Detailed Notes from SaaStr Annual 2017

Bill Bing
Bill Bing
Feb 10, 2017 · 67 min read

This was my first SaaStr Annual conference and I took as many notes as possible from the excellent talks and panels I attended. The purpose of this post is to share my notes from the conference with those who couldn’t make it. I intend to write a “Lessons Learned” summary of some of the key points from the conference at a later date, but figured there is value in an unabridged notes recap as well for some people, and that’s what this post is.

Warning: This is long, so I tried to organize the information by subject and session to make it easier to filter and find. Each new session or panel is in bold and questions posed are in italics. I put an asterisk (*) in front of my favorite sessions.


*Twilio, The Inside Story — 1st developer-centric company to go public. Everyone needs to deliver on great customer experience regardless of your business. Communications is a major part of that experience, and Twilio facilitates that and rides that wave. Jeff thinks of developers as a new entry point to get into the market, not a new market. Ship a product before you can start the enterprise sales process and then use a roundabout way to get into customers that is more efficient. Similarities to Stripe story.

Use marketing to spread general awareness — for example Twilio’s sign on the 101 saying “Ask your developer”. NetSuite billboard another example — when choosing what to replace QuickBooks with Jeff immediately just thought of NetSuite vs. Intacct or others.

Jeff described the process of product development/iteration where you hear feedback from customers that your product needs certain features and you write them off initially, but eventually you realize that for certain customer segments you need these items (for example, enterprise vs. SMB customers). Jeff doesn’t believe in freemium for their product because usage based pricing can be incredibly inexpensive. Customer revenue size results in how, when and where Sales gets involved.

Early sales team and culture was hard to develop because Engineering was the dominant discipline initially. Jeff felt he had to go overboard to support Sales and say it was important. It was really hard to pull off and to have a balance, as most companies choose one dominant culture (e.g. Salesforce: Sales, Google: Engineering). Pricing tactics are tough as is Sales compensation when you have self-service customers. How do you associate Sales activity with revenue? Management struggled to credit Sales — where does the “sale” occur? At what revenue number can the Salesperson declare victory?

Jeff as CEO was doing the Sales for the first 50 biggest customers and didn’t realize that he was really “doing Sales”. That was the realization he needed to hire Sales people and not just support, customer happiness type people. Myth that product is so good it doesn’t need to be sold. Jeff says you can get started, but if you want to get to a big number you need to do more than just put products out there.

Agility discussion — how to manage multiple product lines.

How do you support Voice and SMS? Launched Voice in 2008, then started to hear from customers they wanted to be able to text as well. Twilio launched SMS about 18 months later, realized it was a completely different market with different use cases, etc. but it came from following customer needs. Advice to “find a niche get rich”, “focus focus focus”, etc. is bad advice according to Jeff. Every time you ship a product it’s a bet that you’re solving a customer problem and that if you iterate enough you’ll get it right. It’s a probabilities game, so the more at-bats you have the higher chance of success with one of them.

Believer in the power of a small team to build a product. You need 5 engineers that know the customer and can prioritize well, not 100. They had a series of discrete teams, break problems and products down into small enough chunks for 5–10 person teams to tackle and own.

When do you shoot something if it’s not working? They have never killed an API they built, but they will repurpose teams and change priorities. Don’t want to damage trust of customers by stopping supporting an API some use and like. Agility with resiliency — a lot of companies believe they can be agile but they’re going to discount quality (i.e. move fast and break things). At Twilio they ship 100 production deployments a day. Small teams approach has been critical. Dev teams are responsible for the products and can’t hand them off to someone else to own. They train everyone on an OMM (Operational Maturity Model — monitoring, security, architecture, etc.) and then test them to see how strong their knowledge is across the board. Lots of buy-in and pride for developers.

Twilio uses Developer Preview, Beta, GA phases. GA should be a signal that we stand by this as an operationally excellent product. In early days you don’t have to make that claim, but once you figure out you’ve built the right thing and customers want it, you need to harden it, prove that it is robust and then you get to call it GA. Then communicate what you do internally to customers.

