AMA with SaaStr's CEO Jason Lemkin:Live From SaaStr Annual 2023

Please welcome to the stage jason lemkin, founder and CEO at saster. Thanks everybody. We have fun, good time. Well, cheers. Thank you for everyone. From coming from like a trillion companies and spending a lot of time for our 9th Saster annual, we have. We do this to the extent that I can be helpful for people. For their last three or four events, we just kind of do an open AMA at the end until people get tired or passed out or whatever. So I've got no more slides. I already did several presentations today, but if people want to come up and chat about anything we've chatted at these three days or ask any other questions, just let me know. Come on up to the mic and I will do the best I can to dig into anything, anything I can so we can kick it off. This is my second one, so it's super fancy. Oh, thanks. Coming. Yeah, no, I mean this has been. This is the best event I go to all year, every year. Good to hear. Very, very, very surgical question. Series B company, should product marketing work for product or marketing Boy. You know, honestly, I'm gonna, I'll give you my thoughts. I'm gonna take a pass. I. I don't. I consider myself a pseudo expert in a lot of things, but not product marketing. Product marketing I think is a weird art. I think I know folks here, marketers and productors and CEOs will challenge me. I think we over index in product marketing. I think. You know, I was briefly an SVP to Adobe. I can tell you product marketing there is super important because everyone knows Adobe, right? Everyone, literally every business on the planet is an Adobe customer. They don't even have like contacts or opportunities at Adobe because everyone's a customer. So it's critical. I think these days CEOs and others are looking for too much magic from product marketing. Product differentiation is important, being crystal clear, but until you're massive, there's only so many people to product market to. Right? So the ramly answer, which isn't the question you're asking is I do think we expect too much even going into Series B, even up until 1020 millionaire. I think we expect magic from product market. I don't see it there. But who should it report to? Right? Well, you're right because product marketing is neither product nor marketing. That's the odd thing about product marketing. I don't know why we call it. It's not really building a product and it's not actually getting you any new customers or doing any marketing. So look, I think the answer I'm Going to give you the same answer. And I have less certainty on this than I do other things. I think it's the same answer in the early days of who should my SDR team report to? Sometimes it's clear the SDR team should report to sales. That's natural. Right. But sometimes what happens these days is you'll hire a first head of sales that has never done outbound. Right. And you'll hire a head of marketing that's managed a BDR team themselves. So actually sometimes it makes sense for marketing for the SDR team to initially report to marketing because the head of marketing has more experience. Right. They've worked in a sales driven environment. I would say today, if you're not sure, should product marketing report to product or marketing, whoever has more experience managing product marketing. And now having said that, the more technical your product is, maybe whoever is more technical can do a better job of it. But the person in product is probably not going to be as slick and not going to produce the brilliant imagery and tear sheet. And the person in marketing may not be as deep in product, but I don't have. But generally when you're not sure between two functions, the right answer is not what seems logical in the org chart, but who has more experience. The last thing you want is someone managing a function as you're growing quickly that doesn't understand the function. This I see again and again. Hiring a marketer that's never done ABM have to figure out abm. A marketer that has only done enterprise. Having to figure out a PLG or self service motion. It just. If you have no other choice, it works. But if you have a function that can float between an org, put it where the person's done it. Thank you. That's my best answer. Yeah.

Hi Jason, it's nice to see you again. And after seeing your dog yesterday.

Oh, Marilyn, thanks for coming. Yeah, of course.

So I am in the process of starting my own company and I am of course not invisible to the whole AI buzz that's happening and seems like.

A big deal today, these last couple of days. I know.

Who would have thought?

Yeah.

So my question to you is for early stage companies or new companies that are starting out, do you think they should find a way, if they haven't already, to add like an AI twist to it or sprinkle some AI here and there in their product?

Well, look, first of all, I'm still learning. I'm a pretty pragmatic person and it's funny. Did you, did you, did you go to the first day session when I was with David Sacks from Craft Ventures.

Yes.

And I thought his answer was very telling. And I'll expand on it. I said, of your $3.5 billion, how much of your new money is going into AI? I think he said 80%.

80%, yeah.

And then I asked him, and I've known David since we were founders together, and I asked him, what's the best product you've seen that's done AI? And he's like, well, there's a lot of good demos. So if you think about it for a minute, this is the conflict. All the venture money in SaaS is going to AI. Okay. I met a little while ago with Byron Dieter, who runs the whole SaaS Cloud products at Bessemer. We've been doing stuff together for years. He said the same thing. 80% of Bessemer's SaaS investments going into AI. Okay. That's a fact. So to the extent that venture investment matters, that's super important to understand. But the fact that one of the smartest people I know, founders, David, said it was mostly demo ware, is also telling, isn't it? So, look, the answer is. So let me, let me put it all together. AI does not magically make every payroll product better. I'm not sure it makes. We could ask Drata, but looking here, I'm not sure it makes SOC 2 better. Right. I'm not sure every Apple magically hooking into the ChatGPT API is going to change the game. I do think that every smart engineer today is inspired by AI and they are playing with every API, every Claude, every anthropomorphic, every ChatGPT. And you got to give your engineers and your product folks. I mean, you're tiny, you're starting, but you've got to give your, your team, even yourself, leeway to think, how could. Where AI is today? And I think it's gonna be radically different in two years because it's early. Where is it? What magical things can we do with our product? And you have to be thinking that way. If not, you're not state of the art, right? You're not state of the art if you're not thinking this explosion of creativity, can it make me better? But if it doesn't, it doesn't. Most of the stuff at Saster is business process software. It's changing the way businesses do support or sales or marketing or compliance or procurement. And AI probably is just gonna make them a smidge better. Right? But. So I wouldn't. I wouldn't. So I Wouldn't be cynical about it. I wouldn't go around talking. I talked to too many founders lately. Who. What do you do? Well, I'm AI for that. Just stop, right? Just stop. Just that maybe made sense two months ago. Today everyone is assuming your product has AI in it. So start with what it does again, start with a big problem you're solving, why it's different. But make sure you have a thoughtful response to where IA plays in it. That's all I would say.

All right, thank you so much.

Thank you.

Oh, hi Jason, I'd like to know your thoughts on the future of lead generation software.

And what do you think will be.

The will be out of the competition between Apollo and Zoom Info? I know you like zoo info, but.

Well, I love Henry. I think he's one of the great entrepreneurs of our generation. This is, I mean zoominfos at a billion something. Revenue was bootstrapped. He did it himself as a first time founder from the dirt with no money. I mean that's pretty impressive, isn't it? Well, look, you almost asked two different questions and I'm not a total expert, but you asked about lead generation and then you asked about. Yeah, two questions. Zoom Info and Apollo. Look, the thing is, I mean the second half is data, right? And data for marketing, data for sales. Data is interesting because it's never great, is it? None of these products are great. And I love Henry, I love ZoomInfo. I haven't used Apollo myself, but my team has. People love Apollo, right? But data is. Data is like security. It can't be solved. Like you can't solve security because someone else is going to figure out how to take advantage of anything. And so that's why Security is one of the most dynamic spaces. Because it's not solvable, right? Data is not solvable. Data is not. You will never get the perfect database of every buyer of every SaaS company on there, every customer. It's not solvable. So what I just think is. And that's why it's interesting. So that's why if Apollo is as good as it's and I have just haven't used it, if Apollo is as disruptive as can, it makes sense I would try both, doesn't it? It's like security. Like there are very few enterprises that use one security vendor. Maybe in the old days they only use checkpoint, okay? But today everyone's got 30, right? And so I think, I think it makes sense to try heterogeneous sources of data. I think it's as simple as That I think Apollo is good and zooming for is good. And none of them will be perfect. You'll always find crappy data, you will always find uncleanse data because it's not perfect. And so I actually think it's probably what's more interesting is that ZoomInfo kind of won for a while. I would have expected there'd be three to four vendors. You can say ZoomInfo is expensive, but I would argue if it works, you could buy four of them to get leads. Right? You can always afford more. I'm more surprised there weren't more Xoom infos and I think there will be more. As much as we can innovate in this space, it'll be constantly, slowly innovating. That's as hard as I think in terms of lead gen. I don't know. I think it's fascinating. I guess my meta thought and it's like my caution to founders is the tools change. Apollo is newer, right? The tools will change. HubSpot. Half the half the founders here use HubSpot CRM probably 0% did seven years ago, right? A different, like the tools change, the tools get more sophisticated. The tools do scheduling and calendaring and meetings better and they summarize your meetings and they do stuff. But the basic motions in sales and marketing haven't really changed, have they? We do outbound, we do inbound, we do viral. Now we call this crap VLG. It's still viral. It's the viral of 20 years ago. It's the viral of Hotmail and other things. And you know, ABM is a more sophisticated version of targeting buyers. And we do these things and we're. And we're doing. We all think we're content marketing experts, but we've been doing content marketing since the stone Age, right? And so I actually don't see, you know, for example, one of the classic Saster posts I literally rewrite every single year is if you do a great weekly webinar, it always works. This is so true. We even do it ourselves at Saster. If every single week at the same time, at Wednesday at 10am you do a webinar for prospects and customers and the first week only one comes and people are grouchy, and the next week two and then three, and then a year down the road it's 20 and 30, and then they tell their friends to come and they tell other people to come. This weekly webinar on its own will not make your company, but it always works, right? And how long have we been doing Webinars, I mean, I don't know, since the 1820s or something like that. I mean, 20 years. So look, I don't folks here will someone will produce some truly disruptive products and lead generation. But my advice is you got to do the motions, you got to do the webinar, you got to do drip marketing, you've got to do campaigns. Now maybe SMS will change it versus email, especially if you're in e commerce. But it's the same basic motions, just done with better tools and improved channels. And my biggest fear is that one Founders think there's a silver bullet. Someone asked me this morning, what do you think of the fact that affiliate marketing is completely disrupting early stage SaaS? I'm like, I don't think it's disrupting it. I think it's the same old set of things. I haven't seen it. I haven't seen everyone doing revenue share here dramatically changing the folks that are here. I haven't seen that. I just see the tools getting better. So one, don't look for a magic bullet. And then two. And again, I'm not perfectly answering your question, but two, you got to do them all. And people are lazier than ever in so many functions. They don't want to do it all. They don't want to. I find it so hard to get anyone to do a weekly webinar anymore. People don't want to do drip marketing themselves. They think they're above it. They don't want to do events, they don't want to do the booth, they don't want to do the steak dinner. They don't want to do field marketing. They just want to be strategists. Everyone wants to be a strategist in 2023. And what happens is that means you don't do the basic. You instead of writing great content for SEO, you outsource it to some crappy agency that recycles ChatGPT content. You know how often that works? Nonce, nonce, nonce. If you were here last year, were you here last year per chance?

