The 10 Things I Wish My Board and Investors Had Told Me

Hey, everybody. I wanted to go through the 10 things. Looking back, and I wish my board, my mentors, my advisors, my VCs had told me. And these 10 things, if they told me, if they'd help me, these are the 10 things I needed to hear to do even better than I did. So I want to tell you these 10 things so at least you can reflect on one or two and maybe they'll help you do any better. And the first one, I wish somebody had told me. And I think we get this one more in SaaS now, which is that in recurring revenue, power laws are real. They're real even at 1 million in MRR and 10 million in ARR. 12 million ARR. What do I mean by that? What I mean is, look, it never gets easier. You're going to have to constantly be recruiting more VPs. You're going to have to constantly be fundraising. Like, even when you get to 10 million, 20 million, 100 million in ARR, it never gets easier. I was with a CEO that was doing a few hundred million in ARR, and he said to me, jason, it's so hard now. I'm like, how is it so hard? You have such a great brand, a great team. He's like, yeah, but now I have to close a unicorn in revenue every year. So, yeah, it never really gets easier. But boy power, it just. What you get is compounding effects. So when you hit, say, 10 million in ARR, doing basically the same amount of work, you'll get to 20. If your customers are happy. You can't fail at that point. And let's say you have 140% net revenue retention, that 10 million on its own will go to 14, and that will go to 19 and 20. Some odd and some odd. So once you have a brand, once you have happy customers, you really do have power laws. And each effort, each great VP you hire, each, each jet you get on, when we can get on jets again, each thing you do, you're going to get a bigger and bigger impact. And power laws are real. So go. If you can get to 10 million, somehow, whether it takes you two years or five years or 10 years, and you're growing even, decently lean in, because you'll get to 20, you'll get to 40, you'll get 100. And the magic of compounding revenue is real. So I really needed to hear that. The second one I really needed to hear a couple of times, and I'm telling you is if you're like me and you feel a lot of pressure, you feel a lot of pressure to hit the month, to hit the quarter, to crush it. I hate that term. But to do it. If you feel like you're judged each time you send out an investor report, well, you are, you are being judged. But I needed this one bit of advice at different levels, which is take a break for this quarter and just go full find that darn vp. You cannot grow linearly, you cannot grow the same forever. If you don't build that management team between a couple million in revenue, you need to start building out all your VPs. And then when you cross 8, 10, 12, maybe a little bit later, you're going to need in many cases your second group of VPs, folks that know how to go to the next level. And then you're going to need SVP's as you approach 20 million and 30 million and beyond. And sometimes you just need to go heads down and find that vp. Sometimes a few quarters have gone by and you've let too many VP of Sales candidates gone by. You've waited too long to hire a VP of Demand gen Marketing. You don't have the right VP of Customer Success. Look, you have to multitask a CEO as hard as is. It's part of your job. But I wish someone had said to me, look, the past doesn't matter in SaaS, only the future matters. It's recurring revenue. So yeah, you need most of your quarters to be good. Okay, they can't all be misses. But if you need to say, hey, this quarter I need to build my management team and that's job one. And I may even come up short a little bit, go do it. Take a quarter to build your team. Your team is all that matters really. After a millionaire or after a million, you figured out how to make some group, some corpus of customers happy. After that it's just the team. So if you need to take a timeout one quarter because you're overwhelmed, go do it. And the longer you wait to hire those VPs, it will catch up with you and you will become more overwhelmed. That 4, 5, 6, 8 million. If you haven't hired the VPs you need, it will catch up with you. So take a break. And that's what I tell folks to do now myself. The third one, which I guess is obvious today, but no one told me this, which is that beloved products win. And I don't necessarily mean the best product. We can all go back in time and find a better Dropbox, a better Twilio, a better Squarespace. I'm sure they're out there. I'm sure some wicked awesome engineers built a 1.0 that back in the day was better than Canva was back in the day. But I'm saying something different. What I'm saying is once you have a mini brand, once you have a certain critical mass in the market, a couple million, 2 million, 10 million, whatever amount of ARR you have, once you're beloved, once you have hundreds of customers telling you how amazing you are, that's what it's all about, folks. And invest more there. Invest to get to 60 plus NPS. Invest to get 130% plus net revenue retention. Whatever you do and when you have it, don't let it go. Don't cut quarters, don't do churn and burn deals. Don't promise things you can't deliver. Have a customer conference. If it has to be online today, so be it. Have a weekly webinar. Send cupcakes to your customers. Send thank you. Make the product freer. Give away more of it. I don't know what it is, but beloved products build on themselves. People tell each other, they tell folks the products they love. And I've built