we'll cross 1,000 soon. We've done 387,000, 378,000 valuations. 1,500 founders used it in the last 7 days. 17% are top tier. So 17% got an A- or above. And B-, as you can see, is the average. When we first built this, we inflated the grades at first to make people feel better, but quickly decided that was a bad idea. This is an honest grade. So if you're in the Bs, here's a way to use our tool. If you're in the Bs, you might get funded, but you better talk to everybody. It's going to be a lot of work. And so most folks, if you think that the average grade is a B-, there's quite a few Fs. These folks are screwing around, I guess. And maybe that's helpful too, because people are delusional. We just tell you you're not, you're not going to get funded at that growth rate with that type of company. But the fact that most people, if you look at this distribution, are B-minuses, it's probably kind of summarizes a lot of what I feel too, which is founders, they're, they're, they have something, they're in the zone. It's just not enough. It's just not enough. A B-minus is not enough to get funded. So at least we'll tell you so you don't have to be blind, especially if you don't have any, anyone helping you. If you don't know a lot of VCs, if you haven't been through it, if you don't have a great board, we will do that all for you with AI. Okay. My, my last summary. And then one more, one more little show you our next tool, and then we will open up to questions. So how do you deal with this market? How do you deal with the bar where it is? How do you deal with the fact that VCs, 80% of VCs want to put 80% of their money into Replit, Lovable, Cursor, and friends? What do you do? Okay. The first one, excuse me, and this may sound basic, but man, I see so many founders don't do this. Ask your existing investors if you have any investors, seed investors, pre-seed, angels, devils, um, seed, ABC, whoever. Ask them, ask them to be honest and just put them on the spot because VCs won't volunteer this. Your angels won't volunteer this. How, um, on a scale of 1 to 10, how good a startup are we? And more importantly, what are the odds we can get funded for our next round? Ask what the odds. And, um, If you have any experienced investors, they will exactly have their opinion on their odds. Now, they may not be perfectly right, but push them. Tell them you want to know an exact number. What are the odds I can raise an F round? Give me a percentage number. I think actually our AI tools are better, but use them both. Like, use the humans you have and use our AI tool. So ask. The second one, and this was a big deep dive on our, on our 20VC conversation this week. I think because all the money is going into the hottest AI startups, you've gotta be number one at something to stand out today. Now maybe if you're the number one fastest growing anything, you will stand out. But be honest, what are you number one in? And I certainly see way too many decks, others, everyone else sees way too many decks where it's interesting. Hey, we're, we're, we're an AI SDR tool. Great. Okay. Some folks don't believe in it. At Saastr, we do believe in it. We have 4 of these running around being our Esther. We believe. What are you number 1 in? Well, we're gonna do this and the other guy. No, no. Like, you gotta be because we're just seeing these every, you know, number 1 has always been the most important in venture, but people are obsessed with it now. They're obsessed with finding the next OpenAI, the next category winner. And there's so many AI startups and there's so much noise and there's so much innovation and You walk around San Francisco and there's like 100 meetups every day and meetups every night. Like, we're looking— what, what can you be number one in something? And don't talk out of your rear. Show with data, even if it's early, what you are number one in something. This will really stand out today. And I don't see enough folks doing it. Point 3, this is Captain Obvious. We went through it. If you're not in that iconic top quartile, be honest. It will be very hard, if not impossible, to get funded. Don't pretend. Don't pretend, don't run out of money because you didn't know. Don't run out of money because you didn't know. Um, 4, we know this one, but not everyone is AI native or bust, just most. And if you listen to some of these discussions that we have every week over on 20VC with Rory and Harry and me, you'll see a spectrum. And, you know, Harry is probably the most aggressive investor. If it's not AI native or bust, he's out, right? He wants to be in all the cool AI tools. I'm somewhere in the middle. And Rory's more nuanced. Rory is a classic