No.

Well, Dharmesh and Brian, the co founders of HubSpot, came and I knew a lot about. I knew them. But one of the things they did in the early days is for two years, each of them had to write a blog post today about marketing. Two of them. That's 365 times 2 times 2. What's 365 times 2 times 2?

A lot.

1400 pieces of founder created content. Not ChatGPT, not some crappy agency. That would write a post of how to do marketing. You know, great stuff. And so the problem today is people don't do that. Right. So randomly answered my advice to folks. You got to run the whole marketing playbook for real. You can't be lazy if you do anything that works. If you love podcasting and then bring a customer on every week, not once in a while, not once every three months, do a podcast for 52 weeks a year. For real. Invite a great industry leader and talk about something that matters in your industry. Promote it. Even if only eight people listen, I bet one was a prospect. Right? It all works. But if you outsource it to some agency to do a lame podcast once a quarter, it's a goose egg. Right? So I think more consistency, new tools, same playbook. That's my view.

Thank you.

Hi, Jason.

Hey. Thanks for coming.

Thank you. I'm founder of an early stage company and I'm both CEO and head of products.

Many are. Sorry, many are. Yeah, many are both. Yeah. Many are common. Yeah. It works until it doesn't.

That's the point. Exactly. The point is now that we figure out the value of the product, which is the vision coming true.

Yeah.

We want to move more towards PLG and help the client serve themselves a little bit more. And I've never worked as a plot product head of product before.

Yes.

And I feel like it would be time it now. It's the time to bring someone with a bit more technique and experience. But then the product will lose a little bit of the vision.

It will.

How do I balance? How do I make the decision? And what have you seen?

Okay, let me, let me, let me give a longer answer first. Listen, I was a pro product focused founder myself, who back in the day, we didn't call it plg. We called it self service and viral. Okay. I'd never done it. I wasn't an expert. There were no SaaS experts 15 years ago. But there were B2C experts that knew how to do this. Right. I didn't know how to do it. What I knew was how to make a product that was incredibly simple to use. I was relentless. My CTO almost killed me because everything had to be easy. Everything had to be frictionless. Everything had to be onboarding. We had free and free trial. Like not that many people do free and free trial because it's conflict, but it forces you to make the product even easier to use, even more plg. Even easier. Okay, so I did it. You can do it. Like if you've used software so My point is, I think if you are a product focused founder, there is no. And let me go to the second part. Too many founders these days. Oh my God. At 1 million, 10 million, 20 million. I hear something in board meetings, other means and I want to bang my head on the desk. And you know what it is? PLG is a silver bullet. Growth has slowed, growth has stalled. What's the answer? Plg? No, PLG is nothing. PLG is like cloud. It's actually nothing. It is an amorphous term that properly used describes a set of actions and motions that is helpful. Improperly used makes no sense. There are no cloud magicians. You can't hire someone to magically cloudify your application and you can't hire. There are no PLG magicians. If you don't know, you gotta learn it yourself, you gotta do it yourself. And if you're product focused, you can't do it yourself. Hiring someone to do this will be a failure. That's my simple answer. And it is not a panacea. It is not a panacea. If you cannot force your tiny team to go to self serve to do all this stuff, then it's not your DNA. The other problem with this magic bullet of plg, and this has been true since we used to call it cell server viral, is it's not everyone's DNA. Right? If you are, if you don't do. If you have an enterprise or a sales led motion, you often have humans doing onboarding. You have to have humans filling product gaps, you have to have humans doing hand holding, right? And that's fine in the enterprise. It fails in self serve, right? Not everyone can do that jump. A lot of folks will. If the deal size is big enough they will plug the gap from deal signed to go live with humans. A self serve product can't do that, right? You're not going to do that. So ramly answer is don't look for a silver bullet. Going down market does not magically solve problems. Right. And do it yourself. There's no magician and I generally think so to finish it up and hopefully this is helpful. I do think these days founders actually hold on to being the head of product too long, which we could chat more about, but don't let it go too quickly. There's no magician where you want to hire head of product usually as a founder is not to make the product better. It's when the product gets too complicated. Our products generally start off as simple. We have four people, how many workflows and integrations. But then we get 10 customers, then we get 100 customers. We get 100 customers using 87 different configurations of our products. So 100 times 87 is 8,700 use cases. And as a founder, you have five hours a week. I don't care if you were a genius in the early days, you cannot remember 8,700 configurations of your product. That's your head of products job. So you hire a head of product. But if you let it go early, you'll end up with a lot of Gantt charts and Figmas and beautiful designs and you'll go nowhere. That's my thought. Thank you.

Perfect.

Thank you.

Long time fan, first time attendee. Long time fan, first time attendee, first time question. First time question. Yeah. So maybe I hope you'll indulge a quick two part question. So as long as it's one part. Okay, brief one. Brief one. Yeah. I'm interested in what the odds of success are. So if there's a thousand startups. Yeah, this math's crappy. Keep going, don't listen. Everyone gets this math wrong. It's stupid math, but keep going. If there's a thousand startups, in your experience, how many of them Will. Will hit 100 million in revenue as a freestanding company? Okay. How many of them have great founders and have great initial traction? So in your experience of a thousand startups, how many have. Let me get, let me give you a fun example. So when I started invest, I've been investing for about 10 years and so I've only done like 30 investments. Okay, here's my first five, early stage investments. First five early stage investments. Pipedrive sold for 1.5 billion. Now doing almost 200 million in revenue. Okay, so second one, Algolia, worth 3 billion, doing over 200 million, will IPO next year. That's the second one I invested at $8,000 a month in revenue. Third one is Talk Desk. They're worth 10 billion. They're doing hundreds of millions of revenue. They will IPO Yesterday I invested when it was five people and one person in the United States who didn't even have a desk. Okay. Fourth one is Greenhouse, which is over there. Okay. They're doing hundreds and hundreds of millions of dollars and will probably IPO in two years. I invested pre revenue. Fifth one was sales loft sold for $2.5 billion. 12, 31, 21. I was there pre revenue. Okay, so look, it sounds like a humble brag and it's not for reasons that we could talk about, but that's five for five. Five for five. Okay? So the sixth one is an ediscovery company called Logical that acquired. Got acquired for 300 million two weeks ago. That was the sixth one. So six for six. Okay, my point of the story we can dig in is you bend the odds. You bend the odds. Now these all. Now some of them had a little bit of revenue, some of them had none. Of those six, okay? They were all great founders that hustled, that acquired customers and didn't quit and kept going. And we could talk about the different cases because they're fun, because it's fairly diverse and different set of founders. But I just hate this math. Of a thousand founders, only 1% will get to Series A and of that only 0.1 point. Like that's sort of true how you build your funnel. But the best founders bend the odds. The best founders bend the odds. So that's on my first six investments. All six were wildly successful. We're only from 300 million to 10 billion from the seed stage. Now after that, I've done another 25 investments and I think five of those 25 or six of those 25 will equal the rest of the. But maybe 20 of them, 10 or 15 of them won't. And that's where the folks didn't bend the rules. The founders were good, but not great, right? They didn't fully lean in. In some cases they quit. In some cases they ran out of money. In some cases they didn't try hard enough. In some cases they yelled at each other and blamed other people, right? But the ones, the incredible founders that never quit, that got customers, they just don't fail, right? So listen, that's why the very first Saster Annual 2015, our tagline was from 0 to 1. Millionaire impossible. No one needs another product, do they? There's 100,000 SaaS products. 0 to 1 impossible. 1 to 10 is unlikely because that scaling so hard. 10 to 100, inevitable. Inevitable. And that's still true today. If you can get it to 10 million, you have good NRR and the founders don't quit. Like even if you're growing 30%. Build a spreadsheet, you will go from 10 to 100. If you're patient enough, even if you're at 60% growth, even though the VCs will not invest in you because you're not growing 100% of 10 million. If you grow 60% of 10 million, of course you will get to 100 million. Won't you so rambly answer, but if I could kick anybody, give anybody generic kick in the ass advice is don't look to these numbers for excuses. It's up to you. If you have a great set of founders and you have a great technical founder and Great Non Technical Founder, 2Technical like if you can build kick ass software for real and a lot of us can't build kick ass software, a lot of folks have a good business person and a mediocre CTO or an outsourced development team, that's harder, okay? That is much more rarely successful. But if you have amazing founders who are committed for 10 years and understand the market, you are already better than 99.9% of the rest, right? And you will not fail unless you let yourself fail. If you get to just 10 customers. Because if you get to 10, you will get to 20, right? And I said this in the earlier disaster, people thought it was dumb. Now it's obvious if you get to 10, you'll get to 20. If you get to 20, you'll get to 40 to 80, 160, 320, 640. It always happens. If you have a great team and you don't quit and you get better and better, you learn the industry better from that 10 you didn't expect, right? But then the 20 you learned if you. I don't know if you were the session with the co CEO of Monday Iran on the first day, but I asked Iran how come 70% of Monday's customers aren't in tech? Why are they in churches and agriculture and insurance? He's like, well we ran Facebook ads and the tech companies were too hard to close, but we could close churches. So we became a church company, right? Not literally right. But they didn't quit. They leaned into it. They embraced what they were good at and did and they kept going and going and building and building and building. They went from 7 million when they came to Saster annual. They had 7 million Saster annual in 2017. Today they have 700 million. So is that how just. I just so many people cite these numbers and I think they're dangerous for great founders, right? So that those, all of that first group succeeded, Right? But the last point I will make of all those, the pipedrive, talkdesk, Algolia greenhouse over there. Logical almost. This is the last point I'm gonna make to founders. Almost, not all of them, but almost all of them almost failed. So the most extreme example, so logical that just got acquired even in these tougher times for 300 million. A couple weeks ago I was emailing with the founder Andy, who's spoken Here you can watch his videos on YouTube. And I was looking back in our Investor updates at 5015 million in ARR their ARR growth was negative for 6 months. Not it didn't shrink. It wasn't the macro economy or blah blah blah blah blah or woe is me or zirp or derp OR WERP. In 2019 they had negative growth. They hit 10 million really quick. They fell out of product market fit for a variety of reasons. And they went to 1:10 pretty quick. And then they decelerated. After 12:30, most founders would have quit. Growth didn't slow to 30%. Growth went. I couldn't believe it. When I look back, I forgot. I'm like you grew minus 4 point something percent at 13 million. Revenue just sold for $300 million. If you re watch Andy from Logical on YouTube and Saster, the best founders don't quit. They didn't quit. They didn't.

