So I wanted to kick off a new series that productized something we’ve been doing for 10+ years at SaaStr … getting top leaders share their mistakes. So the rest of us can get to $100m+ ARR faster, with less stress and more success. We’ve done a ton of this content over the years, but never on a consistent basis, so I reached out to one of SaaStr’s longest-time contributors, Nick Mehta, CEO of Gainsight, to reflect on his top 10 mistakes taking Gainsight from a tiny startup one doing well more than $100m ARR.
I really thought this first one was truly excellent and hit home. Take a read. — Jason, ed.
“I never make the same mistake twice. I make it 5 or 6 times, just to be sure.” -Random quote I found on the Internet
If that doesn’t describe the CEO experience, I don’t know what does.
In February 2023, I hit my 10-year anniversary (or “Gainaversary,” as we say) of running Gainsight. After receiving my gold watch and Silicon Valley AARP card, I had a chance to reflect on a decade of community-building, cheesy music videos, and #CustomerSuccess.
But much more interesting than the short list of Kodachrome-colored successes that are easy to recall are the gloomier-toned failures I try to forget. While I struggled to produce 10 things I got right in a decade, the list of mistakes flowed much easier. Here are my 10 greatest (worst?) hits, in no particular order:
Mistake: Not holding my leaders to the highest standard
One of our company values is the Golden Rule—treat people the way you’d want to be treated. As such, we always try to find the best in each person at Gainsight. Often, this means working hard to see if they aren’t succeeding in a given role, whether another one would be better. Many of our most important Gainsters in our history are ones that rotated from a suboptimal job into one in which they thrived.
Early on, I tried to apply the same mantra to leaders. We should give them a chance. They are humans too. Maybe they are misunderstood. Maybe they need more coaching. Maybe they just need more time. And those maybes could be right. But what I learned, after years of procrastinating on tough moves for our leadership team, is that the leaders’ teams suffer greatly through that inaction.
Lesson: I need to hold our leaders at Gainsight to the highest possible standard. This means it’s really tough to be a leader at Gainsight, and I’m unapologetic about that. I wrote up a document of what I expect from our leaders, in extreme detail. I walk them through this when I hire them. And over time, I got better at parting ways quickly when we weren’t aligned. As the saying goes, “to those who much is given, much is expected.”
Mistake: On the other hand… not betting on the team that got me there
“Everything will be fine once we get a new head of [X]” -every startup CEO ever (also me, frequently)
When you launch a company, the initial team is usually whoever you can get. It’s typically a bunch of scrappy underdogs looking to prove themselves. At some point, either through external prompting or internal contemplation, CEOs think “maybe I need to ‘upgrade’ the team.” This thought is usually accompanied by a vague statement like “this person isn’t scaling.”
Of course, sometimes that is indeed true. There are many stories of legendary exec hires. Over the years at Gainsight, we’ve had a few—our first Chief Financial Officer and our first Chief People Officer, to name two—that had a massive impact. But much more often, I swung and missed. I hired the person with a great resume but who didn’t get our business, culture, or community. And inevitably, these folks ended up not working out, despite being very talented in other settings.
On the flip side, we’ve had incredible success with internal promotions and “up and comers,” including our first Chief Marketing Officer (started as a Director of Marketing, with no marketing experience), our first Chief Operating Officer (started in Business Operations), our third Chief Revenue Officer (started as a sales rep), our current Chief Financial Officer (started as our head of FP&A) and our current Chief Customer Officer (started as an enterprise CSM).
Lesson: Many times, I thought, “I need to hire for the role I’ll need 4 years from now.” In reality, I needed to bet on the person who had believed in Gainsight for the last four years.
Mistake: Not scaling based upon leading indicators
We’ve had 3 periods in history where we scaled up way too fast:
- Early on, when we thought the enterprise opportunity for Gainsight’s Customer Success product was huge after closing *1* enterprise deal!
