At the end of Day 3 of SaaStr Annual 2022, Jason opened up the mic for an AMA. This episode is the second half of the session.
In this episode, Jason discusses:
- Advice for very early-stage founders
- Why real customer support is critical
- Bootstrapping
- What’s next for SaaStr
You can watch the full video below, and we’ve included a transcript of the episode. The first half of the session was published in Episode 607.
Transcript
Audience Member 1:
I follow your tweets and your content and I really love all the materials you guys put out there. But sometimes I see the title, something like, “After a hundred million ARR, growth slows down.” I’m like, “Dude, I’m trying to survive here. Super early.” So what are maybe one or two things you want to give as advice to founders who are doing sales in the very early stage, the first couple of million ARR, that you feel are super useful in that stage in kind of trying to develop that, I think that sales muscle, if you will.
Jason Lemkin:
Well, look, first of all, some good feedback. All the early SaaStr content was only around folks sort of for one to 5 million and we added more diversity to some stages than others. And I think we could better organize it. So it’s good feedback to us, to our team, to make sure there’s an easy way that you can only get that content. And I’ve done some good videos and other content, but if you wanted me to distill a couple of pieces of advice that are most important, post one to five, something in that zone. It probably goes back to so much of our iconic piece, first of all, and some of this was really innovative years ago and now is table stakes and copied. But first of all, do whatever it takes to get two reps hitting quota.
You’ll never scale revenue if you can’t get two people to hit quota. If you don’t have two, who do you hire? This is the number one hack. I’ve had this conversation like 20 times here. Why did your first rep not work out? I always know the answer. Would you have bought from her or him? No. Why did you hire them? Well, I liked their LinkedIn. They knew how to talk about ACV and MRR and RRM. But would you have bought from him? No, I would not have bought a product. This is why we screw up. When you hire your first couple reps, they do need to have sold a software product. And something at least vaguely close to your ACV. They can’t have sold pool equipment or plastic widgets. Sometimes people hire that. It can work out a little bit for tiny SMBs, but it doesn’t work in software, okay? Because there’s a playbook at 3K ACV and 10K and 25K and 100K, and they just know how to talk to customers and they know the cadence.
So hire two reps close to your ACV, and then forget all the other crap you read. Talk with them. If you want, have them sell you this pen, even if you think it’s trite. Listen to them. Have them do a Zoom pitch and then say, “Would I buy from him or her?” And every CEO you talk to, almost everyone will have what… I’ve written about and called The First Magical Sales Rep. And when I first wrote this on LinkedIn, I got a hundred comments with everyone telling me who their magical sales rep is too. I say, “They’re a little quirky, they’re a little smarter than usual, they’re more product-focused, they deeply understand the product and the customers frigging love that magical sales rep.”
They often came from a slightly different place. That was mine too. Mine was a opera singer. He had come from a failed SaaS company and was mid-pack at best. But his parents were both doctors. He was wicked smart and he frigging loved Adobe Sign and EchoSign. He loved… He knew the ins… Was he the best closer? No, he was mid-pack. And I remember, the first Dreamforce I went to in SF, I’m walking out of the parking garage and this really tall guy grabs me by the back of my jacket. It’s like, “Jason.” He’s like, “You work for EchoSign?” I’m like, “Yeah, I’m one of the founders of EchoSign.” He’s grabbing me, this tall 6’6 sales guy. He’s like, “Do you work with Joe Colletti?” “I work with Joe. Yeah, he’s our only rep. Yeah, I work with Joe.”
“I love Joe. I love Joe.” And that’s the kind of thing that you want. And you get that when you would buy from them, when you would buy from them. So find two reps you would buy from, work with them, help them so they hit quota and then hire a sales leader. The other mistake people make, I mean it’s become so trite, but… It’s hyper-risky to hire a head of sales. Even a stretch one before you have two reps that hit quota because a head of sales’ job is to hire reps three through 300, not to create product market fit. Not to create the playbook, but to take a really rough playbook, it’s not really clear why it’s working, but you’ve proven twice, two reps can hit quota. A smart first-time VP of sales will listen, they’ll learn, they’ll get on calls. They may carry a quota, they may carry a bag, and they’ll hire you three through 300.
