Scaling from $1 to $10M, an AMA with SaaStr CEO and Founder Jason Lemkin (Pod 573)

Jason recently opened up an AMA on Twitter Spaces to answer questions about scaling from $1M to $10M. Episode 573 of the podcast is an excerpt from the recording, and you can find the full transcript below.

Jason Lemkin:

Hey everybody. We did a good AMA on this scaling at SaaStr Europa in Barcelona, a couple weeks back. It was packed. So anyone has any questions where I could possibly be helpful on the journey from one to a hundred, please ask any questions.

prasanth_p (@prasanth_p):

Yes, Jason. So I wanted to know, what are your thoughts on using SEO as a credible source of traffic?

I mean, we’ve all read about programmatic SEO, and how successful SEO has been for Airbnb and Canva. So how feasible do you think that works for a typical B2B SaaS business that probably our user-base is not too knowledgeable about [inaudible] on the internet for something specific in their day-to-day use case?

Jason Lemkin:

Yeah, I think if you ask how applicable is SEO, programmable is maybe a different question, but I tell you every single SaaS company I have invested in or worked with that has made a commitment to building at least one high quality piece of content per week has seen significant ROI from SEO over a period of months or a year. It’s pretty good, someone did a Tweet storm the other day on Zeb from ClickUp’s presentation at SaaStr Annual 2020. You could watch it on YouTube or search on SaaStr on the blog about how ClickUp leveraged it. That’s a great example. DigitalOcean is a great example, HubSpot of course, Monday, but I’ve never not seen it work.

Jason Lemkin:

You certainly can hire a whole content team and build 10,000 pieces of content, but I will tell you what I have always seen work is one incredible piece a week. This always works. And there’s something in your industry where you are a subject matter expert where you know how to do mobile billing, you know how to do something in your vertical area of SaaS. And if you publish a great piece a week, if you can, put in the time, don’t do 10 crappy pieces, do one quick, great piece a week, and also collect emails. That will scale, and then take those emails after four great pieces of content and do a weekly webinar and do a weekly get-together for them. And each of those webinars will probably produce at least one customer if you do it every single week in scale. So a bit of a rambling answer, but I’ve never seen great, even just a great blog, done once a week, not work. But I almost never see mediocre outsource SEO really work for B2B. So, thanks man.

Fergal Kerins (@FergalKerins):

What if the customers you are trying to reach are all giants?

As a tiny startup who might be commercializing its first product, are there any general guidelines that you can stick to that would prevent the massive companies out there from crushing the baby?

Jason Lemkin:

Well, let’s break it up. How, if no one’s heard of you, do you sell to big companies? And the second question is how do they not crush you? Let’s just step back a bit. If you haven’t closed a lot of big customers in the early days, or like me, it was a bit of a revelation to be a Senior Vice President Adobe for a little while and sit on the other side, see how things are bought. But you don’t have to do that. You can be a founder too. You’ll realize that two things. One, at every large company, there is an innovation budget. There’s an innovation budget in the CIO’s budget. Literally, they call it an innovation budget. It’s often 5%, 10% of the spend. And there is a slush budget in each department for extra stuff. For example, I was the lowest ranked of those senior VPs at Adobe, but I still had four to $500,000 a year that I could spend on extra stuff, extra software, that I needed to make my department work well, all the other VPs had more in their slash budgets. Plus there’s the CIO piece.

Jason Lemkin:

And so you’re not going to attack the budget that Salesforce or Workday, or any of those folks, have. You’re not even going to attack [inaudible] you are budgeted. But there is an innovation budget and you need to be tenacious to achieve it. And the way you get it is whether it’s outbound, generally inbound events or whatever, solve a 10 X pain point, solve a unique pain point that a large enterprise has that other vendors don’t provide. And do it importantly in a low risk way, in a low risk way, because all large enterprises want to firewall a new vendor in some fashion, either try it with a small department or try it with non-sensitive data. Getting access to the crown jewels and highly sensitive data as a four-person startup is hard, but if it’s a segregated piece of data and a pilot.