- Later on, when we thought a new acquisition of raw technology was ready to scale (it wasn’t – it is now)
- In 2022 (like many companies), when we misread the “COVID bump” of 2021 for a secular change in software
In each case, the mistake wasn’t being aggressive. To run a startup, you have to make bets. But I should have looked more carefully at leading indicators and had a clear system to evaluate if we were on track or not. Instead, I set a big sales number for each of those years (based upon the biggest trap ever—a sales rep capacity model) and totally missed each time!
Lesson: “Fire bullets, not cannonballs,” as Jim Collins says. I need to constantly run small experiments and scale only based upon clear leading indicators.
Mistake: Not standardizing pricing and related systems early
Every enterprise-oriented startup, including Gainsight, can fall into the same trap. For this one deal, we just need to do X. Eventually, you end up with 2000 contract types for 1000 customers. And if you didn’t invest proactively in systems like CPQ early, you create a byzantine mess that’s impossible to scale. This causes many problems:
- Complexity for customers
- Frustration for client-facing teams
- Difficulty in analyzing the business
Inevitably, companies like Gainsight then end up going through a massive project to “simplify” policies, pricing, and complex systems. But no matter what happens, it’s almost impossible to get back to the level you would have had if we had done things right from day 1.
Lesson: Be REALLY careful about custom deals and make sure they are worth it. Invest in back-office systems early. BTW, this helps you have better leading indicators for decision making (see previous mistake!)
Mistake: Not investing in Digital Customer Success early
The cobbler’s kids often have no shoes. In our case, because we focused on a super high-touch experience for our clients, we had a high-touch CSM-led model. This worked great for many of our clients – and led to very strong Gross Retention – but made it harder for us to scale over time.
They say, “If you have a hammer, everything looks like a nail.” The same can be true for CSMs and this is why company CSM teams often get stretched too thinly.
Lesson: Invest early in Digital CS capabilities for all customers – like self-service, community, in-app engagement, telemetry, digital journeys, and product-CS feedback loops.
Mistake: Not parting ways well always
In startups, relationships end. Teammates and clients will leave. It’s tough, but it’s part of the circle of life.
Over the years, I adopted the philosophy that I want to treat people well in all phases of our relationship, aligned to our Purpose “to be living proof that you can win in business, while being Human-First.”
But I can remember two situations (early on) with teammates and two with clients where I didn’t practice what I preach. In the teammate case, I made the folks leaving feel guilty—“How can you do this?” In the clients’ case, I didn’t take it well and burned two relationships in the process.
Lesson: End every relationship in a Human-First way. When a teammate leaves, my only reaction is (1) thank you for what you’ve done here, (2) congratulations on what’s next and (3) what can we learn to continue to get better. When a client leaves, we want to help them on the way out, because they often come back.
Mistake: Not being prescriptive enough, early enough
In the early days of Gainsight, I remember clients asking us, “How should we implement your product?” TBH, we didn’t know, since we were still figuring it out. So our response was something like, “I don’t know—how would YOU like us to implement it?”
That works for a while with early adopter clients. But eventually, you run into problems:
This back-and-forth leads to long time to value.
Every client uses you a little differently.
It’s hard to ramp new teammates in CSM and PS.
Since clients use you differently, they can’t always use new functionality that you develop.
And so on.
For us, one of the best things we did (which we should have done sooner!) is create a Prescriptive Methodology. If you’re a Gainsight nerd, at various times, this was called V3D, Elements, and now O2. But the spirit was the same: We are the experts on how to get value from our software. Lead our clients to the outcome.
But this process was also hard:
We had to get alignment across Product, Marketing, Sales, CS, and PS on what our end-to-end value (from 30K feet to 30 feet).
We needed the right granularity for each stakeholder.
We had to find a way to keep it updated.
Most importantly, we had to coach our teammates (from Sales to PS to CS) to be “brave” (in the words of the great Allison Pickens) and tell our clients the best way to get value.
Lesson: It wasn’t without its flaws, but Prescriptive Methodology, to me, is one of the most critical step functions for any SaaS company in a new category.
Mistake: Not starting Act II fast enough
Gravity is brutal if you fall while skiing. And growth deceleration—startup gravity—is equally painful for entrepreneurs.