B2B investor. He's invested in Box and Bill and DocuSign and lots of other leaders and been on their boards for many years, and he's made a lot of money. And Rory's point is triple, triple, double, double is good enough for him. Triple, it's hard enough, but he's like, if you do triple, triple, double, double, I can see my way to an IPO at a multibillion-dollar company and make money. And, but I would say, of the folks I've grown up with, of the folks that have come to our events, of the folks that have spoken, maybe only 20% are like Rory. So not everyone is AI native or bust. Not everyone needs you to be Replit or Gamma or, or Higgsfield or whatever. Just 80% are. So if you're not that, I mean, don't jump off the roof, but get— realize this, this, this, this founder VC dating is just going to be harder. It's just going to be harder because you're going to have to— sorry, I've never never use these apps, but you're going to have to swipe left a lot more times and have a lot more meetings to find somebody if you're not AI native. But it doesn't mean they're not there. It doesn't mean they're not there. And two last points that I hope should be obvious, but I find that with founders, they're not. Don't assume the next round is coming. I still see too much of this. I still see too much where a company is at $20 million in ARR growing 60%, which is still compounding to something great. Okay. If you don't need money, just do a spreadsheet, 20% growing 60% and 50% and 45%. Like, you're still going to have a hundreds of millions of dollars company. It's going to be great, but no one's going to want to fund you. So just because everyone on your cap table saying great job or good job, Amelia, or great, great month, Jason, or whatever, don't assume in this day and age when everything's going again to those ones on the left that the next round's coming. Ask your investors, challenge yourself, make sure that it's coming. Don't assume. And then this final point, I see this way too much often too, for funded companies is, look, there's some folks that are like Harry who are on the bleeding edge and are pushing everyone to grow 10x every hour. For sure, they're out there, they're on X. But man, there's also a lot of investors who haven't been investing a lot recently, or otherwise, and they give you dated advice like it's still 2021 or 2022. And they just don't know and they're just not connected enough to what is getting funded or not. And, you know, I just had a debate the other day with a group of very seasoned investors who were convinced this company was hot as— hot as— boy, what's hot these days? Hot as Travis Kelce and Taylor Swift. That hot or hotter. And I'm like, look, I love this company. It's great. But this is a company that doesn't have an ounce of AI in it today. Okay. And has an incredible management team, but feels a lot like 2021. Like there's nothing wrong with this company. It's, I love this company, but no one's going to look at this and say this is the hottest AI startup. And it just, I felt like we were, we were, we were living on different planets. This is Mars and Venus. So just be wary of, for fundraising, be wary of the dated advice, be wary of VPs of sales that Haven't since 2021. Beware, he's a CMO today. Okay, then finally, and then I'll break down ClickAIBC at the top. You can use them all. We have— we'll, we'll tell you what you're probably worth. We'll, we'll, um, we'll give us your VC pitch deck even if Upload your latest investor update, upload your latest financials, upload a VC deck, upload anything that has your data, and we'll benchmark you compared with, with you, with all the other B2B startups. We'll tell you how you stack up. We'll tell you what percentile you're in. We'll grade everything. And you don't have to be fundraising and you don't have to have a VC pitch deck. Just give us whatever you have. We'll do the best with it. And will instantly tell you how you're really doing. It kind of, kind of combines everything we've done with this SaaStr AI, AVC into one cool tool. So this, this real-time benchmarking, you can do it every day, every week, maybe once a month is enough when you have new data and just find out how you're doing every week. And we'll just tell you and we'll tell you quietly and we'll tell you without telling anybody else. And you can print it or email it to yourself, or you can, you can delete the window and run it next month. But you'll have someone that will honestly tell you finally How the hell am I doing? Saastr.ai will tell you. So, so thanks everybody. And with that, Amelia, if we have any questions, we can, we can dig in there. Whoops. Amelia, you still there?

