0
SPEAKER_00
Welcome to the official Sastr podcast, where you can hear some of the best Sastr speakers.
0
SPEAKER_00
This is where the cloud meets.
0
SPEAKER_00
Hey, everybody.
0
SPEAKER_00
We re so close now to Saster Europa 2024.
0
SPEAKER_00
Me and the entire Saster sales team and over 3,000 SaaS and cloud enthusiasts will be together June 4th, 2nd, and 5th in London, England.
0
SPEAKER_00
Everyone from around the world will take over London.
0
SPEAKER_00
We re down to the last chance tickets.
0
SPEAKER_00
So use my code Jason20 to save 20% off the last tickets now.
0
SPEAKER_00
That s Jason20.
0
SPEAKER_00
Why pay more?
0
SPEAKER_00
Get more when Northwest Registered Agent starts your business.
0
SPEAKER_00
They ll form your company fast and stand up your entire business identity in minutes.
0
SPEAKER_00
That means business-free domain, business email, website, hosting, address, mail scanning, business phone app, all within minutes.
0
SPEAKER_00
Visit northwestregisteredagent.com slash saster to start your business today.
0
SPEAKER_00
This episode is sponsored by our friends at Pendo, the all-in-one product experience platform.
0
SPEAKER_00
Pendo helps your users do things you really want them to do.
0
SPEAKER_00
You can try Pendo for free at pendo.io slash saster.
0
SPEAKER_00
That s pendo.io slash saster.
0
SPEAKER_00
And check out Mind the Product, their community for product people like us.
0
SPEAKER_00
Are you overwhelmed with paperwork managing overseas contractors?
0
SPEAKER_00
Say hello to Efficiency with Remote s contract management solution, seamlessly handling invoice fixed payments and compliant localized contracts.
0
SPEAKER_00
Kickstart your free trial today at remote.com.
0
SPEAKER_00
Up today on the Saster podcast, the metrics that actually matter in 2024 and will IPOs really be back with myself, Saster founder and CEO Jason Lemkin.
0
SPEAKER_00
three metrics that are under discussed on social media with venture capitalists, really with certainly, especially with founders.
0
SPEAKER_00
I ve actually got, I m in the Bay Area this week and have four board meetings or investor meetings this week.
0
SPEAKER_00
And everyone talks about ARR and
0
SPEAKER_00
and growth and to some extent, NPS and others, but we are under discussing some metrics that in 2024, especially matter for SaaS executives and founders.
0
SPEAKER_00
So I just wanted to talk about three things that I think are important and under discussed here.
0
SPEAKER_00
And the first one that I put this together on SaaSter in the last week or two, you can find it on what I think the most important metric in SaaS is today.
0
SPEAKER_00
This is not discussed enough.
0
SPEAKER_00
And I encourage all of you, especially those of you who maybe have seen growth slow over the last year or two to be laser focused on this.
0
SPEAKER_00
I see very few founders put net new customer account as their top KPI.
0
SPEAKER_00
Everyone talks about revenue growth.
0
SPEAKER_00
Everyone talks about revenue growth.
0
SPEAKER_00
And look, your first year, your first two years, you don t have any customers to renew at first.
0
SPEAKER_00
You re adding new logos on a percentage basis at high rates.
0
SPEAKER_00
There s no real goal for net new customer growth.
0
SPEAKER_00
But what we are seeing today is that anyone with any scale, even from 4 to 5 million, ARR to 4 to 5 billion,
0
SPEAKER_00
Obviously, that s a wide range.
0
SPEAKER_00
I m seeing folks whose new customer growth is anemic.
0
SPEAKER_00
And if you look at most of the public SaaS companies, you will have seen that in many cases, NRR has come down.
0
SPEAKER_00
But if NRR was really high at a Snowflake or a Cloudflare or a HubSpot, it s come down, but it hasn t plummeted to zero.
0
SPEAKER_00
So the top leaders in SaaS and cloud still have triple-digit NRR.
0
SPEAKER_00
They still have triple-digit NRR.
0
SPEAKER_00
And so even if you bring in no new customers, you ll still grow.
0
SPEAKER_00
At the bottom of this table is the worst defenders.
0
SPEAKER_00
And again, these are great companies, so I don t mean to pick on anybody.
0
SPEAKER_00
These are all top.
0
SPEAKER_00
They re all in the NBA.
0
SPEAKER_00
It s like picking on somebody because they re not LeBron James, realistically.
0
SPEAKER_00
But this is the world we play in, right?
0
SPEAKER_00
We re all in the NBA of SaaS.
0
SPEAKER_00
So probably the biggest defender at the bottom is Fastly.
0
SPEAKER_00
And Fastly is a pretty enterprise CDN at 500 million in revenue.
0
SPEAKER_00
It still gets more money out of its customers as they route more content through their network, but they re only growing customers 1%.
0
SPEAKER_00
1%.
0
SPEAKER_00
So they can look, it s not, it doesn t look all bad.
0
SPEAKER_00
If you breeze through the numbers, revenue growth up 18%.
0
SPEAKER_00
That s not great, but it s okay at 500 million, but only 1%.
0
SPEAKER_00
PagerDuty similarly has done a big tilt up market to the enterprise.
0
SPEAKER_00
If folks have been around for a while, you remember when PagerDuty was like a grab and grab and go app for tech folks and SMBs.
0
SPEAKER_00
Now it s very enterprise.
0
SPEAKER_00
And that s worked because they re growing.
0
SPEAKER_00
Their NRR is high enough that they are growing, still growing 60%, but only 1% customer count.
0
SPEAKER_00
I just see too many founders when times are more challenging, even when growth is just okay, but not great, hiding from this.
0
SPEAKER_00
They re hiding from this.
0
SPEAKER_00
Oh, we grew 48% this last year.
0
SPEAKER_00
That s great.
0
SPEAKER_00
But if your new customers didn t grow at least half of that, if it s not at least half of your top line revenue growth,
0
SPEAKER_00
Your future is not secure.
0
SPEAKER_00
Your future is not secure.
0
SPEAKER_00
You re hiding an NRR.
0
SPEAKER_00
So you have to tweak that ratio based on how enterprise or SMB you are.
0
SPEAKER_00
But roughly speaking, if your new customer growth is not growing half of your top line, your revenue growth,
0
SPEAKER_00
you are shrinking in relevance.
0
SPEAKER_00
You are shrinking in market share and your future is at risk.
0
SPEAKER_00
And I would much rather, and we ve really made this mistake even worse the last 18, 24 months, where we try and wring every dollar out of the customer base.
0
SPEAKER_00
We try and force people to renew early.
0
SPEAKER_00
We jam price increases up.
0
SPEAKER_00
All that stuff is financial engineering and it might work for a year,
0
SPEAKER_00
But jamming your customers to pay more, that doesn t increase your net new customer account, does it?
0
SPEAKER_00
It doesn t increase the number of new customers.
0
SPEAKER_00
If you have a great team, and we can talk about this in the AMA after, but if you have a great team, they will over time figure out how to drive up your deal size, how to drive up your ACV, how to drive up
0
SPEAKER_00
all of these pieces as long as you re growing your customer count your future is assured your future is assured and that s why i have this list really i would say the most impressive are the top three.
