Each year, tens of thousands of SaaS fans attend SaaStr Annual. And every year, Jason Lemkin, the founder and CEO of SaaStr, takes the stage to answer the audience’s most pressing questions.
For part one of this Ask Me Anything session, Jason covers everything you need to know about hiring your first VP of Sales, what he really thinks about AI, what the future of lead generation in 2024 looks like, and much more.
Let’s jump right into the questions.
Q: Should Product Marketing Work for Product or Marketing?
Product marketing is a weird art, with many over-indexing.
When Jason was an SVP at Adobe, product marketing was super important since basically every business on the planet was an Adobe customer, so they didn’t have as many opportunities to iterate on either product or marketing.
These days, CEOs are looking for too much magic from product marketing.
Product differentiation is important, but until you’re massive, there are only so many people to product market to.
Maybe we expect too much, even up to $10-20M ARR, and expect magic from product marketing.
Product marketing is neither marketing nor product. You’re not building a product or getting any new customers.
But ultimately, who should Product Marketing report to?
Whoever has the most experience between the two functions: either product or marketing.
Q: Should Early-Stage Companies Sprinkle in AI?
Whether you’re in the early stages of your company or you’ve been around, everyone is thinking about AI.
Should you sprinkle it in to compete?
In this interview, David Sacks talks about how 70-80% of investor time is spent looking at AI.
But “sprinkling” in AI isn’t the answer if you truly want to compete.
When asked what the best product is that Sacks has seen, he said there are a lot of good demos.
That’s very telling.
AI doesn’t magically make every payroll or SOC2 product better, and hooking ChatGPT into an app doesn’t magically change the game.
Every smart engineer today is inspired by AI, so give your team the freedom to dream up how AI could improve your product.
It’s still early.
AI could probably make everything a smidge better, but you want to be thoughtful about how you incorporate AI into your product so that it genuinely adds value.
Start with the big problem you’re solving and why it’s different, and thoughtfully craft a response where AI plays a role.
Q: What is the Future of Lead Generation, and How Do You Stand Out?
Lead generation tools do change, but the basic motions of sales and marketing haven’t changed much.
We do outbound, inbound, and a more sophisticated version of targeting buyers.
But the truth is you have to run the whole marketing playbook for real for it to work.
If you do a great weekly webinar, it always works. But only if you do it every week at the same time and never stop.
The same is true for podcasts, emails, drip marketing, etc.
There is no silver bullet.
If you outsource your content to some crappy agency that recycles ChatGPT, your content marketing will fail.
But if you create truly valuable content, it won’t.
The co-founders of Hubspot were at SaaStr Annual last year and said that for two years, they each had to write a blog post every single day.
People don’t do that today. But they should.
If you love podcasting, do a podcast. If you love writing, write. If you enjoy meeting people in person, fly out to prospects and big clients and take them out for a steak dinner.
It always works if you’re consistent in providing real value.
Q: As an Early-Stage Founder, I’ve Never Worked As Head of Product. Should I Bring in Someone More Experienced?
Many early-stage founders are both CEO and Head of Product.
One audience member was in this role, figuring out the value and vision of her product. Through that discovery, they realized they wanted to move more toward PLG and help customers serve themselves.
As someone who has never worked as Head of Product, she wondered if she should hire a Head of Product at this very early stage.
Bringing someone in means the product loses a little of its vision.
So what’s a founder to do?
Lemkin started out as a product-focused founder. Back in the day, PLG was called self-service or viral.
He wasn’t an expert but knew how to make a product incredibly simple to use and frictionless.
He did it, and anyone can do it if they’re a product-focused founder who uses software.
Too many founders these days at $1M, $10M, $20M, or more think PLG is a silver bullet. “Growth has slowed or stalled, so let’s go to PLG.”
PLG is like the Cloud. It’s nothing — an amorphous term that properly describes a set of actions.
There are no Cloud magicians, and you can’t hire a PLG magician.
You have to learn it yourself.
If you can’t force your tiny team to go to self-serve, it’s not in your DNA. If you have an Enterprise or sales-led motion with humans onboarding and handholding, that fails in self-serve.
Don’t look for the silver bullet. You can’t hire a magician Head of Product. You have to learn it and do it yourself.
You don’t want to let go of being Head of Product too quickly, and you don’t want to hold on too long.
Q: What are the Odds of Success for a Startup to Hit $100M in Revenue?
All startups are trying to figure out how to grow. Some are looking for the next VP of Sales, while others aren’t sure whether it’s possible to succeed at all.
There’s a stat floating around about how many startups fail.
The real question is…
Do you have great founders and great initial traction?
When Lemkin started investing ten years ago, his first five early-stage investments were wildly successful.
Pipedrive sold for $1.5B. Algolia’s valuation is $2.25B. Talkdesk is worth $10B, and he invested when it was just five people.
The point of this story is that successful startups bend the odds.
Some of these had a little revenue, and others had none. Many of them almost failed. But they didn’t quit.
If a startup fails, it could be because:
- They had good but not great founders
- They quit
- They ran out of money
- They blamed other people for their problems
Founders who never quit and get customers don’t fail.