They didn't.

They got. Maybe they got discouraged. I never saw Andy and Cheng got discouraged. I saw them. And they changed their business model and they went to pay as you go model and they changed their whole ICP and they gave up on selling to law firms even though they need discovery process. And then that didn't work. They sold different and they hired a disastrous CEO who ran the company to the and it took them too long to figure it out, but they got rid of the CEO and then growth came back and they got rid of the terrible VP of sales. They didn't quit and they eventually found the VP of sales and they never fucking quit. And they went from pretty quickly to 10 million and then negative. It's hard in SaaS to go negative, right? Fast forward to 300 million bucks. Not 3 billion, but pretty damn good in the founder's own half. So not a bad outcome, right? So thank you.

Hey Jason, it's going to be the same questions that same question that I asked you yesterday.

But we had like a very, very like short time.

Remind me. I'm getting a little tired.

Perfect. So we're about to hit $2 million.

In revenue this year.

When is the right time to hire your sales vp? And how do you know like that is the guy that is the guy can take you to an A round or to the next stage.

Thank you.

Look, the answer. I've written this and no criticism. I've written this at least 80 times since 2012. But I'm gonna say it again because it's really true and I've had many conversations around it this week. If you Can. The perfect time to hire the VP of sales is when you have two scaled reps. When you do what we now all call founder led sales. When Sastra started, I just said you gotta do it yourself. Now we call founder led sales. Ideally, take founder led sales to two reps that can hit quota. When you have two reps, you have the beginning of an engine. You have something that someone that has sales experience can replicate. Okay? So if you have two reps hitting quota, you can go out and fire your first stretch VP of sales and her or his job will be to take you from three to 300. Once they have two, if they're smart enough to understand the pattern, close some deals themselves, listen and learn to these two. The good ones will listen and learn, the mediocre ones will disregard them. The two ones will say it's a blessing and they will find two others like them. And then the next two will be a little less like them. And the next two, as you develop a playbook and get some heterogeneity and some diversity. But if you hire a head of sales before two reps, maybe 5% of the time it works out, there's nothing for them to build on. There's nothing for them to VP to be ahead of sales, right? There's nothing there. So if you wait too long after two, then it's okay, but you're doing founder led sales too long, right? Like I think Daniel at Greenhouse is over here. If I remember, I think he was managing 10 reps start at Greenhouse in the early days. It just took them a while to commit to hiring this head of sales. So you can do that. And Greenhouse was very successful. But it's a waste of time to hire reps. 8, 9, 10 yourself. Someone else that has done sales before can do that, right? So that's the moment in time. How do you find someone great? Look, at the end of the day, two things. The first thing I've said a million times, but it's worth repeating because It's a top 10 mistake founders make today too. If nothing else, would you hire them without their LinkedIn? So the mistake so many founders make is, you know, oh, she worked at Twilio or you know, she worked at Mercury and Fintech or Drata or wherever we are, looking out on this great thing. They worked at Expensify or wherever you want and you're like, I need that. Like I'm doing something kind of like Expensify. If only I could hire this person, my, my problems will be solved and Sometimes it does help a little bit. But what we all make the mistake is we over index on that. And so you gotta like take their LinkedIn and put your hand on top of that expensify or draw or whatever it is or G2 and say would I still hire them? And usually be like well, actually didn't really respond too quickly to the email. Actually failed one of the interviews. Actually doesn't seem to understand our product. But it can't be that hard. It's like expensifying. That's the mistake we make. Right. So would you hire them if it wasn't for their background? That's mistake number one. Mistake number two is you gotta hire a stretch vp. You gotta hire a first timer. Not an SDR to vp, but you gotta hire someone from director to VP or head of to VP or something. But not a stretch too far. Okay, this is the tough Goldilocks thing. If you hire someone that was already a VP of sales here, why are they going to join you at 2 million? Probably only because they're terrible. It doesn't make any sense. It's illogical. They're probably not good. Okay, what you want is a stretch. What you want is the upper. And the kid could be 20 or 60. I don't care about. So I'm using kid as a concept. You want the kid that wants it, the up and comer. But the mistake we make when we hire the stretch head of sales, the kid and again the kid is not chronological is we do what I call and you can research it on sastr. If you do the search on our home, say double search, we do a double stretch hire and you can hire someone that only hired two reps themselves or three reps themselves. @ Dakota, if you hire someone that hired zero reps themselves, it never works. The mistake so many. And I'll end with this and I'll end with two more things. The mistake so many founders make. Andy from logical that sold for 300 million, made this mistake himself is you're like I got to take a risk on a kid, right? So I'm going to go to Drata again. Poor Drata. I'm using them right there. But it's a great company and I'm going to find I'm kind of in the security or compliance space or something similar. I'm going to find the number one ae. I'm going to hire Elaine. She is the best. She closed 1.9 million at Drata last year. Everyone says she's a monster. She's great Right. All the reps that say she's the best at Drata, I'm going to hire her as my VP of sales. Okay? And Elaine might take that job because Elaine's ambitious. She's the best rep. Right. She wants the ring. Not all reps want to be managers because there's downside. But she wants it. She wants it. And she put in the years and she put in three years at Drata and crushed it. But you know what Nellaine never did at Drata? She never hired anybody. She was an IC and she hit her number. What happens? And I'm making up a lane. Let's call him Bill instead. Bill comes over from Drata, the number one rep. And Bill doesn't know who to hire. And Bill tries to hire the other folks at Drata, but they would want to leave Drata. And Bill doesn't know how to hire. Bill's never hired a quota carrying rep. And Bill can't find anybody. And 30 days go go by and it's bad. And so Bill hires a random recruiter and Bill starts bringing in random people because he doesn't have a network to pull from and he doesn't have people to bring in and he doesn't know. And the random recruiter gives them the really mediocre candidates and they don't really want to work for Bill because he's never done this before and he's not that polished. And you start hiring C reps into it and then everything spirals and falls apart. Okay? So the ideal stretch head of sales, the ideal one is they're ambitious, they get it, you believe in them. But they have to have hired a couple people that hit quota too. If they've hired two, you can run the risk that they will hire a hundred for you. They can reproduce that experience. But if they've hired none, I almost never see it work. And again, I'm having fun with andiological just sold for 300 million. I remember we literally had this conversation and I got in a lot of trouble for it. And he hired this top AE from this company. I said, whatever you do, Andy, don't hire this guy. Right? And it got me in trouble because he hired this AE out of another company I'd invested in. So Now I had two CEOs mad at me, yelling at each other. I told him not to hire him. I'm stuck in the middle. Hires like five never hired anybody. All the next five people he hires are terrible. They close nothing. Right? So that's long winded. Summary of stretch. Don't double stretch. Put your hand over the LinkedIn and make sure you truly believe in them.