Jeff is spending a lot of time meeting customers now — at least 3 a week — not doing speaking gigs and PR. He feels that sets the tone for the company on being customer-centric and also has the maximum impact on performance.

*Veeva, Biggest Vertical SaaS Success Story — Peter Gassner, CEO. Pharma CRM initially, 10 years ago, in 2010 expanded to content management and some newer products in the data area. Still all specific to Life Sciences. Peter had been early at Salesforce and other SaaS companies. Studied enterprise software for 30 years (starting at 20 at IBM), never followed the herd, and enabled him to spot trends. Everyone thinks you’re wrong when you’re early but Peter has a knack for doing that. When you get that thing where you rationally believe something will be great and 99/100 people think it is bad, don’t get discouraged, that’s when you’re on to something.

After Salesforce he retired a bit, then became a Product guy and ran into some folks who wanted to fund him. He figured they’d be able to hire a CEO if the Product did well. Found out he enjoyed being CEO and was doing a good job, worked on improving himself. Knew the likelihood of success was low but it wasn’t going to be due to lack of effort. Never had a plan that extended beyond 90 days in the first year and a half of the company. Why bother when you could be out of business? Only quarterly plans. Then graduated to annual plans, then later graduated to 3 year plan. Just now working on 5 year plan.

Less than 500 customers, mostly big deals (8 figures). Secret to defending pricing is to sell yourself first. If you’re selling something YOU get to set the price. If they don’t want it it’s not your problem. Otherwise you’re always floundering and lack confidence in deals and negotiation. Not knowing what something is worth is not OK — the price you set is self-fulfilling about quality of product. If you make it cheap people won’t think it’s good. If it’s expensive you can’t accept problems because it’s a premium product. The better your team, the more you should anchor high and it starts with the CEO. It must have the value that you assign.

You can’t let uncertainty of the market affect your plan. Need to plan with confidence and then adjust if you end up being wrong vs. letting uncertainty cloud your plan. Need to be aggressive as well. Put a number on things. Don’t be reckless though — be honest about your capital and intellectual capital to achieve your goals.

Raised $7 million but only used $3 million. Had pressure to spend more — investors said he “just didn’t get it, too conservative.” He disagreed and did things his own way — with discipline. Sometimes lack of capital is an excuse but it depends on the business. Scarcity of capital can help you — just need to have money to hire dedicated people to work on the problems. Get to a dozen great people as quickly as you can and then worry about what comes next. A dozen is good multidisciplinary number, cohesive group.

Don’t waste any money on hiring, be frugal, get the product out quick, sell it for a good price to as big a customer as you can, don’t give away your people’s time (i.e. Professional services). Rule is don’t give away their work. If people aren’t worth the customer paying for them, they aren’t worth having. If the deal tanks because of that, so be it, because they’re not giving away professional services as a RULE. Typically companies lose money on services, but Peter disagrees with this approach. You have to look at yourself and assess why your value is so low that it’s not worth more than the cost to deliver support and services. Whatever your product should come with, don’t charge extra for that, but the other stuff beyond the core you need to charge for.

Sort of like a drug to be non-profitable. If you get on the drug it’s hard to get off it. It’s not important to do everything people say, just do what makes sense for you. If that’s being profitable so be it.

Does headcount drive revenue or revenue drive headcount? Veeva believes in the former, but intelligently and conservatively once they know the formula for what they would generate. Rather leave top-line revenue on the table because a desperate rep will do desperate things and that will have a negative trickle-down effect on the customers that are good for the rep’s comp. Quota comes from annual plan. Don’t over-cover with reps or they will grind to close bad deals to hit quota.

One of Veeva’s solutions is to help people collaborate on clinical trials. A customer might have 4,000 people working on it and they need a system to make them efficient and get the drug approved. That cost would be hundreds of millions of dollars, so that problem requires a high price. Focus on value. What do you solve and what is your impact and then sell that value. Veeva makes life sciences more efficient and that makes a real difference.

Initially the mission was about “let’s not go out of business this quarter.” Now they are growing into their mission to have an impact in the world and deliver on their purpose. The transformation has been becoming more mission driven over time as they actually are delivering on goals. Becoming a multiple product company was a big decision — either crash the car or become a billion dollar company. Now the challenge is solving bigger picture challenges.

