How to 10x Your SaaS with Jason Lemkin, SaaStr

A good VP of Sales will take what she learns from those two and hire you three through 300. But without two, it's too early. But too early is a bigger mistake. But don't wait for three or four scale sales reps. The minute you have two that hit their number, obsess about finding someone. Not because they're a magical VP like we talked about, but because as a founder, you're not great at hiring 3, 300. It's a different skill set. I need some traction. You need some traction.

Let's get some traction.

Hey, what's up innovators, entrepreneurs, visionaries and disruptors. This is your Traction podcast host, Lloyd Lobo. We're a community of over a hundred thousand people just like yourself, on a mission to help you get the methods, the money and the madness to explode your business growth. Featuring stories and tactical advice straight from those who've done it before, like Shopify, Twilio, Asana, and many more, this episode is brought to you by Boast AI. Each year, the US and Canadian governments give out billions of dollars in R and D tax credits and innovation incentives to fund businesses like yours. But the application process is cumbersome, prone to frustrating audits, and receiving the money can take up to 16 months. Boast AI gets you access to research and development tax credits and innovation funding opportunities without the headache and red tape. Join thousands of North American companies leveraging Boast AI software to maximize cashback, check out B oast AI. This episode is also brought to you by Launch Academy and an international tech hub that provides mentorship, resources, network and the environment for entrepreneurs to launch, fund and grow their startups. Since 2012, Launch Academy has incubated over 6,000 entrepreneurs, of which 300 have grown their startups past seed and Series A and have collectively raised over $1.2 billion in funding. To learn more about Launch Academy's programs, check out LaunchAcademy.

Super excited to have you, Jason here. So Jason's been like unofficial mentor to me. I've been a huge follower fan of Jason Saster, serial entrepreneur. I think I call you the godfather of SaaS. And for folks who don't know, everyone knows. But Saster.com is the world's largest SaaS community. A hundred million dollar SaaS venture fund. Is it a hundred million? Is it more than a hundred million? Where is it now?

Something like that. Yeah. Enough.

Then you founded the web's most popular E sign platform. I used to use.

Yes, yes, we can chat about that too.

Yes, Grew it, sold it. And then you also Founded one of the only successes in nanotech, which was.

A long time ago.

Yeah, 50 million. So a lot of experiences. Let's start with your career before we.

Go, just in case someone watches and they don't know. What does Boast do?

There's hundreds of billions of dollars in government funding and tax credits to fund businesses. But it's a complex application process. We automate that so you get more money without the risk and time on your team.

Okay, so both north, you started off in Canada, Both north and south of the border now, right?

Yeah, yeah.

There's a series of R and D tax credits, often at least half a million bucks. Right. That people don't know exists. They go to your website, they throw in a few bits of data, and they find out if they're eligible for these credits. Is that how it works?

That's exactly it. So go to Boast AI and we'll help you get that money from the government.

For fun, let's talk about Boast as a case study for SaaS, because you're super interesting because you went from a services business to recurring revenue business. Right. Successfully. How did you manage that transition? Right. And you saw mammoth growth in your valuation and economics as you switched from services to essentially a software business. Right. How did you do that?

When we started the company, we were working on a few different ideas, so Alex and I did Automatically, which was a chatbot in 2012 13, built on top of Zendesk. Got a lot of people, people using it, but we couldn't get it working, so we punted that. Then I did Speak Easy, joined a team that Byron Dieter was incubating. That was an AI for sales. In parallel, we were running this consulting firm doing R and D tax credits. You know what, it's going to funnel or fuel other projects. But after a couple of failures, we're like, hey, you know, this is a big problem. And we learned a lot with other doing other startups and failures. Why not just pivot this from a services company to. To build technology and grow this. So in 2017, we made that decision. We put together an MVP. The good thing was we already had clients that were paying us to offer this service manually. And so I realized from like.

So you were faking it at first? Behind the scenes, it was a web form and you were faking it as a service at first, Right?

Exactly. Exactly right. So, you know, the good thing was what I realized from automatically failing and speakeasy failing is customers want an outcome on software. Your job is to get them that outcome. We already getting customers, the outcome. So we already had customers and they were recurring and they were constantly paying us. So we're like okay, now let's just start migrating them in software. Any complex AI applications where you're looking at a lot of unstructured data, like we're integrating with Jira, GitHub and we're stitching it with financial data. You can't automate all of that on day one. Like step one is like how do you do it manually? Get the data in manually, then you augment it with humans and then eventually you start getting enough data and success. Then you can apply machine learning to then take over a lot of the human work. Right. So everyone that says oh we're a machine learning application for complex SaaS, they're mostly like AI enabled with humans in the loop. Almost everyone like even like there's a.

Lot of humans in the loop. Right?

There's a lot of humans in the loop. And so 2017 we launched at Saster. You gave us a free booth, you were gracious enough and our journey to traction started from there. And we always wanted to bootstrap because we'd been a part of foreseen like venture backed failures and we never thought anyone would fund this anyway. We went from like 2 million to during COVID when grew to 7 in that year and then we'd been doubling sort of. There was just a lot of inbound from this community. We had good relationship with the radian guys, I really liked them and then the deal just happened.

Okay, so I know there's a lot of stuff you want to get to but last question on both because like for other folks that are taking a service or a human powered business that's got a couple million revenue, it's probably what you had before you did it. A couple million. Right. What's your number one tip to make that jump and turn it into a software business? What's your number one tip in learning for folks that that want to cross that chasm?

You don't have to build everything on day one. We're living in a no code world. Right. And also depends on the application. Now you can't build a self service product led SaaS company by this method. Right. Eventually you're going to have to launch some feature set. But my number one T is do as much as possible like Mechanical Turk, like human mind the loop as like wizard of Oz I would call it. Get customers the outcome once you get like 10, 15, 20 customers that are happy and that keep coming back, then you look at, hey, what can I automate? Eliminate, delegate, right? So what are the things that I can completely automate in this equation? Like so it takes me x amount of time to pull data in. Well then you should just look at the most common tools that your customer base uses and build integrations to them so you can automatically ingest data. Once you ingest data, then it's like parsing and normalizing that data so that you can write some algorithms to normalize that data. Then it's like taking sort of workflow and actions, right? The workflow is the easy part. The ingestion to build automation is also the easy part. It's the how do I normalize this data and get to a reasonable, sensible outcome based on that data? Do things manually and then look at it. What are the hype? What is taking me all this manual time? Then automate that as best as you can and you can break it up. Data ingestion, normalization and then workflow and actions.

Right. Based on that good insight. There are so many things, there's so many integrations, so many things you can, you can't have be powered by humans until you're ready to automate it. Right? It's not what we love as founders, but it's more practical, especially in the enterprise than we might think at the beginning.

I recently met two companies. One is Surge, one is datapure that does data labeling for last mile. Because large companies especially that are parsing lots of data. AI doesn't always work, machine learning doesn't always work. And these companies need high accuracy like a Walmart, like their manufacturing facilities and whatnot. So they do data labeling with humans for the last mile, not their gross margins are high. Augmenting with all humans and, and the second thing is one of these companies got to 10 million ARR in 18 months.

When you significantly replace human beings, especially expensive human means you can scale that way. Pretty rapidly.

Exactly. Do things that don't scale. You've had a super successful career, serial entrepreneur, investor, community builder. Give us your backstory. I summarized it. But how did you decide to start this massive community? How did you get it to where you are today?