It’s true that:
- $0 to $1M in ARR is impossible.
- $1M-$10M is unlikely.
- $10M-$100M is inevitable.
Even if you’re growing 30%, you’ll go from $10M to $100M if you’re patient enough.
The advice for founders here?
Don’t look to numbers for excuses. It’s up to you. “Find a technical and non-technical founder and build kickass software,” says Lemkin.
Get a good CTO and commit to understanding your market and staying in the game. You won’t fail unless you let yourself fail.
If you get at least ten customers, you’ll get twenty.
Q: When is the Right Time to Hire a VP of Sales?
“I’ve written this at least 80 times since 2012, but I’ll say it again because it’s true. If you can, the perfect time to hire a VP of Sales is when you have two scaled reps,” Jason says.
Ideally, you take founder-led sales to two reps that can hit quota.
When you have two reps, you have the beginning of an engine, and someone with sales experience can replicate it.
At that point, you’ll want to hire your first stretch VP of Sales, who can take you from three reps to 300.
What’s a stretch VP of Sales?
A first-timer. Not an SDR to VP, but maybe a director to VP. You don’t want to stretch it too far.
So many founders are impressed by previous companies. “Oh, she worked at Twilio or Mercury or Expensify. I need her!”
Sometimes, that helps a little, but we tend to over-index.
Cover up that LinkedIn history and find someone who has the following traits and history:
- They want to further their career — the ambitious up-and-comer.
- They’ve hired at least a couple of people.
Your first VP of Sales can succeed if they:
- Understand the pattern of your current sales process with your first two scaled reps.
- Close deals themselves.
- Learn from the previous two reps.
- Find and hire two other similar reps.
- Develop a playbook.
One note of caution — Be wary of the double stretch hire.
You can hire someone who has only hired two or three reps themselves, but if they’ve hired zero reps, it never works.
So many founders make the mistake of finding the number one AE who closed a lot and hiring them as VP of Sales.
That AE might take the job because they’re ambitious, but if they’ve never hired a quota-carrying rep, they might not know who to hire.
A double stretch hire might bring in mediocre candidates, and everything spirals.
How do you know if your first Head of Sales is a stretch or double stretch?
During the interview process, ask them who they’ll bring with them. Then go interview those two and see if they’ll come too (and if they exist at all).
A good VP of Sales is always recruiting and building a team before they need one.
Q: What Should Founders Be Thinking About Regarding M&A Over the Next 6-12 Months?
As a founder, there is an offramp.
It’s hard to build these companies, and in the beginning, you just want to build anything.
Once you cross $10M, you know you’re not Gitlab or Okta, and you won’t IPO.
It can be intimidating because it feels like you don’t have any options.
Here’s what’s changed in SaaS…
If you can get to $20M or more with decent growth and modest burn, you’ll get offers to buy you.
You’ll get cold calls from analysts, and you might not love the terms, but there is an army of capital looking to buy these companies because they become annuities.
Even if they never ship a line of code or keep customers happy, it becomes a five or ten-year annuity.
So, as a founder, you have this step-off point if you can get to $20M with mediocre growth.
You don’t have to be a rocketship.
In terms of corporate M&A, that’s murky because things are much better for SaaS than 12 months ago.
Things are better, but multiples aren’t great.
The average public SaaS company trades at 6x ARR. When Salesforce bought Slack, it traded at 25x ARR.
When multiples are low, big M&A is tough because it seems expensive, and targets don’t want to sell cheap.
No one who got to $8M in revenue wants to sell for just 6x ARR.
M&A gets paralyzed when multiples are low, and no one good wants to sell cheap.
Q: What is the Sweet Spot for a First Investment in Bootstrapped Companies?
Along the lines of what investors are looking for, many founders are wondering what that first investment might look like, especially if they’re bootstrapped.
Many folks who are bootstrapped misunderstand how venture capital works.
They think VCs don’t like bootstrapped companies, but nothing could be further from the truth. They love bootstrapped companies!
Why do investors like bootstrapped companies?
Because no one else is on the cap table.
Investors can buy more and control more, and it’s simpler without seven or eight other investors in the room.
But for that first investment, investors don’t want a slowing-growing bootstrapped company.
Jason just met a great set of founders that got to $15M bootstrapped, growing 50%. If they commit for another ten years, they’ll build a 9-figure business.
But no traditional growth VC will touch it. Not because they’re bootstrapped but because they aren’t approaching 100% growth at $15M.
You have to be an outlier like Atlassian or Qualtrics to win.
This year’s AMA with Jason Lemkin had plenty of takeaways. The key takeaways during part one include;
- When you aren’t sure who someone should report to, it’s almost always to the person with the most experience, even if it doesn’t make complete sense when looking at the org chart.
- If you’re going to do AI, you should do so thoughtfully. You don’t want to “sprinkle” AI into your product if it doesn’t provide value.
- The lead gen playbook is mostly the same, even if the tools change. Provide consistent value in whatever format you choose, and don’t stop. It always works.
- The best founders bend the odds to get from $0-$10, $10-$20 and $20 to $100M and beyond.