Execution is underrated. He likes trains to run on time. His Dad always said “good enough is not good enough”. As you get to scale, 200 to 300 people, it’s about engaged teams working together. How does he know who is supposed to do what? It’s managers trusting other teams and managing their own team. Execution matters most, he spends 90% of his time executing, what am I going to do today, this week, and this month? Write it down and measure yourself against it. That’s what matters.

Meets with people in adjacent areas that are outside his field but still starting something and focuses himself to talk to them and learn about what they’re working on. Adjacent results in creation of big new ideas. Chemist talking to physicist can create something special; chemist talking to chemist not as much.

Conversation with Trello Founder & CEO Michael Pryor — The team built a bunch of products, dev-centric culture, they built the product that became “Trello” during a dev days period. Saw their team using sticky notes instead of other tools, was impetus to build Trello to handle task management and share the worklist. Product idea came when they built something they needed for their own purposes. Then extrapolated it into something for everyone else (i.e. not just developers) and kept the terminology for product management out of it. Kept it simple — sticky notes on a wall other people can see vs. teaching new language and making it about project management opened and expanded the potential market.

Raised money because they had a bunch of projects they needed to do at the same time and they didn’t have enough people to handle the workload. Discussion around Freemium model, user acquisition and conversion tactics.

After Marketo — 10 things I’m Doing Even Better the Second Time — Shasta Ventures and Engagio CEO (formerly CEO of Marketo).

Background: John focuses on defining and creating categories and then building a leading company in that category. Engagio is establishing the category of Account-based marketing and then building a leading company there. Marketing technologist. Studied physics, got into MIT PHD program, deferred. Went into management consulting and marketing instead and never looked back.

Marketo built a revenue engine where Marketing was responsible for 80% of the leads that Sales closed, which drove a ton of very efficient growth. CEO wanted to allocate more resources to create more leads, but couldn’t just blog more. They needed to work with accounts instead which led to the idea for Engagio. Before they were fishing with nets, now they’re fishing with spears — reaching out to them proactively rather than putting content out there and seeing what comes to you.

Left Marketo because it stopped feeling like his company. Engagio is 2 years old, has over 100 customers and $2.6 million of ARR. Trying to replicate some of what worked at Marketo. They identified a great market. He found something that existed, helped define and amplify it. Category with existing buyers and competitors but competition wasn’t so aggressive that he couldn’t enter it and win. Still able to be defined but not validated or created. Also need great Product and Sales and Marketing execution.

Doing differently this time: trying to build a great company with teamwork as the ultimate competitive advantage. Smart companies vs. healthy companies. A healthy company with average smarts will beat a super smart company with only average health. Creating core values before incorporating — at Marketo they didn’t do that until $20M ARR. Freedom and Transparency, Happiness and Positivity, Excellence and Execution. Lack of strong values and culture made it hard to retain people at Marketo post-IPO.

Also focused on teaching his team how to be a good team and work effectively. Pyramid with trust at the base, then conflict, then debate, then clarity, then commitment, then accountability, with results at the top. Whole team needs to reinforce. Put company needs before department needs before personal needs. Make sure core values get pushed into operational items and processes like hiring, perks, development, raises, and office environment and so on. Had “Culture Day” to establish shared mission and then brainstormed about these topics. Then everyone had to join a team to help create processes. Going to do again on second birthday now that they have grown.

Focus on quality meetings. Always fantasized about quitting during horrible meetings. So they emphasize teaching how to have good meetings. Good meetings have conflict and debate. Fundraising strategy — raised $32 million in 18 months. The problem is that they had to raise at high valuations based on his reputation as a CEO, so now he needs to make sure the money lasts long enough for him to achieve business metrics that will enable growth to the point where they can raise at a valuation their performance justifies. Still using initial $10 million, not into second $22 million raise. Benefits of this strategy are less risk and dilution and distraction.

This time around he has a financial roadmap. There are metrics governing the business the guide growth objectives. Created a market map to understand all the players in the category sorted by different characteristics. Helps with positioning. Also focused on larger enterprise deals this time around vs. SMB with only a couple of users. Goal is $40K ACV. Building enterprise muscle earlier to make this work. Finally, using their own tools to drive outbound sales.