a beloved product several times. But I didn't get it. I didn't get why these leads were seemingly coming out of nowhere, why we had zero cost lead acquisition, why we had viral and that's a tough word today, but why we had why we had viral acquisition, why we had 104% net revenue retention. It wasn't just because we built this product. It's because we were beloved. So when you have that hire ahead of product, higher, ahead of customer success, hire ahead if you want of customer love and never let it go because it's precious. Fourth point. I wish someone had told me this. And now I tell this to founders when I invest, which is if you're doing well and you need a little money, just ask. Just ask. And I didn't know how to ask my investors for a little more money. When we were coming up on about 8 million in revenue, I really needed more money. I only had about 2 million in the bank and that's not enough. I have a 50% ARR balance sheet rule, which means if you don't have about 50% of your ARR on your balance sheet, you will under invest. I needed at least 4 million in cash at 8 million ARR to hire the next level of VPs, to hire, to start that international office, to build the bigger office, to build the bigger team. And I didn't have enough. So I was holding back, I wasn't investing enough and I should have asked for more. And one of my investors did offer, but it was a soft offer. He was probably playing games. He didn't know about valuation, he didn't know I would take it. It wasn't enough. I needed to hear, Jason, you're doing pretty good and we will give you more money. We're VCs, that's our business. So I do the same thing now. When I see a founder doing well, I just tell, hey, look, anytime you want more money, I'll give it to you, just let me know. And I wish my investors had said it to me. But a different bit of advice is just ask. Just ask. Don't be embarrassed, don't feel like it has to be a one way conversation. Don't feel like there's going to be games and there may be games with a lot of investors, but ask anyway. Ask where you stand. Ask at the end of each board meeting, Bob, Linda, Ray, Sarah, how am I doing? 1 and would you invest more? Just ask how am I doing? 1 to 5 and would you invest more? And if you're hearing four and fives and yeses, you know, and if you need more money around the table, go get it. And especially if you don't need too much because these are the best of times in cloud and SaaS as crazy it is. But sometimes you don't want to raise a whole round, sometimes you don't want 20 or 25% dilution, sometimes you just need a little more capital and the best source of that is your existing investors. Like they don't. If they already own 20%, they don't need to own 40%. They might to, but they might be okay going from 20 to 23%. That could be a big win for them. So they're happy to invest odd sized amounts of capital, extra pieces of capital if you're doing well. So just ask, ask how you're doing to each of your investors and just ask if they would invest more and they'll tell you they already know the answer. And I never asked and I should have and I never figured this out and it was a mistake.5. And I want to qualify this, but it's okay to talk about exit goals. I needed to hear that. And I think talking to your investors about exits, about selling your company is a tough topic because you don't want to come from a position of weakness. If you say, I'm so scared I'm failing, I need to sell my company, you know, what the problem with that is, that may be true, and that's good for investors to hear. They know you're worried, but what will happen is they won't want to invest anymore. We just talked in the prior point about how to get more money out of your existing investors to ask as soon as they think you're terminal, as soon as they think you don't believe that, you don't think you can build a unicorn. Those checkbooks, they're going to slam closed. So talking about exit goals is complicated because when you want to say you want to sell, for many investors, that means you might be checking out. You might never go for a big enough number, that 100 million, 500 million, 1 billion, $2 billion exit. And they might not make enough money and they may not be mad, but they may be checked out in terms of investing you. So I think you have to be careful. I think you have to say, hey, what if we got an offer to sell? What do you think? Or I had a conversation with Salesforce. I don't know what to do about it, but they expressed some interest. I think it's important to be as neutral as you can, but I think it's important to talk about exit goals, especially before you take people's money. Because after you take people's money, you're stuck with the cap table. You have. But ask, ask before you take someone's money. And don't ask in a way that will spook investors. Just say, listen, I know you're just writing me a term sheet today, but what type of exit are you comfortable with? What if I don't build a datadog? What if I don't build a zoom? What makes you comfortable? Ask in that Columbo style. So you know, because I never knew where I stood with my investors. I never knew if they would let me sell. I never knew if they would block a sale. I just didn't know. And most investors will tell you on the way in. They may not be totally honest once they're on the cap table, though most are, but they'll be honest on the way in. So ask in a way that doesn't suggest you want to sell cheap, but you just want to know. Just ask. That way, I think I can build something better than datadog or Zoom, but what if I don't? Where are you comfortable? What