Thank you very much. You're the best man.

Before you go, if you're looking for your next stretch vp, give me a ring.

He's right here. He's right here.

You can do the rest of the.

You're not a double stretch, you're just a single stretch. Right?

A single stretch for now.

Very good.

Always be prospecting. Right? So related.

Yeah.

But let me follow up that question and answer yours. Really to the point is here. When you hire your first head of sales, how do you know if they're a stretch or a double stretch? The great VP, like the seasoned VPs of sales always have like 10 people that want to work with them. They're working it between jobs during jobs on vacation because half the job of scaling a sales team is recruiting. Okay? So the best sales leaders I know, I bumped into a bunch of sales folks I know here. They're constantly recruiting each other. Okay? And they always know, hey, when I do my, I love my current company but when I do my next thing, Justin and Ellen are the two. You always hear Justin, Ellen, who I'm going to bring with you. A stretch VP doesn't have 80 people, but they better have two or one. And when you go to interview that stretch VP of sales, stretch head of sales, ask them who they're going to bring with you. It's one of my classic 10 interview questions on sasser.com and ask them and ask them and you don't need 50. That's, that's when you're, you know, late stage. But make sure they have two and go interview those two. Find out if they will come with them. Sometimes they make the two up. Sometimes the two are notional. They're like, oh, I hope to get Elaine and Bob, but I've never talked to them. A real head of sales is recruiting Elaine and Bob constantly year after year after year after year. Right. I don't mean grooming in the slightly toxic or pejorative sense. I mean in the old fashioned sense. They are grooming leaders. They are grooming their team month after month after month after month. That's the of part, part of the job. So if they have no one to bring with them, don't hire them. So a transition question. Okay, ask your question.

Sorry, you just made my interview a lot harder.

Okay, well, you might be a double stretch. I'm not saying you're not very good, but you might be a double. You might be a great double Stretch, right? And if you do, okay, last point. If you make the double stretch, if you hire someone that does not have anyone to bring with them, right. That has not scale, at least hired themselves, not inherited a team, not inherited, not was given a team, but hired to themselves. If you're going to do the double stretch, there's only one time it sort of works. Is really early. Because if you hire a double stretch head at half a million in revenue 250 and you can afford it, they have more time, they have more time to learn on the job and they have more time to start as an IC to basically carry a bag themselves, not for a week or a quarter, but to carry a bag for six months, right? And they can basically be a team lead. And if you love them, if you fall in love with them, you can give them, you can take a high risk that they will be good recruiters. But you got to go really early. You got to go really early.

Awesome. This is related to the topic, but the reason I'm asking the question is my company is going through an acquisition right now. I'm part of the acquired company.

Yes.

And you know, I just learned about, knock on wood, databricks acquisition. And so I'm seeing a lot of activity in the market. I'm curious, what's your perspective on MA in the market over the next 6 to 12 months? What should founders be thinking about for founders?

Well, look, I do think M and A is definitely for companies that are north of 20 million in revenue that are not burning a lot of money. Like the logical example from two weeks ago, there's a lot of MA interest for a variety of reasons. There's a ton of interest from private equity firms. Private equity firms will buy any SaaS company with high NRR that are break even north of 20 million. Like if you get to 20, here's a cheat code for founders, okay? If you're in any well established category, okay, anything that's established and you hit 20 million, you're growing even just 30% and you have over 100% NRR and your break even, someone will buy you as part of financial engineering. If you're at 25 million and they have another and you're doing whatever, they will slam two security companies together, one at 75, one at 25 each only growing 30. Put them together, boom, you have one at 100, growing 30 that maybe in a year and a half can IPO. It's financial engineering and the Tamo Bravos and the Vistas and smaller folks do it every week. So I know it's not the question you're asking. I'll talk about the current times. But bear in mind, and this is, I wish I'd known this as a founder because this started to change just after I sold my last company to Adobe. This hadn't matured yet. In SaaS, there is an off ramp as founders. Just so you know, it's hard to build these companies and in the beginning you just want to get anywhere and then you want to get to 5 million and 10 million air. And then sometimes when you cross 10 million or so you're like frack, look, I got something. But I'm not GitHub. I'm in GitLab. I'm not Okta. I'm not gonna IPO. I'm not gonna IPO. And it's intimidating because what are my options, right? And there are other things that can come up. But here's the thing that has changed in SaaS. I don't again, if you can get to 20 million or more, and 20 million is the trip line for private equity. If you get to 20 million or more with decent growth and modest burn, you will get offers to buy you. I will bet you dollars to donuts you will get offers. You will get cold calls from analysts at PE firms and others and you may not want to do it and you may not like love the terms. And you, you may be bought by something that's a little ossified or dated, but there is an army of capital whose job it is to buy these because they become annuities. A $20 million business growing 30% with 110% NRR with no burn. Even if they never ship a line of code, as long as you keep the customers somewhat happy or trick them into renewing, it becomes a five or ten year annuity, right? So that is already picked up. It briefly receded, but there's more money in private equity to buy those 20 plus ARR low burn companies than targets. There's more money than companies. And so you have this step off point as founders. If you can just get to 20 with even mediocre growth. You do not have to be a rocket ship. This is not obvious. You might need to be a rocket ship to get bought by Salesforce or Twilio or something because they want to buy a rocket ship, right? You might have to be growing 100% at 20 million to get bought by a tech company, but you can probably get bought by PE at 30% if you don't burn nothing, right? So that is all coming back. There's a surplus of capital in terms of corporate M and A. The Adobe is buying the figmas and and Salesforce is buying Slack. You know that's murky because things are much better for public SaaS companies now than 12 months ago. That was my opener. You can look at the growth rates, the efficiencies, things are better. But multiples aren't great. The average public SaaS company trades at 6x ARR. Now when Salesforce bought Slack, even Salesforce, which is really old, I think it sold at like 25, it traded at 25XAR. So when multiples are low, big, big M and A is tough. It's tough because it seems very expensive and the targets don't want to sell cheap. They don't want, you don't want to sell. No one wants to sell for 6x arrows. No one that finally got to 8 million in revenue is like really excited to sell for 48 million after 12 years. Like they might do it, but no one's woo hoo, 12 years. We get to sell for six times our ARR. So it's very hard to make M and A work unless multiples are high. I think everything's much better in SaaS than a year ago. Not for everyone, but for many things are better. And that was my opener. Multiples are the big question mark. They're not great. And this will damp. No matter what anybody says, this will dampen M and A. Everyone's like oh you know what, M and A is stupid. You should buy companies when times are bad and you should not buy things when times are good. It's not that simple because the big companies do better when times are good too. So when sale, I mean actually Salesforce had a great year this year but, but the multiple is still low. When you're trading at 20 or 30x revenue and you can buy something for 18x, it feels cheap, right? If you have to pay even 10x revenue today, it feels expensive, right? And so M and A gets paralyzed when multiples are low because the bargains aren't there. And no one good wants to sell. No one good wants to sell cheap. No one good wants to sell cheap. So there's not going to be a magic renaissance. But since things are a little bit better in the public markets, I believe that every public company wants to do cheap M and A. So I think we will see anything good that can be required for 100 million, 200 million, 300 million that is good. Not that it's pre revenue will get bought. But I think it will take a while for like billion dollar deals to come back because the multiples are so low.

Thank you.

Hi again. I actually have a question from my dad who couldn't make it.

Okay, well then that doesn't count. That is a repeat. Okay, what does dad want?

His name is Andy. He's a founder and CEO of Uniper. Unipr.

Yes.

And his question is, what is your sweet spot for making the first investment in bootstrap startups from the point of view of ARR, number of customers, team size and order of preference. And then from what type of business perspective? Which do you prefer more like PLG, SMB or Enterprise SaaS?