My number one learning of the last decade, going from a SaaS founder to a student of SaaS. Right. I'm a student. I took what I learned building Adobe sign to 10 and then 100 million and then shared my mistakes and learnings and applied it to other startups I invested in. And if I had the number one mistake I've made and my number one Bit of advice and it ties to your history, Lloyd, that you just brought up is don't be a serial entrepreneur. Serial entrepreneurs for idiots. It's for suckers. You want to do one great one in at least in B2B and never quit. The greatest mistake of my life. And look, building Saster, the largest community in the world for cloud executives. We'll talk about it. It's my life's mission and we'll talk about it. But the greatest business mistake I will ever make was having sold Echo Sign to Adobe at a million a month, at 12 million in revenue. And there were a lot of reasons it made sense. A decade ago, cloud was much smaller, right? A lot of issues. But the fact that everything compounds in B2B, if you have a good team, you are, you do not want to be a serial entrepreneur. You want, as soon as you have even a million, 2 million in revenue, the odds that you have a better idea, right? The odds you have something better to do in your life as a founder are low. Now things are screwed up. If you have massive founder disalignment, if you run out of money, blah blah, blah, blah blah blah blah. But don't be a serial entrepreneur. Be a one time winner and even Lloyd, you're talking about and we'll see where your career goes. But boast as a startup was built on top of two failures right before. That's okay, that doesn't count. I'm not going to call you a serial entrepreneur. I'm going to call you a first time successful entrepreneur. And that's, to me, that is much more to be celebrated and emulated than doing 12 startups at the same time from Tulum or being a serial entrepreneur. And it's just SaaS compounds, right? There's a thousand unicorns this year and frigging go for it. Try to build a unicorn. Even if you don't come close. Man, Cloud is so big and SaaS is so big that don't do it, do one. And no matter how hard it is, even if Q4 sucked, even if it looks like on Twitter and LinkedIn, everyone's growing 300%. If you have momentum, if you grew even 40% last year, 30%, make your existing company better, make your product better, don't tilt, don't be serial like double down, even if it's hard because especially if you have NRR north of 100%, like these businesses can't be killed that have NRSR north of 100%. They just cannot be killed. If they're nurtured, if they're nurtured and invested in. They're not. They cannot be killed.

You know what my definition of cereal was? They start something, they make it great, they sell it, then they start another one.

Don't do it. Why would you sell it? Why would. Why not just keep building it? Who's the single richest person in tech still? You know who it is. In B2B, it's Larry Ellison. In B2B, it'S Larry Ellison. Why is Oracle crushing it completely? It's very mature. He never sold a share. He just kept doing it. He's the largest shareholder in Oracle today. And Oracle. We can make fun of Oracle. It's a $240 billion company and he's the largest shareholder. Right. That's how you go along. And with secondary liquidity, with loans, with all of these things, there are fewer reasons to exit than there used to be. So I want to deglamorize that concept. Especially these days when there's a growing. There's a growing community and meme around building and splitting for 1 million or 2 million. So many micro hires, micro acquisitions, micro this, that's fine. But cloud has never been bigger. I don't think founders fully internalize the power of that, the tailwinds, the boost that gives you. Right.

So that, that ties into a good point you brought up.

Right.

What if, like you're not on pace to be a unicorn yet? What do you do then?

In that case, let me step back from it to one of the earliest Saster posts and points. I. If you are at 1 to 2 million in revenue, just if you've gotten there and as you. If you go back in time. Lloyd, we know it's not as easy as it sounds. If anyone's early stage listening or watching to this. Right. The hardest part, it never gets easier. It never gets easier. But intellectually, the hardest part is getting people to buy a new product because there's plenty of products in market. There are there. There was plenty of products before Zoom that were on. There were ways to get tax credits before Boast there. There were products before Notion. There were products before Slack. Like convincing the world to buy a new product is harder, harder than it sounds. Right. So that first million really is the hardest. If you're there and you have happy customers, ideally NRR, over 100. Right. So that they stay and you're growing even at a mediocre rate. It's up to you. If you're. Everyone would like to go from 1 to 10 in six quarters. That's the magic today that's the bar today. That's what VCs want. One to ten and six quarters. Okay. It does happen. It happens far more often than it used to. It's crazy, but if it takes you 5 years to go from 1 to 10, does it matter at the end of the day? And the other thing that happens is when we look at folks that start slowly Sometimes look at UiPath, right? One of the most successful IPOs of last year, 40 billion. Still worth $40 billion today. It took them 10 years to get to 1 million in revenue. 10 years of not quitting and also turning a services business into a software business like you've experienced, and then boom. In a way, it almost doesn't matter what your growth rate is before about 10 million. And what really matters is your velocity. Coming out of that carries you to 100 and carries you through brand creation. Right, because automatically as we approach 30, 40, 50 million, we start to have a real brand in the industry. The average SaaS company has 30,000 customers at IPO, but if you're more mid market, it's really like around 10,000. Okay, so we think about SaaS companies that IPO, they all have brands in their markets, don't they? Wow. They all. And so you start to get this brand around a couple thousand customers and that just carries you the brands. Like we don't have time to qualify 11 vendors, do we? How many of us have the time to do 20, to do a 20 vendor bake off? Right?

Nobody does.

Okay, so we're. The truth is we're either looking at one or two vendors or we have a niche need. So we're looking for a vendor that has a 10x feature. Okay. We know about Salesforce and we know about HubSpot for CRM, but I have a particular need. I need to integrate with Boast or I need to do some sort of thing. So I'll do a search and find a new vendor, but otherwise it's all going to the top one. So if you can just get there, if you can just get to that brand level and it happens as early as 4 to 5 million, you get a mini brand. Like it will carry you. You've just got to push through to that point. And at the end of the day, if you're committed, if you're on a journey, if you're on a mission, and if you have a good co founder. Right. Which we could talk about. I say intellectually at least, don't sweat it. Don't sweat it. If growth is slow to 10, just freaking get from 1 to 10, get from 1 to 10. You can still build a UiPath, you can still build a squarespace that took years to get to a million in revenue. Just get to 10 and then put it in a Google Sheet. 10% growing 100%. Boy, you get to 100 million pretty fast, right? 10 million growing 60%, you're still going to get there. It's just going to take a decade. It's not the end of the world. If you're on the right journey for.

You, if you're on the right journey for you, unpack that a little bit.

It's just too hard, right? This isn't really so much advice as filtering out the uncommitted. We did a little analysis on Sastr, but I know it's, you can guess. It takes 12 years to IPO in SaaS and it takes 10 years to get to a billion dollar exit. And plenty of folks will never have a billion dollar exit. But even the folks, even the huge successes that are sold for a billion dollars, it still takes a decade. So if that's not you, if that's not you, it's okay to have a few doubts. We all as founders, we all have doubts. But if you don't believe, just quit. Just get off that journey. Because even today, even this year, where there's seemingly wild success like there's no. Very few SaaS apps are incredibly viral. Very few SaaS apps explode 12 months into release on the market. Just filter yourself out if you're not committ enough. But just be cognizant of the fact that you probably don't have a better idea. The folks that I know that quit after a couple million in revenue, sometimes they quit because of internal issues or other things, but usually I don't see them going on as founders to something so much better than what they had. If at 10 million you're only growing 50%, if you grow 50% and then even if, and I modeled this out, you can do a saster with pretty good growth. You can build a unicorn. Even with some deceleration after 50, you will probably get from 10 to 100 million in nine years. That's compounding nature of growth. You will have $100 million business in nine years. At 10 million, even if you're only growing 50% coming into 10 million in ARR, that's pretty doable. If you keep your customers, let's say you have 120% NRR, right? You're really not adding that much at 10 million to grow 50% with 120% NR are you, you're really doing a pretty crummy job and marketing the sales, especially in marketing, you could still get to 100 million in 10 years. So the advice there, settle in at 10 million, settle in, upgrade the management team. You came in, you guys raised your round and you went out and you calmly built a whole management team, right? That's what you should do. Settle in at 10 million, analyze your management team up level top, enhance, backfill and settle in and start adding incremental improvements, which is what SASTR is all about. Because even at and again, 10 million to 50% sounds hard, but it's pretty mediocre. If your NRR is high, you can still get to 100 million in 10 years. And I really don't think most of you have something better to do for those 10 years. I really don't think so. Than to build a company that's worth a billion dollars ten years down the road. I don't think most of us have something better to do.