Yeah. Can you hear me now?

I can hear you now.

Okay. Sorry about that. Yes, we do have some questions.

Do we have any note takers?

We've got a lot of them. Okay.

Note takers.

We've got plenty of those.

Plenty of note takers.

Let me pin you here. And pin. Okay. Okay. The first question was from Andy. For the shooting star companies that you showed from Bessemer.

Yes.

Is it realistic for them to really have over 600 employees at $100 million ARR?

I think that's still, well, 600 employees at $100 million ARR. It depends. There are, you know, that if we go back to that slide and we look at where they were, they said, you know, Glean is pretty hot for enterprise AI search. Why is Glean hot? One of the old founders of Rubrik, but basically folks, CIOs have decided we have this huge need. We have vast amount of unstructured data in our companies. We need to search and find it. Glean has crushed selling that. Okay. They've crushed selling that. It's an obvious need that every company has. Whether Glean is the best or not, I couldn't tell you, but I know they're incredibly good at selling it. They had 1,000 employees when they crossed it. Okay. Extremely well-funded, repeat founders. So is 600 employees at $100 million AR okay? It was pretty common in 2021. I would say most folks would be concerned. You don't— you shouldn't need that many people. But listen, whether you're AI or IA or whatever you are, if you're, if you're growing quickly and you're running a lot of the classic go-to-market playbook, as long as the growth is there, you can certainly justify 600 at $100 million. We're just seeing a lot less of those super heavy startups today, a lot less, but it still can make sense if the growth is there and you have a very sales-heavy model. Interestingly, you know, OpenAI, the information published, OpenAI's financials today. And look, there's plenty of lovelies and cursors that get to $100 million with 100 employees or less. OpenAI itself is not like overly employee headcount, but they spent $2 billion on sales and marketing in the first 6 months of this year alone. OpenAI, like one of the most— ChatGPT has to be one of the most word-of-mouth viral products we've ever had. It dominates. It's not the only vendor. It dominates its niche and it still spent $2 billion in sales and marketing in the first 6 months of this year. So Um, but most folks wanna have leaner teams. Yep.

Um, related, I think related question from Scott. How much of the big teams pattern is driven by the VCs?

None today.

Okay.

None. It's a good question. I hadn't thought about it in a while. If we go back in time to 2021, which pretty soon we're not, we shouldn't even be talking about again, cuz it was such a different time. It was fueled not by what AI could do, but by the fact that we were stuck at home for a few months, for a year up and through 2021, from all of my time in B2B from, you know, 2011 through 2021 for a decade, you know, classic B2B investors were all about team size. It was, it was, I need, I need quota capacity for my sales team and I need to push money into marketing and I'm gonna use sales and marketing as the tool to dominate the market and I'm gonna put massive amounts of this in and I'm gonna put, I put twice the amount of dollars into sales and marketing as I do into product and engineering. That was the model. I don't hear— I rarely hear that today. Even the companies that I'm involved with that are running a version of that playbook, the VCs are not pushing them to do it. The VCs don't care. And the reason is because there's so many— like, that was the main reason you might be growing until 2021. The reason VCs aren't pushing is because it's not the main reason they're seeing growth. The, the, the AI native companies that are growing like weeds, honestly, sometimes their sales and marketing are like not that great. Amelia and I work with a lot of them. Okay. It's just, they have insane demand, insane demand. Like we have never seen in our lifetimes the amount of demand. And why is there insane demand? Well, often these AI tools can do things we couldn't do before. Like, like we just couldn't do ChatGPT before. We couldn't do Gamma for decks. We couldn't do Artisan or Qualified for AI SDRs or BDRs. You could do some of it. You like, you can make decks yourself. But so the best of the best are just seeing demand like we've never seen before. You can criticize Replit and Level if you want. I've used Replit to build these AI VC apps, but you know, 9 months ago there was no tool to vibe your own app. Like a non-developer couldn't just will an app into existence. Now you can. So the amount of demand that there are for these products is insane. So VCs aren't really pushing anybody any way in particular. They're just trying to grab a seat at the, at the, a chair at the party.

Yep. Um, question. Next question comes from Gal. The Iconiq data you showed for sub $10 million was 5x growth and SaaS for data for, uh, for $5 million is 188% growth.

Yep.

Which one do you think it is?

Well, the SaaS data is showing you our aggregated data, so they're not inconsistent. And when we roll out this benchmarking next week, you'll be able to see all of them in one table. Like you'll be able to compare Iconiq. Carta, Saster, Bessemer, and more. Like, it'll show you all 4 of them because they're pulling from different data. Our data is showing you what all your peers are like, right? It's thousands of calculations and it's telling you— Iconiq is showing you how you stack up against just their subset. It is a, it is a more elite subset. I'm not saying that they're better human beings, but Iconiq is only looking at folks— they're a growth investor. They're only looking at folks that were already funded by top-tier investors before them. So it's a subset of the subset. So, so just understand they're different. Our data will tell you how you're really comparing to everybody else. Iconiq's data will be telling you how you're comparing to everyone else that has been funded by their feeder funds. So net-net, Iconiq is much better for telling you the odds you can raise from VCs. Our data is better for telling you just how you compare to your peers. Yep.