Well, look, let me step back for a minute. People miss. Folks that are bootstrapped completely misunderstand how venture capital works. People that are bootstrapped think VCs don't like bootstrap companies. Nothing could be further than the truth. Nothing could be further than the truth. VCs love bootstrap companies. If you talk to Excel Partners, one of the top VCs at all times, they'll say our favorite investments were Atlassian, right? Which I think they bought 20% of bootstrapped Qualtrics. Bootstrapped, on and on. Why do VCs like bootstrapped? There's no one else on the cap table. Okay, you can. Within reason. You can buy more, you can control more. And it's simpler if you, if you can find a bootstrap company that gets to some scale that the last thing you want to DO is have 78 other investors in the company. Because there's no room, right? There's just no room. So every and Atlassian for a while, I mean, Excel had this practice and it's still there. They tried to hunt all of. When folks only want to invest in the Bay Area, right? Like anything, that SaaS was terrible. They're like, no, we're. We'll go to Australia and meet those guys at Atlassian. We've heard good things. And we'll go to Utah and meet Ryan Smith. They didn't care because they built real businesses, right? And they will tell you those are some of their best investments of all time. So VCs love bootstrap for greed reasons, for selfish reasons. There's no competition. There's competition. There might be competition for the deal. You might get multiple term sheets, but there's no one else jamming up the cap table set. People completely misunderstand it. People think VCs are anti bootstrap. No, it is Your best dream as a vc, to be the first investor because you. This is almost a toxic term. But VCs want to control the DAI. They want to be the biggest investor and have the most control and the ability to invest more if there's an option. They want to control the die. So they love bootstrap. The problem is that they don't want slow growing bootstrap companies. This is where bootstrappers get confused. And you'll meet. I just met a great set of factors here. Incredible, incredible founders that got all the way to 15 million bootstrap growing. 50%. Okay, 50% is not 10% or 20% that if they commit for another 10 years, they will build a nine figure business and they will be very rich and have a great journey. But no VC, no V, a PE firm like we talked about will touch them at 20 million. Like they'll get. When they cross 20 million, they'll get an offer for 200 million. But no VC is going to invest in any price because they're not approaching 100% growth at 15 million. No traditional growth stock stage VC is going to touch it. Right. But it's not because they're bootstrapped. It's probably. And I talked to these guys and they're great. I love them. They're at 50 million and I asked them how much cash do you have? Because they're bootstrapped, they have a million dollars on their balance sheet. So they don't have enough to invest at slowing down their growth. And that's the bootstrapping paradox challenge. Right. And that's why, you know, everything's hard. You have to be an outlier to win. But the Atlassians and the Qualtrics are rare. They are rarer. It's a minority of the public SaaS companies, but there is no VCs prefer bootstrapped. But they are not willing to give you credit on growth. That's how I'd summarize. They're not willing to say, oh well look, 50% growth is okay, it's because you didn't have money. But if I give you money, you'll accelerate to 100. A founder might believe that, but no VC is going to take that bet. No VC is going to say, you would have been 100 at 15 million if you'd raised 20. So I'll give you 20. There is founder logic in that. There is no VC logic in that. So thank you, thank you.

Thank you so much. You've always been so helpful with your guidance and it's Generous. You and your guests, really big impact. Thank you.

Good to hear.

And the weekly webinars are great. My question for a large enterprise SaaS sales team, the AE ramp planning assumption is six months. Do you have any.

That's a stressor, isn't it?

Do you have any advice on moving it to five? What might we suggest and do?

Oh, I know how to move it to five. And listen, I know this is going to sound trite. This is what a great VP of Sales does. Until then, you can't do it. There are no shortcuts. But a great. If you do, you have a great VP of Sales today. Yes, that should be her job. Take a month off it. Because what a great VP of Sales does is create more urgency. A great VP of Sales listens more. A great VP of sales talks to more stakeholders earlier in the process. A great VP of sales realizes that even though Jason inbounded on your form, Jason's not the buyer. Jason's never going to write a check. You've got to get to Jim or Jane or Julia or Johnson, the Junior A's, like, oh, I got this great deal that came in inbound. It's a million dollars a year. But it's the wrong person, right? There's a million things a VP of sales will do to bring to cut your sales cycles on the order of 20 to 30%. But not half. It's not possible. You can't accelerate procurement, you can't accelerate discovery. Past a certain point, if you need to do five discovery calls with seven stakeholders, you can't do that in an hour. It can't be done. But I guarantee you if like a great VP of sales should increase at least some things quickly, 20% make things 20% better. Maybe for yours it's not sales cycles, like maybe they're better at something else, that's okay. But I will tell you, in my experience, one of the first, when a VP of Sales comes in, they know time's the enemy of deals. Right? So if you bring in a deal quicker, it has a higher chance of closing. Right. And they know that how to create urgency when it doesn't exist. Right. And they know how to quickly identify who matters in a deal or who doesn't. Just add those three factors together, sales cycle shorten, they know, Right? And they know time's the enemy of deals.

Thank you, Jason.

Appreciate you. Around 11 million in ARR.

Congratulations.

Bought the company a few years ago. We have one person in sales like a consultant, 100% inbound. We're just about to hire first VP of sales.

So it's mostly self serve or how do you do it with one person?

Like it's a consultative engineer who does.

Does 11 million of sales herself. It's.

It's ARR.

So it's like a 50 senior old company.

Okay. Okay. So the growth.

Slow.

Okay.

Yeah. Okay.

Just hiring the first one. I know you mentioned that we should have two AES.

You gotta have two. You have to have.

But we are doing the flip because we don't have a salesperson. This guy's an interview.

So I have to have two.

So we're gonna hire the salesperson and then salespeople.

You misheard me too.

We're hiring the VP first. I know we're doing the flip side. So I'm just wondering.

It's. Listen, you're at 11 million. It's very risky. But you can hire the VP of Salesforce. You have, you, you may not have an established sales process, but you certainly have an established business. Right. So I get it. So you're going to hire the head of Salesforce.

Okay, so how long would you wait to hire the two AES? Would you hire them immediately or would you have this person.

Can you. Can you afford the two AES?

Could.

Okay, so here's, here's my evolved. Here's my evolved answer. And I've been thinking about this a lot late. I'm going to update my classic Saster post on it. You can hire. You have 11 million revenue. So you can hire the VP of Sales. You don't need to hire a kid first. Right. They've got to carry a bag and they've got to close a significant amount of revenue themselves and then hire two.

That's my question.

They have to hire two.

How much revenue and how long?

If you're hopefully not much more than a quarter because you're running out of time. If it's more than a quarter. Right. Listen, I have. There's something I wrote a long time ago that got misconstrued so I got to deeply update it soon. I wrote a long time ago that. And now I'm going to put some asterisks and daggers next to it. I wrote a long time ago that in some senses, like too many founders get cheap in the early days and they want a VP of sales to not only be the VP of sales, but hold a full quota. Right. So they can pay for themselves. That doesn't work. You can't even in this day of side hustles and multi hustles and everyone running A real estate business on the side and courses on the side. As a sales leader, you cannot own a full quota and manage eight reps. It's not possible. If you can't afford it, you can't afford it. So what I said years ago was, look, whether they should they hold a quota, should when they start or not. Sometimes, yes, but it can't last forever, right? And that is true today. But people somewhat misconstrue that to think it doesn't matter if they ever hold the bag. What I have learned is if they already know the product, if they're already a customer, if they've already sold it, sure. Like they could just be a manager. But I think 80% of VPs of sales today should close when they start. 80 to 90, they got to close. And now ideally it's just a quarter or two. And then they, then they assist deals, they join deals with their team. Because if you, if you ask them to close themselves without any help for too long, you will run out. You can never grow. Right. But I would, I would either ask them to hold a full quota or half a quota for a quarter, close 2, 3, 4 deals and then bring in Jack, Jane, Jill, Joe and Julia to fill it out. But, but the mistake. I see. And I'm going to rewrite this to be clear, I see this again. I was just talking with the CEO out here at 15 million in AR that I know who made this mistake. He hired a VP of sales that I know that's pretty good. Okay. And it's a complicated product. It's not technical, but it's very complicated workflow. So he hired a VP of sales that actually was good, but came from a slightly less complicated industry. So that's hard. You want to hire someone always from something that was a little harder or more complicated. That's the other cheat code in sales. It doesn't have to be 10 times. Hire someone from a little harder or more complicated and it'll be like the gravity is lower at your startup. It will be easier for them. I'll tell you a story in a minute. If you hire someone from something that is great, but easier to sell, and yours is harder, they will fail almost always. Okay, so this VP of sales came in to a product, he sold a product that was medium, hard to sell to one that was more complicated. And he never sold himself. He hired five A's. Okay, And I like this VP of sales. He closed nothing the first six months. He never learned it himself. And he could never train his reps and he never closed anything the first five or six months. Nothing. Yeah.

Just to follow up, do you have an opinion on solution engineering as a department within the sales team? To sit if it's a super technical, say like 10 out of 10 one.

Way or another, you need a solution architect department, whether that's the CEO or the CTO in the early days, which is often the case, whether it's. Sometimes the customer success team will play that role, whether you grab one of your top engineers to do it. The reality is if you have a technical sale, there's always a solution architect, solution engineer, sales engineer in there. They're always in there. Once in a while you'll get an AE that was an engineer themselves. So they're wearing two hats. But even if they're wearing two hats, here's the learning. There's always a sales engineer in the deal. So you got to figure now, do they have to have the title like. No. Sometimes if someone else on the team can do it, great. But. But the biggest mistake in technical sales is when you hire a generic AE and don't put anyone. No solution of any form. No chance. Right. Listen to their gong calls. You're gonna blow your brains out when you listen to the dumb things they say. Like does your product. Wait, what's an API again? I think our. Yeah, our API does that. Yeah, a hook web. We might have those. I think we do. Which of the socks do you want? We have all the socks. Soc 12. Of course we've got all. You're like. And especially if you're selling to like a VP of Andrew cto. They're gonna see through that in three seconds. They're gonna just click X on the zoom and be out of there. Right.

Hey, I'm Christina. I'm the founder of One Schema.

Thanks for coming.

Yeah, thanks. So we've been thinking a lot about product roadmap lately and a lot of companies invest in multiple product lines on their path to 100 million. ARR.

We talked a lot about that here. Spencer from Amplitude did Jack from Lattice. It was a big theme. We talked a lot about AI this year. But multi product was the subtle theme. Right, Nick? Talk about it from gainsight at the end. Yeah.