0
SPEAKER_00
Sprout social which a lot of folks don t talk about in the social media space cloudflare which is i think that s the highest multiple revenue multiple of any public sass or cloud company and hubspot.
0
SPEAKER_00
For those of you who think you ve exhausted your market, for those of you who think you re running out of customers to sell to, HubSpot has 205,000 customers and is still growing its new customer count 23%.
0
SPEAKER_00
It s still going to add 50,000 customers a year.
0
SPEAKER_00
So this is your job.
0
SPEAKER_00
This is your job.
0
SPEAKER_00
And I know especially if you have investors and team members, yes, of course, revenue growth at the end of the day is what matters for a while in SaaS.
0
SPEAKER_00
And then as we ll talk about next, revenue growth and profitability ultimately matter.
0
SPEAKER_00
But your future is growing your customer count.
0
SPEAKER_00
So I would challenge you in your team meetings and your investor meetings, whatever, I would make this your first slide.
0
SPEAKER_00
This, I think, is the core health of your company.
0
SPEAKER_00
Now, if you re under some pressure for renewals or under some pressure for pricing, so be it.
0
SPEAKER_00
But if customers aren t growing, and again, to me, that s the canary in the coal mine, especially if your NRR is decent.
0
SPEAKER_00
And I see way too much discussion about other metrics and not enough about if we re growing our customer base.
0
SPEAKER_00
The next less discussed metric I wanted to just touch on, I ve really only got three and then we ll open up for questions.
0
SPEAKER_00
And this chart s a little complicated.
0
SPEAKER_00
You don t have to read it, but I ll explain it to you.
0
SPEAKER_00
And I ll show you some examples next, is growth versus efficiency.
0
SPEAKER_00
And the single biggest mistake
0
SPEAKER_00
error, confusion that I hear from founders today, founders in general, founders that are venture-backed, founders that are bootstrapped, vanguards that have raised a little bit of money wherever you are, is that this is the era of profitability.
0
SPEAKER_00
It s not.
0
SPEAKER_00
It is not.
0
SPEAKER_00
Profitability is not your key to success.
0
SPEAKER_00
What has changed is efficiency.
0
SPEAKER_00
You have to be more efficient.
0
SPEAKER_00
You can t go public not growing.
0
SPEAKER_00
Too many startups are not growing or growing 10%, 15%, 20%, but hooray, we re breakeven.
0
SPEAKER_00
But it actually turns out to be pretty efficient if you don t close any customers.
0
SPEAKER_00
You don t have to pay the sales team that much.
0
SPEAKER_00
Your marketing costs go down.
0
SPEAKER_00
It s actually fairly easy to be efficient.
0
SPEAKER_00
If you have a few million or more in revenue and you don t grow at all, you often actually can be cashflow positive.
0
SPEAKER_00
It s really not that hard.
0
SPEAKER_00
Just fire the whole sales and marketing team or don t do any of it.
0
SPEAKER_00
That s not what it s all about.
0
SPEAKER_00
What has changed, and this is what confuses social media advice, it s all terrible.
0
SPEAKER_00
What has changed is now you have to do both.
0
SPEAKER_00
You have to both grow and you ultimately have to be profitable at scale, but profitability is not enough.
0
SPEAKER_00
And I m going to show you an example next that will be more helpful on this slide.
0
SPEAKER_00
But both Bessemer and Meritech, I ll put them up on Sastr in a week or two, but they both did their own overly complicated analysis of this.
0
SPEAKER_00
This is Bessemer s, but they both come down to the same conclusion, looking at all the public SaaS companies and cloud companies.
0
SPEAKER_00
In 2021, all that mattered was growth, as we know.
0
SPEAKER_00
All that mattered was growth in 2021.
0
SPEAKER_00
Forget about startups and unicorns.
0
SPEAKER_00
No one actually cared if public SaaS companies were even profitable.
0
SPEAKER_00
Literally no one cared in 2021.
0
SPEAKER_00
In 2024, profitability matters, but growth is twice as important.
0
SPEAKER_00
It s twice as important.
0
SPEAKER_00
So let that be your guiding light, your guiding principle, is this ratio of growth to profitability.
0
SPEAKER_00
You can calculate it however you want.
0
SPEAKER_00
You don t have this rule of X that Bessemer did.
0
SPEAKER_00
I love it, but it s super complicated.
0
SPEAKER_00
It s a little bit too nerdy, unless you re pre-IP.
1
SPEAKER_00
But growth is twice as important as profitability.
1
SPEAKER_00
So track both.
1
SPEAKER_00
But profitability is not the goal.
1
SPEAKER_00
It is an end state ultimately that you need to get to.
1
SPEAKER_00
The goal is to grow almost as fast as we did in 2021, but without burning all the cash.
1
SPEAKER_00
It s hard, but that s the real goal.
1
SPEAKER_00
We don t get a pass on growth because you re profitable.
1
SPEAKER_00
You don t get a pass on growth because your cash flow break even.
1
SPEAKER_00
It doesn t get you anywhere.
1
SPEAKER_00
So let me show you.
1
SPEAKER_00
Oh, sorry, this slide.
1
SPEAKER_00
This is an interesting example.
1
SPEAKER_00
I pulled up, there s a series on Sastr called Five Interesting Learnings.
1
SPEAKER_00
It s published every Wednesday.
1
SPEAKER_00
If you don t read it, you should.
1
SPEAKER_00
I think it s pretty good.
1
SPEAKER_00
I write it though, so I guess I m biased.
1
SPEAKER_00
But we look, we do, we look at all the complicated metrics from a leading public company and we break it down to just five, five-ish things that actually matter for founders.
1
SPEAKER_00
And I pulled up three of the latest ones, HubSpot, Viva, and Dropbox.
1
SPEAKER_00
And you know what s interesting?
1
SPEAKER_00
Viva you might not have heard of.
1
SPEAKER_00
Viva is probably the largest vertical SaaS company.
1
SPEAKER_00
It is CRM and a little bit more, but CRM for life sciences.
1
SPEAKER_00
It is for life science.
1
SPEAKER_00
In fact, Viva was founded by the VP of engineering CTO at Salesforce who wanted to build a Salesforce for pharma and it ended up becoming this huge platform, CRM platform for life sciences, vertical SaaS.
1
SPEAKER_00
Anyhow, Convergent Evolution, HubSpot for SMBs, Viva, everyone s a million to $10 million contract and Dropbox is at the edge of consumer, but they re all $2.5 billion in ARR today.
1
SPEAKER_00
They re all doing $2.5 billion in revenue.
1
SPEAKER_00
but what they re worth and how they re doing it is very different.
1
SPEAKER_00
Let s look at HubSpot and Viva first.
1
SPEAKER_00
It s super interesting.
1
SPEAKER_00
They re actually both worth 33 billion.
1
SPEAKER_00
This is both in the top 10%.
1
SPEAKER_00
These are top decile.
1
SPEAKER_00
These are the LeBron James and Steph Curry s of SaaS, HubSpot and Viva.
1
SPEAKER_00
HubSpot s growing twice as fast at 24% with 17% profit margin.