Next question is, given the reality that less than 5% or so are funded by a iconic investor. Um, what should founders do? It's kind of—

well, look, I think, okay, it's a good question and I think it's also a troubling one. Um, and I don't mean that to be a critic of whoever asked it. I'll tell you why it's troubling. The, the number one worst thing that happens in startupville around venture capital is people assuming that they'll get funded. Or like most folks don't get funded and plenty of folks get funded once and never get funded again. It's called life. Okay. And so the reason I say that is there's too many founders that, that just assume one way or another they will get funded again. And many of them won't, many of them just won't. And so the answer is annoyingly simple. You gotta make whatever you have in the bank last. We've all been that way, whether it was in college or whether when we had allowance as a kid, it doesn't matter. Like, whether you have $10 million in the bank or $100,000, like we've all done it. And you could call that bootstrapping. You can call it whatever you want, but there is no middle option. Okay. Either you can get money and burn it, which is, you know, the whole point of venture capital really is so you can run at a loss. Like, let's simplify it. It's not to make— it's not so you— it's not, it's not just something you grab at the supermarket. The point of venture capital is a small segment of startups will be given money. So that they can run at a loss, but in exchange achieve hypergrowth. In exchange achieve hypergrowth for running at a loss. If it's not you, you just can't run at a loss. And I know that's a no. Maybe that sounds annoyingly simplistic, but it's the only answer, right? And so that's why you got to be ruthlessly honest. Use our tools, use your existing investors just to find out what are the odds you can raise another round. And if the odds are much less than 60 or 70%, don't run your company like you can run it with what you have and Run it with the revenue you have coming in the door. It may not be fun, but it's doable.

Yep. Really a question, if you're somewhere in the middle, um, what's your suggestion for making pitches to VCs if you are, if you are super capital efficient and you already have some capital, but you're lacking the high growth metrics that Iconiq, Bessemer, and Harry are looking for?

Well, look, there's really only two options. Again, if you're not fundable, you're not fundable. You're just not, um, well, maybe 3, if you're close, right? If you're within 20% of those ranges, you may find someone takes that, uh, deal, especially if it's not expensive and your burn is low. Okay. Not everybody wants that. Most VCs only care about top line growth. We could talk about why, but not everybody. So if you're 80%, 70% of those iconic numbers, um, and you're barely burning anything, um, you will get some investors' attention. Not most, you might not get the heads of the top funds. Mark Andreessen may not take the call personally, but if you're close and you're burning almost nothing, that could be a great bet. Okay. So just talk to as many investors as you can, get a thick skin. Don't follow up 11,000 times with crazy emails. Just try to get meetings and be— don't hide it. Like if you're close, don't— here's my— okay. Don't hide it. Don't obscure it in metrics. Don't use fake metrics. People just want to know, like, okay, if you're at $20 million. Okay, let's, let's do one that's easier to understand. Okay. Because it's closer. If you're at $20 million ARR growing 70%. Okay. Most VCs will pass on that deal, but not all. If you're at 70% and sort of breaking even and you have a new AI agent coming out and that agent's really exciting and it's done 200,000 meetings last month. Okay. So there's a reason to believe you might grow faster. I think that company might get funded, but you're going to need a lot of meetings. Okay. Same thing if you're at $1 million in ARR and you're growing to $5 you'll probably get funded. If you're $1 million growing to $3 million, it's going to be really, really tough. But be honest and tell folks why. Like, be honest about your numbers and give them other things that are accelerating and folks might get interested. So that's my second bucket of advice. My third bucket of advice is, and everyone that's an investor has seen this a lot of times, if you're close and people take meetings but they don't want to invest now, so you're close enough that people want to take meetings, but you can't get any term sheets. 3 good months will turn it around. So what I mean, and I've written this many times, if you're close but people believe in you, they're interested, but they're just not— you're just not there. The other— and again, this takes time, but if you, if you keep them in the loop and you keep to give them monthly updates and then you show them one month where instead of growing 6%, you grew 10%, and then you show them a second month, you grew 10%, and then you show them a third month where you grow 10%. So many startups flip on in one quarter, flip from unfundable to fundable because they cross those Iconiq or other lines. You don't need a year of good months or 10 years of good months, but you probably need 3, 4 is perfect. 4 is like, if you have 4 great months, no one cares if you had 40 crummy months before. Okay. But 2 is, 2, you'll still get meetings, but people will want another month. So maybe you could start taking meetings with 2 good months. Once you have 3, you can just say, look, these are the old days. This was us pre-AI or pre, version 3 or pre our agent or pre whatever, or, or, you know, before we hired Amelia, it doesn't matter. Just define, uh, uh, uh, just, just create a moment in time when you accelerated, explain it, and then 3 great months. No one will care about the 30 before.