It can be incredibly distracting for both your engineering and product team and your go to market team to juggle multiple value propositions, customer types and potentially neglect your core product. So how do you know when is the right time to invest in a new product line? Are there any red flags for the or when? It's obviously the wrong Time. And how do you think about what is fundamentally a new product line versus a very large feature?

A lot of really good questions. That could be a whole session, right? Let me give my overly simplistic answer to all of this. 101,000, 10,000. 101,000, 10,010,000. Now let me explain. No matter what you do, you're gonna hit some TAM issues. People talk about multi product, but the main reason great founders talk about it, like Spencer and Jack, is because they're starting to exhaust the market for their initial product. Right. It's not a weapon or to make. It's because they're worried that Once you approach 10% market share in your, not, not in the whole world, but in your core ICP, your core market, it starts to slow down at 10%. The good news is your brand picks up at 10%. People have heard of you, they love you. So it starts to feel, it's weird as you cross 10% market share because it's both easier and harder. The good news is you're in every deal. You're in every deal. But the good news is, for reasons you're not sure if things are still slowing down, not radically. It's a weird thing. You're in every deal. But it's because you're exhausting your micro TAM, your initial TAM. And in enterprise, it's often around 100 customers in a group. In mid market it's 1,000. And in SMB, you're lucky to get to 10,000 customers without hitting significant headwinds. Okay, so my rough way too rough rules are Enterprise Mid Market SMB. Before you get even halfway to 100, 1,000 or 10,000, you better have a plan to go multi product or you will, you will not go to zero, but you will slow down due to TAM exhaustion. Right? So that, those are my numbers. But obviously enterprise is a smaller universe with bigger deals. So once as you approach those, not cross them, approach them, you will exhaust your tam. That's the tactic. And I've, you know, and I've seen, we've gotten, you know, when we Did Saster Annual 2017 in Bill Graham, it's funny, we didn't know this and I, and I did two sessions back to back. I did Jeff Lawson, CEO of Twilio, and Peter Gassner of Vivo, who had just gone multi product and that was very innovative at the time because they were smaller, they were both crossing coming up on 200 million and seeing these issues, right? But now it's well understood you have to do it. But to answer your Question. If you do it before TAM exhaustion, you may be stressing the team too much. You've got to get good at it. What you want to go in SaaS is from nothing to mini brand to brand. Mini brand is when the viral word of mouth loops in, you start to get pulled into deals. Magic. You don't know why you get an inbound. Hey, I heard of you from my friend Bob or Elena or you know, I was at my last company, I was at gainsight and went to vitally and I want to bring you in. That's like a mini brand. Like you know the world hasn't heard of you but like in your core ICB they start to hear about you. That's magic because you start to get this inbound viral loop and then as you become a real brand, you're in every deal. Like not everyone picks salesforce for CRM that's here. But everyone kicks, everyone thinks, everyone always talks about it, don't they? They're in every deal. So you want to get there because life gets easier. But as soon as you get there, you're exhausting your dam. So that's your job as a founder, is not to go too early because you'll burn the team out. And so you've got to do this. Am I approaching 10% market share? Not in the notional world, but not every restaurant in the world, not every SMB. You've got to be. Your job as a founder is to be very rigorous and in this case define your TAM narrowly. Like your core ICP where you get the majority of your revenue and are we approaching 10% market share? You better have a second product by that point.

Thank you.

Yep.

Hi, Jason, nice to meet you.

Thanks for coming.

My name is Wayne, I'm a first time founder of a generative AI startup.

Good.

It's funny that my question is pretty similar to the previous one but potentially from different angle. A quick context is that we help businesses create their AI avatars and videos so they can scale up their video.

Yep. It's a good space. It's a hot space right now.

So the question is really simple but we've been really struggling with that a bit like do we go horizontal or vertical? So facing the possibility of using AI to create videos, there's lots of kind of sub use cases.

Yes.

Like each one of them makes sense. There's real customers asking us to do that and we definitely would want to try because no one else is doing that and we have the competitive edge of doing a, you know, first mover. Advantage. We try some of them, they actually also work well. But the problem is that after we do two or three of them, our product becomes kind of weird. You know, it's like one product for not only one thing, but like two or three things. So it's like it's getting hard to describe that.

But that's a problem. That's the problem with the horizontal platform. If it's hard to describe, it's tough. Right, Right.

So it's a simple question, but we've been thinking back and forth all the time. We've been growing. Okay, but we don't know if it's a good decision to say, okay, let's focus, let's stay laser focused, people say, or let's continue to expand to really do horizontal.

Look, I don't know the answer. Look, it's one of the great. If you build a broad based platform, especially one that has a self service element. Right, right. You want to be horizontal, you want to be zoom or slack or canva like because that's the biggest ham. Of course you want to be horizontal. And as product builders we also kind of enjoy horizontal products. Right? But even horizontal products have segments where they outperform. Right. And if you again, if you went to the Monday.com session with Iran the first day they built a horizontal platform at Monday. But once they started doing Facebook marketing, they found that insurance, churches, construction were the ones that performed. So they leaned the hell in. Right? And so look, I think that the conceit, the founder arrogance or conceit is that you can be totally horizontal because even in a horizontal you're going to have verticals and industries that want to use you, you. Right. And you got to get to 1 million, then you got to get to 10 million, you got to get. And you got to get momentum and it's. And even these horizontal platforms are not when you look, when you peek behind them, you'll often hear a story that a loom really performed in this area or slack took off with developers early became it before being broader. I would. If you love horizontal and you believe that's your future, I would build an elegant, easy to use onboarded PLG self serve product that is magical, that is beautiful, that is elegant for content or whatever you're doing. And then wherever you have any concentration of customers, I would lean the hell in like a vertical. It's not either or. Right. And going too horizontal is a dream because you still have to find the areas, the areas of strength where you're relative no matter what you Say everyone's feature poor at this stage, right? And everyone also has a magical feature or you would have no customer. So you've got to do that two by two of where feature poor is. Okay, because I have a magical feature and you gotta lean like hell in there. And then if you do, I'll give you one last bit of advice related to the prior question of multi product. The biggest mistake I see from like 2 ish million to 10 million that founders make is they over diversify. They cross a couple million in revenue, they finally have something, it's more than beer money, it's real. And they're like, okay, well we're strong in insurance or I want to do all these other things, it's too early. You have rarely exhausted Your TAM at 2 million from 2 to 10, all you want to do is double down on what's working, get better and better and better as you cross 10 million or so roughly, then go back more horizontal. Maybe for you it's horizontal to vertical to horizontal. Even though we don't all think about horizontal to vertical to horizontal. But I think that's really the way most of us work because you got to focus once you have something and put almost all your energy into what's working. And then when you have some fat on the system, when you have extra engineers, extra salespeople, extra capital, then you can do more experiments and you can invest in things that are, that are more expensive or have lower ROI. Right? But on the march to 10, don't do it.

Got it.

Thank you.

Thank you so much.

Hi Jason, my name is Chase, I'm the chief period officer at Sanico US.

Thanks for coming.

I practically stalked you online on LinkedIn and Twitter. Good.

I love a good stalker.

We've been building a B2B. Just say Asana for black period. We are building an employee productivity to for women in the workplace who wants.

To manage vertical SAP vertical asana manage.

Their menstrual matana mental health. And we've been able to at least see that we're in the precede stage and currently our secret, we wanted to be able to ask you for your sacred soul to be able to support precede founders. Because truly there's certain startups who will continuously get this funding because startups are not able to at least write the same language that investors are looking out for the struggle to come for conferences like this and even getting the right investment of flights and hotel to be able to be participant of assessing that it's expensive, it's, it's really ridiculous and we see ourselves like very resilient to doing this. But we want to be able to ask you your secret sauce to be able to at least see for the SAS TL fund.

Yeah.

Be able to support pre seed funding and we would love to invite you to Tulsa, Oklahoma.

Thank you.