1
SPEAKER_00
17% of each dollar goes into profit, non-gap profit, but profit.
1
SPEAKER_00
So that combination and add them together, 24 and 17 is 41, this so-called rule of 40, they re worth 33 billion.
1
SPEAKER_00
That s 13x ARR after you take out the cash.
1
SPEAKER_00
Pretty darn good.
1
SPEAKER_00
Now, Viva, this is the line where if you fall below this line, not as a startup, but as a public company, you become interesting.
1
SPEAKER_00
But Viva is just above it.
1
SPEAKER_00
Their growth is barely in the growth stage.
1
SPEAKER_00
It s in the double digits.
1
SPEAKER_00
It s 12% at 2.5 billion, although they are guiding to 15% next year.
1
SPEAKER_00
So importantly, they re telling Wall Street, hey, we re going to accelerate rather than decelerate.
1
SPEAKER_00
almost 40% margins, almost 40 cents of every dollar comes in, goes to the bottom line.
1
SPEAKER_00
So Viva s actually sitting on $4 billion of cash.
1
SPEAKER_00
Viva only raised $8 million in capital before its IPO.
1
SPEAKER_00
It hasn t spent anything.
1
SPEAKER_00
It s built up $4 billion in cash.
1
SPEAKER_00
It s so efficient.
1
SPEAKER_00
And add 12 and 39, you get to 51.
1
SPEAKER_00
So that s wildly efficient.
1
SPEAKER_00
And it trades at the same as HubSpot, a tiny bit lower when you back out the cash.
1
SPEAKER_00
So both of them profitable, or depending on the difference, both of them have high margins, but Viva s margins are insane, which can make up for good, but not great growth.
1
SPEAKER_00
HubSpot is very good growth at 2.5 million, and it still has to be profitable.
1
SPEAKER_00
Dropbox, 2.5 billion, growing 6%.
1
SPEAKER_00
That s not a growth company anymore, is it?
1
SPEAKER_00
It s fallen to the single digit.
1
SPEAKER_00
That s 33% margins.
1
SPEAKER_00
It generates almost a billion of cash, but Wall Street doesn t care.
1
SPEAKER_00
Back out all of its cash, it s only trading at 2x ARR, a sixth, a sixth the valuation of HubSpot and Viva.
1
SPEAKER_00
So Dropbox is the example of, hey, a tiny bit of growth in tons of cash is not good enough.
1
SPEAKER_00
No matter what you read on Twitter, no matter what everyone says, like the mantra is getting profitable.
1
SPEAKER_00
It s not.
1
SPEAKER_00
The reason people are all, especially VCs are saying get profitable is because they re worried their portfolio company is going to run out of money.
1
SPEAKER_00
There s no more money to go into the engine.
1
SPEAKER_00
So they re telling them to get profitable, but it s necessary, but not sufficient.
1
SPEAKER_00
Necessary, but not sufficient.
1
SPEAKER_00
So super interesting set of case studies.
1
SPEAKER_00
Take some more time studying this if this doesn t make intuitive sense to you, but this is the world we re living in today.
1
SPEAKER_00
You got to grow and you got to be profitable.
1
SPEAKER_00
And I think this is under the combination is under discussed and that growth is twice as important as profitability as we can see when we compare Viva and Dropbox, right?
1
SPEAKER_00
It s just Viva is 33 billion and Dropbox is 8 billion back out its cash and only 2x AR.
1
SPEAKER_00
No one wants to be worth 2x AR folks, especially after all that work and getting over 2 billion in revenue.
1
SPEAKER_00
So related to that one last slide, and this one frankly is slightly discouraging, but I m going to show it anyway, cause we re among friends.
1
SPEAKER_00
This is much debated among VCs today, so I m going to take out the debate and just summarize the facts.
1
SPEAKER_00
What does it take to go public today?
1
SPEAKER_00
What does it take to go public?
1
SPEAKER_00
Because at some point, if you re founders, most of us aren t going to go IPO, most of us, but
1
SPEAKER_00
It s good to know, but at least it s good to know where to skate the puck to, right?
1
SPEAKER_00
So that if you re a little bit on that path, someone might buy you for 10 million, 50 million, 100 million, 500 million, a billion.
1
SPEAKER_00
What does it look like?
1
SPEAKER_00
What do you ultimately have to be, even if you re not there today, what do you have to build to and
1
SPEAKER_00
You know, when I started in SaaS, the bar was a hundred million in revenue, a hundred million ish growing, maybe 50%.
1
SPEAKER_00
That s where HubSpot and Box looked like as they IPO d a decade ago, as they came to the first couple of Saastra annuals.
1
SPEAKER_00
The bar and everything s gone up for a variety of reasons.
1
SPEAKER_00
It s not a hundred million or 150 million.
1
SPEAKER_00
And no one knows what the bar is today to IPO per se.
1
SPEAKER_00
But what we can look at is there have only been two SAS IPOs since the crash of December of 2021.
1
SPEAKER_00
There s only been two.
1
SPEAKER_00
In fact, there s only been 1.5 because Rubrik is in process of going IPO.
1
SPEAKER_00
They ll IPO shortly, but they actually haven t gone out at least as of today.
1
SPEAKER_00
What does it look like?
1
SPEAKER_00
It s a big bar.
1
SPEAKER_00
So Klaviyo IPO d late last year.
1
SPEAKER_00
If you don t know Klaviyo, we have a great interview with the CEO on Sastr.
1
SPEAKER_00
Look at it.
1
SPEAKER_00
It s one of my favorites.
1
SPEAKER_00
Klaviyo owns marketing for e-commerce.
1
SPEAKER_00
It owns marketing for e-commerce.
1
SPEAKER_00
If you re not in e-commerce, you ve never heard of Klaviyo.
1
SPEAKER_00
You use HubSpot or other apps.
1
SPEAKER_00
Sorry, can we mute that guy?
1
SPEAKER_00
We got it.
1
SPEAKER_00
Okay, good.
1
SPEAKER_00
Sorry.
1
SPEAKER_00
Klaviyo owns marketing about almost 70% of everyone on Shopify uses Klaviyo.
1
SPEAKER_00
It s insane.
1
SPEAKER_00
It s an insane, it s one of the highest partner attaches there is Klaviyo to Shopify and a beloved app.
1
SPEAKER_00
Literally, I haven t seen a product that folks love more for marketing automation.
1
SPEAKER_00
IPOed at the end of last year, after that drought, like the two-year drought, 600 million in ARR growing 57%.
1
SPEAKER_00
57%, right?
1
SPEAKER_00
And profitable.
1
SPEAKER_00
50%, 600 million.
1
SPEAKER_00
It s only worth 6 billion.
1
SPEAKER_00
It s only worth 10 times that.
1
SPEAKER_00
All that work is only worth 10 times that.
1
SPEAKER_00
Rubrics, the next one.
1
SPEAKER_00
Rubrics, ARR is really confusing.
1
SPEAKER_00
You can read, we put it up last week on SaaS, run five industry learnings.
1
SPEAKER_00
It s really confusing because they went from a...
1
SPEAKER_00
from sort of a hardware on-prem to SaaS model.
1
SPEAKER_00
And frankly, I think they flatter their metrics a little bit by confusing them, but put that aside.