On the other end, since we've talked a lot about post-revenue companies, what do you think are the critical factors for either pre-seed or bootstrap companies?

Well, it's tough. It's tough. I'll give you some advice that's sort of annoying. If you are pre-anything, if you can join a top accelerator, join YC or Neo or whatever, because it's just such— I mean, I've been saying this for a decade at Saastr events, but it's more true today than ever. Are you a better company just because you happen to go through YC? No, but the amount of investor attention that you will get is at an all-time high in these accelerators. It's just, it's, it's any of the top ones, YC, Neo, um, South Park Commons. There's, uh, there's even EF if you're early stage, any branded ones. The second tier ones I think remain at the edge of worthless. Okay. But the top tier ones, if nothing else, we can talk about how great the programs are and how neat it is to meet, to wave to the CEO of Airbnb. Maybe that's worth 7% of your company. I don't think so. But good God, the amount of— I mean, when you go to YC Demo Day, when I was just at this last one, I mean, I don't mean this meanly, but the amount of 20-year-old CEOs I saw with 2 weeks of revenue and the hubris they had, the confidence to fill out their rounds was at an all-time high. And the amount of VCs there, it just attracts flies to the flame. So if you want to— there are many reasons not to bother with accelerators. Many great startups, most of the leaders that are public today did not go through Y Combinator or Neo or South by Southwest. But man, do they attract investors like flies because everyone's looking. There's so many startups, there's so many thousands of AI startups in SF. Everyone needs— the earlier stage you are, the more signals you need. The later stage you are, it's just, it's just, you know, if you go out to the private equity stage, just send me the spreadsheet. I don't even need to meet the team sometimes. The less there is, the more you're looking for signals. Beyond that, if you're, if you're early, at least find other metrics. I mean, this is Captain Obvious. Find other great metrics, find great pilots. I'm not that interested in pilots because I'm a B2B guy. Show me the money. I'd rather— I just want you to have— for me to invest, I need to see 10 real customers, almost irrespective of what they pay, but 10. But some folks are into the pilots. Show if you're still in a free phase early, show me that you've got 100,000 users. Show me you have traction. Show me or show me that you have an epic team. Right? Epic teams always get funded. So you got to have something that is a signal, an epic team, great metrics, even if they're pre-revenue or something that's— you're starting their pilots or something else. I'm a small investor in an AI healthcare company that raised a pre-seed round, mostly for folks that believed in the founder. She's just an incredible engineer. And so the pre-seed was based on her reputation, and now she's kind of going to raise a seed. And look, the revenue's early, but she's got 3 incredible pilots that could easily be multimillion dollars each. Now, Am I the kind of guy that believes in those pilots? No, but the round's going to get done. Okay. Other people love these pilots. So she's shown the progress, great engineering leadership, early, early proof points, and some great pilots that may or may not convert, but probably will convert. That's enough bet in this case to make it for an example from this week.

Cool. Next question. We're at $600K total revenue, about half professional services, half ARR. Should we keep going and push ourselves or stop and start something new?

Well, there's almost two different questions there. Let's talk about half is software and half is services. I think you should not worry about in the early stages, right? I mean, for an extreme example, the single most successful software company that is public today is Palantir. Okay. Palantir was almost all services until, until just before it went public. In fact, its gross margins I should pull up— I think its gross margins in the year and a half before it was public were still in the teens or 20%, and then they miraculously went up to 60%, 70%, 80% as they became a software company. I mean, Palantir literally is worth over $300 billion today. No one cared that it needed a lot of— now, was that professional services? No, it was more one-off software done by forward-deployed engineers. But this was low-margin stuff to get Palantir off the ground. They did one-off projects, which every VC will tell you is a bad idea. So don't, don't listen to— again, just like I said before, dated advice. Don't listen to too much dated advice that some services are bad. In fact, in a way, if you look— another thing the Iconiq report had that I wrote up is the hottest trend in hiring is forward-deployed engineers. Forward-deployed engineers are up 12x in the last year because as we've talked about a million times, if you have an AI product, you probably have to train the agents. It probably takes a month to deploy the agents. And Palantir was very early here, but now every startup that has an agent is hiring forward-deployed engineers so that when customers start, the agents are already trained. And so that's not— is that's not technically professional services, but it's darn close. So don't worry about that ratio. Should you— should you throw— what was it, Amelia? $600,000 or $800,000 a year?