100%. And you know what, it takes a fricking long time, but if you put it that way, 10 million. Not a lot of founders look at it analytically, right? If you look at it, 10 million at 50% takes you 9, 10 years to get to 100 million and a billion dollars valuation. What else do you have to do?

For what else do you have better? What else do you have better do? And the first, even worse, the first moment I got, fuck, I. This is why selling was the greatest mistake of my Life. Selling at 100% growth at 10 million. Because you can see that would have led even with some deceleration, to 100 million in five or six years. Terrible mistake. But in a related point, I remember right after I sold, I met Nick Meador when he joined Gainsight. So it's probably 2013 or something early. Maybe it was 2014 and he had sold his company to Symantec at about 10 or 2015 million in revenue. And I said, what's it like? What's it like joining Gainsight pre a million in revenue when he joined his CEO? It's like it's going to take me five years to get back. And it didn't quite take him five years to get back to the revenue he had there. But the point was well taken. Selling his prior startup to Symantec and then having to join Gainsight and then again having a billion dollar exit there last year and then keeping growing. But It's. He lost five years. Better to push on nine times out.

Of 10, push on, keep pushing on. So then there are a lot of things that get founders dejected, right. We're not growing fast enough to. The competitors have raised more money and started to creep in. All of this stuff like how do you mentally make sense of it and stay focused? Right. And I guess my question was, what are the top things that founders miss that can help them grow faster?

Look, there's two things if you're struggling to be. The first one is harder to solve. The first one is though, it's so much easier with a great co founder. Each co founder should be better than the other co founder. Now, as an investor, when I look at there are startups I've invested in that I know just cannot be killed, okay? Cannot be killed. And it's because a great co founder has another great co founder especially I love a great CEO and CTO combination. And I could criticize them, I can provide this. But I've never seen anyone that's good and get your traction that has a great partner co founder fail because that's what gets you through the tougher times. And personally, in my endeavors over my career, when I've had a great co founder, I did the impossible. When I lacked a great co founder, I did okay. But I could only do the unlikely and the impossible with a great co founder. And I think it's tough if you don't. And what do you do if you don't have a great co founder? Lloyd, you might ask, and it took me a while to find the answer to this question, which is you can find one later. And this in two ways. First of all, if it's early enough, you literally can find a co founder later, right? You can find a co founder in the first one or two years. Co founder as a title is free, isn't it? But it's someone that cares as much as you, as committed as you. It does not. They do not have to be there on day one. It does not matter if they're on day one, right? That is literally, you can find a co founder that's there a little bit later, it's fine. Two, even if you can't find that, you can find what I call an ex post facto co founder. You can find someone that maybe they're not really co founder but later, three, four, five years down the road, they are so passionate about what you're doing, they are so committed to that they carry some of the load for you. And I was fortunate enough, I had a lot of co founder issues back at Adobe Sign and Echo Sign. But my VP of sales, Brendan Cassidy, who went on to be first head of sales at Talkdesk and many others, my VP of product who's now COO at Gong, they both carried the load for me, Brendan and Aran. And I had great other folks on the management team. No one else really carried the load. And I should have leaned into them even more and I should have realized how special and unique that was. But my point is, you got to find someone to carry the load with you to have those tough conversations. A true co founder you can have the really tough conversations with. But find Recruit. And this is the second of the two answers. You guys, a truly amazing vp, a truly amazing will take some of the load for you and it makes it easier. I remember at your last Traction event before COVID in 2019, I was up in Vancouver and I was in the green room, which is always a great thing. And I was with Wade from Zapier and we were talking about management teams and obviously Zapier is a hot company. And we were talking about recruiting and how we recruited and. And I said, how many of your VPs are so great? They take some of the load, right? They really own more. If you're really lucky, maybe even half might. So search that out. So if things are tough, find one vp, one senior person to add to the team that doesn't just check the box, isn't just good, but is so at least might be so passionate about your problem, passionate about your product, passionate about what you're doing that they can carry some of the load for you and you will do better. And sometimes, and this is the final point, I know sometimes that person, that VP you need for your team, sometimes they're already working for you. Sometimes they're a director, sometimes they're a senior manager. It is not. Sometimes they are that person that gets promoted so quickly. And they're not just, I think half the time they're already working for you. You just need to give them more room to grow, to take over some of that load. That's the answer. And when you have someone to carry some of that load, if you're growing at all, if you're growing 50% at 10 million and it's going to take a decade, with that help, you'll get there.

A lot of CEOs don't want to give away the load.

They're terrible CEOs. Who does not want to give off, give up some of the load. What successful CEO everyone is. If every great CEO that You might interview here at any unicorn, any successful public company CEO. All they're doing is constantly trying to recruit the very best people to take over the load.

What do you think are the top three loads for a CEO at a fast growing company that needs taking?

Maybe let's go in backwards order. The first one is you have to stop being an individual contributor. Even maybe sometimes up to 8 to 10 million in ARR. Especially first time. Sassios are still IC, right? They're still running social media or outbound or something like that. You gotta stop being an ic, okay?

You're still writing one post a day. No. Or three.

I know. That's why I know this advice is good. Because I've succeeded prior in my career and I'm failing today. You gotta stop being an ic, then you have to stop being a vp. Sometimes what happens is I'm not the IC anymore, but I'm still the VP of sales. Okay? I hired three great sales reps, four great sales reps, but I can't find the VP of sales, so I gotta do it myself. Or I have a marketing manager and a content marketer, but I still have to be the VP of marketing because I'm the marketing genius. That's not that uncommon for a marketing focused at Boast. You are probably the head of marketing as well. For a long time you're a natural marketer, so you gotta stop being a VP next. And then the third point is you gotta hire great ones, it's obvious. But you got to hire great vp. So stop being an IC stopping a VP and then stop complaining, beating yourself up, saying how tough recruiting is and go hire a great VP for a role. And it's just magical when you do. If you don't think you need a great VP of something, it's because you haven't worked with them. If you don't think you need a great VP of product, you don't know what you're talking about. You've never worked with one. If you don't think you need a great VP of marketing because marketing is going so well, it's because you've never worked with a great VP of demand gen. Okay? Same thing with sales. And the third point is get a great VP of everything and every area will not only perform better, but the load will come off your shoulders. The load will come off your shoulders. And ultimately the sign of a great VP isn't just that things go better, but they always do. It's that you look forward to your one on one each week and that plus some informal conversations are enough. One on one. And unscripted slacks and conversations aren't enough. You don't have a great vp, do you? You're micromanaging them. And when you get there, at least as Wade says from Xavier, in half your. Even in half your areas, you can fly. You can just fly.

What are, what are some other leading indicators? Let's say VP product key things, right? VP product, VP Eng, VP Sales, VP marketing. What are some leading indicators in between sort of your weeklies or quarterlies that you look for that. That they're going to fly?