In the early days, you work off small numbers. Your new logos grow rapidly. You have a small base, so churn isn’t a factor. But eventually, you hit the frontier of your initial Total Addressable Market and your new logos per year flatten out. Meanwhile, even with a fixed Gross Retention Rate, your base grows, so your churn dollars grow year after year. This toxic combo can turn a hyper-growth company into a stalled one in an instant.
This stall will happen to all companies eventually. For a lucky few, it happens past $1B of ARR. For many, it happens between $50M and $100M. And for some, it occurs before.
For Gainsight, we started seeing a slowdown around $50M in ARR. Our new bookings stopped growing, as we were a huge chunk of the market for Customer Success Platform software and thus were TAM-bound. But we had no second product – no “Act II” in sight. So we kept trying to scale stuff that was maxed out – see a previous mistake for more!
Eventually, we expanded to become a platform company (adding on Product Analytics and Customer Communities as part of our solution) and this re-accelerated our growth. But along the way, we slowed down, so our value and attractiveness did to investors, too. As I’ve written about before, we had a “Series F” that was a true F— every investor turned us down!
In hindsight, we should have started much earlier. We should have had a pipeline of organic and M&A products to expand into adjacencies. We should have understood the limits of our TAM and seen the wall coming.
Lesson: Track your TAM vigilantly and start your second act— organic or M&A—well before growth stalls.
Mistake: Not being patient and not ignoring FOMO
Every mistake I made over time can be attributed to one issue: lack of patience. And that impatience ties to one human vice: Fear of Missing Out.
Over the years, I saw hundreds of companies raise money at valuations bigger than ours, go public in spectacular fashion, and announce massive growth rates. Every time, I thought, “Why not us?” And this comparative emotion drove me to many of the ill-conceived decisions above.
Nearly every premature scaling, pressured exec hire, forced customer deal, in hindsight, turned out to be a big mistake. We had to unwind the scaling before its time. The execs that we hired too quickly moved on. And the customers that bought too quickly ended up churning.
And guess what? Many of my FOMO peers flamed out too. In spectacular collapses, some IPOs went bust and growth rates decelerated off a cliff. Don’t get me wrong—many did better than us. But many more fell off the map.
Lesson: In many markets, the patient tortoise beats the over-anxious hare. Stick to your values and vision and, in the words of Lin Manuel Miranda from Hamilton, “Wait for it.”
Mistake: Not being myself
Our first Pulse conference – which became the industry event for Customer Success – was in a small San Francisco ballroom in 2013. After the initial event exceeded our expectations, I decided to up my game for 2014.
I hired a speaking coach (who was great in her own right, despite this story). She watched me speak and said, “You’re too informal, and you speak too fast. Try writing out your speech and reading from a teleprompter. Try to have more gravitas.”
So at Pulse 2014, I became a “grown-up CEO.” I wore a boring suit. I read from the confidence monitor. I spoke slowly in a measured pace. And you can see the results. Pulse 2014 was by far my worst keynote of all time.
The next year, I went back to my “high energy,” “frenetic,” “cheesy,” yet authentic self. And then at Pulse 2016, I decided to take another leap. In our closing keynote, I channeled Brene Brown’s vulnerability and talked about being lonely as a kid—eating lunch alone every day from kindergarten to twelfth grade. I shared that I still feel insecure about whether people like me to this day.
After the speech, I received tons of accolades, but a few Gainsters said, “That’s not very CEO-like. I want my CEO to be tough and not have issues.” I wrote about the experience here.
But thankfully, I leaned further into myself over the years, talking about sadness, loneliness, my dad’s dementia, fears about my oldest daughter growing up and, of course, Taylor Swift. I realized that the best version of myself is myself.
Lesson: Being yourself is pretty powerful. Nothing can hold you back if you find the confidence to show up with authenticity and vulnerability.
Writing this post was like a painful therapy session. I looked in the mirror and saw all the pimples and acne and hair loss and graying of a flawed human being. But over the years, I’ve grown to love this version of myself because I know it’s all I can truly be. And my only goal is to keep making mistakes and learning from them—after at a minimum 4 attempts!
Published on April 2, 2023