$600,000. Yeah.

You know, I don't know, man. I mean, this is what I can tell you is a lot more founders are throwing it away today because they're watching all the AI explosion and they want to find the hotter, simpler, easier path. These are one of the tough questions. If you've been at it for 5 years and you haven't gotten to a million, you have to be honest if you have product market fit, which is ultimately the question, right? Let me simplify it this way. I wouldn't chase the shiny penny. I wouldn't— you, you've built something, you have happy customers. This is a SaaS or theme that's harder than it sounds, even in the age of AI. But what it probably means, and I, I've written this many times, I should write it even more. You're probably at the edge of product market fit. You're, you're, you can get customers, but the product is not so dynamic and has so much pull like a Replit or Lovable that people will instantly buy it. You're at the edge of product market fit. And so the question I, I think is, do you have a strong enough team in terms of technical capabilities, domain experience, and will to break through to product market fit from almost product market fit, from almost product market fit. And there's, there's a startup I'm the only investor in. They're at about $3 million in revenue, which sounds great, but it's taking them longer to get there than they would like. Okay. Longer to get there to like first-time founders. And this is the discussion I had with them. I'm like, listen, it's okay, but like you're at, you have $3 million in revenue, but you're not adding $3 million each year. You're at the edge of product market fit. You have happy customers. Your product is good. Your churn rate is very low, but it doesn't do so much that, that the, that you can convert at a higher rate, but you're close. Like you're, you're close. And do you have a good enough team or can you recruit enough good enough team to break through to true product market fit? That's the question you guys should ask yourself. And if you can break through, you may be just a, a critical feature, a critical module away from true product market fit. But my guess is you're at the edge of it, but you don't really have it.

There's another Um, question in the chat kind of related of what they should do.

Okay.

We are an AI agentic enterprise software SaaS focused on finance with a million ARR, but can grow to 5x with some investment to develop our AI. We're looking for $2 million. Do you think VCs would do that as a SAFE?

Well, let me break that up into two things. Um, the first one is a mistake a lot of founders make. It's a subtle mistake. I'm at a million. Great. Okay. Let's, I already, it says to me, you have product market fit because I assume it didn't take you 5 years to get there. Okay, great. I'm, I'm interested. I need money to grow faster. This is about the worst thing you can say to VCs. Now it, it may be true. Okay. But flip, let's just slow this down. And then we'll answer the second part. What this says to VCs is, look, we're not growing quickly enough now, but maybe, just maybe if you gave us money, we would grow faster. This is not the point of venture capital. Okay? The point of venture capital is to take things that are already growing quickly and facilitate them growing even more quickly. Okay? To add nutrients to the soil, to water, to water the plant, to whatever. These are pretty, pretty terrible metaphors. It is so many, I would say so many founders, maybe 80% of the founders ask for money with some version of this pitch. If I just had a little more money, I could grow faster. That is almost 100% chance you fail. Okay, so I know that wasn't exactly the question that was asked, but it's— you started off so great and then you hit the number one trap and flag, which is we could grow quicker, but we don't have the money, right? VCs want to say, I'm— the better pitches, I'm going from 1 to 5 this year. Here's why. I've got 3 great months behind me and I'm raising $2 million to grow even faster. Okay, that, that gets folks excited. Um, but I might have hit the second half of the question. Could you reiterate it for me, Amelia?

Yeah. Do you think VCs would do that $2 million as a SAFE?