This is a top. This is a top 10 error for founders make. The mistake founders make is they give a new VP too long. And I wrote this post years ago and it was the first post I wrote where people, I really upset people, okay? I really upset people. And I wrote, you'll know in 30 days if your VP of Sales is going to work out in every VP of Sales a while ago that a lot of folks we know that have gone on, they complain like, you got to give me more time. 30 days, Jason, that's. You're going to. That's completely unfair. I never said you have to triple sales in three weeks. I said things need to improve, okay? And this is true in every functional department. Let's start with sales. It's the easiest. What does a great VP of Sales do in the first 30 days? Bring in a couple new great reps, move out one or two reps that aren't performing and just take whatever deals are in flight, whatever is in the pipeline already, and do a better job closing them. If you swap out, if you get rid of the two worst reps, bring in two better reps and just jump into three deals and decrease the sales cycle. Close them that month. What's going to happen in 30 days? You're going to see progress. Will you always see a massive uptick in revenue? Sometimes yes, sometimes no. But you're always the great ones. Just think about those two steps. Getting rid of your two worst reps, bringing in two better reps, and then closing two or three deals now instead of next quarter. How much is that going to impact your business? Epic. And every great VP of sales can do that. Every VP of sales almost before the day they start, will identify who on the existing team, even if it's five people, who on the existing team is good, who isn't. Route the precious leads to the best closers and then bring in one or two people that they know. That alone usually like increases revenue 20 to 50%. Just getting the right leads to the right rep and not squandering them on the ones that waste it. That's the rookie error. And so a mediocre. What a mediocre VP of sales does when they come in, Lloyd, I can't lose anybody. They come in and Bob and Linda on your team are your worst performing reps and you have a mediocre VP of sales when he says, I gotta keep Bob and Linda. No, like the best VP of sales learns by the end of her first day on the job that Bob and Linda gotta go. But you know What? The best VP of sales, there's already 20 people that want to work for her. So she brings in Gary and Jason and boom, magic happens, right? They don't. The product doesn't change. There's no new features, nothing. But. So that's. You can see how that happens in sales, right? What does a great marketer do when they start? They improve the funnel. They bring in a couple BDRs to reach out to leads. They do lead scoring for the first time. You weren't doing lead scoring before. They improve lead scoring. They build better collateral for the sales reps. They pick up the phone. The best VPs of demand gen pick up the phone when they start and talk to prospects and learn how do I improve the messaging. They improve the email marketing, they improve the drip marketing. They improve everything. These are all things you can do in your first 30 days. And does that triple leads in the first 30 days? Not usually. Not unless it's. Not unless it's paid performance. But you can see, you can instantly see improvement. You'll see more influence on the pipeline. You'll see the sales reps improving the quality of the leads they get. You'll see MQL's going up. You'll see that some type of improvement in the funnel in the first 30 days. For a good VP demand gen, always some improvement in the funnel. Somewhere along that funnel you see it, right? A mediocre one needs a quarter or two to get the lay of the land.

What about product?

First of all, what does a great VP of product do their first two weeks? Do you know? It's always the same thing. Talk to lots of customers. Okay, here's the insider tip. When you interview VPs of products, and especially when you hire one, if their first job, their first two weeks is not to talk to customers, you made a bad hire, sorry, they're not going to work out. I would instantly fire them just to. And I don't say this glibly they will never work out. Every great VP of product talks to customers. You know what the mediocre ones does? Join meetings, reads notes or talks with engineering. Like you got to work with. Like product engineering need to be stitched at the hip. But if, but as you said, that's what the great ones do, right? So they come back. Listen, in the first month, can a VP of product ship new features? Of course not. Can you? Can they even impact the product in a month? No. But if in the first two weeks you've talked to 30 customers, I bet you can do two things. You can impact the roadmap. You can bring in a couple external resources to help. Maybe someone to improve your salesforce integration or your Shopify integration or your NetSuite integration. Right. Someone to connect, boast to another analytics suite that some customers you bring in another resource, an external resource. Because it always works. As you said, not everything has to be automated. Right? You can always bring in a third party. They'll reorient it with the customers and a good VP product will actually jump in on a few customer conversations and help those deals close. Okay. Because a good VP of CS will jump in on bigger deals too early, but so will the VP product. They will join the calls and they will help backfill and they will speak out. We are going to work on that. Hi, I'm the VP of product from post. That's a good point. Like we really need to go native on that salesforce integration. We're going to get it to you in two quarters. I'm going to get back to you. Here's my email. Here's my cell phone. Here's my home number. Here's my. And they impact the customer relationship. The customer experiences the priorities and all of a sudden magic happens. And when product and customer success become the wing person to sales, at least in mid market enterprise sales does better when sales is on its own and it doesn't have help from product or customer success to close deals. They can still close deals. But it is a huge accelerator for sales. When product and customer success adds value during the sales process because customers are buying a product for a decade or longer and the product person can become a deep subject matter expert. All of our products get complicated as we scale. I would say almost every product even for SMBs by 10 million revenue is so complicated sales can't remember all the features. Okay. Or they may not know that if I combine three different features together, it could actually do this. A great head of product gets in on the sales call for that 100k, 200k deal and says, yeah, actually I think I know way like I actually, I think it's. I'm not going to tell you this is what everybody does, but I have a way to make our product for now do this and maybe in a year we'll do it even better. And that's magic on a deal, isn't it? Definitely magic. And if you haven't experienced how VP of product can help manage that complexity and simplify it for customers because you haven't worked with a great one.

Now, in what order do you hire these execs? From 0 to 10 million. And then I also want to ask what happens from 10 to 100? Do you start swapping out some of these? Do you start leveling it up? What are the signs you look for that they got to go and you got to bring someone else?

The right order to hire your VPs in is the order you can find them. This is another rookie error. Okay, for most startups, would VP of product be the first VP you hire? Is that, Would you naturally. Would that naturally occur to you? No. But boy, let me tell you what, if you hire that VP of product early and she can be your VP of Customer Success and work with your CTO and take some of the load off the engineering team, that's worth it. And let's say you hire that VP of product early at just a million in revenue or less and then a big deal comes in, okay, a big enterprise company, it's whoever 3M, it's a half million dollar deal, let's say, because you happen to have that VP of product who's experienced, who sold enterprise deals, who knows how to speak to these customers. What if that because of that hire you closed the 3M deal? Was it worth hiring her early? Of course. So yes. I will then tell you, like in a perfect world, what's the. What might be the optimal sequence, but the real answer is do not hire them early. Do not wait to hire the great VP of product. Certainly for CTOs and others listening. Do not wait to hire a VP of engineering to help you with recruiting, with doing the mundane parts, with doing that, with doing database management and DevOps. You don't need to be doing this as a CTO, as a co founder CTO, you should be doing innovative things. As a CTO, you will always be the heart and soul of innovation at your startup. You do not need to do something that's already been done 10 times before. You do not need to do the SoC2 compliance you do not need to do. Any of you do not need to do integrations that have been in a thousand times before. Right. Why a CTO should you do the Salesforce integration? A million people have done it. Go hire a VP of engineering to take these things off. Don't wait till 10 million, 20 million to hire a VP of engineering. I think hopefully I've convinced you the order is whenever you find that great vp. But let's answer it specifically. In a perfect world, if there are infinite number of talented candidates, but cash were constrained, right. So there's no problem finding people. It's just you only had. You could only hire them once in one order because of money, right? Yeah, it's at least a forcing function for the conversation. The number one mistake is people wait too long to hire a VP of marketing. And I want to highlight. It's getting. This is getting worse, this trend. It's getting worse. And I wrote this early Saster post. I hired my VP of Marketing at 20k in MRR. It was too late. Or it wasn't a week too early. And I just would ask people to think about that and read that again and again. Because if you're. Even if you're at 20k mrr, even less 10k mrr, but you're growing a great VP of demand gen. Even if they get you just a one or two more good leads and they close, isn't it worth it? Won't they pay for themselves? And even if it's just you're the only salesperson or you have one rep. Okay, you don't have any VP of sales. But just think back to the days when it's early, when you're the only salesperson. Let's say you had one great deal, one great 3M or whatever. What if another one was brought in? A Georgia Pacific or a GE or something? What if you had two instead of one? Would that have paid for its? Paid for her salary or her comp? Of course. Of course it would have. So we're running around as founders, desperately closing every lead that comes in the early days because we're always lead poor until we have a big brand. What if we just had 50% more leads? Not. Not 500% or 10,000 more likely. What if we just had 50% more leads? Would that help? Yes. Would it pay? Would it be worth 200, $300,000? Whatever the fully burdened cost of this employee? Yes. Then of course you waited too long, didn't you? Mathematically, didn't you wait too long so you can hire a VP of marketing, a VP of Demand gen, certainly at the same time as you hire your first sales rep or at least when you have some repeating revenue. So I call it 20K. Okay? Hiring very well funded founders that hire marketers before they have any customers, that's a luxury, right? It can make sense, but it's a luxury. But 20k Mr. Just do the math in your head and you realize you waited. And what I see these days is because more the playbook is known on the web based on what we do things because markets are bigger, because PLG works a little bit better. I see founders waiting until 5, 6, 8, 10 million of revenue before they hire a VP of marketing. It's such a waste. It's such, think about the math. It's such a waste. And they don't do it because they don't get what marketing is and they think it's all brand marketing and webinars and white papers and they don't do it because things seem to be okay. I hit the plan for the year. I don't get it. But again, the reason you don't think you need that resource is because you haven't worked with a great one. And so don't wait. I just don't understand why founders are waiting longer and longer to hire a VP of Demand gen and then it becomes somewhere around 8, 10 million revenue, sometimes 20 if you're SMB. But it becomes a huge wall. It becomes a huge wall. I was earlier this week, I was at a board meeting for a startup that had just crossed 10 million. Actually I did two this week where leads had plateaued. And leads always plateau if you don't do anything, if you don't inject new programs, new marketing campaigns, they always plateau. And these are companies that had many assets, great products, great CEOs. And so they didn't really see the impact of this lead plateau until 8, 10, 15 million revenue. But they were all seeing the pain. And I asked them all to draw a chart of leads in 2021 last year and they all were flat. And you can make that up by driving up your deal size, getting better at sales, increasing profit. But at some point you will hit a wall. And why not hire that VP of marketing a year or two before you hit that wall so that the leads just keep growing ratably. And I and this is a mistake, founders don't see the impact of flattening leads and so they wait just too long to make this higher. Hire a VP of sales at least a stretch, one at Least the first one. The moment you have two reps that can hit quota, the moment you have two, one is too early. And almost everyone I see outside of extremely enterprise stuff, outside of everyone I see that hires a VP of sales when they just have one successful rep or almost successful rep, that is a mishire. Like they're going to be gone in six months. But when you have two, you have a playbook, right? Not a properly documented playbook. You have no training, you have no sales enablement, but you do have an engine in a playbook. A good VP of sales will take what she learns from those two and hire you three through 300. It can be done again, but without two, it's too early. But again, too early is a bigger mistake. But don't wait for three or four scale sales reps. The minute you have two that hit their number, obsess about finding someone, not because they're a magical VP like we talked about, but because as a founder, you're not great at hiring 3, 300. It's a different skill set. So hire the person that will hire you 3, 3, 300, and that's how you'll be able to scale. And what I see when founders don't do this, when they don't hire a good VP of sales after 2, I see this pattern again and again. I come in and meet with the company. Jason, we're struggling in sales. What's going on? We have 10 reps, but only two are performing. This is why you never built any engine for recruiting, training or managing. So you have these two kooky sales reps that are a little bit smarter, a little bit different than your normal one, and they're able to learn all the niches of boast or whatever it is and sell it. And then you throw another eight people into the pool of maths with no one to train them, no processes and no systems, no manager, and none of them close anything. I see this again and again. Only two reps. Jason, why are only two of my ten reps performing? You didn't hire a good VP at rep number two. And if you had, then three through ten would be performing.