1
SPEAKER_00
For purposes of today, let s simplify it.
1
SPEAKER_00
Rubik s going public at about 780 million in revenue, growing maybe 47%.
1
SPEAKER_00
And again, it might be a little less because of the metrics are confusing, but let s call it what the most optimistic version, 47%.
1
SPEAKER_00
And we don t know what they re going to trade at, but it looks like about 6 billion to 7 billion.
1
SPEAKER_00
So this is the bar.
1
SPEAKER_00
This is the bar.
1
SPEAKER_00
And
1
SPEAKER_00
A lot, and I don t think this is bad, but I think most startups today are living in a bubble in a glass house.
1
SPEAKER_00
And I think I m not criticizing.
1
SPEAKER_00
I actually think it s a good thing.
1
SPEAKER_00
It is a good thing, but way too many startups are getting venture funded.
1
SPEAKER_00
Way too much is happening for companies that are good companies, but have no hope of these are high bars growing more than 50%, not where you are today.
1
SPEAKER_00
but it s 600 million and more.
1
SPEAKER_00
It probably, if you back into what is the equivalent of growing 57% at 600 million.
1
SPEAKER_00
For most of you that might be tripling this year, quadrupling, quintupling.
1
SPEAKER_00
That s probably what it should take to raise venture capital, go through this cycle, do all this stuff.
1
SPEAKER_00
And that s just a trade at 10 times revenue.
1
SPEAKER_00
So if you ve raised any capital at 10 times revenue or more, you re living in a bubble, you re living in a glass house and do it, like hide from it, hide from the real world.
1
SPEAKER_00
It s like living at home with mom and dad for a while if your room s nice.
1
SPEAKER_00
Stay as long as you can.
1
SPEAKER_00
So don t be in a rush to get a mom and dad s house if the room is nice and they have a car for you and they pay for your Apple Pay.
1
SPEAKER_00
Maybe stay at home until you re 22, 25, 26.
1
SPEAKER_00
I don t know, maybe this is a bad analogy, but I don t mean to, but there is an argument to staying in a bubble where everything s great because the real world is tough now.
1
SPEAKER_00
Now, maybe we ll see, there s, Meritech had a good analysis saying they think there ll be plenty of IPOs at 200 million, 300 million, but even that s a lot, right?
1
SPEAKER_00
Even that s a lot.
1
SPEAKER_00
But if you want the tough,
1
SPEAKER_00
My tough concern, my tough worry today, I ve under discussed is what is this bar and how do we get to it?
1
SPEAKER_00
And I know quite a few SaaS companies that are in the 150 to 200 million ARR range, okay?
1
SPEAKER_00
Because I got to know the founders or even invested in them, all different reasons over the last decade.
1
SPEAKER_00
Many are now at 150, 200 million or so, 250 million in that range, big range.
1
SPEAKER_00
But the growth isn t at this level.
1
SPEAKER_00
The growth isn t at this level.
1
SPEAKER_00
Now you can blame macro and this and that, but macro isn t stopping Rubrik.
1
SPEAKER_00
Macro isn t stopping Klaviyo.
1
SPEAKER_00
There s good macros too out there.
1
SPEAKER_00
They re not all bad macros.
1
SPEAKER_00
And I don t mean to be discouraging, but as founders, even if you don t, maybe you don t show the slide to your teams.
2
SPEAKER_01
Maybe you just keep this quietly among yourselves and only talk about it a quarter, but understand that as hard as it is to do what you re doing today,
2
SPEAKER_01
you may actually have to do even better.
2
SPEAKER_01
The IPO window is open, but the bar is pretty tough today, guys.
2
SPEAKER_01
And so those are just a tough fact to be aware of when you re trying to understand it.
2
SPEAKER_01
So anyhow, to summarize, track your net new customers after churn.
2
SPEAKER_01
Track this as your, to me, the North Star metric.
2
SPEAKER_01
A team will fix everything.
2
SPEAKER_01
You ll figure out more products for them.
2
SPEAKER_01
You ll figure out how to drive your deal size up.
2
SPEAKER_01
You ll figure out how to do all these things if you have happy customers and a good team.
2
SPEAKER_01
But if you re not growing your new customer count,
2
SPEAKER_01
It s trouble.
2
SPEAKER_01
So especially invest in your long tail.
2
SPEAKER_01
Don t give up on your smaller customers.
2
SPEAKER_01
Don t give up on your champions because they can grow big.
2
SPEAKER_01
Two, profitability isn t everything.
2
SPEAKER_01
Growth still matters twice as much.
2
SPEAKER_01
You just have to do both.
2
SPEAKER_01
It s harder.
2
SPEAKER_01
And three, just quietly be aware of the bar to IPO.
2
SPEAKER_01
So how all that cascades back to your stage, at least you re at least yourself aware out of it.
2
SPEAKER_01
So thanks for that for everybody.
2
SPEAKER_01
And I ll open up to any, it doesn t have to be on this topic.
2
SPEAKER_01
Anything anybody wants to ask.
2
SPEAKER_02
Thank you, Jason.
2
SPEAKER_02
We do have a couple of questions that came through.
2
SPEAKER_02
AJ, you have a question for Jason.
2
SPEAKER_02
I can bring you up.
2
SPEAKER_00
Jason, good reminder and anchoring on the, on the growth.
2
SPEAKER_00
And I love the anchoring of the growth.
2
SPEAKER_00
First of the rule of 40, a lot of people get caught up in it.
2
SPEAKER_00
So I think it s a really good reminder that growth is, growth is still king.
2
SPEAKER_00
Question for you on the growth specifically.
2
SPEAKER_00
So I m seeing a lot of.
2
SPEAKER_00
insistent on sales and marketing efficiency in the startup world and especially smaller and you don t have the brand like like a Flavio or a Snowflake or anyone like that.
2
SPEAKER_00
What kind of sales and marketing efficiency should we expect given that right now I m seeing a lot of chatter on social media that the overall buying environment has changed drastically because of no more zero interest rate.
2
SPEAKER_00
So without buying in a much more slower manner, they re more cautious.
2
SPEAKER_00
They make you go through many hoops.
2
SPEAKER_00
In that environment, what kind of sales and marketing efficiency metrics should we expect?
2
SPEAKER_00
Has there been a calibration?
2
SPEAKER_01
A meta comment, and then we answer your question about sales and marketing efficiency.
2
SPEAKER_01
I would say in my career in SaaS, which is going back quite a while now, folks that are saying that on social media are missing the point.
2
SPEAKER_01
They re missing the point.
2
SPEAKER_01
Sales is much harder than 2021.
2
SPEAKER_01
It is exactly as hard as it always used to be.
2
SPEAKER_01
It is exactly as hard as it always used to be.
2
SPEAKER_01
How it used to be until the second half of 2020 is almost every company had enough apps.
2
SPEAKER_01
No one was looking for on their own to spend even more.
2
SPEAKER_01
If you if they had a real need, if you just or you created radical efficiency in their organization, there was always budget.
2
SPEAKER_01
But no one was trying to add double their app stack.
2
SPEAKER_01
People doubled the number of apps they had in the boom.
