Harry did a great deep dive with Russ Fujioka, President U.S. at Xero. Xero seemed to come out of nowhere a few years back, with a seemingly strange New Zealand IPO, followed by a big investment by Peter Thiel … but there was a method to all of it. Fast forward to today, and Xero is doing nine figures of ARR selling to small businesses — not an easy thing. Let’s learn more straight from Russ and Harry. Check it out here on iTunes or by clicking the above or block images to go to ProductHunt. — Jason, ed.
David S. Rose‘s answer — just tell the new investors. If they are true angels, e.g., small checks at a Demo Day, they may not care. All VCs will care. They’ll usually ask you to re-vest all or some. As long as you are upfront you are currently 100% vested, but know it needs to change, it won’t be an issue. Sometimes, if it’s a small round, a small VC may “punt” and let the Bigger VC in the next round deal with the issue. That may be OK but again only if you are transparent up-front. Also, bear in mind — this is a good chance to fix a situation. The more committed founder strongly benefits when Continue reading "I’m a fully vested founder, what challenges will I face raising our seed round?"
When a great SaaS business starts to come together, and crosses Initial Traction ($1-$1.5m), growing nicely (8-10%+ Month-over-Month Growth) … often times, the founders start to see the first bit of real economic returns on the model. It finally starts to make sense, this SaaS stuff. As you cross $2.5m, $3m in ARR, you can start to see a path to real cash flow and financial independence, even though you aren’t there quite yet. Even if leads are still a bit lumpy, outbound is still stretching itself … you at least learn how to close by this point. It’s repeating, and repeatable … finally. And often, if you are capital efficient, your marketing cost will be close to $0 at this point (you are barely spending anything to acquire most customers), and your sales costs are pretty predictable. Your Magic Number is often well under 1.0 — you often
Continue reading "Your Sales Efficiency Will Probably Plummet Toward $10m ARR. Plan For It."
Continue reading "Our VC is encouraging us to hire aggressively and increase the burn rate. Should we listen to them?"
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- #1: Full-time sales rep at $8k-ish MRR. Should have hired two. Should have hired him even early. Hired once we were closing > 1 new, non self-service customer a week.
- #2. A great, paid, full-time-ish intern. A great one is a terrific force multiplier.
- #3: VP of Marketing. I hired at $20k MRR. Should have hired even earlier. Because all she had to do was improve our process and get us a few other good leads to pay for herself.
- #4: Head of Customer Support — a veteran. I can’t believe I waited so long. This made our customers 50x happier, and I didn’t have to force everyone in the company to take so many shifts Continue reading "What were the first five hires after your startup reached product market fit?"
- It’s pretty common in start-ups to pay commission on all years under a multi-year contract IF all the cash is received up-front, and the contract is uncancellable. Generally, the commission will be smaller for the second+ years, but only a bit … and not always. This is a great deal for start-ups. Pull Y2 and Y3 cash in early!! You will probably trade a little MRR off here, b/c of a multi-year discount, but it’s almost always worth it for start-ups.
- Start-ups rarely pay material commissions on multi-year contracts if only the first year is paid up front. Maybe a little, but not too much. Cash is king and the customer remains “at risk” no matter what the language says. And really, for start-ups, this can be a bad deal because the rep will have Continue reading "What’s more common – paying commission on first year annual contract value or on first year plus subsequent year contract values for the initial term?"