— Elkanah Carnell Reed (@ElkanahReed) April 6, 2021
The top SaaS companies grow faster than ever these days. And that means your initial leadership team often takes you faster, and further, than you might ever think.
There are roughly 2 types of start-up management teams. The first type is the kind of management team hired by second+ time founders. They often staff up their teams with folks they already know and have been successful with at their last startup. Veterans of the SaaS journey. Often folks they convince to once again be a VP of Eng or VP of Sales. Even though they already did that before.
But most of us are first-time founders, or close to it. And if you are, you are going to naturally start off hiring up-and-comers to your first leadership team. The ones that will benefit from taking a risk on a less-proven team and brand. The director that wants a shot at VP. The sales leader that did well, but their startup still didn’t quite make it. That CTO that doesn’t quite have the traditional background. That driven marketer that wants their shot to own a number and run the whole shop this time.
And that’s great. Stretch hires are the way to go for 95%+ of startups. (“Double-stretch” hires though are too risky for VP-level, but a single stretch is great. More on that here). You are giving folks a shot to run faster and harder.
The challenges with strong stretch hires usually crop up about 12-18 months after you hire them, maybe 24 if you sell to SMBs (where you learn faster, with the shorter cycles). Eventually they just plain reach the limits of their experience.
Basically then, one of two things happen. The best ones find a way to recruit strong Directors and others under them with more experience than them. If a Stretch VP or other hire can do that — get people better AND more experienced to work for them — that’s magic. Then, they can scale almost infinitely. But it’s not that common, unfortunately.
So what ends up happening more often is eventually you have to “top them” and hire someone with more experience. This interjects a lot of risk, however.
So what do you do? How do you help a stretch team … stretch further?
There’s a simple rule, really a heuristic, I’ve come up with: Hire One Strong Veteran VP Every $10m ARR or so.
This almost automatically helps solve a lot of your scaling problems. It ensures by $10m ARR, you’ve found at least one proven SaaS veteran that can help fill the rest of the team’s experience gaps:
- A truly experienced VP of Product, for example, can really help guide the founders in how to scale product choices — and make customers happier. Once it all starts to get really complicated.
- A truly experienced VP of Sales, for example, will know exactly how to scale the sales team to hit your revenue goals. Rather than get overwhelmed as the numbers start to look really big. They know you need this many AEs, that many SDRs, this much pipeline. And they’ll get it done. Rather than see a ceiling.
- And a truly experienced VP of Marketing will know how to consistently hit their commit, rather than see everything just … plateau.
That's a wrap for @Twilio's Q4 2020 earnings: $548M revenue, up 65% Y/Y.
A huge thank you to the 4600 Twilions, 220,000 active customers, and the more than 10M developers in our ecosystem. So proud of all you built through the difficult year of 2020!
— Jeff Lawson (@jeffiel) February 18, 2021
But on-the-job-at-your-startup experience is even more important than prior experience. So you want a mix of experience learned on the job at your company, and experience brought in by a seasoned hire.
So just make sure you add one experienced VP for each $10m ARR. It really often is that simple. Maybe start with marketing, that’s often easiest. Or maybe add a more experienced VPS or SVP or CRO if you see your initial sales leader struggle to hire — so that VPS can help them scale further. And if that stretch product lead is just shipping like there’s no tomorrow? Well, maybe that one can be your VP of Product forever. It happens. A few can stretch forever. Some won’t make it to the next level. And others can go further, if there’s more seasoned help on the team.
So, say, by $10m ARR, you’ve added 1 truly great seasoned exec to the team that can run the playbook again. And at least 2 by $20m ARR. Then as you hit $30m-$40m ARR, and add #3 … you’ll likely have a management team balanced 50/50 between home-grown talent and VPs you’ve recruited that were VPs before. A 50/50 mix is ideal in general for management (half promoted, half hired from outside). You’ll get there almost automatically with your VPs if you add one veteran each $10m ARR.
Fill your management team early, by $2m-$3m ARR if you can, a Head of Everything at least, if not VPs. But those first leaders will likely all be stretch hires for most of us. Otherwise, the only veterans that will join you will be washouts. Don’t hire those.
Then, be selective and thoughtful where you add and upgrade. And if you are biased to letting up-and-comers run with it … well so am I, so are most of us. Just add 1 veteran leader each $10m ARR. It all works out if you do.