2
SPEAKER_01
If you think about it for a moment, that was insane.
2
SPEAKER_01
That could never last forever.
2
SPEAKER_01
You can t go from 100 apps to 200 to 400 to 800 to 1,600 to 3,200 to 6,400, and then they all double their pricing.
2
SPEAKER_01
The global domestic product, the global world product doesn t count.
2
SPEAKER_01
There s not enough money.
2
SPEAKER_01
2021 made no sense in terms of the budgeting and therefore the sales and marketing practices in 2020 made no sense.
2
SPEAKER_01
They weren t crazy.
2
SPEAKER_01
They were just, they were just attuned to buying patterns that we ve never seen before and may never see again for a decade or more.
2
SPEAKER_01
Okay.
2
SPEAKER_01
So then this is, then I m going to answer your question next.
2
SPEAKER_01
This, and this is the toughest thing to say, but the folks on social media that have been around and that are complaining about how hard the market is and how impossible is most of them you can t hire.
2
SPEAKER_01
broken.
2
SPEAKER_01
It was never easy, but the easier times lasted too long.
2
SPEAKER_01
They lasted from the summer of 2020 until about Q1, Q2 of 2022.
2
SPEAKER_01
Even as the public markets crashed in 2021, people kept buying.
2
SPEAKER_01
Actually, the growth was pretty good until Q2, Q3 of 2022.
2
SPEAKER_01
There was a whole new generation of kids out of school and senior folks who got promoted or whatever who have
2
SPEAKER_01
Don t even know what it was like it was over two years of buying that wasn t easy but so much easier than we ve ever seen that they re unable to work or unwilling not unable unwilling to work in the current environment they re unwilling they re blaming the world they re blaming macro factors they re blaming customers but
2
SPEAKER_01
It s supposed to be hard.
2
SPEAKER_01
We all have enough software.
2
SPEAKER_01
Like we all are already have a CRM and a marketing solution and an ERP and half of this stuff can be done in office.
2
SPEAKER_01
Excel is a pretty good piece of software.
2
SPEAKER_01
Google sheets is great.
2
SPEAKER_01
Google sheets is like free, like canvas almost free.
2
SPEAKER_01
We don t need anything.
2
SPEAKER_01
The bar was always supposed to be insanely high for software.
2
SPEAKER_01
You had to change the world and there was so much money.
2
SPEAKER_01
invested on just on enablement in the boom that we lost track that you have to be utterly disruptive to succeed in business software, right?
2
SPEAKER_01
If you do, there s a lot of markets.
2
SPEAKER_01
So I ve written this before and I know it s tough to say, but I believe there s genuinely a lost generation.
2
SPEAKER_01
There was a generation of folks that grew up in 2020 through mid-2022
2
SPEAKER_01
half of them may no longer be willing to work in SaaS companies today.
2
SPEAKER_01
And as executives, whoever s here, founders, CEOs, CROs, CMOs, don t hire... I m not judging.
2
SPEAKER_01
I m judging them a little bit, but don t judge them too much.
2
SPEAKER_01
Just don t hire them.
2
SPEAKER_01
They re broken.
2
SPEAKER_01
They cannot work in this world.
2
SPEAKER_01
They cannot work with a smaller team.
2
SPEAKER_01
They cannot work with a smaller budget.
2
SPEAKER_01
They cannot work with the level of efficiency we have today.
2
SPEAKER_01
It s broken.
2
SPEAKER_01
Okay.
2
SPEAKER_01
So let s step back.
2
SPEAKER_01
So
2
SPEAKER_01
Let me ask you a question of sales and marketing vision, and then we can back into it.
2
SPEAKER_01
The reality is if you re comparing your company to two years ago, you have to be twice as efficient.
2
SPEAKER_01
That s just the math.
2
SPEAKER_01
That s just the math.
2
SPEAKER_01
And I wrote it up on SAS for a little while ago in terms of revenue per employee, but the average public company has over 300, SAS company has over 300,000 in revenue per employee.
2
SPEAKER_01
In 2021, it was just over 100,000.
2
SPEAKER_01
So do quick math in your head.
2
SPEAKER_01
That means the average public SaaS company is twice as efficient.
2
SPEAKER_01
And it s got to ripple through startups too.
2
SPEAKER_01
You ve got to be just twice as efficient.
2
SPEAKER_01
It s just the facts.
2
SPEAKER_01
And is there going to be some trade-off in growth?
2
SPEAKER_01
Yeah.
2
SPEAKER_01
That s the slide we looked at, right?
2
SPEAKER_01
Snowflake is not growing at the insane rate.
2
SPEAKER_01
It was HubSpot s growth is great, but down.
2
SPEAKER_01
There s some trade-off.
2
SPEAKER_01
There s some trade-off, but you got to hit it.
2
SPEAKER_01
So the final point I ll make, I know it s not a full answer to your question, but then we can take the next one.
2
SPEAKER_01
How do you budget this?
2
SPEAKER_01
How do you budget this?
2
SPEAKER_01
And we have to go back to what we always used to do.
2
SPEAKER_01
Even the best companies did this until maybe 2019 or so.
2
SPEAKER_01
When capital got easier, you have to do at the end of the day, zero burn, zero cost budgeting.
2
SPEAKER_01
You just have to say, look guys, this is how much money we have this year.
2
SPEAKER_01
That s all we got.
2
SPEAKER_01
And we got to, let s figure out what s the absolute best we can do with our budget.
2
SPEAKER_01
And that s how well you do.
2
SPEAKER_01
That s how well you do.
2
SPEAKER_01
And we had, the truth is we had tons of sales folks that were marginally efficient in 2021.
2
SPEAKER_01
And we ran marketing campaigns that maybe worked in 2021 and don t work today.
2
SPEAKER_01
So you just can t do them.
2
SPEAKER_01
You just can t do them.
2
SPEAKER_01
It s not that complicated.
2
SPEAKER_01
And I ll go even further and then I ll break.
2
SPEAKER_01
I think that s funny.
2
SPEAKER_01
I just had, I ll say finally, one last point.
2
SPEAKER_01
I don t think that in most startups, even your payback time, your magic number, none of that matters.
2
SPEAKER_01
If you re tracking the top and the bottom line.
2
SPEAKER_01
I was at a board meeting yesterday of a startup.
2
SPEAKER_01
I invested in very early 5k in revenue.
2
SPEAKER_01
They re just crossed 60 million and their CAC payback time is 26 months.
2
SPEAKER_01
So that s not fast, is it?
2
SPEAKER_01
But their break-even at 60 million, their break-even, they re not even burning any cash.
2
SPEAKER_01
So does it matter?
2
SPEAKER_01
The growth is hitting the plan and their break-even.
2
SPEAKER_01
So these CAC metrics, these payback metrics, all these numbers, they re all, they re, they re good.
2
SPEAKER_01
They re important.
2
SPEAKER_01
back in the old days, they were devised by a lot of VCs and Byron Dieter at Bessemer did a ton of this in the early days so that VCs could understand how to invest in SaaS companies.
2
SPEAKER_01
If I m going to give these guys 10 million, 20 million, 40 million, I want it to be an engine.