Now we're in this market where everyone seems like they're raising every other day. How do you navigate the. No.

Every other month? Not every other day. Every other month.

Every other month. I don't know if you believe TechCrunch. It's happening every other day.

People raising there are certainly hot startups sometimes are raising three times a year. Right now, the hottest of startups yeah. Have a startup I invested in that raised three times in the last three weeks.

Wow, one single startup.

Yeah, three times in the last three weeks.

But more capital if you have product market fit and high NRR could mean good things. So many well funded startups. How do you hire in this environment? Like prices are going up, people want bigger comms. Like how do you navigate hiring and recruiting in 2022?

It's hard. Recruiting is hard, but let me tell you, it was hard in 2021-2020-2019-2018, 20. There were like a couple of years. Recruiting was early in my entire lifetime. That's when we were in massive recessions. There might have been two years of my whole life when recruiting was easier. And it was still wasn't easy, but there might have been two years in my whole life. It's always been hard. And yes, there's a million startups, but you know what the good news is there's so many more startups going through phase transitions that we're creating more candidates. Literally. When we started Saster, when I started investing and working in startups, 2013, 2014, the biggest problem was there just weren't enough VPs. It wasn't stealing them from another startup or another opportunity. There just weren't enough startups because a startup has to hit 50, 100 million in revenue for those directors and up and comers to leave and go to the next one. And not everybody, but they. How many startups had gone through the $50 to $100 million AR journey 10 years ago? Like 2, Salesforce and Workday right now? A hundred a year go through this. So we are, even though recruiting is hard, we are overloaded with potential directors, stretch VPs and others that are suitable for a startup. They're everywhere. It doesn't mean that the competition isn't fierce, but they are everywhere. Okay, so at least the good news is today, even versus five years ago, more of them exist. Like more of these human beings exist on planet earth. Even though the number of startups gone up. What do you do? Well, look, my only advice, unless you're Brex or whatever the hottest startup is at the moment, or Coinbase or whatever you want, is two things. One, when you're recruiting yourself as a founder, you're doing direct founder recruiting. You have to find romantics. You have to find romantics. And romantics are people that have an almost irrational attachment to what you're doing, an almost irrational attachment to your journey. They see something in your startup that not everybody sees. I was interviewing someone yesterday for Saster. And it wasn't a candidate that I even was sure about, but he saw a passion for our community that was amazing. He saw something for him. And I don't know that joining us was a natural career progression for him, but the amount of passion he had for what we do for founders and executives, it was infectious. And if you interview enough people and you're doing something unique and you're on a mission as a CEO, it's work. But if you interview enough startup people, right, someone is going to want to be on that mission with you and that's what you have to close. You cannot compete for fungible people. You cannot hire the AE that is interviewing with 23 SaaS companies and wants an easy job. You can't win those. But there are romantics, there are folks that want to be the first ae, aren't there? They're rare, but they want to be. And does that even make sense? No, it doesn't. If you just want to make money as a sales rep, you want to go to the hottest SaaS company that pays the most, right? You want to go somewhere that is so well funded that if you hit quota, I'm going to make 300 and I'm going to have all my calendar set up for me and all my documentation is going to be made for me, my slides are going to be sent to me and my keyboard is going to be dusted and my sandwich is going to be laid out on my desk at home. That's what you want most days want. You don't want to be the first one in with no help. What's the advantage? I get to work with the CEO, I get to be on the front lines and I got nothing. I got a bug ridden product that doesn't do anything most people can't do. But most people do not want that. 95% of AES do not want that. But 5% do, maybe 2% do. 2% do.

But there's a lot of those people, right? So one of my AES, or the only AE I had at speakeasy, he was the last person out the door. He went to intercom and then he said, you know what, I'd rather work with you. And he came to do sales for our US market and he smashed it year over year, year, solo with no sdr.

But he was a romantic. But he was a romantic. This is the term I use. I've never used anyone else use it. But think about it. He was a romantic. He was on this mission. It didn't make Sense. He should have stayed at intercom. Intercom's doing 230 million a year. He should have phoned it in there.

But he didn't want to do that. And he's been here now three and a half years and he's absolutely smashing it. There's a lot of people like that who, like, they're generated or energized by your mission and your purpose.