Okay. So first of all, I talked about whether it's the right, whether you have the right position. As a SAFE, look, let me, let me, it's, first of all, let me simplify something that is overdiscussed. SAFEs are not optimal for investors. Okay. So to simplify it, unless they have to, or it's immaterial, have to, or immaterial, VCs don't want to do SAFEs. There's a lot of reasons they don't want to do SAFEs. If it's a large fund and a tiny check, if Andreessen's putting in a $100,000 check, I don't think they care if it's a SAFE or an equity or what's SAFE backwards? FS, EFS. Uh, I know no one really, because it's just immaterial. It's just immaterial. When a check is material, when it's, you know, more than say half a percent of a fund, if a $100 million fund is putting in more than half a million dollars, they don't want to do a SAFE unless they have to. Okay? They just don't. It is, it is not equity. Investors have no protection. I recently helped the founder. I wasn't involved where the founders raised a bunch of money on SAFEs and one of the founders just decided that they wanted to keep it all. They wanted to keep it all. And they hired a lawyer who said, my client can keep all of it because it's neither an equity nor debt. It's nothing. You have no rights. We're going to keep all the, all the SAFEs for ourselves. Eventually, most of the money was given back to investors and they shut back the startup. But that's an extreme example. There's no protections. You generally have no way to control the amount you'll own. You generally have very limited, if any, pro rata rights, and no one really wants to do it. Now, why Y Combinator is very successful, as are the others, they force you to do it. You have no choice. If you want to invest in my YC startup, you use their website and you sign up for a SAFE. So everyone's gotten— You know, big deals don't get done on these YC safes. They go off the platform, but small deals all get done that way. But no one really wants to do it unless it's a small amount or immaterial to summarize it. So net-net, could you do it on $2 million? Sure. It's not a huge amount, but unless you have a hot hand, don't push it. That's how I'm going to summarize it. Unless you have a hot hand, don't push it. Make the ask for the money and don't over-optimize on exactly whether it's done as equity or debt or safes or eFASAs or whatever. Don't, don't over-optimize on crap that doesn't really matter. Optimize on getting the deal done.

Okay, 2 more we'll try and get to. Next one's a quick question. Can you create a sample deck using all of the decks that have been submitted to Saastr's AI pitch deck with a grade of A or higher and share it as a sample as a good example?

Well, I, I gotta think about it. I can't do it because we don't, we don't With— unless the founders ask us to, we don't retain the deck. So, but we probably could do some meta version of it going forward, like we could add a feature. So I'm going to think on it. If you go to our AIVC and click at the top stats, you'll see all those stats across all the decks. So we have all the stats. The problem with a deck is you think it's amazing, but you could distill it, you could throw that deck into ChatGPT and distill it down to like 10 bullets. And founders think it's like a magical story or beautiful fonts or like that slide 6 came before slide 8, but it's really just like team growth, market, team growth, market. That's it. Team growth, market. And then also team growth, market. So I'm going to think about that. We have so much benchmarking because it's a good— it's a fair question. Like, show me some winners, right? And like, you'll see a few like on Business Insider, but they never share the metrics. So like, hooray. Like, you know, here's the deck I used to raise $20 million from Andreessen. And you look at the deck but you don't see any of the good stuff. So Saastr could do that. But I think if it's like a composite or aggregate, you won't learn anything. Okay. You won't learn anything, but I might be wrong. I do like the idea. Thank you. I'm going to think on it. If I can do this in phase 2 of our new benchmarking project, actually we'll do it because it's a great idea.

Okay. Last one that they want your opinion on. We're at $11 million ARR, but we're growing slowly at about 50%.

Yep.

We hit cash flow positive this month, but the growth rate has made a raise challenging.

Yes.

What would your advice be based on today's conversation? We'd like to raise to accelerate sales and marketing and increase our growth rate.