2
SPEAKER_01
I want it to be a flywheel and how much am I going to get out of it.
2
SPEAKER_01
So these payback metrics are really important for investing.
2
SPEAKER_01
I think for startups, just the bottom line matters.
2
SPEAKER_01
So do zero cost budgeting.
2
SPEAKER_01
How much can I spend this year?
2
SPEAKER_01
How many can I hire?
2
SPEAKER_01
And then lastly, I know there s a lot of points, but I think they re important.
2
SPEAKER_01
If you have a good sales team and a good marketing team, they will respond.
2
SPEAKER_01
They will respond.
2
SPEAKER_01
A great sales team is almost always accretive.
2
SPEAKER_01
They almost always bring in more money than they take out and marketers will focus.
2
SPEAKER_01
They won t just hide and spend nothing.
2
SPEAKER_01
They will focus their spend on what works and they will rise to the occasion and they will work within the budget they have.
2
SPEAKER_01
And that s how you do it.
2
SPEAKER_01
So any zero cost budget, it s the best we can do.
2
SPEAKER_01
It s back to reality.
2
SPEAKER_01
So thanks for the question.
2
SPEAKER_02
Thanks Jason.
2
SPEAKER_02
Okay.
2
SPEAKER_02
We have a couple others that I m going to ask for folks.
2
SPEAKER_02
So from Paul, when it comes to go-to-market efficiency, what do you think are the most meaningful leading indicator metrics to manage?
2
SPEAKER_02
New revenue per head, sales velocity, or some other metric?
2
SPEAKER_01
I don t think anything s changed.
2
SPEAKER_01
I think I just did a great one.
2
SPEAKER_01
It s really worth watching.
2
SPEAKER_01
I did a great podcast video podcast with the CMOs of HubSpot and Zapier who used to work together at HubSpot.
2
SPEAKER_01
They have a new pod called Against the Grain and it was like all about
3
SPEAKER_03
marketing.
3
SPEAKER_03
This one was pretty good.
3
SPEAKER_03
I think you guys would enjoy it if you watch it for marketing.
3
SPEAKER_03
And HubSpot is the biggest, Zapier s nine figures, but smaller.
3
SPEAKER_03
But anyhow, I think the whole point of the conversation was at the end of the day, there s too much noise in marketing and marketing s job is to accelerate top of funnel.
3
SPEAKER_03
So what matters?
3
SPEAKER_03
It matters, first of all, you have to figure out what type of marketer do you have?
3
SPEAKER_03
Assuming it s not you as the founder, what are you good at?
3
SPEAKER_03
Are you good at generating leads, opportunities, what piece of the funnel you have, and just focus your energy there on growing that at least 20% a quarter if you can.
3
SPEAKER_03
Grow whatever layer of the funnel that marketer s good at.
3
SPEAKER_03
Most marketers are only good at one or two things.
3
SPEAKER_03
So asking them to do motions, they don t know how to do asking digital marketer to do enterprise stuff and field events and webinars is not going to work too good.
3
SPEAKER_03
Asking an enterprise field marketer to spool up Facebook ads.
3
SPEAKER_03
It s not going to, it s not going to work too good.
3
SPEAKER_03
So figure out what level of the pipe they re optimal at, measure it consistently and just drive it up 20%.
3
SPEAKER_03
It s just, that s just the goal.
3
SPEAKER_03
It s just that simple.
3
SPEAKER_01
So Jason, thank you for sharing that one.
3
SPEAKER_01
Another question.
3
SPEAKER_01
So I m going to turn it over.
3
SPEAKER_01
Giovanna, you had a question about metrics.
3
SPEAKER_01
I m going to bring you up to ask a question live.
3
SPEAKER_00
So Jason, in terms of efficiency, what do you think should be the expected return on investment on your marketing spend?
3
SPEAKER_00
Number one, example, 2x, 3x.
3
SPEAKER_00
And on your sales team, as an example, 5x on OTE.
3
SPEAKER_00
What is the best?
3
SPEAKER_03
I think those, you ll see those metrics.
3
SPEAKER_03
I think they re not practical for startups.
3
SPEAKER_03
Let me step back for a minute.
3
SPEAKER_03
Number one is your bottom line managed to your bottom line.
3
SPEAKER_03
Okay.
3
SPEAKER_03
You have to have a budget.
3
SPEAKER_03
You have to start from the budget, not the metrics, but let s step back for a minute.
3
SPEAKER_03
Let s talk about marketing efficiency and let s talk about sales efficiency, marketing efficiency.
3
SPEAKER_03
People come to the dumbest conclusions, the worst conclusions.
3
SPEAKER_03
Okay.
3
SPEAKER_03
Folks, we literally had, so we have about 200 sponsors at Saster annual.
3
SPEAKER_03
Okay.
3
SPEAKER_03
Each year.
3
SPEAKER_03
And we learn, I learn, I actually keep fresh in some of the Zeitgeist, just talking to some of them.
3
SPEAKER_03
We had one last year.
3
SPEAKER_03
a startup.
3
SPEAKER_03
They re a startup.
3
SPEAKER_03
They re doing $15 million, growing about 60%, and they have budget.
3
SPEAKER_03
And they re not renewing for Sastry Annual this year, which happens.
3
SPEAKER_03
It s a marketing spend.
3
SPEAKER_03
It happens.
3
SPEAKER_03
It s okay.
3
SPEAKER_03
But we asked them, why are you not renewing?
3
SPEAKER_03
They said, we only made about 3x our money.
3
SPEAKER_03
That s great.
3
SPEAKER_03
Their target, but they said our target s gone up to 10x this year.
3
SPEAKER_03
Here s the thing in startups, 1x is good enough.
3
SPEAKER_03
You re trying to grow.
3
SPEAKER_03
You re trying to put points on the board.
3
SPEAKER_03
You re not Dropbox growing 6% a year.
3
SPEAKER_03
You re trying to put the way marketing works in, in, in startups is, and you have to be careful to measure where the money is going.
3
SPEAKER_03
Anything that gets you a customer is worth it.
3
SPEAKER_03
Especially what if that customer stays 10 years?
3
SPEAKER_03
What if you get that customer and what if you don t get it and your competitor gets it and you never get it back?
3
SPEAKER_03
Okay.
3
SPEAKER_03
What we forget is because it doesn t feel this way in the early days.
3
SPEAKER_03
Okay.
3
SPEAKER_03
But as you get, you don t have to be HubSpot stage.
3
SPEAKER_03
Even as you get to a few million in revenue, you, I ve talked many times over the years about a mini brand.
3
SPEAKER_03
Okay.
3
SPEAKER_03
People will start to hear about you and what will happen as you cross just a couple million revenue is you will get at least some zero cost leads.
3
SPEAKER_03
You ll get at least some people that say, I heard about you or I used you at my last company, right?
3
SPEAKER_03
Or I saw you on Twitter that the cost of that lead will be very low.
3
SPEAKER_03
And it may even be zero depending on how you measure it.
3
SPEAKER_03
Okay.
3
SPEAKER_03
You got to blend that with your paid.
3
SPEAKER_03
Ultimately, all the top software companies, the number one source of customers is word of mouth.
3
SPEAKER_03
The real job of marketing is to accelerate word of mouth.