So two you would buy from, then wait, then hire the head of sales and then the last one… And I wrote this so early and people still think that’s controversial today, but I wrote one of the first SaaStr posts and I’ve up updated it, which is I Hired My VP of Marketing at $20k MRR. It Wasn’t a Week Too Early. I used to have cuter blog titles. But I hired at 20K MRR. And I went through the math, I hired Loretta at 20K, I didn’t know much about marketing at the time. And I think we went from like… So 20K MRR, 240 to maybe 800 in a year. It wasn’t like a rocket ship.
But you come in and all she had to do was help get me in enough leads to close another couple hundred thousand dollars and that one, more than covered her comp. Two, fueled the sales team. Three, built our bones so we could do more demand gen and things. And so don’t hire someone that works on your logo all day. There’s another old classic SaaStr post, don’t hire the wrong VP marketing, you’ll just get a bunch of pens with your blue logos on it. Half the folks here will tell you their mis-hire in marketing just did branding and product marketing and corporate marketing. But you can’t hire a growth marketer, a true demand gen marketer too early. Well, you can hire them too early when you have no customers. But as soon as you have even a handful, 10, 20 customers, you can hire a great senior growth marketer or demand gen to get you more leads. So hire that person as early as you can find her or him.
Audience Member 2:
You recently wrote an article that said when the phone rings, pick it up. Even though the current DNA is put people in a work cycle and schedule any meeting in three days. Two-part question. What motivated you to write the article? The other is, what’s your advice to companies who want to change that DNA, but are struggling with it?
Jason Lemkin:
I’m so passionate about support for a whole bunch of reasons. But I got passionate about it initially because back in the day when I was a CEO, we quickly expanded to the UK very early. Like six months in, our biggest three customers were in London. Six months in, not expected, a white swan event, maybe not a black swan event. And we had nine people and no one really was willing to do support from 12 to six in the morning but our product went down every day. So someone had to do support when the load hit and we went from 10 concurrent users to a thousand when this huge company rolled this out. I mean you could imagine why there were issues and so someone had to do support. And so I did it every night from 12 to five in the morning for UK time.
So I became very passionate about support tools doing this, me not having to do it. And so very early, when I realized I couldn’t hire 10 support people, I immediately hired an outsourced team in Canada so that someone could do the chat and pick up the phone 24/7. I figured out how to get good at that. And then I just kept investing in companies that did some of this because I was passionate about it. I invested in Talkdesk, which is worth 10 billion now, to do phone contact center. I invested a small amount in Front, which is 1.7B. I invested in Gorgias, which has 10,000 customers in the Shopify ecosystem. I invested in MaestroQA, which is the leader in contact center QA making agents perform, sort of like Gong but for QA. And so I’m very passionate about it, but to really answer your question, why am I more passionate?
It’s because all of these SaaS companies in support and outside support that I invested in and no one does support, even support companies do shitty support. And I go on to all the leaders, “Okay, do all the leaders in SaaS do the Zendesk and the Intercoms, do they answer their phone?” And none of them do either, right? And I learned as a founder, I could make up so many competitive gaps by picking up the phone. So many because no one did. And you can’t solve a number one feature gap. But boy, when I had someone, even when we were tiny, 10 people, 24/7 answering the phone and I wrote them a script. So the top 10 questions, even if… They couldn’t do tier two support, but they could answer the 10 questions and they could say, “I’m sorry, Bob. I’m sorry, Linda. Scott or someone will get back to you in a little while. Here’s the best I know…”
That didn’t solve their problem, but boy, they felt better. Boy, our NPS was happier. And I’m just shocked when SaaS companies say they can’t afford to do support, they can’t afford to do phone support. And I’m like, “I get it. But when I call the restaurant in San Mateo, they answer the phone. Why can’t you answer the phone when all the restaurants at SaaStr Night answer the phone?” Well, no, you don’t need your top engineer answering the phone. Have a human being and half the questions are the same questions again and again and again. “Do you have a Hubspot integration?” “Yes.” I mean, whatever or, “The internet, the app doesn’t work.” Well, whatever, I mean I’m not doing the best answers but pick up so that… I’m passionate about it because I find so many folks in support are crappy at support.