How are goals different after you have 1 win under your belt? Not just about bigger financial outcome, it’s about making Marketing and Sales more successful broadly speaking. There is a desire to prove that he’s more than just a good marketer, also a good CEO. Prove Marketo wasn’t a fluke. Going for something big as a couple million won’t make a difference to him personally.

Are expectations elevated and pressure higher? Way better to be second time that not. Market respect, help with fundraising. More pressure on himself, fear of failure, what if he has to go be a CMO somewhere if this fails? Difference in being CEO is that he has more doubt. Trust in Marketo CEO enabled him to punt some of the worry and doubt to him rather than bearing it all himself. Very self-confident person, and that has helped a lot and is very important for any CEO.

Advice for would-be CEOs? What should they learn to become CEO? Skills side, people talk about Product skills and Sales skills. Sales come more naturally to CEOs than Product. Learn everything you can about SaaS companies if you want to build one. Finally start thinking about your team now — who would you hire for which roles. Create a wish list of people you’d love to hire at the right time. Building your team is one of the hardest things so if you can identify those people and nurture the relationships over a period of time it makes it a lot easier.

How do you manage work-life balance second time around? People have a set point for how hard they work. Co-founder also has kids, so culture isn’t work until 8 or 9pm, but there’s a culture of work intensely when you’re in the office. Would like to work out more, but that’s what gets lost. He takes PTO for trips more so than he did without kids. Role models something nice for the company.

What advice for building a board and choosing investors? Wasn’t able to bring in Shasta. Trust is the most important factor. Had the luxury of looking at a lot of different firms. Ended up choosing people he knew and trusted most, not best terms. For board composition, he thought about 4 roles: 1) strategist to help navigate big issues and identify blind spots; 2) the operator who has been there done that; 3) networker who knows everyone and can make intros and help with hiring; 4) fundraising specialist who knows the investment industry well and can guide on tactics.

Zendesk from Day 0 to Today: Lessons Learned with Zendesk CEO — Customer service and engagement company, 100K business, 10 years, $312 million in revenue in 2016. CEO wrote a book on his journey called Startup Land. Early on, part of you is incredibly confident about the potential and the other side is you can’t even pay your bills — reflects the conflict of being a founder. Still feel like the biggest struggle and opportunity is ahead of them, always a new mountain ahead to climb.

0 to $1 million — Founder dynamics, dealing with relationship challenges, lack of complete commitment and trying to really believe in the company. Came from an area without a startup tradition (Copenhagen) 18 months to $1 million ARR and never found anyone who believed in the idea locally. Once they connected to a German angel and US VCs they didn’t fully have confidence. Having a helpful angel who isn’t pretending to be smarter than you and second guess you was hugely valuable. Got caught in the 2008 downturn and made it hard to raise money, but helped build resiliency and also got rid of a lot of competitors who already had high cash burns. Moved the company to SF in 2009.

Zendesk was part of the first wave that was all about user experience. Removing friction and complexity from the application, making decisions for the users and so on. Was a novel idea at the time but helped provide differentiation. Passion around building a brand was very attractive to investors. Everyone hated customer service so they wanted to build a brand to reverse that sentiment.

$1 to $10 million — Lot of trying and failing, took 18 months to go from $1 to $10 million. Built the team during this phase, hired in San Francisco where they had no network. Copenhagen people are very modest, US people not so much. Funnel model was their business (and 90% of SaaS companies). Back then, that was a novel concept and people weren’t sure if they should do that. Primitive concept but extremely valuable. Zendesk decided to raise prices because they had added features, and that almost killed them because there was major backlash. Had to regain trust of customers, which is so critical for a subscription based service. Mikkel printed t-shirts with angry customer comments to impact culture.