Well look I'm gonna. I'll give a quick for me I personally what I invest. I don't invest before 10k mrr. I don't do any pre seed because I'm not smart enough. I want to see 10 customers, 15 customers. I think my secret sauce as a SaaS founder that is passionate about go to market is if you're a great founder and you have 50 customers or 40. I'm pretty good at figuring out if you can get to 4,000. I'm pretty, pretty darn good at that figure out if you go from 0 to 10 customers. My track record is muddled at best. So I don't, I don't ever do it as a, as an investor. I'm very narrow to the broader point of this chicken and the egg issue. How do I don't have traction. I didn't come out of stripe. I don't have the perfect connections. It's unfair. How do I get this pre seed funding? Right? It is unfair. And the real answer is, look, it sucks. And the only answer is one to raise. If you really need money, find angels. And I mean angels in the traditional sense, angels. Because you have not, you have, you haven't taken off yet. Right. So there's nothing for a traditional financial investor to sink their teeth into. If you come to me and you're at 10k mrr and you're tripling and you have cool stuff, I can sink my teeth into something. I don't care where you went to college or who you know or whether you went through YC or Stan. I don't personally, I don't care about any of that. But I need some. Everyone needs something to sink their teeth into except an angel. And that's why as unfair as it is, why do the standards Stanford and MIT graduates so effortlessly get capital? And I don't care where anyone go to college. I don't think I've invested any. But it's not irrational because it's some, it's some indicator. It's something. I was speaking with Michael Seibold from Y Combinator because he was here this morning. 85% of their batch get funded and they hit their funding target. You know why it's 85%? Well, one most of them are pretty smart. There's a filter. But for investors it's helpful because it's a sign like a lot of them are going to fail. But you know what came out of came out good. Some good stuff came out of Y Combinator. So the earlier you are you got to look for some kind of sign. You got to look for something and privilege sucks. And being a stripe alum is unfair and coming out of YC is unfair and coming out of Stanford, it's all it is unfair. It is not fair. And I don't have the answers because the earlier you got to look for something it is too risky to invest early unless you are genuinely, genuinely an angel. So it may take you two years to raise this money. You may have to talk to every person on planet earth because you aren't the Stanford YC Stripe alum Perfect Everything grad who also closed 100 million at Salesforce and was the secret co founder of Dropbox. You're not that it's not fair but I know this is hard to hear for folks. It's not designed to be fair. Here's the last thing people think that venture is supposed to be fair. It is not about fairness. Maybe it should be about access. But it is a niche, niche, niche niche investing category. It is a niche of a niche of a niche of a niche. Most VC firms perform terribly. Most. It is a terrible investment. You will hear this again and again. It is true. Most VC firms take meet with thousands of founders and still do terribly. They're still terrible assets. Right? It is a brutal, terrible industry where if you actually saw the numbers, most VC firms underperform nasdaq. So why would you invest in venture? If I can buy a QQQ ETF tomorrow and sell it if I don't like it, why would I stick my money in venture where I don't get my money back for 12 years? It doesn't make it's not fair. There are access issues, there are inequality but the asset itself is so tiny and niche it cannot create fairness. It is a and so if your job so there is a classic thing in venture which is the further you are from obvious. The further you are from privilege and having all the boxes, the further you're gonna have to go to raise venture capital. It is not fair. But it is also not unfair in the sense that you don't have the signs. It is unfair like I'm not But if you get frustrated with it or angry or you'll get nowhere and you have to be honest with yourself, you have to say, look, this is a little bit unfair, but tell yourself, have you checked any boxes? Did you put the decade in at Slack, Right? Were you the VP of whatever at datadog? Right. They deserve something, right? I mean, maybe not, but there's a lot of data to say that the best VPs at Datadog, once in a while build another datadog. Okay? There is data to suggest that, but you don't have any of that, right? So it's a come to Jesus thing where again, I want to say it because people feel like it is unfair and it is, and they feel like it's biased and it's fucking biased and it's unfair. But you got to understand it's not just a game when this asset class doesn't outperform NASDAQ like it. Understand the flip. You got to understand who's on the other side of the table, even if you don't like it, right? And they may be making fees and they may be driving a fancy car and that's a different discussion of how. But they're not making a ton of money in many. They're not delivering a lot of results. And so again, I say this just to be helpful, that it won't. I don't think venture will get fairer for pre seed. I don't think venture will get fairer for folks that don't check any boxes. It sucks. But venture is a business and here's two last points and I know founders, as founders especially haven't gotten this last four or five years. Venture capital is a niche, niche, niche, niche asset class only designed for outliers. The job is to find an outlier. It is to find a GitLab. It is to find an Okta. It is to find a stripe. It is to find an Algolia. That is the job. The job is not to find a 10 million dollar exit or a $50 million, 100 million or even a $500 million exit. The job is to find outliers, right? And folks will take risk if there's signs you might be an outlier, right? The top engineer at datadog. But if you've got nothing, you have to go further. You have to get. And again, it's not fair. But typically if you're not finding true angels, if you're not hustling and finding folks that meet you personally and love you and say, I'll give you 25 grand, I'll give you 50 grand because I met this kid I love that happens all the time, right? Aaron Levy at box couldn't get anyone to give him a nickel back in the day. But he met Mark Cuban and Mark Cuban gave them $500,000 and said, I like these 20 year old kids. Kids, right. Then he got mad and asked for his money back because he didn't want him to go enterprise. He thought that was a terrible idea. And when they went from consumer to enterprise, he asked for his money back. But he liked those kids. Okay, that's an angel, isn't it? But until then, you got to check at least one box and that box. It's a rambling answer. I hold this level for most folks with nothing, with no privilege, with no stripe, with no DataDog, with no YC, with no nothing. The box is revenue. The box is revenue. And it's 5k 10k mrr. If you come here next year, and I know it's hard, if you come here next year with 10k mrr and you're growing quickly and you do our Meet a VC program and you sign up and you share your numbers in your deck, you'll get 20 meetings. But that's because you checked the box. Right. And I know it's not fair, but that's your job as a founder, is to work the system. Right. So thank you.

Would you be able to accept our invitation to visit Tulsa to speak to minority founders?

I could. When you're at 10k. MRI will before then. I would waste your time.

Okay, thank you.

We got time for like these questions, but we'll probably have to wrap after these four. Thank you. Hi Jason.

I'm a huge fan. I've read a lot of your blogs on hiring the first ae.

Thank you.

And first two AES. My question is, you've written a lot about the magical SDR at some of these early stage companies.

Maybe the magical AE more than the magical sdr. But we can talk about a magical SDR too.

Yeah.

My question is I'm transitioning away from founder led sales. Million dollars in ARR.

A million, you said? Yep. Ideally you would.

I just hired my first AE about three days ago.

Just one and then. But the post said hire two, didn't it?

My plan for the second one is essentially that SDR that we hired about a year ago from college. We just really killed it over the last year promoting him into that.

You got. You have to or she'll quit.

Is that the second AE or do I need someone with more sales experience than should I make it through?

No, you can promote her. Look, I mean, look, you got. First of all, not exactly the question you're asking you. You have to be. If you have a great sdr, you got to be communicating like I, I think it's a. One of the top problems in SaaS structurally I got to rewrite this is that we don't have a good career path for SDRs. Lars from Cloudera, I mean from. He was a Cloudera. Sorry, it's Snowflake last year. He's the head of Outbound. You can watch. He's been doing Outbound since and he's so great. Watch this session last year. We've talked a lot about this. It's a. He's trying at Snowflake now, but there's no great career path. The best SDR should be able to make 150, 180, 190. If they can bring in massive business, they should. But instead they all want to quit after eight months and be an ae. You can't fight it today, maybe you can be the one, but you're trying to fight human nature. So when you have a good sdr, you got to be communicating with them. What are your goals? And maybe you ask them to be an SDR for another quarter or two. But most of them, unfortunately, and this is why it's exhausting to build an Outbound team. The best ones will wait a year at most. So if she or he is saying I want to be an ae, if you don't give it to them, they're going to quit anyway. So that's your second. So that's your second ae and I think that's fine for your two and go hire another SDR that's your ab. Now the beauty is this is great because you're going to run an A B test. You're going to have one more expensive experienced AE that doesn't know your company or product, then you're gonna have the SDR that probably will work out, but might not, but knows the product cold. And you're gonna get your A B test and you'll see how they perform. And you'll do a better job of hiring number 3 or 4 AE based on the A B test. So it's good. Perfect. Just wanna clarify. Thank you.

Hello.

Thanks for coming.

Thank you. Switching tact a little bit. I wanna talk about the journey from 10 million to 100 million.

Okay. The inevitable.

The inevitable.

Yeah.

You've alluded a bit to the difference between seeing this as a PE backed journey versus a VC backed journey.

Yeah. Or purely bootstrapped. But.

Yes, or purely bootstrapped. So what advice Might you have. For someone who has seen this journey on a PE backed financial engineering path a number of times as a leader in a SaaS company and is considering the VC backed version of this, what are the key differences and what advice would might you have?