3
SPEAKER_03
That s the real job of marketing.
3
SPEAKER_03
So my point is just one X is enough.
3
SPEAKER_03
And if you, let s say you get half, let s say you get half your marketing initiatives, get you one X and half your customers cause zero because they came from word of mouth or virality.
3
SPEAKER_03
Your marketing costs pretty low.
3
SPEAKER_03
Rambly Way, and then you can ask the follow-up, but let me then answer your sales question.
3
SPEAKER_03
Rambly Way is, I get that if you re at scale and you re deploying 50 million, 100 million, 200 million, you ve got to get every sell right, and you have to know the ROI of every Facebook ad and every Insta post and everything.
3
SPEAKER_03
But what actually I find almost all SaaS marketers get wrong is they just don t
3
SPEAKER_03
low it down and say, hey, what performs at all?
3
SPEAKER_03
Most stuff won t work at all.
3
SPEAKER_03
You ll dump a bunch of money into some partnership.
3
SPEAKER_03
You ll dump a bunch of money into a channel.
3
SPEAKER_03
You ll dump a bunch of money into digital and it won t work at all.
3
SPEAKER_03
You won t get one customer.
3
SPEAKER_03
Don t take a pause on that until you have new DNA in the company.
3
SPEAKER_03
But if you have any ROI, what you want to actually do is not do less of it.
3
SPEAKER_03
You want to do more of it and just get better and better and better, right?
3
SPEAKER_03
Get better and better.
3
SPEAKER_03
And so my summary, the way I summarize all of this is,
3
SPEAKER_03
SaaS marketing, do anything that works.
3
SPEAKER_03
Anything that gets you customers, do more of it.
3
SPEAKER_03
As much as you can, as much as you know how.
3
SPEAKER_03
You will often run out of ideas on how to deploy more capital into that channel rather than the opposite.
3
SPEAKER_03
So anything that performs usually
3
SPEAKER_03
is a gift from heavens, especially if your ACV is high enough, especially if it s in the five figures.
3
SPEAKER_03
On the sales one, here s the thing.
3
SPEAKER_03
We lost a little bit of the picture in 2021, but for all of eternity in software, there have been, actually used to be even higher in the old days of true enterprise software, but we ve had these 3x, 4x, 5x multiple, right?
3
SPEAKER_03
What do sales folks need to bring in as a multiple of their earnings?
3
SPEAKER_03
It s pretty much always been 3x for SMBs, 4x for mid-market, and 5x for enterprise.
3
SPEAKER_03
That s pretty much what it has been.
3
SPEAKER_03
Do some folks do much better?
3
SPEAKER_03
Yeah, I ve invested in two SMB folks that are well north of 5x.
3
SPEAKER_03
It s possible.
3
SPEAKER_03
But even when they do, usually as you scale, it s hard to maintain.
3
SPEAKER_03
It s hard to maintain as you hire more reps and enter new categories.
3
SPEAKER_03
The folks that are at that 6X, 10X for SMB, it s not sustainable infinitely.
3
SPEAKER_03
So those 3X, 4X, 5X remain the right yardsticks.
3
SPEAKER_03
It s just like the marketing thing.
3
SPEAKER_03
As leaders, as founders, that s how you should build your spreadsheet.
3
SPEAKER_03
That s how you should hire your team.
3
SPEAKER_03
But slow it down and understand, is it being measured properly?
3
SPEAKER_03
And is that rep really profitable?
3
SPEAKER_03
And are the leads going to the right people?
3
SPEAKER_03
And figure out what is the most you can do without breaking the team.
3
SPEAKER_03
The worst, the most destructive, for sure.
3
SPEAKER_03
The most destructive thing we re seeing across startups today, a lot of folks know this, is too low a quota attainment.
3
SPEAKER_03
It s just a cancer on the sales team.
3
SPEAKER_03
When you need, forget about all the metrics out there, you need the majority of your sales team hitting quota.
3
SPEAKER_03
or people don t feel good.
3
SPEAKER_03
They get negative, they start to not believe, they start to believe the competition s better than them, they start to believe they can t do it.
3
SPEAKER_03
You need one or two folks making a ton of money on a bigger sales team, and you need the majority at least hitting quota.
3
SPEAKER_03
And so 3x, 4x, 5x is you gotta get there, that s efficiency, you have to escape there.
3
SPEAKER_03
If it s harder for you and there s stress in the system and you can cut that back a bit,
3
SPEAKER_03
still meet your financial goals, your bottom line goals, but get half the team over into quota.
3
SPEAKER_03
I would do that.
3
SPEAKER_03
I would do 2X, 3X, 4X, or whatever.
3
SPEAKER_03
If I had the means and everyone was hitting 50% quota, you will end up making more money than if 30... There s just a downward spiral when 20 or 30% of folks are hitting quota.
3
SPEAKER_03
It s just people quit, they get negative.
3
SPEAKER_03
And you find that when people lose faith in sales, they get worse and worse.
3
SPEAKER_03
So it becomes this self-defeating prophecy.
3
SPEAKER_03
So thanks for the questions.
3
SPEAKER_01
Jason, we ll probably close it out here with our last question from Tyler.
3
SPEAKER_01
I have some questions about, and some of your best recommendation in this situation.
3
SPEAKER_01
So Tyler, I m going to bring you up now.
3
SPEAKER_02
Jason, thanks.
3
SPEAKER_02
I came across you about six months ago and your stuff has become viable for me.
3
SPEAKER_02
So I appreciate it.
3
SPEAKER_02
So I m about, we re about seven years in a bootstrap down or haven t raised any outside capital.
3
SPEAKER_02
Hopefully this question applies to some other people.
3
SPEAKER_02
It s a little bit more of a broad stroke here, but I m constantly focused on metrics like net new customer account, customer growth is critical.
3
SPEAKER_02
And ours critical, obviously, to make sure we re paying our bills.
3
SPEAKER_02
So with limited resources, I m talking to 95% of my peers that are venture backed.
3
SPEAKER_02
How can I effectively approach the growth of my business?
3
SPEAKER_03
Look, I can only tell you one thing that is slightly helpful.
3
SPEAKER_03
There is a point and it depends on your margins and it depends on your industry and your situation, but there s a point.
3
SPEAKER_03
somewhere between 10 and 20 million of ARR, which maybe you re not at today, but there s a point where it doesn t matter.
3
SPEAKER_03
There s a point where it doesn t matter.
3
SPEAKER_03
Software, assuming you have 80, 90% gross margins in software, your revenue is venture funding, right?
3
SPEAKER_03
It s funding.
3
SPEAKER_03
There is a point where, let s say you re at 20 million in revenue.
3
SPEAKER_03
Unless you re building open AI or Anthropic or something that s incredibly engineering and resource intensive, at some point, 20 million bucks a year of financing is enough for most B2B companies.
3
SPEAKER_03
It s enough.
3
SPEAKER_03
And you don t need it.
3
SPEAKER_03
And I m not saying there isn t value to capital, especially one round of capital can be transformational.
3
SPEAKER_03
If you could raise four or $5 million right now, I m not saying you can, but now you can see how just one round actually could take a lot of stress out of your system.