Jason Lemkin:

And be tenacious and realize a lot of buyers are not going to use their innovation budget on you, but they do exist. This money is explicitly out there at big companies to find new vendors that solve their problems because they know they need new vendors to solve their problems. So bound the risk, don’t be discouraged when you get no’s, because that bit of the CIO’s budget or the bit of the VP’s budget, that slush budget, is there. Just be thoughtful also about how much you ask for, if I had 400,000 at Adobe and you asked me for a million, it wasn’t going to happen. But if you asked me for 25 grand for my whole department and it solved a big problem around whatever my problem was, I could probably give it to you in a week, that 25 grand. So be thoughtful about not pushing too hard when you’re in that innovation budget.

Jason Lemkin:

And then just two other points, if you haven’t done it. And I’ll try to address the getting smushed on the second part, don’t forget that in these folks, the VPs, the buyers, the CIOs that do want to talk to new startups, that do want to tap this innovation or slush budget, they want to talk to the CEO. You actually have a super power as a small startup that you might not realize or might be intimidated to use, which is that directors, managers, VPs at even big companies do not have a lot of relationships with CEOs. They rarely talk to CEOs. And so if they connect with the CEO of a company and that CEO shows them, not just general deep respect, but empathy for their problem and commits to solving their problems today in six months, in 12 months, folks want that special relationship. They want a vendor that will solve their problem over the coming years. And you can build that in a way with the startup that you can’t in a bigger company.

Jason Lemkin:

Folks love to love to talk to the CEO. I’ve written this before. But even the CEO of a four-person startup. So don’t be scared to use those three letters. Don’t be arrogant because you haven’t proven it yet, but, “Hey, I’m the CEO of whatever. I do something 10 times better than anybody else. Here’s what it is. Can I show it to you?” That simple email, if it’s great, if it really solves a VP’s problem it’s probably going to get you a Zoom. So that’s my long-winded or medium-winded answer.

Jason Lemkin:

The second part was, how do you make sure you don’t get crushed by big companies? I think a lot of worries people have with big companies are misguided. Yes, there is the classic situation where a big company wants to give you a lot of money, but overwhelm your engineering resources. Sure, we’ll give you a million dollars a year, but you basically have to build custom software. That happens, but when it does, you’ll know it. And you just say, “No.” You’re just honest. Be honest and say, “Listen, I don’t want your million dollars, but for $200,000 a year or for 20K a month, sometimes more digestible, I can do all of this. And over the coming two years, you’ll get what you want.”

Jason Lemkin:

So the crush things happen, I’ve been on the other side of it. But the answer is just be honest, explain your parameters that you’re building something great and that you can’t be dedicated to one vendor. And eventually at least they will understand. So hope that’s helpful. Anyone else have a question that we can chat through?

Ash Bhoopathy (@ashbhoopathy):

What the key things are to have to absolutely make sure you have in-house versus nowadays it seems like there’s a whole bunch that you can actually outsource?

And at various stages, I’m curious as to your perspective on, what things are really, really important to actually have in-house versus outsourcing?

Jason Lemkin:

I’ll answer it, but are you thinking more on sales or technology or broadly speaking in the question?

Ash Bhoopathy (@ashbhoopathy):

Probably more around go-to-market and sales. But potentially even technology. I’m assuming that most of the stuff on the technology side is not outsourced, but I’d be curious to your perspective on that as well.

Jason Lemkin:

Well, look, I don’t have any magic answers to this, but I’ll give maybe one or two pieces of advice. First of all, on go-to-market and sales and marketing, be very, very wary of folks that want to outsource your core. Whether it’s technology or sales, revenue, marketing, you can outsource the edge, you can outsource integrations, you can outsource experiments for sure. Experiments are great to outsource, but you cannot outsource your core. So folks that promise you they can do magic things for outbound or SDRs, it doesn’t work. Folks that magically promise you they can deliver leads from the ether. It doesn’t work. Why doesn’t it work? Well, they’ll never know your product that well, they’ll run the same canned strategy they run for other clients without their own list. It never works.

Jason Lemkin:

But it can work sometimes if you manage it very carefully and it’s an additional layer. I’m not a huge fan of outsource SDR companies, but if your product is pretty generic, if it’s yet another sales product, yet another marketing product, if it’s something like they’ve done before and you write the script for them, and you audit it and you listen to the Gongs or the Salesloft calls, it can work, but it’s not core. You got to build anything that’s core in-house. And think about it that way. Think about just like we’ve talked about on SaaStr, you got to hire two AEs that hit quota before you hire a VP of Sales.

