Lately I’ve had a chance to interview some terrific executives for start-ups that I’ve been helping on different levels. I’ve used it as an opportunity to, among others things, test some of my assumptions on what types of hires really work for SaaS companies at different phases.
Once you start hiring up in SaaS, you’re probably going to feel like it’s sort of a Catch-22. On on the one hand, guys without any start-up experience are almost always a terrible fit for a true start-up. On the other hand, you’re going to be very attracted to the domain expertise of someone that seems to have excelled at Salesforce, or Successfactors, or Cornerstone OnDemand, etc.
And beyond that, pure start-up guys often don’t scale. Mr. Start-Up, who’s always been VP of Sales at companies with <50 employees and been allegedly so successful … but never beyond that … I doubt he can really get you to $20m in ARR. Once you get to Initial Traction, at least … you are going to need people on your team that really can scale. That can really go the distance and build teams and expand the vision to $10m in ARR, $20m, $40m, etc. etc.
The best of all worlds of course is someone with both. Who has had success in a fast growing SaaS start-up and a BigCo SaaS company. It’s just there aren’t that many of them, especially ones that have really done both at a senior enough level. And if they really did it all — they probably don’t want to join you too early anyway. They’ve done that already.
I can tell you personally, the biggest hiring ‘mistake’ I made in the post-Traction but pre-Scale phase was hiring a Mr. BigCo with the Only BigCo SaaS experience when we were at about $2m in ARR. We spent a ton of money, hired the wrong people under him, and worst of all, lost our way in understanding the data. And it wasn’t this hire’s fault — it was mine. At least I knew Mr Big Co was a risk at $2m in ARR. Not sure that was true for him.
And yet … as bad as that was … Mr. BigCo way too early … and it was bad … it wasn’t all bad. We did get two great things out of this bad experience: two great customers we wouldn’t have gotten otherwise, than since then, have yielded over $2m in revenues. (A good return on investment, in that sense). And one really great hire (out of 10 or so). And this one great hire, though he was the only good fit out of the 10 Mr. BigCo hired … this one great hire by Mr. BigCo has closed another $4m in revenue or more. So again, $2m + $4m = $6m … that Hire Mr. BigCo decision doesn’t sound all bad from that perspective, given his $X00,000 salary.
I was gun shy after that. We didn’t hire someone with only BigCo SaaS Experience again until we were at about $12m in ARR or so. But then, at $12m, we brought on a senior executive with Only Great BigCo SaaS Experience. And you know what? He’s just killed it. Excelled. At every level.
The reasons for the difference are varied. But clearly, it was a far better environment for Mr. BigCo at 60-70 employees than at 15 or so. There were already existing, successful systems and processes in place. We had years of data in Salesforce. Mr. BigCo was able to join and run a big part of a department that while small – actually was a department. And Mr. BigCo was able to hire his or her own team. We had enough budget as well to make it work, not just systems and infrastructure. And also, once you are bigger … you can get a different type of Mr. BigCo. Not just someone running from something. Or someone that wants to try a “Hot Start-Up”. Rather, someone that can actually do what they already know how to do, just with far less baggage, and just enough resources to really do it The Right Way this time … Their Time.
What’s the learning? I think two things. Resist the allure of Mr. BigCo until you are perhaps at, at least, $4-$5m in ARR. But maybe after that … be more open. I think a VP of Client Success from a BigSaaSCo can probably be very effective in a $4m ARR SaaS company. Engineering, too. Sales? Riskier. Product? Probably most risky. But at least at $4-$5m I’d consider taking a risk on a Mr. BigCo.
And as you approach Scale, say $10m in ARR or so … I’d consider pulling the trigger on Mr BigCos. in many areas if they really did it and are a good fit.