Top Hack: Keeping a “Stub” Source of Capital in Your Back Pocket

One of the wonderful things that has changed in the years since I was running my own SaaS company is the rise of “stub” sources of capital.  Investors that, for a variety of reasons, are OK buying fewer shares than the average investor, and often, outside of the timing of traditional venture rounds. The most visceral example is how the top startups out of YCombinator Demo Day raise money.  For the top YC companies, there is always more investors than room to invest, and the startups are often fairly capital efficient.  This combo means they can leverage Demo Days to fine tune the exact amount of capital they want to raise. I wish I had had that luxury.  I didn’t have trouble raising traditional venture rounds.  But the gap in between rounds was tougher. When EchoSign was at about $6m in ARR and growing nicely, and cash flow positive,
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Top Hack: Keeping a “Stub” Source of Capital in Your Back Pocket

One of the wonderful things that has changed in the years since I was running my own SaaS company is the rise of “stub” sources of capital.  Investors that, for a variety of reasons, are OK buying fewer shares than the average investor, and often, outside of the timing of traditional venture rounds. The most visceral example is how the top startups out of YCombinator Demo Day raise money.  For the top YC companies, there is always more investors than room to invest, and the startups are often fairly capital efficient.  This combo means they can leverage Demo Days to fine tune the exact amount of capital they want to raise. I wish I had had that luxury.  I didn’t have trouble raising traditional venture rounds.  But the gap in between rounds was tougher. When EchoSign was at about $6m in ARR and growing nicely, and cash flow positive,
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10 Tips To Avoid SaaS Burnout

Burnout is a real risk in SaaS.

Not usually in the early days.  But as time marches on — It’s a huge risk.  

One piece of “evidence” — a lot of fairly successful SaaS startups all sell at about the same point in time … about 5 years in. Because the founders get just too burnt out around Year 4 … and as Year 5 rolls in, they’re running a bit on fumes, and … they sell.  Or take a bad venture deal.  Or just plain start to give up a little.  Often, as it’s just finally getting good.

My Top 10 suggestions to avoid long-term burn-out:

  • Hire than Extra VP — a True Owner. Don’t try to save a few nickels here. You’re responsible for everything as it is. But you have to own less as you scale. Find 1 or 2 or 3 truly great VPs that Continue reading "10 Tips To Avoid SaaS Burnout"

Why I Usually (Not Always) Prefer Customer Success to Report to the CEO

Ah, who should Customer Success report to?

It’s not super simple.

There are generally 3 options in the early and middle days:

  • CEO
  • VP of Sales (once you have one)
  • VP of Something Else. Finance sometimes. Product on occasion. Other “business” co-founder.

There are clear Pros and Cons to reporting to a VP of Sales. The Pros are:

  • Usually, a VP of Sales is your best manager. So usually, she can easily also manage Customer Success as well as all her reps.  You have too much to manage as it is.
  • Better alignment with VPS owning an ARR/MRR goal vs. just bookings goal. She’ll be better able to hit your ARR end-of-year goal if she’s also in charge of churn, and all upsell.  It’s always at least a little awkward to ask your VP of Sales to own the year-end ARR number, if she can’t also control churn.  They are Continue reading "Why I Usually (Not Always) Prefer Customer Success to Report to the CEO"

5 Advantages To Working With a New VC

We’re all attracted to brands.  We want Google and Salesforce and Amazon as our customers.  We want to be in the Cloud 100 and on TechCrunch every week.  We want to be on stage at the SaaStr Annual ? Brands do matter.  They are a proxy, albeit an imperfect one, for quality.  They at least help guide us on what vendors and products to pick, especially if we don’t have time to do the diligence ourselves. The same is true in venture capital, when you go to raise money.  There are good reasons to take money from the Top Brands in VC.  Their brand will accrete to your brand.  They likely have better networks.  And maybe even most importantly, later stage VCs all want to write bigger checks into startups funded by the VCs with the best brand at each preceding stage (pre-seed, seed, A, B, C, etc.).   Look Continue reading "5 Advantages To Working With a New VC"

Your #1 Management Hack: Weekly 1-on-1s

When I catch up with founders on the march from $1m to $10m in ARR, the number one topic is always recruiting.  Where do i find a great VP of Sales, Marketing, Engineering, Product, Customer Success, etc. Sometimes, it seems like simply building a management team is all you have time for.  But it’s not.  It can’t be.  It has to just be the start of a journey together. Once you finally build out your first management team, the last thing you want to do is lose it.  Or more subtly, for your team not to perform as well as they could. The question I always ask founders here is:  Do you do 1-on-1s with your VPs and direct reports?  I’d guess 90% do not.   Most of us end up with once a week staff meetings.  That’s OK.  But it’s not a substitute for a 1-on-1 with your VPs.
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What You Want to Hit: 50+20 at 10 (million in ARR)

The first SaaStr post that got widespread distribution was this one — “Want to Understand SaaS?  If Nothing Else — Understand That It Compounds.” The excerpt here: “What does this mean, that SaaS compounds?
  • It means it’s really, really hard to get revenues going.  You close a customer for $120 in annualized revenue, you only get to recognize $10 of that a month.  A lot of work for ten bucks.  Think of trying to get a train out of a station with a very small engine.  Tons of work, tiny revenues to start.
  • It means you’ll really have to struggle to get to cash flow positive.  Unless you get a lot of annual prepayments, cash will lag.  This will be painful.