What SaaStr CEO and Founder Jason Lemkin Really Thinks About AI, Sales & Lead Gen In 2024

To the extent that I can be helpful for people. For the 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. 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 I can so we can kick it off. This is my second one so it's super fantastic. 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, I'm gonna, I'm. I'll give you my thoughts. I'm going to 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 do that. I can tell you product marketing there is super important because everyone knows Adobe, right? Everyone, literally every person 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 is 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's 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.

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.

It seems like a big deal today, these last couple days. I know.

Who would have thought? 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 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 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 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 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 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 app 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 team, even yourself, leeway to think, how could the where AI is today? And I think it's going to 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 I 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 out of the competition between Apollo and Zoom Info?

I know you like zoom 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 Zoom Info 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 Saastr 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 gotta do them all. And people are lazier than ever in so many functions today. 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 to 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 rambly answer 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 product.

Many are.

Sorry.

Many are. Yeah, many are both. Yeah, many are both. 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 this decision? And what have you seen?

Okay, let me. Let me. Let me give a longer answer first. Listen, I. 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've got to learn it yourself, you've got to do it yourself. And if you're product focused, you can 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 a, 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 genuinely 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 a 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. Longtime 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, so 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 give, let me give you a fun example. So when I started invest, I've been investing for about 10 years and said 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 E discovery 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 case studies because they're fun, because it's fairly diverse and different set of founders. But I just hate this math. Of 1000 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, weren't they? 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. 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 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 SAS trany in 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's 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 said. 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 early 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, 163, 20, 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 in 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. And 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, 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 talk desk, Algolia greenhouse over there. Logical almost. This is the last point I'm going to 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 15 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 Zerper 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 to 30 most founders would have quit. The 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 just. And they hired a disastrous CEO who ran the company to the ground. 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. And the founders owned half. So not a bad outcome. Right? So thank you.

Hey Jason. It's gonna be the same questions that same question that I asked you yesterday. But we had like 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 going to say it again because it's really true and I've had many conversations around it this week. If you can the right. 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 got to 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 to start at Greenhouse in the early days. It just took him 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. I'm doing something kind of like expensive. If only I could hire this person, my problems would 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 expensify. 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've 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 gonna 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. 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. If you do the search on our home, say double search, we do a double stretch higher. And you can hire someone that only hired two reps themselves or three reps themselves at a quota. 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 gonna go to Drata again. Poor Drata. I'm using them right there. But it's great company. And I'm gonna find I'm kind of in the security or compliance space or something similar. I'm gonna find the number one ae. I'm gonna hire Elaine. She is the best. She closed 1.9 million at Drata last year. She's a. Everyone says she's a monster. She's great, right? All the reps that say she's the best at Drata. I'm gonna 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 Drata, 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 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 2. If they've hired 2, you can run the risk that they will hire 100 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.

Is he's right here. He's right here.

You can do the rest.

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

It's a single stretch for now.

Very good.

Always be prospecting, right?

Always. So yeah, but let me follow up that question and answer yours related 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 the 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 and 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 when you're late stage. But make sure they have two and go interview those two and 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 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.

So 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 gonna 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 it back for six months. Right. And be it, 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're, 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 M and A in the market over the next six 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 M and A interest for a variety of reasons. There's a ton of interest from private equity firms. Private equity firms will buy any SAS company with high NRR that are break even north of 20 million. Like if you get to 20, here's, 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 tomo 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, you know, 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 AR. 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 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 dollar 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. 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 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 ARR. 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 whoo 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. And I think everything's much better in SaaS than a year ago. Not for everyone, but for many things are better. But, 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. And 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. 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 bootstrapped 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 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 when folks only want to invest in the Bay Area, right? Like anything in SaaS was terrible. They're like, no, 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 in 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 die. 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 dice. 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 founders 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 it. 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 stage VC is going to touch it. Right. But it's not because they're bootstrapped. It's probably, and I talk 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, that's the bootstrap bootstrapping paradox challenge. Right? And that's why, you know, everything's hard. You have to be an outlier to win. But the out, the Atlassians and the Qualtrics are rare. They are rare. It's a minority of the public SaaS companies. But there is no bot. VCs prefer bootstrapped. But they are not willing to give you credit on growth. That, 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.