They are. So, as a founder. And then. Let me talk to the second part. As a founder, you just got to look, talk to more people. You cannot. Do not try to compete with the AE that wants to go to Intercom or Brex today, okay? If it's a direct competition, you can't win. It's not just the money, it's the lifestyle, it's the support, it's the infrastructure. Right. It's the brand. It's the brand. Right? Selling with a brand is so different than selling without a brand to back you, isn't it? When you have a brand, you're competing for budget and maybe you're competing with someone that's smaller than you. It's six questions when you're the market leader. But it doesn't mean for sure they want to go to Brex, you got to talk. You got to do 30 interviews, you got to do 40 interviews, you got to do 50 interviews. And if you're truly competing with. And I love Brex, I love the whole team. Sam Blonde, who's the CRO, worked for me, is one of the best heroes I know. That's why I'm having some fun, because I think anyone in the world should go work for Sam in sales. Anyone that wanted to build a great career in sales for something with a brand, I would say go work for Sam Blonde's team at Brecht. But there are romantics that shouldn't, right? And so if they want to go work for Sam, go work for them. But if you interview 30, 40, 50, you'll find someone like the one on your team is. No. I could go to Intercom, I could go to Coinbase, I could go wherever. But I want to own something. I want to own something as a human being. I want to be that guy, that person, and that's the key. And passionate CEOs, this is your job as a founder. And if you can't do it, eventually you should quit. Recruiting is hard. I'm still bad at it. You're better than me. But you have to find a way to get good at it. And you have to be tenacious. You have to force yourself to do the extra interview, right? The extra candidate. You have to force yourself not to quit after 10 candidates or 12 or 20, but interview 30 or 40. And eventually, if you are passionate about what you do, you will find that candidate always. You will find that candidate always. And our biggest mistake we make as founders is we hire the 21st one because we get tired of interviewing, right? We've all done that once. Maybe you haven't done it. I certainly have. You hire the 21st one.

I have. Everyone has. Everyone has. Multiple never works.

So you push through it. So having said all of that, you've got to find the romantics. They do exist. We both experienced them. What bails you out is when you hire a real VP. The definition of a real VP1 is they put points on the board the first 30 days. Some type of points, right?

Some type of points on the board.

They either, they increase leads, they increase sales a little bit, they organize your product better, they bring it. But most importantly, they bring in someone good. They bring in something good. And a good VP is a great recruiter. Great VPs are great recruiters. So some of this burden comes off you as you hire great VPs, right? And a VP of any single role, half of it is recruiting, right? Why do you need a VP of Engineering? There's a million reasons you need VP of Engineering. But every great VP of Engineering spends half their time recruiting. Every great VP of Sales spends at least half their time recruiting because they have to build the biggest teams of all, right? VPs of sales are constantly recruiting the best VPs to sales and Engineering. They're not only constantly recruiting for their current job, but they're actually constantly recruiting for their next job. The best ones are, they're constantly not just recruiting entry level folks, but mid level folks and folks that will join them at the next one. And that's why when they go, when a great VP of Eng or VP of Sales goes to your startup, if they're great, they already have three or four people. It's not just because they're so, because they know good people. It's because they've been grooming them and nurturing them for their whole career because they know at some point they're going to go on to something else. And they're like, gosh, if I got to do this sales thing again, I want Lloyd, Jason, Amelia and Deb with me. Or if I got to go run engineering again, I got to have Linda, Paul, Gail and Tomas with me. Because I can't do, I can't do another VP of hench gig without my four directors. The classic example is when Eric Wan walked out of Zoom. He walked out with 30 engineers. Wow, 30. 30 of the best engineers. And he knew it. He knew it, right? Even as a first time Sassio, he knew he needed those 30. And that's not as a VP, that's the CEO. But it's the same point on a different scale with the VP. So that's why you gotta with your VPs, you gotta ask the question, who would you bring with you? It can be the first question for a discussion point, but then it's got to also be the last question. And then you've got to talk to those reports. You've got to don't quit, don't get tired when this VP of sales tells you he's going to bring Lloyd and Jason with him. Gotta call Lloyd and Jason. You gotta make sure it's true. And then you gotta make sure you think Lloyd and Jason have a brain. You don't have to. They don't have to be like the people you already have because the VP will bring new types of cultures and new types of people. But you gotta talk to those two potential folks and make sure it's real. And then if that VP doesn't know anybody to bring in with him or her, ain't a vp. Might be an IC might have a place for you, but it's not a vp if they don't already have two people to bring with them.

I don't even know how many founders ask this question, who would you bring with you? And I think it's a big red flag as a vp, as an exec. They can't bring any of their past colleagues or the great ones along with the good ones.

It almost split spills out of their mouth. If I don't have Johnny, I can't join. I got to. Look, Lloyd, I'm interested in both, but if I can't get Johnny with me, I'm out. Let me talk to Johnny tonight. That's what you hear from a good vp because they're already excited. But they know if they can't bring their director or their number one AE with them, they won't take the job.

What are some key things or mistakes you've seen? And route going from 10 million to 100 million. What are top three things founders should keep in mind?

I did not finish that journey as a founder. I got to watch it happen at Adobe. My great regret, I've certainly seen it happen now with probably six or eight investments and 20 or 30 other companies. I'm close with the two biggest things you're going to have to do from 10 to 100, maybe three, flushing out that management layer. And I think a tough one for founders, a really tough one. But actually I want, because I want to hone in on this because I think this is something people have gotten radically better at the last two years. Some things people have gotten worse at waiting to hire the VP of marketing. But I'm going to get to the one thing they're better at, which is you've got to figure out when to level up and top the team. And I think that a few years back, founders would come in and they'd be like, Lloyd's a great. Lloyd's a great first VP of sales, but we're at 20 million. Lloyd doesn't know what he's doing. I've got to, I've got to move him out and bring someone in. What I see happening in all the best organizations today is Lloyd, that Lloyd, right? That stretch VP never gets moved out. In fact, that stretch VP never even gets demoted. What happens is you bring in a Croat or an SVP of sales and just a new VP of sales needs the best ae. A great CRO or SVP of sales retains that first VP of sales and makes her him even more successful, helps them scale further. So that's your job after 10 million at first, maybe a 10 million. It's to finish out your first management team. And you've often got to swap out failures with new ones. But then more complicated is how to top and enable your top performers that just don't have the skills to go to the next level. And I just. Again, I'm going to repeat myself, but speak out when you have to top folks, and I'll tell you. And let's talk about how, when you have to top it, when you have to top them, don't think anymore if they're good about replacing them. That's bad thinking. That's dated thinking. That's 2015, 2016 thinking. Think about how to hire someone above them that's so good that their careers are enabled and that their equity is not threatened. Their stature is not threatened. Because if they figured out how to hire 20 or 30 A's, you don't want to start from scratch. You want her to hire 100 AES but just make it easier for her to get from 31 to 100 and maybe add some other VPs or other areas around her. That's what I see happening Again and again. And so I think that's important again is to hire. That next level of management is always going to be your challenge from 10 to infinity. But I see two things. I see founders holding on to mediocre VPs too long after that point to check a box. We all know that. And then you just hit a wall from 10 to 100. And then I see folks not figuring out this topping situation. And again, what's the flag to top someone? And I know this term can almost be triggering topping, but what's the flag is when anything plateaus do leads plateau? Does sales plateau? Do story points plateau? Does productivity plateau? Plateau does not mean get rid of somebody. Plateau can mean they've. They don't. They're out of ideas. Okay, if you've never been ahead of sales, head of marketing, head of CS before, your job, if you want to scale to 100 million, is to hire people better than you, under you. But if you don't do that, you will run out of ideas. That does not mean you're fungible. That does not mean you are not critical to the company. It just may mean you need a boss to add ideas to your toolkit so you can scale.

No, this is, this plateau thing is actually a great advice. I think we all have stuck on to VPs or stretch VPs because they become friends. You build relationships with them. As you grow from like a 20, 30 person company to now, like in a year, we went from 30 people to about 130 people.

Right.

These guys help you build the foundation of the company and you feel like you're betraying them. But this plateau is truly great advice.