$10 to $100 million — This phase took about 3 years. Shifting gears for the business, as prior to this point they didn’t really have Sales. Heard a local customer was unsatisfied with them, CEO looked into it. They had asked for help and the response was “If you can’t figure it out we’re probably not the right fit for you.” So that led to forming a Sales team to work with customers and follow up on questions. You have to make everything as simple as possible for your customer — remove all friction for the customer. Started segmenting the market at this point as well. Packaging and pricing is a constant exercise for a company because there’s always new things to try, new use cases, so being really flexible for your pricing and packages can be very disruptive. Makes pricing feel like its custom oriented to user needs. Land and expand tactics using outbound Sales to turn small customers into larger customers.

Need to start the process to IPO years in advance. Implement processes and controls and the team and working with bankers, developing relationships, etc. Decided early on to go out because it was the right thing for the company, ignoring market conditions. Doesn’t matter your valuation when you go public — it’s about the team and the path you set yourself up for after that.

$100 million to today — Grew 50% year-over-year from 2016 to 2015. Things change all the time. Once you go public it’s about executing on what you tell the public you’re going to do. Trying to get to $1B in revenue by 2020. Announcing that goal was helpful to get everyone on the same page and then help bring everyone together to figure out how to get there and what is needed to make it work. A lot of established vendors are lagging far behind, so great opportunity for agile companies today.

*Double Unicorns — How things are Different Now and Things that Never Change with Domo CEO — Josh has a great presentation on his rules for Sales ( Domo mission is to take all the data you have in your company and put it on your phone. Was running Omniture and he realized he didn’t know info about the company because it wasn’t easily accessible. Higher expectations the second time around. First time no one has expectations, everyone thinks you’re going to fail. Second time people have expectations and throw money at you. Josh grabbed people from his prior company but he lost the wonderful thing that happens at a brand new company where people are trying to make a name for themselves. Lose some of that fire and energy because people feel like they’ve been there done that.

Had some false beliefs that things would work the same way, but they didn’t. Omniture it was easy to sell and Domo is a harder sell. Had to be much more consultative on the Sales process. If someone comes to him to complain about someone else he calls that person into the room to solve it. At Omniture they were begging for money, had to IPO to raise money, was literally using credit cards. At Domo money was not a problem. When they brought in smart investors it gave them extra pressure which was good. Benchmark asked two questions — Why are you doing it? (A: I want to make Omniture look like that cute little thing we did in elementary school). Want to do it for decades. Swinging big, going to be $0 or $1.8B.

Really fun to meet with customers and see them excited about the product and the real-time dashboard they never thought they’d know. 240% revenue retention of customers. NPS is a core metric too. They had 100% retention for the first 6 years at Omniture. At Domo that didn’t happen initially but now retention is great and customers are happy. Able to scale at Omniture due to stability of infrastructure.

Doubled-down early on focusing on customers and customer happiness. Didn’t have product drift but tried to understand customers that say they need features to understand value of the feature request. Opened up a huge amount of new customers for them.

Recruit customers like you sell big customers. Best ones are employed and often happily employed. They try to give a red carpet treatment for people they identify and put on full court press. Recruited CFO of SuccessFactors, called Lars and he said he’s a 12 on a 1/10 scale. The guy had a lot of other options, post interview they lined up Board Members, executives and had everyone following up with him to try to close him. Treat it like a big deal you’re trying to win. Spend 25% of time recruiting. Early on spent 50% of time on recruiting, met with every engineer, then rolled back to every manager, then moved to only directors, etc.

One question or tip for recruiting, he likes to knock down people who act like the big man on campus. Always try to ask something that will make them uncomfortable. “I heard you’re an asshole — talk to me about that.” Even VCs. He wants to be pitched too, come across as a nice guy but make sure the pitching is coming both ways. When people feel like they can’t have something they want it more. Feels like if he can get people on a plane to Utah he can close them. They introduce candidates to other local CEOs and companies to try to sell them on the area as a whole.

Does remote hiring work? Hates all of it. Will only do it for a few people who have done it before and can prove they can make it work. Can’t stand to have a person working from home and doesn’t believe you can work the same remotely.

Josh’s philosophy is to only care about Sales. Have to get the entire company focused on it, not just the Sales team. Marketing, Legal, HR, everything needs to be thinking about revenue and how else you could put that to work to boost Sales. Why spend $100K on something instead of another rep? Justify it. When chasing a big customer he finds a way to get everyone thinking about that customer. Kmart, blue light special, put blue lights and music in the background when a deal closes.