Well, there's a lot of nuance to that that you and I could talk about offline, but might be too much for the audience, I think. Look, it's the VC backed at the end of the day. Two things about being VC backed. Most VCs at the end of the day, if you give it your all and make the money, they're fine with the outcome. Here's the paradox. But at the same time they only want to invest in companies that can ipo. So you cannot make money in venture. Oh, thank you. You cannot make money in venture if at least per fund you don't have a couple billion dollar outcomes. There's a few exceptions, but as a rough rule, let's say you do 30 investments in your venture fund. Not all 30 have to IPO. But if a couple don't, or at least one or two, you'll never triple your money. And VCs, if they don't triple their money, they don't get another fund and their business dies. It dies very slowly over a decade, but they fail. They eventually lose their job. As slowly as a human can lose their job. But you have to. And so you need an IPO or two, but so they're not. If you're, if you're a good vc, you will not invest in any startup that you don't think has a shot of IPOing or better. Okay, but, but the mistake they make is as long as you don't raise too much money and you don't lose your investors money. If you've done your best and you, you raise 10 million and you sell for 20, that's not going to make the fund. But no one's going to be mad at you if that's the right outcome as long as they make money. So that's kind of like the groundwork. So then V versus P. It's not that simple because P doesn't do early investments and they don't do other things. But don't raise venture capital if you don't want ipo. That's what I'm connecting. Don't raise venture capital. Or at least let me qualify it with an asterisk and a dagger. Don't raise more than 5 to 10 million. Don't go to the double digits. If you don't Want ipo. If you raise a seed round and you don't really want ipo, but you kind of tell the folks you do it's okay. Like, it's not that much money in. Okay. Raise 10 million, the stakes go up. Raise 20 million, 30 million. You know, all these unicorns that are struggling that raised money, they're frigging miserable. They're not having fun. They raised 200, $300 million. And they have good companies, but if you sell that company for 300 million, it's a disaster. And it's not only a disaster economically. I don't want to run that company. You want to spend 10 years of your life building a company to 300 million in value, but then you raise 300 million. So, yeah, there's a little carve out for management, but the employees make nothing. The investors barely make their money back. It's soul crush. It's soul crushing for the amount of our lives we put into these companies. So only raise double digits of venture if you're going for ipo. If not pe. Is this fun? Not fun, Actually, it's not remotely fun. But this unexpected middle ground that may not be fun, but is an off ramp with good liquidity that people don't realize. Again, my fun case study from these weeks, when Andy from Logical sold for almost 300 million, they gave all cash, no escrow, no anything. And he just left the next day. He literally just got back from his first vacation in 10 years at the One Hotel in Kauai. Is it great? In a couple years. Mighty. Look at it and say, you know, maybe I wish I was still running it. Maybe. We'll see. But that's a total off ramp, right? Literally. You get acquired by HubSpot or Salesforce, they're gonna make you stay three years and be the SVP of something. You get acquired by PE and like they got a guy down the hall. They have a guy. It could be a woman or a man, but they always have a permanent down the hall. That's their job, to bring in another manager, another CEO. And so you may not love it, but that's how I would think of it. As a founder, are you willing to commit to IPO? And if not, and you raise more than 10 million, I think you're going to be miserable in the end.

Hey, Jason. Good to see you.

Thanks for coming.

Thanks. Last time we spoke, after we went through the winter YC batch, we were doing a lot of founder led sales.

Yep. As we all do.

We were growing really quickly. And we hired our first two AES and we sell to construction companies.

Okay.

And we had a lot of like struggles teaching them how the founder led sales worked. And construction companies don't answer the phone or look at emails. So we tried outside sales, going to construction sites and their offices and it started to work. So how do we know if we double down on that or continue down the like inside sales route?

Well, I suspect what happened was not only were you only doing inside sales which didn't work, you were hiring like 10 tech guys that didn't know the industry and so no one would buy from them. I see this, you certainly see this in complicated technical products all the time. But actually I see this in vertical SaaS all the time. Which is in vertical SaaS the sales team needs some industry expertise, right? In like developer LED sales. If the early reps don't understand software, they don't understand how to build it. If they don't understand how to spell API, they can't sell anything. There's a different problem as you take an outreach or a gong or these great companies that know how to that are salespeople selling sales tools and you put them into construction and they just give the dumbest friggin answers. I need to do this with load bearing concrete across this. Does it do? Of course it does that. Are you sure? What's the amount of pounds per square foot? Prefer the seven. And I see, what I see again and again is I see founders who are pretty good at founders and they hire rep after rep after rep that worked at Dropbox or whatever and 100% failure rate again and again and again and again and again. So if that's what you're seeing or other folks, you're not alone. This is hard. You need to either be in deals with them or get them help or hire folks. We usually over index on domain expertise. It's transferable to some extent, but what's not transferable is going to something harder and more complicated to sell. It's not transferable. Maybe if you came out of the chemicals industry and you were really good and you wanted to learn construction, you give them 90 days, right? But you really understood the entire periodic table for sales. Maybe construction's easier, but we go the other way, right? We hire those and it fails. And so now you're finding that field works. And field probably works because that's where they are, but it might also work because they know the product better than they know industry better. It might be two factors you're conflating, right? But whatever it is you got to do more of that, don't you? Isn't it that simple? You gotta do more that. Right, but my point is. And maybe we can break on this but that first group. And again you're not. Tons of folks do this. They hire the Dropbox or the whoever, the rippling the checker, the cool ones. And they all fail in vertical SaaS. Right. If you ask who else is in vertical SaaS like you, you're going to hear that you're going to have a beer here again. You're going to hear the same story again and again and again and again. How they ripped through 10 and they just, you know, they were, they were nice. Like they, they went to the customer dinner and everybody liked Bob or Bill or Eleanor, but they sold nothing.

Yeah. So take nothing on the construction worker that wants to work in tech versus the tech that wants to sell to.

That's super risky. But I don't know that you have a choice. The only other choice. There's a third path which for some is the only answer is you have to be in every deal. If you're willing to be in every deal, you can make a lot of Personas work. But you got to think about that and related to that and then that's an option. But another point is that so many folks in vertical SaaS leave exit founder led sales too early again and again they exit it too early. I'm going to make up something that I'm not sure is true, but I'm going to do some work and I think it's right. I think if you exit founder led sales and vertical SaaS before 10 million you fail, you got to suck it up and you got to find the extra 20 hours a week. And I know you don't have time because you're doing product and you're doing HR and you're doing this and this and this. You're not going to get it. You've got to be. You might have to be in every deal. You. I know it sucks.

Yeah.

But you might have that. I see this again and again and again. They leave it too early. And yeah, you, you know, you're selling the sales tool, you get some energy going, you hire a couple of folks from gong and sales loft, you plug them in, maybe you can kind of get out of a little bit of it. Never seen it work in vertical SaaS.

And wait until the AES are just efficient before bring on a VP at 10 million ARR.

But maybe bring in the a year even when you. But here's the nuance. Even when you bring in the VP of sales, but you still have to be in every deal. Even when you bring in the VP of sales. The real reason founders in vertical SaaS or complicated SaaS, the real reason they fail all the way to 10, is they finally hire the VP of sales and then they exit sales. And the VP of sales never understands construction or environmental science or the deep weird niches of the contact center. They never understand it. And they run the genero playbook. Is it budgeted? Who are the stakeholders? And it just. It doesn't work. And so I would say whether you hire the VBSLs next week or in a year or whatever, you gotta be in every deal. At least think about it. Stepping out of the founder led sales leads to just a plane crashing to the ground in vertical SaaS. So. Thank you.

Thank you. Hey, Jason. Thanks. This is my second Saster annual. It's been amazing.

Good to hear.

Yeah. So my name's David. I'm the CEO of Fondo. We make it easy for startups to file their taxes.

Good. That's what we all want easier, right? Can you, can you get rid of our taxes too? Have you developed that product? This is the first time I've actually ever paid taxes and it's not fun.

Yeah, it's not. We can help you get money back, so.

Okay.

But you've talked a lot about the IPO window opening up again in 2024.

Yep.

And which is really exciting, especially all of us who might be raising money or thinking about it, like, what is our valuation? What should we expect it to be?

Well, you're not going to like the valuation impact.

So what do you think the multiples will be?

And today. Look, today, I. I don't mean to interrupt you. I'll answer after you can finish and then we can this off to be our last one. The IPO window opening up is going to be good. It's going to mean that VCs will do more deals. It's going to mean LPs who are the limited partners that give VCs will give them more money. Because this last year was the driest year ever for VCs giving money back to LPs. VCs basically have 10 years to give the money back and more. But it ebbs and flows. 2021 into early 22 was a record of money that went back out. The last 12 months were a low point. Money is not did not flow back. And it's all this great. You can even be cynical about it. It's all this great recycling, right? The LPs give the VCs money, the VCs give the startups money. The startups have liquidity. The VCs take 20% off the themselves, they give 80% to the LPs, then the LPs give it all back to the VCs and it's this virtuous circle. But for the last, the IPO market's been closed for 24 months. So the virtuous circle is broken right now. So when it reopens, liquidity will follow. VCs will get more money to invest. But if public, the average company's trading at 6x ARR, it's not going to inflate valuations, it's going to create more appetite for VCs to do deals. But it only at the margin will it increase valuations. Only at the margin, only where there's like hysteria to invest, like certain AI deals. But other than that, unless there's massive competition, valuations will remain mediocre.

And what do you think it'll be the biggest impact in the multiples once companies start going public?

Look, our job, you know, I got to be honest, I was a founder for over a decade and I've been investing for a decade too. I didn't even look at public multiples until like 2021 because I basically just my whole life in SaaS, I basically decided, all of us that came up early, we basically came up with the basic rule, which is that the public markets went up and down. They were pretty crappy for a while. But good startups are always valued at 10x ARR, not forward multiple, not this or that. But when I did Adobe signed Echo Sign, when David did Yammer, that was early. When Renee did build.com, we all kind of came up together. When Peter did Aviva, everything was like it was either nothing or 10x. And once in a while there'd be a rare one that was so off the charts but, but like it was, it was very flat actually. It was either like you couldn't get funded and if you were in this very elite group, that it was always 10x. Right. And maybe because I'm tired, I'm actually losing track of my question for the first time today. I think that's kind of the world we're going to be in. Again, like the multi, the public multiples are 6x. Startups don't have to be at 6x, but everything's outside of, you know, some, some great stuff in the YC batch that's the world you're gonna live in. It's a. It's back to a 10x world. Unless you're a crazy outlier. Right?

Thank you.

Okay. Thanks, everybody. Really appreciate it. Thanks for coming this year. London in June and back here in September. So thank you. Really appreciate. Sam. Ra.