Jason Lemkin:

You got to figure out how to do outbound or inbound or demand gen before you add someone to help augment it. But if you figure it out, if you know what you want from outbound or you know what you want from demand gen or content marketing, and then you hire a third party agency to augment it and you’re all over it and you micromanage it, that’s when it works. It doesn’t work when you’re like, “Hey, I don’t know sales, or I don’t know marketing, I’m going to hire this seemingly good looking agency or this seemingly good looking consultant on the internet.” I’ve never seen that one work.

Jason Lemkin:

So anyhow, that’s the most important answer. I think that’s the mistake most founders make. They think they can hire these agencies to prove out sales and marketing, they can’t. The same thing’s true on tech. Obviously, the only one thing I will say on the intersection of technology and go-to-market is, I’m a strong proponent of building every integration you possibly can on planet earth; Salesforce, Twilio, Shopify, and then do all of them. If you do Shopify, try to do BigCommerce, try to do Magento, try to do WooCommerce. If you do Salesforce, try to do Pipedrive. Certainly try to do HubSpot and try to do Microsoft.

Jason Lemkin:

But usually your teams can’t do that. So if you’ve built one integration and you can spec it out, don’t be shy to hire an industry expert to reproduce it, to build integrations on other platforms, and then get a half decent version of it that clones your core and then bring it in-house. It sounds obvious, but too many people wait. Too many people wait to build other integrations when that can be outsourced to domain experts, you get the 1.0 outsourced, and then you rebuild it from scratch for the 2.0.

Philip Joubert (@PhilipJoubert):

So, many years ago you wrote a blog post called the 48 Types of VP Sales.  Thanks for writing it.

And so as you near the $10 million ARR mark, or exceed it, my question is in terms of what are you looking for in your executive team?

If I recall correctly, the blog post is very much centered around who to hire; hiring the right person for the right stage.

Jason Lemkin:

Yes.

Philip Joubert (@PhilipJoubert):

But imagine you already have the team in place, how do you know you have the right team in place? Obviously, if things are going wrong, that’s an obvious sign. But what are the kinds of things you would be looking for in a team, specifically the executive team, as you get from one stage to the next? What are the things that you are looking for where you might not be squeezing as much juice out of the opportunities available? If that makes sense.

Jason Lemkin:

Yeah, maybe let’s break it up into two points. I think those are two great points. Let me reframe them. One is, when do you top maybe an existing VP, an early stage person as you approach 10? And then two, if you do, who should you hire? And we can break that post into those two pieces. And 10 million’s a good number, as you said, because many of the folks that are so scrappy that you hire at half a million, a million and two million, at 10 million, it can break. It starts to get complicated. Think about you promote your first sales rep to Head of Sales and she does an amazing job and she gets you to 10, and it’s amazing.

Jason Lemkin:

But then think about going from 10 to 20, let’s imagine your yielded attainment’s 400,000 per rep. That means you’re going to need, to add another 10, you’re going to need 25 people in the sales team. Very often the person that got you to 10 does not have the experience or even the real interest to hire 25 great people in the next six months to get you from 10 to 20. That’s really where it breaks, is they never hire the talent for the next level. They never hire the talent in general and they never hire talent that is better than them. So that’s really where it all breaks as talent, is hiring.

Jason Lemkin:

And then ultimately on the way to 10, it’s hiring good managers under them. And what the folks that can’t stretch end up doing is either they don’t hire managers or they hire very junior managers. So again, we could use it for any function. Let’s imagine that Head of Sales needs to hire 25 people to go from 10 to 20 million ARR the next year, 25 folks are going to need three Directors of Sales, or RVPs, or whatever you want to call them. The average Sales Manager manages eight. So you’re going to need at least three of those in the sales ops team. Someone that can’t stretch will often hire very inexperienced managers, weak managers, or only promote for within, and it will break. The great people, at least one or two of those managers, is better than them. Whether it’s internal promotion or external, and they keep attracting better and better talent.