He likes when 6–7 reps come into his office and do a sit-in asking for another manager. Until that point he’s not doing it. He doesn’t buy into you have to have a manager for every 7 employees etc. Otherwise you’re adding overhead you might not need.

“Spend a few days each year on detailed com plans. The most powerful operational weapon you have.” This insures alignment. If it moves the dial they have to figure it out. CFO once walked into his office and said “We can’t close any more deals, we have to stop.” They had cost ahead of Sales and they had limiting factors on hiring due to a particular manager. So he went and gave an incentive to that manager and said for every person you hire I’ll give you $1,000. Problem solved. Gave the CTO an incentive on every % point he could increase gross margin, and he grew it 12%. He loves incentives.

Venture-Backed CEO: Lessons Learned Inside and Outside of Silicon Valley — Promise Phelon, CEO of TapInfluence. Promise is an HR SaaS Marketing serial entrepreneur. She started by moving to the Valley and joining a startup at 100 people up to a multi-billion acquisition by Oracle. Since 2005 has been CEO of different tech companies. 3 exits and 1 lesson.

In 2015, Allen & Co said that more and more companies in the Valley are going to have more and more talent outside SV. That inspired her to move to Boulder, CO. Assumptions going into running a company outside the Valley. Took the reins at a small, slower growth, venture backed company TapInfluence. Evolve into a SaaS company, and had to do it in 3 quarters. World’s largest marketplace for brands to connect with influencers. Went from a million dollar Services company to an 8 figure marketplace.

She thought she would sell everyone on the value of moving fast and scaling. The motivation of her team was different than in the Valley. People are motivated by family and connection and intimacy. Promise’s focus on growth and personal development and selling a billion dollar vision didn’t work in Boulder. There was a culture clash between being a Valley CEO and being a Boulder/Denver CEO. Still haven’t nailed it yet. It forced her to turn inward to think about, if she’s going to run a company with employees based outside of SV, what does she need to do?

One of her lessons is who she hires for her leadership organization is absolutely critical. They have to have extreme ownership and a desire to have an impact. That has to be their default.

Lesson 2 is that free lunch isn’t culture. Iceberg model where the little things are visible up top like ping pong etc., but underneath is growth and learning, rewarding performers, developing people, winning as a habit, and transparency. Not just about the perks.

Lesson 3 is managing yourself. Stay curious, hobbies are soul and stay uncomfortable. Had to build a new network, push herself into new things and new skills.

Lesson 4 is to manage her (non-SV) board. Be not alone and avoid busy egotists. SV investors are on 8–10 boards, lots of deal flow. Outside the valley there is less ego, more relationship based, fewer boards and deal flow. Different relationship, much more about relationship building.

Lesson 5 is managing time. Avoid the attempts at motivation. CEO has to raise money, has legal issues, always something that requires you to be at the top of your game. One of the mistakes to self-motivate and try to make things happen. That’s not sustainable. What you have to do is the exact opposite of that, which is discipline. Her discipline is to read a book a week and codifies the lesson.

If you don’t fit the mold (not young white male from Ivy league school) that becomes demotivating. You have to wait for people to process their bias and wait for people to get over it. She was having success at the company and growing it quickly but she had negative Glassdoor reviews. She second guessed herself a bit, but she didn’t have time to self-reflect. That gets you stuck and you can’t improve, so that’s why she codifies and reflects on what happened that day. Then on Sunday she listens to them all. At the end of the year she listens to all of them as a podcast series. Takes quick notes every morning and night to try to capture ideas. Focus on learning rather than beating yourself up as CEO.

*The AppDynamics Story: From Idea to $3.7B…The Journey Continues — Jyoti Bansal, Founder and Chairman of AppDynamics. Got acquired days before the IPO by Cisco. AppDynamics does monitoring and troubleshooting for apps. Technology and business model opportunity recognized in 2008. Initially he had a couple of incorrect assumptions — he was too early. He also assumed everyone would want to be on the cloud but enterprise was still locked into on premise, but they weren’t yet. Took 15 months to get to product-market fit. Entering an existing market, your v1 has to be a 10x improvement over what else is out there. Wasn’t acceptable to enter with anything less than 10x improvement.

