I did a version of this Old Me-Young Me post in both 2020 and 2018. SaaS just keeps getting bigger, so I like to update this every 24 months.
This is the conversation I would have had, wished I could have had, with my younger SaaS CEO self — Jason
Young Me, 2011: $100m ARR seems so very far from our $10m ARR today. Very far from today.
Older Me, 2022: It does feel that way. But what you don’t 100% get yet is that It Compounds. That is a force of nature in SaaS that is incredibly powerful. Even if you can’t feel it at the moment, not fully. In 2020, that same business will be doing $300m ARR. Possibly much more. I know everyone around you in a Unicorn and a Decacorn. But even if you just grow 60% at $10m ARR, if your NRR is decent, you will get to $100m in ARR. And more.
One fun last exercise you can do in '19 is to re-run your TAM
– Take your TAM today
– Assume overall Cloud spend doubles in 5 years (maybe more)
– Assume your Market Share grows 5x in 5 ys
– Assume you figure out how to 3x your ACV
Forward TAM: Today x 2 x 5 x 3 (30x)
— Jason ✨BeKind✨ Lemkin #ДобісаПутіна (@jasonlk) December 31, 2019
Young Me, 2011: But what if we can’t IPO? What if we’re not that good? The bar is so high to IPO. Everyone is at $200m+ ARR, growing 50% or even 100%.
Older Me, 2022: It’s OK. There will be other options. You will be able to sell to PE like Vista or Insight or Thoma Bravo or many others that will emerge in the coming years, or to many other SaaS companies that will IPO. You will be able to do a secondary sale of some of your shares if you continue to do well. Don’t worry so much. Also, once you cross $20m-$30m or so, new acquirers will get interested, even if they seem unlikely today. The Cloud is getting huge and everyone wants to be a part of the success stories, even the imperfect ones.
Young Me, 2011: I don’t really want to do another VC round. That will be 3 VCs on my board. I don’t want to give it all away, for it not to be our company anymore.
Older Me, 2022: I hear you. Then just hold out a bit to $15m ARR-$20m then. You could use the money now for sure, but you can also wait. Raise at a $150m or $200m valuation later on more favorable terms, and then you won’t need to give up a board seat. Raising money isn’t binary. You can also just do it later, like Atlassian and 1Password and Qualtrics did. None of them raised any money at all until $40m ARR.
"It can be a choice." pic.twitter.com/DUTY6A9AlN
— Jason ✨BeKind✨ Lemkin #ДобісаПутіна (@jasonlk) March 16, 2022
Young Me 2011: The competition just raised $60m+. They will outspend us.
Older Me 2022: Probably they will outspend you. Indeed, that is stressful. But even if they do, as long as your customers remain happy, your revenue base will still compound. That’s the thing. You will still get to $100m+ ARR in 5-6 years at the latest. 120%+ net revenue retention at $10m ARR with happy customers will drive you there. That’s just math. Even if the competition does just as well. And remember, if you are beating your bigger competitor, that means you have something special. Do more of that and worry a bit less about where you lose.
Young Me 2011: But a lot of my team is tired.
Older Me 2022: I know, I know. Recruiting is hard. I hate to tell you this, but actually, it never gets easier. But push through it. Go find a great COO or SVP to help you. Just one more leader will make a profound difference. It will refresh the team. And you. And try not to let anyone great leave, if you can. That’s the thing, no matter how big you get, one great leader can totally re-energize the team. And you. Go find her.
Young Me 2011: The other CEOs around me, like Box and Veeva and Yammer, are doing so much better.
Old Me 2022: I guess they are. Or at least it seems like it. But it doesn’t matter. You are doing plenty well to build a unicorn. It will just take you a bit longer than them. So what? It won’t really matter in the end. And you know what, you can build something bigger than some of them. 130% NRR compounds to something magical.
Young Me 2011: I’m worried we’ll lose it all. It all still seems fragile.
Older Me 2022: You might. But you won’t, if you don’t quit. In fact, every strong peer CEO you are working with today gets to $100m ARR or more. Every one. And you may not be the best of all of them, but you are plenty good. Plenty good enough.
Young Me 2011: I’m worried about founder conflict.
Older Me 2022: Indeed, this is one thing that can kill you. And it may, if you don’t fix it. But here’s the thing. You can also find a great co-founder later. At least, someone great to carry the load with you. Again, go find her.