Jason Lemkin:

So when you see weak managers being hired, it’s almost unfixable at that point. The person has reached the limits. Of course, it does not mean you should fire them or move on from them. That’s maybe the second point of three I want to make. We’ve all learned that when you have superstars at this level, keep them. Oh God, keep them. Find a role for them. Maybe they just manage a new initiative. Maybe they manage a vertical. Maybe they manage just one team, but don’t let those superstars go even if as VPs or managers, they can’t own it all at the next stage. But when they can’t hire leaders under them that are good, that’s when you know. [inaudible] intellectually honest, who are you going to promote under you? Are they unable to hire any great managers? Or are they hiring weak people that are worse than them?

Jason Lemkin:

Again, the best leaders, if you haven’t seen it, the best leaders are constantly bringing managers under them that may be younger, may have less experience, but are better than them. And not to date myself, but going back to our old Adobe Sign, EchoSign team, let’s look at the managers that Brendan brought under him. And yeah, they were less experienced. Sam Blond, he’s now CRO of Brex. Jameson, he’s now SVP of Sales at Gong. Brittany, who was VP of Sales at Clarity. They keep going on and on and on, these folks. And they were sort of VPs to be, or the managers he brought in. And we see this again and again. So that’s what you want to see. If you’re not seeing it, you’re growing slower than you can.

Jason Lemkin:

And then the third point would you want to hire a VP at the 10 million or later stage? That’s going back to the post, the 48 Types of VPs of Sales. I think we can almost simplify that post down to one criteria. And this is a mistake that got amplified in the last two years when things boomed, but when you’re ready to hire someone for the next stage, they have to at least have experience in where you’ll be six to 12 months from now. So if you’re crossing 10 million, you do not need to hire a VP of sales that’s been there at 10 million, because you’re already there. It would be nice if she or he had that experience, but they have to have at least had experience, let’s say, 15 to 20 million ARR.

Jason Lemkin:

When they don’t, I’ve been writing this for almost a decade, but I got to tell you, even this year, even last year, it just never, ever works out. I don’t care if they came from LinkedIn or Shopify or Twilio or Segment, if you’re at 10 million and they didn’t join Segment until 40 million, it’s not going to work out, it never does. But if they were there at 18 or 20 million, at least they’ve seen enough of the playbook, that as you scale, you will grow into their strengths.

Jason Lemkin:

So my summary’s there; make sure that they’re hiring good managers or you got to top them, but don’t fire them. Don’t let anyone great go, find a new role for those folks. And then three, when you do hire someone to top, make sure they’re great and make sure at least they have experience where you’ll be six, nine, 12 months from now. So thanks for the question.

Philip Joubert (@PhilipJoubert):

Thanks, Jason. Great answer.

Anshuman Pandey (@anshuman_01_):

So what advice do you have for developer tool companies building out of the U.S. and trying to serve the market in the U.S.?

We have a ton of investors in India, but the amount of investment that comes to dev tool companies is really, really low. So what advice do you have for us?

Jason Lemkin:

For customers or for VCs or for investors?

Anshuman Pandey (@anshuman_01_):

For customers.

Jason Lemkin:

Listen, I feel like India, the last two years, is sort of… And I admit I’m generalizing, but it feels like it’s like where Europe was five or six years ago where everything was crossing over. And the first investments I did were in Pipedrive from Estonia, they got bought for 1.2 billion. The second one was for Algolia, now worth three billion, that was from France. The third one was [inaudible] from Portugal, 10 billion. Back then, people were like, “Why would a US company buy a contact center or a search API from France or a contact center from Portugal or a CRM from Estonia?” First of all, obviously all those companies back in the day localized, the CEO moved to the US. That still works today.

Jason Lemkin:

Absolutely, having the CEO here works. It worked for Freshworks, it works for others. So that’s always something to reflect on. I know it’s hard, and good God, the time difference with India is brutal, but there is something to be said for at least the CEO being here. So that hasn’t changed, and that helped a lot of European startups in the early days.

Jason Lemkin:

Having said that, and then maybe my second point is almost unhelpful. Well, let me step back. I’m going to make a 1.5 point, and the second point. The point and a half is, if you’re far enough along, if you’re past three, four, five million in revenue, maybe not a million or half million, one of the greatest changes since we went distributed is you can hire pretty good VPs in the US and not work in the same office as them. I’m not saying it’s easy, nothing’s easy. But if you’ve got a couple million in revenue and you have a great API and a great product, try to hire a great VP in the US. And that also can be your US connection, if you’re lacking it. Before COVID, no great VP would want to work more than five feet away from the CEO, but the world is so radically changed that you’ve got to take advantage of that.