And I’ll tell you a last story. Obviously, I love Hubspot to death. I love everything about Brian and Dharmesh, and the company and there’s no but. But I remember when they were kind enough to invite me to their Founder Day in 2019, and they did a whole thing on support. It was great. And they all talked about how they’re going to automate support more and more. And I said, “That’s great because you have so many customers … But I’m curious, how quickly do you pick up the phone?” And they didn’t know. And I get that it’s hard. But anyhow, I know you’re in the space. We could end the question there, but I just think the reason I write it is because I’ve seen it myself and I’ve seen support. You got to be good at whatever you do and support companies struggle. But it’s the simplest thing you can do this next week, after all of the Annual is you can go back and you can upgrade your support.
You do not need the world’s experts. You can outsource it to start. You can just hire one more person to pick up the phone. And if you’re like, “Well, I’m going to get too many calls,” well, at least you’re going to answer some of them. And the other complaint we get is, “Hey, if I do real-time support or if I do real-time tickets, all my free users and my small users overwhelm us.” Well, at least you can talk to some, and then you can build systems and then you can filter the questions and then you can triage support. And then you can hire someone just to do free and someone to just like at Hubspot, just to do two to 20. And then just to do… There are tools. The systems and routing is much more sophisticated today. But even if you don’t ship another feature this year, you can go back and you can upgrade your support next week and you can do some of it next week.
And you can do over four to six weeks and your NPS will go up. Your sales will go up a little bit, your NRR will go up and people will just be happier when as a human being, why do I have to spend this money and I can’t talk to a person? It’s criminal. Why can’t I talk to a human being in any SaaS company? Why? I mean, we’re switching to Hubspot because I love Hubspot. We pay Marketo like a hundred thousand dollars a year, and I can’t get anybody on the phone. I was using a product, a mission-critical product for SaaStr over the weekend, that went down. Okay, it happens. I go onto their live chat, they’re like, “Response, we’ll get back to you within a few days.” You’re not down anymore. You were down. I have a question. I have to wait three days for… How many of you can go onto your Intercom or Drift or whatever you use and it’s going to say someone will be back to you in 60 seconds?
None of you. Right? It’s criminal and as expensive as it is and I will end my rant or my ramble, whatever you think it costs, it’s cheaper than engineers and it’s easier to source than engineers. And it’s cheaper than building features and it’s cheaper than building products. And it’s not just the great support wins. That’s of course hopefully, true. It’s that it’s an upgrade. It’s an upgrade you can do without a line of code, without a VP of sales, without that great VP of marketing you’ve been spending a year to find. You can do the upgrade at some level next week. So thanks for the question.
Audience Member 3:
So my name is Zoya, and we are basically a gifting company. And my question to you is, so what advice do you have for bootstrapped companies that have just under a million in ARR but are having trouble sort of selling their mission, their story to investors?
Jason Lemkin:
Let me break it up into two points. I don’t think… I’ll give them the smaller point and the larger point. I don’t think you’re struggling for investors because you’re bootstrapped. Actually, if anyone thinks investors don’t prefer bootstrapped companies, you’re wrong. And every investor wants to do what Accel did at Atlassian. Atlassian bootstrapped its way up to like 50 million, a hundred million, a hundred million in revenue and you couldn’t get this deal today. I think it was a hundred million. There’s an old video I did with Jay Simons who was president then, I think at a hundred million, Accel invested at 400. So four times revenue and I think bought a quarter of the company. That’s the best deal as a VC because there’s no one else on the cap table. you’re not jockeying with Sequoia and Andreessen for space.
Everyone wants to invest in the gem. Today when I got here, right when I walked into SaaStr Square Park… We have a Meet-A-VC program and I talked to a bootstrapped founder. He was like, “Jason, I love your Meet-A-VC program.” I’m like, “Great.” But some people have different experiences, I got 32 meetings already. I’m like, “Well, what’s going on?” He’s like, “Well, I’m at four million ARR, I”m bootstrapped, I’m growing 150% a year and I’m in a really hot space.” Well, you’re going to get the meeting, so I just want to simplify this.
VCs prefer bootstrapped companies, but you want signals. YC is great, that we talked about. What they want is hot companies with room on the cap table where they can buy every share they want. So don’t let that be an excuse. Bootstrapping is harder, right? We’ll get to that next, but it’s a positive for most investors. VCs would love to be the first one on the cap table because there’s more space and less drama. It’s what you want.