exits are you comfortable with? And just listen to the answer. And just listening, you'll learn a lot. So that's number five. It's okay to talk honestly but carefully about exit goals. Point number six related. I needed to hear this from my investors, which is don't be scared, we'll block a sale if we make money. And this is a complicated topic. Let me talk about what raising money means. And I needed to know when my investors would stop me from selling and allow me to sell. It's life. I have a few nickels in the bank today, but I didn't always. I sold two companies. One time it was a great deal, the second time it turned out to be a pretty mediocre deal. But I needed to know. I needed to know if my investors, if I got a great offer, if I got a life changing F U money capital offer, I need to know if the investors would block it. Because no matter what anybody says, the investors always have the right to block a sale. So I needed to hear from my investors, don't be scared, we won't block a sale. And so I say the same thing to founders today, with a caveat that I learned from my old boss is I'm always cool if founders help if we make money or if we're going to run out of money. Either one's like, it's OK to lose money if it just didn't work out, but if the company is doing well, you have to sell at a price where your investors make money. I mean that's the whole point. You owe that to them, but any amount is fine within reason. But I would think for most investors, think about these two, think about the 10x rule. And what's the 10x rule? The 10x rule is however much money you raise, you probably have to sell for about 10x that. Now you'll hear different numbers from other investors. You'll hear about two or three times the last round price. And all these metrics which are true, like any VC they invest doesn't want to lose money. They generally need to make between 2 and 10 times the price they invested in just to break even or just to hit their own IRR goals. But the real truth is that valuations are all over the place and there's things you can fix but generally you got to sell for 10 times what you raised. So when you raise that couple million in safes and debt, you're sort of saying I'll sell for at least 20 or 30 million, then it will work out. When you raise that a round and you've got 10 million 15 million in the bank, you're kind of saying I'm going to sell for 100 million or more. Which if you read TechCrunch doesn't seem like a big deal, but it's not that common, folks. And when you start raising 20, 30, 40, $50 million, you're starting to commit to an IPO or close to it. You're starting to commit to an exit for hundreds and hundreds of millions of dollars. And if you can't deliver that, my advice is don't take the money if you can avoid it.7. I wish this had been told to me. It only oddly mattered a little bit later in my career as a CEO, not earlier. But I wish someone said to me, if you need a salary raise, just tell us. And this is what I tell founders all the time now. As soon as there's any money in the bank and they're doing okay, are you making enough money? What do you think is fair? Let's make sure you're paid fair. My first startup, I was actually overpaid. We had a lot of drama with the VCs, and they played with the cap tables, and they felt so guilty about the stock they took from me and my founder. They gave us huge salaries to pick up for our small equity stakes. It's kind of funny, but it worked out in their favorite. But the second time I took a low salary, I raised less money. And also I went over a year without any money after raising money because I got in trouble and I wanted to extend our Runway as far as possible. So I took no salary for over a year and I could afford it. I made money off my first startup. But you know what? It did add up. We started having a family, had a mortgage, and not going without any salary for more than a year added up and I was uncomfortable and I had a very low salary. And I asked my board, actually not for a raise, but a tiny bonus I actually brought in in the midst of the last downturn. I brought in an extra 300,000 in prepaid cash from a customer that had no need to prepay. They had no need, no reason. But I burned my social capital to get us another 300,000 of prepaid cash because our burn rate was like 50 grand at the time. So that's another six months of Runway. I was pretty proud of myself for getting a customer with two years left on their contract to prepay another 300,000. And I asked, I asked my board for a $10,000 bonus even when my salary was zero, and they said no. They said we only do bonuses at the end of the year. And I was crestfallen. So none of those games, folks. My investors need to Tell me, just tell us what a fair salary is. If we can't afford it as a company, we won't pay it. But tell us. There shouldn't be games. Founders shouldn't be worried they can't feed their families. They shouldn't be worried even just after a certain stage, after a couple million revenue, ideally, you shouldn't be worried that you're making too many short term sacrifices. You should be going for it. So I always say, when there's any money in the bank, not if you raise a token amount of money, but once you've raised more than a million, certainly 2 million, just make sure you're paid a fair wage. It's not great for anybody. If you're not. And I always bring it up, I bring it up so the founders don't ask. But I wish somebody had said, if you need a raise, if you need something, just tell us. So I'm saying that to you. If we ever work together, if you need a raise, if you need