The truth is, it’s not just VCs that lowered their standards in the boom of ‘20-‘21
So did startups
Many mediocre hires were made to fill slots, reference checks not made, etc
If there really is a slowdown (and I’m not sure will be in SaaS), folks will have to work harder
— Jason ✨BeKind✨ Lemkin #ДобісаПутіна (@jasonlk) May 23, 2022
So I’m not yet convinced times are really tougher for SaaS companies. Yes, public stock prices are way down, which creates a lot of pressure in general and on venture fundraising in particular.
But buyers are still buying more SaaS than ever, far more than just last year and far, far more than even 2 years ago. These are good times.
One thing that clearly happened through in the ‘20-‘21 boom was intense competition. VCs funded startups in a day, with limited diligence, sometimes at 100x revenue for the hottest of deals.
And startups … well, they moved pretty darn quickly too.
What we used to do, from ‘05-‘19:
- Do 30 interviews per position, ideally
- Find 3 good ones
- Do reference checks, on and off sheet
- Have the candidate spend a bunch of time with the team
- Make sure they really can do the work, not just talk to the talk
- And only then … make an offer to the top choice of the 3
That worked pretty well, but even there, we all made a lot of mistakes, both at the VP level and the IC level.
Then when everything super boomed in 2H’20 and ‘21 it went kind of like this:
- Do 3-4 solid interview for a position, not 30
- Anyone decent was going to get 10 other offers this week
- So immediately make an offer to any decent-seeming candidate
- Often with zero reference checks or diligence
- Little work was done to prove a candidate could do what they claimed they could, as long as they seemingly did it in their last role
- For VPs, the process was a bit slower, but often not much. Because they all had 10 other, better funded offers, too.
- And everyone got so tired with the accelerated hiring frameworks, that even more corners were cut than that
This is going to leave a lot of damage, especially if times get a little tougher. If nothing else, it’s important to be aware of.
Everyone talks about making 10x hires, and each hire being better than the last. But I saw most of the startups I work with cut corners in the Boom Times of 2020 and 2021 just to keep up with hiring. Even the very best VPs of Sales I know admitted to lowering the bar a bit on their sales teams, when I quietly pushed them. And increasing comp at the same time.
If things get a bit harder, those folks probably won’t have a place on the team anymore.
And if nothing else, ask yourself if you’d be better off with a few less hires that were better. Probably. So maybe it’s time to get back to the Old Ways, with more interviews, more time, and real reference checks. And losing a few candidates along the way due to that process. It’s probably just fine.
A related post here:
Image from here.