Dear SaaStr: Why Are So Many SaaS CEOs Former Engineers?

Q: Dear SaaStr: Why Are So Many SaaS CEOs Former Engineers?

I’ve come to almost exclusively invest in founder-CEOs that are or were engineers. Or at least — where the co-founder CTO is a true equal partner to the CEO. I’ve found that works equally well.

Why?

Well to get something off the ground,

  • You need to build it. If you can’t help here in the early days, you better be a darn good salesperson.
  • You need to recruit a great engineering team. Why at least in the early, pre-revenue days, do they want to work for a CEO that can’t also ship product? Maybe only if you have already done it before.
  • You usually need to understand how and where technology is going. You don’t need to be an engineer to do this, but most “salespeople” CEOs can’t pull this off. At a minimum, you need to have steered a product from nothing to success to pull this off.
  • You need to be able to build if not a jaw-dropping product, then at least, a very state-of-the-art one. Want to outsource it instead? How, in this day and age, you are going to build a great product that way, I don’t know.

How do you do this, if the CEO isn’t at least a pretty good engineer? It takes, best case, a lot more money. Maybe 3x-5x more money to get it off the ground. You need to pay up to recruit a “technical co-founder” and then she often will bring in 2x the engineers, at a higher price, than an engineer CEO.  Or worse, it’s outsourced to someone or a team that just isn’t great.

There are exceptions, many of them. But usually, there is an amazing (in terms of cleverness, if not always pure skillset) CTO from Day 1. And often. Salesperson CEOs burn a lot more money getting to $1m and $5m-$10m ARR.

After that, maybe it doesn’t matter as much.  Maybe.  But still, I’ve found the SaaS startups without a strong technical background in the founders just … iterate more slowly.  If either the CEO or the CTO wasn’t at one point a great engineer or at least a super-smart hacker, they just don’t know how to iterate quickly.  How to be super agile.  And the super agile startups just pull ahead as the years go on.

I look at the 25+ seed investments I’ve done.  The unicorns and decacorns?  All run by ex-engineers as CEOs, or, business CEOs that have a true CTO co-founder.  It’s just too tough otherwise, in my experience.

Published on February 1, 2022

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