Jason Lemkin:

And then the third point. And the third point maybe isn’t helpful, but it’s helpful so that you don’t accidentally feel sorry for yourself. Buyers are more global than ever. And just like Europe changed where no one cared any longer if the product had European roots, I don’t think people are carrying anymore if products have Indian roots, they’re not seen as different or local products. And maybe that’s still an evolution to be fair. But if you have a 10 X solution to a core problem, just market it in the US. Go to events in the US, show up in the US, be present in the US. I don’t think anyone’s going to be bothered. Provide support in US hours, provide realtime support, provide local support. Boy, that really does help localize your product without being there. But I don’t think there are any barriers to selling your product in North America, or the rest of the world today, and they’re falling away. So thanks for the question, hope that was helpful.

Paul Tomkinson (@paultomkinson):

I’m wondering if you have a cadence that you recommend or find that works best when you’re scaling from one to 10 million for VP hires? Do you use ARR as the milestone when you think you need to expand departments?

Jason Lemkin:

No. So let me go back. If you search SaaStr, I’ve written a bunch of posts the year about the perfect order to hire your VPs in. And I will tell you that order second. But before we do, what has become clear over the years is, and we’ve written this too, every great VP is accretive, every great, truly great, if you don’t settle, if you hire someone great, they will generate more revenue, more benefits, than they cost. So you should hire every great VP when you find them. And let’s just go through that again, because it’s not always obvious, but once you understand it, you’ll see that you don’t try to sequence VPs. You hire any great one you can find. And then we can chat about briefly when you would sequence.

Jason Lemkin:

But let’s just think about it for a minute. Let’s say you hire a VP of Marketing, which I think generally is the first one you should hire. But let’s say their cost is $150,000 US. It could be more, fully burdened, it could be less, probably more these days. But let’s say you hire them at half a million in revenue and you’re doubling. So you’re going from half a million to a million, but instead she just increases your leads 30%. So instead of one million, let’s assume they close. So instead of one million, you go to 1.3 million. She’s paid for herself. That’s why I wrote this post long ago; I hired my VP of marketing at 10K MRR, it wasn’t a week too early. It’s still true today, because a good one will generate more leads, more pipeline that closes than they cost well before a million in revenue.

Jason Lemkin:

You can already see the math for a VP of Sales. Let’s say your VP of Sales has a 200K base and a 200K bonus. So 400K, that’s a lot. Maybe it’s 300, maybe it’s 250, maybe it’s even more. You hire her at two million ARR and she increases sales 30%. So instead of going from two to four million, you go from two to 5.2 million. Completely paid for themselves, both quantitatively and qualitatively. So marketing, they can pay for themselves well [inaudible] four million. Sales, they can pay for themselves at, or even below, a million. And then product, well VP of Product, everyone waits a long time for a VP of Product. But once your product gets complicated around three or four million, what if you’re able to close a big customer? Because a VP of Product can figure out how to get the customer comfortable, how to sequence that build, how to prioritize what you’re building so that you can make one more six figure customer happy.

Jason Lemkin:

And even though everyone’s like, “Oh God, we can’t close another one of these big annoying customers.” But your VP of Product figures out how to get it done so you close another 250K deal. Again, she’s totally worth it. Same with engineering, if you get more productive, same with customer success if NRR goes up. Hire a great Head of Customer success at a million and drive your NRR up another 10%, that can pay for most of her comp too. So they’re all accretive if they’re great, and they’ll all blow all your money if they’re not. So when in doubt interview more, when in doubt, don’t settle. When in doubt, err on a stretch hire that’s brilliant, but hasn’t done it all before, rather than someone that seems to have done it all before that your gut hasn’t told you is great. So any great one, hire them. And the ones that aren’t great, just push on, is the net, net, net.

Jason Lemkin:

But having said all of that, that’s the real learning. In a perfect world, if you were the world’s best recruiter and you had infinite candidates and you could time it perfectly, I will go back and you can see this on SaaStr if you search. A VP of Marketing will be accretive even at 20K or 30K MR, because they’ll bring in more revenue than they cost. A VP of Sales can easily be and should be accretive at one to two. A VP of Product, almost everyone’s product, sometimes it takes them a while to admit it, it gets so complicated that by three to four billion, a VP of Product is accretive. It lets you close more bigger deals, manage your existing customers, better manage your partners better.