Yeah. You sit down with them, the plateau and you say, look, Lloyd, you've done an incredible job at the company. I want you here for 20 years. I'm staying here. I want you for 20 years. But we have plateaued and we need to bring someone in very senior that will help you grow even further. And sometimes that's a hard first conversation. I get it. But literally the good ones, they always get it. I was just working with a startup earlier this week that went through that with their first head of marketing. And the CEO was really anxious. It's going to be a good friend. It's going to be a tough conversation. At 10 million, he sat down. It was a lot for the candidate to internalize. The next day he's like, you're right. I want to be here at 100 million. I know how to do one thing and I've done it really well. And that One thing is maxed out and the great ones respond to that. When you have these VPs that it's plateaued, you have to decide, have they given up? Are they personally stalled out or are they just out of ideas? And if they're out of ideas, get them help above them so they can.

Scale and route to 100 million from 10. When do you add a second product and how do you think about it?

I think we have so much more data now about adding a second product because there's so many public SaaS companies and I remember at the 2017 Sasser annual, I didn't know the answer to this question. So I did two interviews back to back with Jeff Lawson from Twilio when Twilio was just IPO'd and Peter Gassner from Viva, which is a $30 billion cloud CRM company. And Viva had just launched its second product. And I didn't know the answer and their answers were very different and very telling. And now we have numbers and I'll tell you what their answers were and then I'll tell you what the numbers were. Peter's answer, which now really resonates with me, was you should only add it. You need another product to scale. And then I'll answer when next. But the second product has to be bigger than the first. And when he said that I didn't get it at first. I'm like, look, let's say our main product is working pretty well. Our boast R and D product, right? If we can add this other little product. Tell me something, you're working, you're thinking on that, that's not confidential. What do you think about adding?

We're thinking of adding R and D analytics, like who you should hire.

Okay, analytics, okay, let's say that could give you another 20% boost your ARR should you do it? It sounds great, right? 20%. But if it's a one time thing, if the TAM is small, three to four years out, it may not amount to much. And when. And VIVA has two products today. It has Vault and it's CRM product. And I made me misdescribe the name of the CRM, but basically it's a CRM which was originally a verticalized version of Salesforce and Vault for storing data. Right. And when Peter got on stage in 2017, he said Vault is tiny now, but it is a bigger opportunity and will be bigger than our CRM. And Peter, fast forward today it is the engine of growth for VIVA as it becomes $100 billion company. And his point was you're going to put all that time in. Each new product should be bigger than your core. And I think that's a mistake a lot of us make as we do this incrementalism in products. And that's fine if it's a feature can be incrementally accretive to your ARR, but a product can, it will fail. And then I asked Jeff this the first time I met him and it was interesting what he said. And then I watched what Twilio has done the last five years or six years is he said we just try everything. We have a hundred products that Twilio, Twilio has a few core products but in theory, if you look at his website back then it has a million telephony and voice related products. It's like we try something, we see if it sticks, we do something low cost and then we do what performs. And that certainly has worked for them. But then what did Jeff actually do after that? He went big. He bought SendGrid for 3 billion. He bought segment for 3 billion because he wanted to do things that would be significantly impactful to the business at scale. I guess my learnings are a couple of things. One, think about this Peter Gassner idea that your second product has to be bigger than your first because that will rule out a lot of things you might otherwise do, right? It doesn't mean don't build a feature, but your second product has to be the first. The other thing now that I've learned across my portfolio as an investor is it better be baked before 100. What does this mean? If your second product is an in market immaterial, like doing 5, 10 million by 100 million you're going to hit headwinds. 9 times out of 10 it's too late. You started too late now it's not going to probably kill you, but you started too late. And if you're SMB, it might be earlier than that, right? Just because you may run out of customers at some point, it might even be 30, 40, 50 million. You need your second product in market, being purchased and being used. And I can give you a bunch of examples. But that's what I've seen and I get worried when companies are crossing 50, 60 million. And I know Bessemer has coined the second act idea recently. They did it at Sasser Annual this year and it's taken off. But if you don't have your second product in market past 50 or 60, I worry that you're not thinking strategically enough because it's very hard to get. If we look at, if we go to the five interesting learnings on the Saster site and we look at how did DataDog get to 1.2 billion so quickly? It's got 22 products now. Everyone is multi product and declining revenue after 100 million. For folks that are single product, you see it again and again and there's going to be exceptions but for most of us we run out of customers and we run out of Runway with one product at 100. So get it in market we well.

Before then is Salesforce rare anomaly? Because I wonder if Salesforce has a bigger second product than the Salesforce has.

Seven core products and CRM is its third largest product now. CRM is its third largest.

Wow.

Service Cloud. Three years ago Service Cloud became much bigger than CRM. CRM is is in the teens of Salesforce's revenue 15, 20% max 15%. If Salesforce didn't go multi product, it would be a niche $20 billion company today.

I just didn't think that they had a bigger, more revenue generating. I knew they had like hundreds of products but like not a bigger revenue generating product than the CRM. But that's great insight. So your second, make sure your second act is bigger than the first one.

Salesforce is a good example because it wasn't clear to us like as outsiders, as folks that have been using Salesforce SFA for years that service cloud would be bigger than sales cloud or CRM. But Salesforce knew it and it's been much bigger for years. It's been much bigger for years now.

What about becoming a platform company? Is it something you need past 100 million? Is it something you need to be en route to 100 million? There's a whole bunch of platform companies, but there are others that have not become platform companies.

Folks that wait to build out their API, folks that wait to open up their ability to partner with others are almost. If you wait, you're almost always leaving opportunity behind. Everyone should have an API their first six months in market now. But how open is it? How do you expose it? How do you enable it for your partners? Do you have a partner enablement program? And I think you got to get your API out there you at least want to have. And then you want to think, who are my highest affinity partners? Any vendor in the world. There's only 10 or so partners that move the needle for you now that they may not even be integrated in your product, but it's only 10 that matter, right? There's 10 folks in the Shopify Platform that I think account for 90% of the revenue. In the old days when I was on app exchange, only 10 apps mattered. It might be 20 or 30 a day, but even as these ecosystems grow, the big ones grow. Klaviyo is number one in the Shopify ecosystem. It's a $10 billion valuation. The last round it's doing 350 million in revenue. That's going to dwarf like number two, three, four, five, right. I think number 10 is doing 30 million and number one is doing 350 million. That's the logarithmic distribution and the Shopify ecosystem. So you got to open it up and then see what works and then just lean in on your partners. We all under invest in our partners and so whether that becomes a true platform or not, we under invest in our partners early. We under invest in business development because the sales cycles are longer. We may throw up some web hooks or an API, but when it's slow and when that big deal comes in or when sales has to hit the number for the month, do we focus on stuff that'll yield revenue 18 months out, or do we focus on what's going to close this week? It's human nature. So as CEO, as founders, you have to drive this partner side and this enablement and this platform ification. And if nothing else, be more open earlier. Take some risk being open. And I think we didn't even talk about a VP of Biz dev on that management chart. I think everyone waits too long there too. Like as soon as you have partners, hire ahead of partners. Even if it's just if you have 200k of revenue in your partner ecosystem, hire someone that costs 200k with benefits, bonuses and taxes to manage the 200k, right? You can hire. So you can hire a VP of Biz Dev. When you have $200,000 a month in partner revenue, it's worth it. They will get you more partners.

It's hard though to build repeatability, right? In partnership. How do you motivate these partners?

Why is it hard?

I don't know. I've never figured it out. That's why I'm asking.