The different point is bootstrapping is harder. And I asked Ben Chestnut from Mailchimp if you saw that session. We asked Mike Cannon-Brookes from Atlassian and everyone says the same thing. I wrote this post a long time ago. It typically takes three to four years longer being bootstrapped. It does. And sometimes that can kill you if you pick the wrong part of a fast-moving segment because someone will get funded, And there are spaces, there are parts of FinTech payments where there’s no time to bootstrap. There are other niche spaces. Maybe you vertical SaaS where it’s competitive but you’re competing with 20-year-old software. Sometimes it’s okay if it takes a little longer. But however you get there by 10… Here’s the last point by… It takes longer. But by 10 million or so in ARR you have convergent evolution.
These paths converge. By 10 million ARR, if you bootstrap to 10 million ARR, you’re generating enough cash to hire all the VPs you want. Okay? You can’t hire a thousand sales reps. Maybe at Brex or someone can, but you can hire enough. You’re generating enough cash at 10 million that you do… It is only elective if you want to control your future. So the painful, but best advice I can give to bootstrappers is if you’re unable to get funding and you want funding and it sucks and it does suck. It may be brutal, it may be painful, but by 10 million you may be Ben Chestnut. After Constant Contact went public, they finally came to him and said, “Ben, can we invest in you?” He’s like, “I don’t need you. Why would I take your money now? I’m going to just own all of it at 12 billion,” and you probably won’t exit for 12 billion, but it does normalize at 10 million. So you got to brute force it to there. Right? So thanks for the question.
Audience Member 4:
Congratulations on 10 years. And that’s actually where my question comes from because you said at the beginning you were very focused on everyone learning from your failures and mistakes and then got into best practices. So we all know as entrepreneurs, once you hit a goal, it’s really important to have the next one. Otherwise, you’re going to be like, “Okay, I got it. So what do I do now?” So that’s my question for you. What do you see as the next big thing that you want to achieve, either with this event or the brand? How do you reach more founders? How do you help more people? I’m just curious to know.
Jason Lemkin:
It’s a good question. I think that we don’t have it all figured out. Basically, what we really want to do is do more types of mentorship and learning at scale. So we do almost 2000 brain dates here. We’ve got pretty good out here; we got pretty good in Europe. We want to start doing that every week online, a version of it online, which hopefully we can roll out in Q4. There are different places that can go, but maybe it’s too niche-y. I mean SaaStr is a community; it’s not an event. It’s a community, and we started doing meetups for a community because I’d never been to a meetup, but I heard people did it. So we did one, and 500 people came to the first. And that’s common today. But it was unusual in business software back then.
And those events got bigger, those meetups got bigger and became events, and then became 10,000 people at events. But it’s not about events. It’s about a sort of self-organizing community. We’re not forcing people to go on Circle or Discord. So it’s a weird community in some ways. But how can you add value for the community? So the real goal is to add one minor and one major piece of value to the community each year and to grow with it. So I know it sounds a little amorphous.
SaaStr itself basically has … Well it lost money, it lost 10 million in 2020, last year broke even. As an aside, almost, everything’s free, all the content’s free, SaaStr University is free.
But to fund operations, for the internal team, we do have a goal of getting into a hundred million. So SaaStr took a long time, but we’ll do 27 million this year, still giving away almost everything for free. It’s kind of fun to give away everything for free and do 27 million. So our goal, tactically and for fun too, is to see if we can get from 27 to a hundred because a hundred’s a fun outcome. And if you’re at 27, it’s kind of fun because now we know how to get to 40 next year. It’s like we know we can go from 27 to 40, bootstrapped, in a way. Even though I invest, it’s bootstrapped. 27 to 40, we don’t know how to get to a hundred, but we have hints of a hundred. And so kind of redoing that journey, but that’s secondary to investing in the community. If we invest in the community, the rest of the stuff with good people just kind of, I don’t mean to exaggerate, but it almost takes care of itself, right?
Because these sponsors here, who we are grateful to… They’re here. They’re not diluting your performance, we’re not selling out. But they want to be where number one is. So if we keep just adding value and we’ll get more sponsors and make it fun without having to dilute our mission or anything.