Jason Lemkin:

And VP of Eng, probably around the same time, but certainly by six to eight million, I think everyone should have a VP of Eng. And that VP of CS, a VP of Customer Success, you almost can’t lose as soon as you have a million or two of revenue to renew, because just do the math. If your NRR goes up and your churn goes down, the hire has paid for themselves. So thanks for the question.

Paul Tomkinson (@paultomkinson):

Great advice, thanks so much.

Alex Stoica (@heyalexstoica):

What’s different from one to five million, from one to 10 million, instead of zero to one for B2B sales that they’re selling for SMBs? What tactics, how they’re changing the revenue and the sales tactics?

Jason Lemkin:

Yeah, I mean, there could be a million answers. The question is what’s the difference between zero and one and one to 10? But let me try and distill it all down to one thing and just talk through it for a minute, because maybe it illustrates where there’s mistakes. Typically speaking, from zero to one, you’re just trying to find one channel, one way, to generate customers that works. And I will tell you across maybe the 25 or 30 startups I’ve invested in, they all have a little bit different stories from zero to one. And then after one to 10, the stories start to converge based on how they do it.

Jason Lemkin:

So some folks are great naturally at outbound. I remember in the early days I was shocked that greenhouse which had an 800 million exit last year and is much bigger today. I was shocked that Daniel, even though he was not trained in sales, he loved outbound and built a whole SDR team under him in the very early days for selling HR tech. I had never seen someone that wasn’t a sales leader build an outbound team like that in the early days.

Jason Lemkin:

I’ve seen others at the other end of the spectrum, RevenueCat, where I was the first investor, they’re an API for mobile subscription management that’s done quite well. Jacob just taught himself, going to the first question about SEO, he taught himself how to write canonical blog posts about how to manage mobile subscriptions. And half of their early customers literally came from folks reading those blog post and saying, “Hey, this guy, Jacob Eiting, is the subject matter in this space, let him solve our mobile subscription problems.” So those are two very opposite ends of content marketing working from brute forcing outbound.

Jason Lemkin:

Personally, for me, although I’m dating myself, although you can still see it on SaaStr, I was always good at hustle and creating the top of the funnel and crappy at closing it, so always needed help. That’s another strategy. But my point is, however you do it, whether it’s events, field marketing, outbound, inbound, SEO, even paid, I’m shocked how many folks can get paid to work these days for B2B,. Generally from zero to one, you’re experimenting. And what you’ll find later when you’re really big is actually they all work at scale. Once you have a brand, everything works, everything works; webinars, white papers, outbound, inbound, left-bound, right-bound. When you’re at 30, 40, maybe 20 million in ARR, everything’s going to start to work and you’re going to need to start to build a marketing team to do everything. Some things will work better than others, but it all works.

Jason Lemkin:

But from zero to one, you’re usually lucky if, given your DNA, given your market, and given who you are as founders, if you can find just one thing to work and lean in on that, and then by a million, and it’s usually brutal and sometimes it takes a couple years to get to one million, not a couple months. You’ll finally get good at one thing; the content at ClickUp, the events for others, the SEO, I mean outbound for Greenhouse, where Salesloft was one of the first investors.

Jason Lemkin:

And then from one to two or three or four, you just lean in on what you’re good at and carefully add a little bit more. And then finally, maybe at four to five, there’s usually enough fat in the system. There’s enough extra AEs, there’s enough established marketing where you can start to put some real money into experiments that are outside of what’s working, but usually there’s not enough fat, not enough bandwidth, not enough capital, until four to five to do anything other than get better at what you’re at, at one. So hopefully that’s helpful. Thanks for the question.

Alex Stoica (@heyalexstoica):

Thank you. Thanks a lot.

Reilly Chase (@_rchase_):

Hey, Jason, I love your posts. And I love the title Scaling From a Million to 10 Million. My business is 1.7 million ARR, and I’ve been doing it for four years. We have a team of seven people, all remote. We have 2,000 customers. And I’m really thinking about how we can get the business to 10 million ARR.