The mistake so many founders make is that going back to where we started this conversation and maybe we'll end it at the same place, is humans behind software, right? Yeah, partnerships and platforms are humans behind software. And look, ultimately in the Shopify ecosystem there's a lot of marketing automation partners, but if you're Klaviyo for email or attendant for sms, you're going to get the Partnership with Shopify, right? Because it works. The market has spoken. But when there's multiple products in market, or even more importantly, when you're in a category where no one's broken out, no one's at 100 or 200 million, right? The human side of partnerships is so important. It's so important because the partners have to decide, should I work with Boast or Boast prime or both competitors? And if you're both doing 10 million in ARR, that's not going to determine it, is it? What's going to determine who I partner with, the people there. And too many founders, even if they build the API in the webhooks, they leave it on autopilot or another mistake we make as founders is that the partners love us. They love Lloyd, they love Jason or Amelia. But we don't have time. We can't be. You don't have 2000 hours a week to make Salesforce happy, do you? Or whoever it is. So we build these initial relationships at the seal level, but they fall fallow and they're not deep enough in the organization. We don't get to know enough people at our partners. And those that do win, those that do win, because it's not, especially the enterprise, the best vendor does not win, do they? It's the best. It's the best. Going back to what you said in the beginning, it's the best solution provider that wins. Right? And part of being building a platform is being a good partner, is bringing leads, is solving problems, is bringing them cookies, is making them feel better, is getting on the phone. And folks that rely just on an API and automation don't build those partnerships. And too many mistakes here. Too many folks get to 10 million without anybody running their partnership or biz dev and they get lapped by somebody that has a team.

Market is bonkers right now. How should founders think about for the elite, Lloyd? What is the elite?

Last year, the amount of venture capital doubled again after doubling the prior year. It doubled and doubled. Doubled. We've never seen anything like that. Doubled. But the number of startups that got funded only went up 25%. Not enough. So many folks wrote the headline article, VC doubled last year. They missed the more important point. With all the new funds, with the thousand new funds out there, with the mammoth amounts of money being shaken, it only went to 25% more startups. What does that, what does that have to mean? What that actually means? It's even harder to get funded because the bar has gone up. The bar today is clear. Every Wherever you invest in the stack, okay, from pre seed to seed to A to B until your mezzanine, everyone's looking for 100% growth and 100 million in ARR. That used to be rare, now it's common. And the problem is, if you're off track for now, that doesn't mean that 100% of 2 million is not good enough to get you to 100%. At 100 million, is it going back to rollercount? It's not enough, right? So if you can't meet these astronomical expectations or have the DNA in your team, that looks like it's possible, right? 28 engineers out of strip or whatever, you will not get funded. And in fact, you might have gotten funded three or four years ago, you will not get funded today. So make sure you take the right lessons from the market, which is it is going to the privileged and the hottest and the top performers. And be careful of the advice you take from the privileged because they are seeing this slice of the market that most of us are not seeing. Be careful that advice, when they say funding is so easy, there's too much dumb money out there. That's true of the elite, but it is not true for 99% of us.

So what are the metrics then? Let's take it at A and B. What are the elite metrics? To raise an A round and to raise a B round right now, don't.

Forget these letters with the growth in capital, these letters have changed so radically. Look at the end of the day, whether it's triple double like it used to be, triple double, now it's triple double. Basically people want the best companies go from 1 to 10 in two years or less. Okay? The very best go from 1 to 10 in 18 months. And there are occasional SaaS, companies that do 1 to 10 in 12 months now. And as soon as you see consistent double digit growth past a million, you're going to get funded, right? 1 million at 10 or 12% a month, 2 million at 12% a month. A company I invested in, that's early, it just crossed 3 million. Growing 15% a month, it's worth 300 million. But it's because you got to roll that out into the future. Can it really sustain? Like 15% a month is not a little bit more than 10. Like it compounds to an epic number, right? So people are looking for that one to ten in two years or less. And they're looking, however you slice it, they're looking for 100% growth at 100 million in ARR they're looking for the possibility that will occur now when it becomes a high likelihood. Let's look at Calendly, right? Calendly raised at 3 billion at 60 million, what, 12 or 14 months ago, but now I think it's at 130 million already. So was it worth that valuation? Of course it was, right? But you got to be growing north of 100% at that rate to justify the liquidity in these markets. So that's the tough lesson. And when you look on Twitter and all the privileged giving their advice, be careful going into strong. If you don't have a strong hand, I'm sure you've seen this in your curve boast became very fundable very quickly with the surplus of folks that want to invest in you. But it wasn't true until it was true, was it? There was a moment in time when people, I know you. When people threw more money at you than you guys knew what to do with. But it was a moment in time when that happened. It did not exist before that moment in time. And you had a good last year. But I'll tell you, if you didn't have a good last year, that moment in time would be gone again because you wouldn't have met the expectations of the last round. So go in strong, but make sure you have a strong hand. If you don't like. Remember, selling stock is sales. It's sales with a limited number of assets, right? It's like selling fine art or a rare Ferrari, right? As soon as three people want the rare Ferrari or the perfect house in the Hollywood Hills, right? The price goes through the roof. There's just some, I don't know. One of the most expensive places on South. What's it in New York? South. It doubled its price in two years. It was in the Wall Street Journal. They like the most expensive penthouse in New York. But it's because there's only one. Are you that as a startup then. Then run a process, tell VCs you have one hour to invest, do all this crap. But if you don't, you're selling an asset that does not have sufficient demand for it yet. So go into sales mode, sell it. And don't. Make sure you play the hand that you've been dealt.

You can't have high growth and then shitty NRR and crappy gross margin too, right?

For a while you can't. For a while you can. It comes home to roost later, but for a while you can.

So how long is that?

You'll get a pass. I know These letters are strange. You'll get a pass through the A round. If your growth. What I mean is, if your growth is strong, people will overlook higher than average, not terrible. Churn, higher than average, Churn, lower than average, nrr, large product gaps and others. If the market has spoken. If you are at 1 or 2 million, growing 15% a month, people will overlook those things if they believe in the founders, because they will improve. HubSpot's NRR. HubSpot is a classic icon for SMBs, right? 1.6 billion in AR. It's NRR is only 100% today and it was 80% as it was scaling. So you bet on Brian and Dharmesh and their team that 80%'s not great, but it's SMBs. We'll bet these guys will build such an important product. And it did happen. Right? As you go to raise A, B or C round or. I know it sounds crazy, but as you start to hit a couple hundred million in valuation, those metrics have to. Growth's not enough. You have to attach it with top tier nrr, top tier churn, and to some extent palatable sales efficiency to keep that going. Having said that, if you're growing 100 million at 100, there's a company I know of that raised well north of 100, 200 million in ARR. It was done. No one got any numbers because the growth was so crazy, right? No one didn't. If you're growing 120% of 200 million in ARR, do you need to see any metrics? Arguably, no. They'll come home to roost. Like, you can mask high growth, can mask churn up to a point, and then it can't. Right? And then it catches up with you. And I would say with SMBs, it's around 10 million. Right where it starts to hit you. Just because it's the churn gets so high. With enterprise, it could be 20 million, 30 million, where churn hits you more. But somewhere on that journey, when you just start to scale, Churn will burn you. And VCs aren't stupid. It's just they'll hope you'll solve it. Up until a certain point, up until the B round.

What do you have? Saster.com is the best source on the planet for everything related to growing your cloud business. But what do you have coming up? What major event or anything that you have come up?

We have a digital event. Lloyd, you can help us with this. March 15th, it's our second saster build where we have it's very PLG and build focused. We've had the with CEOs of notion and Monday and others present. We've got Amplitude and Samsara this year and others. So come it's free. Come on March 15th. It's a lot like a lot of stuff we've done together, but most importantly, everyone listening, please come to Saster Annual in September in the Bay Area. Again. We did it outdoors this year. You were there. It was epic. We rebooted it as a festival and it was great. It was like the best Saster Annual since the first one and we just please everyone come. I guarantee it'll be great. You were there. It was great, wasn't it?

Saaster Annual this year was the best conference I've ever attended in all my life. And I don't say that lightly because I host my own events and I go to every single event out there. You guys will see a promo for the Saaster build and upcoming Saster event. It's my favorite and I love being there and learn a lot. And more importantly, the festival vibe. I think no one's doing it but like it was like Burning man meets SaaS and people were having fun. Usually people look at the talks and they leave. Speakers come do their talks and they leave, but people were actually sticking around because of that festival vibe.

I need some traction.

You need some traction.

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