Look, this is in some ways— this is— okay, I'm going to give you my advice. First, I'm going to tell you tough news. In some ways, this is the crap. This is the crappiest place to be right now. And I'll tell you why. Because even through 2023, if you were growing 50% at $11 million, and certainly if you were growing 40% at $20 million, which you're obviously going to get to, like, do the math, right? You're going to get to 40% growth at $20 million. If nothing else, private equity firms would want to buy you. You'd start getting calls. And we would— at the end of SaaS Revenue each year, we do Q&A at the end like this, but we do a big one for hours until we pass out. And there would always be someone who would ask that. I'm a 15 million AR, growing 50%. What should I do? And I'd be like, well, did you get any calls from private equity firms? They're like, I've gotten 20, 20 of these this year. They're not, they're not calling now. They're not calling now. And private equity has done a, not full, you'll still see deals done in the news, but they've done a partial retrenchment from SaaS and B2B because these bets have not played out because they've bought stuff in 2020, '21, '22 that had higher NRR and thought these products would last for decades. And they haven't. And they haven't. And they've seen growth fall or decelerate. And so what private equity has learned is that from, you know, from about 2012 to 2023, so that's 11 years, call it a decade, they would hoover up, buy up any, especially any SaaS company that got to $20 million growing 30 to 40% or more. That was cash flow positive like you, and then sometimes even dip down to $10 million if it was a good category, they would just buy them up. They would just buy them up. And you can see maybe a year ago, you can watch it. I brought on one of my, one of my 2015 investments got bought up by PE in 2023 called Logical. And they were like that. They were at $30 million growing 40% or something like that. Andy has all the numbers in it. And that was, and they got multiple PE firms wanted to buy them, but in my own portfolio, that's about when it stopped. And these calls stopped happening. And part of it was because a lot of these leaders did not have as durable revenue as they used to. And part of it is because AI is making categories more unstable. So unfortunately, I, you know, I wrote a bunch of posts like, like, PE to the rescue, PE is the bailout. I never would have sold my last company if I knew PE was coming. It was all true. I'm just not seeing— I know this, this, this is not fun. I'm not seeing private equity buy up everyone approaching $20 million in revenue that's growing, that is cash flow neutral. It used to be. Used to know, hey, at least I'm going to get an offer at 8 times revenue, 10 times revenue, 6 times revenue. It's not saying they're not coming. Those firms still exist. They're just not leaning in the way they do. But, but take those calls. They will still happen. They're just harder to do. But I do think it will come back. Everything is coming back. IPOs are coming back, as I've written about. And I think this PE thing will come back, especially if you have an AI flavor. And, you know, for example, we know we, the, there's a company called Filevine out of New York. I mean, out of Utah. I think the CEO's coming to SaaStr London in December, right, Amelia?

Yep.

So they've been doing AI legal case management for plaintiffs for years. Old company, but study them and we'll do a case study in London and we'll promote it on SaaStr. Infusing this with, with true AI agents, AI document review, AI everything turbocharged this business. They just raised at $3 billion from Excel, $400 million from Excel. So I think PE will get excited about that. I think AI will help a lot of leaders pull ahead. But right now we're in an area where there's not, there's not as much appetite for PE to buy companies like you than there used to be. So why did I bring up the Filevine story and why am I telling you this? My, my somewhat, Uh, on, you know, there's no, my somewhat, you know, less than satisfying answer is push on, push on, get bigger, AI enhance your product, embrace where agents and AI are going so that in 12, 24 months like Filevine, you may have some great exit options and funding options because right now you were at least interesting to be acquired. Right now you're going to, unfortunately it's not fair, but you're going to be walking through the desert at that kind of growth rate. Rate at $10 to $20 million, but I'm not sure that will be true in 12 to 24 months. So brute force it and don't expect any VCs will fund you with those numbers. And also, last point I'll tell you is there's also a middle ground. There's PE firms that kind of want to buy you, which we talked about. And then, and then we'll break on this. There are other folks that talk like they're VCs, but they're really PE firms that want to buy like 49% or 51% of your business. Um, and there may be reasons to do that, but just don't confuse those with investments to scale. Those are really like partial buyouts. You may find someone that wants to give you, say, $10 million or $20 million to help you grow, but they might want half your company. Forget about whether you like the valuation. That's just not the same thing as an investment. Those deals I think you can get, but I'm not sure after all the hard work you're going to want to take one of those. So thanks everybody for the time. Next Wednesday, Amelia, is AI Demo Day all day, right? Including the Snowflake CRO and CMO, right?

I'll show you guys. Yeah, it's Yeah, so instead of Workshop Wednesday next week, we are doing a full AI day. Starts at 8:00 AM, so it's a little earlier, but we're gonna go all day. So me and Jason will kick it off. Yeah, then we'll have Snowflake and a lot of others.

So how to do an AI SDR, how to do AI RevOps, how to do everything. So come next Wednesday, it's free, and then we'll be, we'll be back doing some of these smaller ones after that. Thanks everybody.