3
SPEAKER_03
And a lot of the real issue, which I ll chat about before we break is that a lot of bootstrap companies fail what I call the balance sheet test, which I ll talk about, which adds stress.
3
SPEAKER_03
But when you get, and I know sometimes it seems far away, but there is a point at eight figures in revenue where it doesn t matter
4
SPEAKER_01
whether you are bootstrapped or not.
4
SPEAKER_01
And if you, there was, I think two years ago at Saster Annual, I did an interview with Ben Chestnut at MailChimp.
4
SPEAKER_01
I thought it was pretty good.
4
SPEAKER_01
I thought it was better than most people do interviews with Ben Chestnut.
4
SPEAKER_01
That was pretty good.
4
SPEAKER_01
It s for bootstrapped folks you re watching.
4
SPEAKER_01
And he s like, one, we were bootstrapped because no one would fund us.
4
SPEAKER_01
That s why we were bootstrapped.
4
SPEAKER_01
And then by the time the VCs would fund us, we had enough cash.
4
SPEAKER_01
We didn t need them anymore.
4
SPEAKER_01
So it s a simplistic way of saying what I said is there is a crossover point where it doesn t matter.
4
SPEAKER_01
And when we did this with Michael Cannon Brooks from Atlassian, and he talked about this crossover point too.
4
SPEAKER_01
Now, interestingly, what Michael said was Atlassian wouldn t work without venture today because the space had become too competitive.
4
SPEAKER_01
When Atlassian started, there were three companies.
4
SPEAKER_01
I m mixing up my timelines a little bit.
4
SPEAKER_01
There s 37signals, which is still bootstrapped.
4
SPEAKER_01
There was Atlassian, and there was Fog Creek Software, which built Trello and Stack Overflow.
4
SPEAKER_01
And that was it.
4
SPEAKER_01
You had two competitors, and everything was so slow.
4
SPEAKER_01
It wasn t anything like today.
4
SPEAKER_01
They had four years to get it off the ground.
4
SPEAKER_01
UiPath had 10 years.
4
SPEAKER_01
You get killed as a bootstrapper if it s too competitive.
4
SPEAKER_01
because there s not, you need that extra three to four years to build up that momentum.
4
SPEAKER_01
But then you cross a point and the Atlassians and the Qualtrics and everyone grow just as fast as their peers.
4
SPEAKER_01
But when you look back and there s an old Sasser post on it takes four years longer, you can search for it on the homepage.
4
SPEAKER_01
It really does take four years longer bootstrapping and then
4
SPEAKER_01
At some point, it does normalize.
4
SPEAKER_01
So that s the best.
4
SPEAKER_01
I know it s not a magic, but that s the best buck up advice I can give you.
4
SPEAKER_01
The stressor, and this is why raising some money now, wherever you re at, is the most helpful.
4
SPEAKER_01
What I learned, this was a lesson I learned early on from Josh Stein, who was the first investor in Box.
4
SPEAKER_01
And then I realized it was very right as I looked at other startups, is that if you don t have about half your error on your balance sheet, you underinvest.
4
SPEAKER_01
And I thought this was too simplistic, but now I ve run this with so many startups, it s about right.
4
SPEAKER_01
If you re at 7 million and bootstrapped, but primally you ve only got half a million in the bank, you can t hire that VP.
4
SPEAKER_01
Even though that VP of sales would help or that VP of marketing or product or CS, you can t.
4
SPEAKER_01
If you re at 7 million and you have 4 million in the bank, you can afford to hire any VP that s great.
4
SPEAKER_01
You don t want to blow all the money.
4
SPEAKER_01
But so if there s any way possible that you can get half your ARR on your balance sheet,
4
SPEAKER_01
it de-stresses SaaS because once you have more than half, you can invest not 10 years out, but you can invest a year out.
4
SPEAKER_01
And it happened to me as a founder.
4
SPEAKER_01
I wasn t bootstrapped, but back in the day, I raised 8 million, spent 6 and then got profitable.
4
SPEAKER_01
But I spent almost all of it.
4
SPEAKER_01
I got it down.
4
SPEAKER_01
And then we slowly built up our cash position.
4
SPEAKER_01
When we got closer to the balance sheet test, I told all my VPs and executives, just hire anyone great.
4
SPEAKER_01
Not hire anybody, we didn t even have a budget, but anyone that was accretive with, once we had 4 million of cash in the bank, I trusted my VP of sales for sure.
4
SPEAKER_01
My CTO was a little cranky, but one of the best engineers ever.
4
SPEAKER_01
He s one of the senior scientists at Adobe today.
4
SPEAKER_01
My VP of CS loved him.
4
SPEAKER_01
So as long as they promised me, Pinky promised that this hire, this engineer or sales exec or CS was going to make us money, was going to be accretive.
4
SPEAKER_01
I didn t even need to look at a budget with 4 million in the bank.
4
SPEAKER_01
But with half a million, you ve got to scrutinize if anyone wants an eraser.
4
SPEAKER_01
So I know these two things may not be actionable, but try to get to that eight figures.
4
SPEAKER_01
It will get easier because you ll have the cash.
4
SPEAKER_01
And the reason it gets easier in part is this balance sheet test.
4
SPEAKER_01
And if you can somehow, I usually hate debt, but for bootstraps, if you can do debt or a little bit of money or even angel money or friends of money, so you can get 50% of your balance sheet, trust me, your life will be less stressed.
4
SPEAKER_01
Great advice.
4
SPEAKER_01
Cool.
4
SPEAKER_01
All right.
4
SPEAKER_01
Good luck.
4
SPEAKER_01
Thanks, man.
4
SPEAKER_01
All right, sir.
4
SPEAKER_01
Thank you.
4
SPEAKER_00
Thanks, Tyler.
4
SPEAKER_00
And thanks everyone for your amazing questions.
4
SPEAKER_00
We are wrapping up for today, Jason.
4
SPEAKER_00
Thanks for an awesome session.
4
SPEAKER_00
Really informative and everyone had amazing questions, but we really appreciate everyone.
4
SPEAKER_01
Thanks everybody.
4
SPEAKER_01
Get more when Northwest Registered Agent starts your business.
4
SPEAKER_01
They ll form your company fast and stand up your entire business identity in minutes.
4
SPEAKER_01
That means business-free domain, business email, website, hosting, address, mail scanning, business phone app, all within minutes.
4
SPEAKER_01
Visit northwestregisteredagent.com slash saster to start your business today.
4
SPEAKER_01
This episode is sponsored by our friends at Pendo, the all-in-one product experience platform.
4
SPEAKER_01
Pendo helps your users do things you really want them to do.
4
SPEAKER_01
You can try Pendo for free at pendo.io slash saster.
4
SPEAKER_01
That s pendo.io slash saster.
4
SPEAKER_01
And check out Mind the Product, their community for product people like us.
4
SPEAKER_01
Are you overwhelmed with paperwork managing overseas contractors?
4
SPEAKER_01
Say hello to Efficiency with Remote s contract management solution.
4
SPEAKER_01
Seamlessly handling invoice fixed payments and compliant localized contracts.
4
SPEAKER_01
Kickstart your free trial today at remote.com.