something, just tell me. And if it's fair, I'll certainly back you to the nines. The eighth point that I wish somebody had told me, and I say this all the time because it's so hard when we're reading everyone succeeding in TechCrunch and more importantly, our competitors seem to be everywhere. And what's the point? Play to your strengths. I worry too much about competition. Everybody worries about competition and that's okay. But I needed to hear from my advisors that competition matters. But you must be strong somewhere if you're winning so many deals, if you're growing at a pretty good rate. And don't worry that you're weak in a vertical. Don't worry that this part of the enterprise you're not strong at. Don't worry that you lose deals over here. Like, yes, it's good that you know that, but you can focus there later. Right now, double down on your strengths. It's okay. It's okay. If you're strong in SMB and we can enterprise or vice versa, don't get distracted. Most importantly, don't listen to the yahoos in your investor syndicate or advisors that are telling you to play to your weaknesses because everyone else is there. Your strengths often can get you all the way to 100 million. In AR, they almost always can get you to 10 million, 20 million and 30. And it's the fastest way. Figure out what you're good at, what type of buyer, what segment, what price point, what features that you win on, even if you're feature poor. And play to your strengths until that is played out and most importantly, until you have enough people more than 50, 60, 70 headcount that you can put a whole team on your weaknesses. Until you can put a team on your weaknesses, generally speaking, don't play where you're weak. Even if you want to go faster, the way you're going to go faster isn't by playing where you're where you don't win. It's by doubling down on where you do in at least until ten plus million. ARR. The ninth point I needed to hear from my investors. And now people hear this all the time. The world has changed that it's okay to sell some shares later and they call this secondary liquidity. It's when as your valuation goes up to 50, 80, 100 million, 200 million, hopefully you all get there that when investors start putting in significant money, they'll let you sell a few of your shares. And that was just kicking off. When I sold my last company, it was just kicking off and I made a big mistake. I had a leading investor come in and offer us millions of dollars for some of our stock, just some. And I didn't know what to make of it. I had never done secondary liquidity. I turned it down because I didn't understand it. And the offer was weird in its own way, but boy, I should have taken that. And you know, I know millions sounds like a lot, but those couple millions or even half a million 300, I mean, I already made some money before, but taking a little bit of money off the table can really let you run, can let you run and build a deck of corn. And it's a complex topic. There's stuff on sass you can read, but most importantly, my investors need to tell me it's okay to sell some shares later and we'll support you. And I say the same thing. My only advice today is be careful because in competitive deals, folks will give you too much secondary liquidity too early. You don't want to be taking it in your series C to profit your series A round. It's too cheap, you'll regret it. Don't sell stock at a 20 or 30 or 40 or $50 million valuation. If you're building a unicorn, your best investment is in yourself. So don't take it too. But secondary liquidity, done right, done sort of in the B round and beyond is terrific. It lets you go long and you really do want to settle in for decades in SaaS. And the 10th thing I really needed to hear from my Investors. I really needed to hear this and I never heard it. And now I tell this to almost every founder I work with when it's true, which is that you're a good or great CEO. I got to 10 million ARR and I got there the hard way. And I lost a key co founder who was my muse and I had to go through a really bad VP of sales and a whole bunch of challenges and we were underfunded and had all these issues. But I got to 10 million ARR with 140% revenue retention growing 100% in cash flow positive. How many folks really do that? It's pretty good. Wasn't, you know, zoom good, but pretty darn good. Not slack good. Pretty good. Pretty good. We'd definitely be running a multi billion dollar company today. And, and look, you don't, as a CEO, you don't sign up for kudos. A CEO, you give kudos. That's your job. But I needed to hear from my advisors, my board members, my investors that I was a pretty good CEO and I never heard it. And I said that I sent an email out to a founder that just crossed 2 million ARR. And he's done pretty well and he's a first time CEO. He's an engineer by training. I just sent him an email. You know, you've really done something. You are a great CEO. And I do that with some frequency now because I think it means something and I needed to hear that. So I tell folks that I don't tell them when it's not true and go out and hear that. It's easy to be a critic. But remember to tell folks when they've done well. Remember to celebrate the good times and remember to tell folks on your team or folks you mentor when they are a good CEO because we need to hear it. It is a tough job, it's often a lonely job and we need to know when we're good, especially when we're first timers. We don't know. Those are the 10 things I wish I'd been told. And I'm telling them to you so that you can go on and build a unicorn. I'm rooting for you.