Jason Lemkin:

Yes.

Reilly Chase (@_rchase_):

And I kind of wrote down on a spreadsheet, if we grow 10% month over month on our MRR, we’ll get there by 2024, but all of a sudden our growth went down and I feel like we might be hitting some kind of plateau because, I don’t know, it’s a whole industry thing too, but it went from 10 to nine to seven to six to four. And the last couple month’s been like three, four, three. So we’re growing like three or 4% per month, that 1.7 million.

Reilly Chase (@_rchase_):

And then I read your posts and I’m like, man, I should have hired a VP at 10K MRR. So we’re a team of seven, we just have two developers, three support people. And I just hired one full-time sales guy, one full-time marketing guy. And so I’m trying to decide on how we’re going to grow. Whether it’s launching new products or upselling or something like that. I’m just not sure what we should be doing, but we don’t have a management team or VPs or anything like that. We’re what you’d consider micro-SaaS. So we haven’t really raised VP money. We raised a $100,000 early on and that’s it.

So I don’t know if it’s even the right question — but I want to know how to grow up to $10 million in ARR from $1.7m today.  We have no management team.

Jason Lemkin:

Well, let me break it up into two things. First of all, if you’re at 1.7 million ARR with seven people, you can still afford to hire one great VP. Maybe you can’t afford 10, you can afford one. Especially if they end up being accretive. So, sure you’re at almost two million and haven’t hired a management team, shame on you. But it’s not that uncommon, especially for bootstrap companies to have no management at two million. And maybe you’re paying the price, maybe half of your deceleration is market, but maybe half of it is lack of folks to help you get to the next level. So go hire one. Maybe marketing’s the right place to start, maybe it’s sales. You just calmly hire one, use the capital you do have, you can afford one. That’s my simple, maybe too obvious, point that people miss. You can afford one.

Jason Lemkin:

Two, let’s talk about your growth, which was 10%, which at 1.7 million is insane. 10% is top decile growth. Sure, you’re at-

Reilly Chase (@_rchase_):

We raised $100,000 early on, and that’s it. So I don’t know if it’s even the right question, but I want to know how to grow up to 10 million.

Jason Lemkin:

Well, let me break it up into two things. First of all, if you’re at 1.7 million ARR with seven people, you can still afford to hire one great VP. Maybe you can’t afford 10, you can afford one. Especially if they end up being accretive. So, sure you’re at almost two million and haven’t hired a management team, shame on you. But it’s not that uncommon, especially for bootstrap companies to have no management at two million. And maybe you’re paying the price, maybe half of your deceleration is market, but maybe half of it is lack of folks to help you get to the next level. So go hire one. Maybe marketing’s the right place to start, maybe it’s sales. You just calmly hire one, use the capital you do have, you can afford one. That’s my simple, maybe too obvious, point that people miss. You can afford one.

Jason Lemkin:

Two, let’s talk about your growth, which was 10%, which at 1.7 million is insane. 10% is top decile growth. It was insane. It slowed to three to four. What meta a point, and maybe one micro point, if you’re going from 10 to four to zero, that’s a problem. If you’re really in free fall to zero, that means you’ve fallen out of product market fit. That means you’ve got to get back to product market fit. If there’s externality, if you’re in weird spaces like parts of eCommerce or collaboration that are under stress, just bear in mind that as long as you don’t settle for three to 4% growth, as long as it’s just for a patch, you will still get to 10 million.

Jason Lemkin:

Redo your spreadsheet. You’re at one to seven, you want to grow 10% a month, but let’s say for the next five months, you average 4% growth. And then you get back to five and then six, and then you re-accelerate after that. Yeah, it’s going to take you a whole nother year or even longer to hit 10 million. And that may be a little soul crushing, but in the long run, it won’t matter as long as you have good growth rate at 10. All that really matters in SaaS is that you’re ideally doubling when you hit 10 million. In a way, everything mathematically is a prelude to, are you growing fast enough as you have a brand at 10 million as you grow from mini-brand to brand? So don’t let that extra time discourage the team or yourself too much, because you have something real. Only be discouraged if your growth is so slow that you maybe have fallen out of product market fit. And that’s a big flag, that you have to take action on immediately. So don’t get too discouraged, hire the one VP.

