Dear SaaStr: When Is It Too Early to Hire a CRO or a COO?
I used to think CROs and COOs were made up titles until “Late Stage” or so, and in startups, a bit of a sign of weakness. Signs a weak CEO was giving away a fancy title to someone that wasn’t really willing to do the work. I used to think there’s no way a SaaS startup needed a “CRO” or “COO” (or even “CMO”) or other C-level Officers Without a Clear, Single Functional Area to Own Until $40m-50m+ in ARR. And also a sign they might be hiring someone not willing anymore to be “just” a VP of Sales, Marketing, etc.
And I saw many over-funded SaaS startups bring in a ton of CROs, COOs, CMOs, and others while still in the single-digit millions of ARR who did little but spend all the money and hire a ton of VPs under them to do the real work. A VP of Sales is expensive enough. Hiring a CRO who brings in 3 VPs under her/him? That’s a lot of money.
But … like many things … my views have evolved. 🙂
Three trends have fueled the rise of hiring COOs and CROs closer to $10m ARR than $50M ARR — at least for the fastest-growing SaaS startups:
- Faster Growth. If you are growing 40% at $10m in ARR, a COO may be a luxury. If you are growing 150%-200%+, it may be a necessity to get help in ASAP to run a material part of the business. The faster you grow, the less you understand why. Your VP of Sales may not quite know why they are closing so quickly. Your VP of Marketing may not understand why the demand gen toolkit is working so well this time. You need more help the faster you grow.
- Specialization. As we’ve all gotten more experienced in SaaS, we’ve specialized more. If your VP of Sales is your closer, you have a VP of Accounts, and a VP of CS … who is going to manage them all? Your CRO. You want each revenue leader doing what they do best. Not trying to manage departments they have less passion for and/or that distract from their core goals.
- Veterans. We now have a lot, lot more veterans in SaaS than we did 5–10 years ago. A great VP of Sales who took a company from $1m to $50m may want to try CRO now. Similarly, a VP of Product might want to own more as COO. If you get a great veteran that really has passion for a startup, and you are at $5m-$10m+ ARR … maybe carve out a portion of the company for her to run. COO or CRO are two good ways to do this.
Nowadays, I like to see the conversation start as you approach $10m ARR, especially if you are growing quickly (>100%-150% YoY).
A COO or CRO title at $2m is a sign of weakness in your org. But at $5m-$10m ARR? Maybe let’s do it if you are growing quickly Is there a great #2 you could bring in? If so — let’s go find her!
Now be a bit careful. Especially, in the Bay Area and with folks who have had a stint at a very hot start-up, almost everyone is a bit delusional about their skillset. Which is not all bad. It drives folks to strive more, and push harder. But if someone can’t really own the full COO or CRO package, you may be setting them up to fail when they otherwise could succeed as a very well-paid VP doing most of the same job.
When it works, it can be magical, however. More and more is cross-functional in SaaS, especially as more and more gets specialized, understood, and turned into truly repeatable processes. A CRO and/or a COO can help you manage multiple VPs and functions under them.
(note: an updated SaaStr Classic answer)