Jason Lemkin:

And then the third point I would say to everybody, I retweeted, or quote tweeted, today you can see it on my Twitter from the CEO of Salesloft. I invested in Salesloft pre-revenue. They’re at nine figures in ARR. And Kyle just said they beat their plan for this quarter, growing 54% and well into nine figures of ARR. So that’s a sales productivity space, you may be in other spaces. But my point is, there are a lot of reasons things can get tougher, but don’t let the Debbie downers on Twitter and others give you too much of an excuse. Unemployment’s at 3%, Gartner’s predicting SaaS spend will still grow 20% organically this year. These are really good times, and don’t let endless tweets about recessions give you an excuse to miss your number. If you miss your number, you miss the number, but be honest and do a root cause. Don’t let yourself off the hook because this is some terrible recession. There’s no evidence in SaaS this is a bad recession yet.

Jason Lemkin:

Look at Kyle’s tweet. I can tell you across my portfolio, there is some stress in some companies, in others, there’s none like Salesloft. But the world has not ended. And even when the world ended in 08, 09, I wrote this up on SaaStr a couple weeks ago, even when literally we were in the worst global recession of our lifetimes, you guys don’t even know how bad 08 or 09 was, unless you’re in market. Our customers still bought, back in the day, to Adobe EchoSign. Churn went up, but gross bookings really didn’t decline much. So if you’re looking for an excuse, and I’m going to write this post next week, if you’re looking for an excuse today, you got one. Twitter’s given it to you, these layoffs, but the truth is SaaS is still great. So be honest about why the downturn is there. Hire a great VP and don’t get too discouraged if growth goes from top tier to okay, because okay is still enough, ultimately, to build the unicorn. So thanks for the question.

Reilly Chase (@_rchase_):

Thanks, Jason.

Jason Lemkin:

You got it. I think I got time for one more, if anyone’s got one last question. Then we could do more next week.

Alex Stoica (@heyalexstoica):

Last year or so, automation was a hot industry. Do you see any more opportunities right now for tools like RPA or APIs that are freeing people hours or so?

Jason Lemkin:

Look, I’ll just step back and I’ll give you one answer. I think the venture market today is in various states of paralysis. And it is not as frozen as it looks. It is definitely frozen above a billion. When you see announcements of companies that have raised at a billion, two billion, three billion, I had an investment today that did an announcement like that. Those deals all happen before the downturn in the stock market. The unicorn market is frozen, the market from 300 to 600 million, the series B and C valuations are close to frozen. And the seed markets are open, but they have no appetite for bullshit.

Jason Lemkin:

So how does that relate to your question? Well, look, assume every… Like RPA, look at UiPath. Well, UiPath is an iconic company, but it’s market cap has cratered. Don’t worry. So my blathering point, and then I’ll tie it up [inaudible]. Don’t try, in today’s world, to position yourself in a hot space. There are no hot spaces in June, July, 2022. Crypto is not hot. RPA is not hot anymore. E-commerce was so hot. Zoom was hot. Zoom is not hot anymore. Even Collaboration’s not hot. Companies that are crushing it like Monday.com in Collaboration, their market’s being crushed.

Jason Lemkin:

The only thing that’s doing well today are wildly profitable companies like ZoomInfo, which you should follow, but there is nothing hot, nothing is hot. So what I think is hot today is authentic. Meet with investors with real numbers, no bullshit, real metrics, a real story. And at least at the pre-seed, seed and A, the capital is there, but don’t play games. Don’t do teaser decks. Don’t try to say you’re the next whatever. People don’t want to hear that, people want to hear that you’re doing something that matters, that you have real customers, why they’re happy.

Jason Lemkin:

And the last point I’ll make is, instead of being so tops-down like, “We’re the whatever or whatever.” And that still helps on an intro slide, be bottoms-up. “Here’s exactly how we’re going to get from one million to a hundred million ARR.” Be honest about it. Be direct. That’s what’s going to impress people today. And we can talk more next week about the markets, but they really are still wide open at the bottom, but paralyzed at the top. So be direct, be authentic, send a full deck, send the model and don’t play any games. These are not the right times to play games. So thanks everyone for the time. I appreciate all the folks that looped in. I learned how to do this well, and we’ll do it again next week. Thanks, everybody.

 

Published on July 15, 2022

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