Learned to sell by studying other companies. Studied both ends of the spectrum — enterprise heavy duty Sales and freemium lightweight sales. He found some companies trying to merge the best of the two and attempted to emulate that model. Land and expand approach combined with field Sales. CEO hired first 6 customers, then recruited the #1 guy from competitor and he closed the next. Raised $5.5 million, and the magic was 3 things.

#1) Convince them it could be a billion dollar company

#2) Show as much market and customer validation as you can

#3) Show them why you’re the right company and CEO to do it… create social proof

Startup hubs starting to emerge, but the strength of SV is it is still the epicenter. It brings the best people from around the world here which is the competitive advantage and why the current immigration laws are counterproductive. Also the culture of accepting failure.

Work on actively developing in 4 areas. Technology savviness, Business savviness, People savviness, Sales savviness. The job of the CEO is selling all the time. Customers, employees, investors. Have to become very good and comfortable with it. You can call it inspiring if you want instead of selling. Need to continually work on all 4 areas.

Grew from $2M to $300M in 5 years. 40 employees to 700 in 4 years. The key to hypergrowth is finding the right balance for how much of the day you want to manage. Keep things simple for people — 10 to 12 points that everyone understands and can recite. Who the customer is, why you exist. The management team would draft these 10–12 things quarterly at off-site and that would set the tone and then it would be passed down and was the North Star for everything else. You have to break the walls between engineers and customers. Make them visit customers and do support. Doing a phone call isn’t enough. You have to visit them. It fundamentally changes alignment.

CEO spends a lot of time with customers. 1/3rd time with engineers because he is a Product guy as his core discipline. 1/3rd with customers, and 1/3rd operating the business, board, hiring, managers. That was his rule of thumb. Most founders don’t spend enough time with customers.


*Sales Mistakes that Can Kill Your SaaS Business & How to Avoid Them — Castlight Health CEO, Former Hubspot CRO Mark Roberge.

Biggest mistake for startups is a premature focus on growth. Going into growth mode too quickly. Hubspot got early traction on product market fit, hired EVP of Sales, ramped team, revenue wasn’t growing as quickly as planned, Salespeople started leaving, finger pointing began. Problem was that they jumped ahead too early. Develop predictable sales model and THEN hire VP of Sales, etc.

1) Customer Success (learn/iterate)

2) Unit Economics (measure/monitor)

3) Growth (revenue/customer count)

Mistake #2 — Hiring — Who should your first Sales hire be? Experienced VP, #1 sales person from a competitor, entrepreneur friend generalist, rising Sales star from another company. Answer is the entrepreneur friend/generalist unless the founder has a Sales background in which case, bring in the #1 sales person.

Mistake #3 — Ignoring Sales Impact on Customer Success — Churn at Hubspot was rooted in the Sales compensation plan. $500 per customer, 2x commission on revenue about quota, 4 month clawback, 8% churn rate per month! The factored churn into compensation plan, and tiered comp based on LTV tiers. Churn dropped by 70% in 6 months. Critical that comp plan aligns with business goals.

Mistake #4 — Aligning GTM by Function Rather than Buyer — Marketing, Sales, Services org structure. Marketing delivers leads to Sales, Sales delivers Customers to Services. Hubspot did a reorg by buyer persona. Different teams based on customer size that included cross functional teams of Sales. Services and Marketing all on one group. Teams bonded and worked hard to help each other. Measure each group using board metrics the board used. Organized Sales team by Customer rather than function.

*The CEO’s Role In Marketing: How to Hustle — Zinc, Mulesoft, Host Analytics, The Muse CEOs.

HA — 10 years Marketing and 9 years of CMO at Business Objects.

Muse — Founder & CEO came in with little marketing background but dove in “face first”, lots of people using their site so she had o figure out how to do the guerilla marketing to build that base.

Mulesoft — 3x former CMO, now CEO for 8 years. Current VP has been great but lots of experience.

Marketing has changed substantially over the last 10 years, but it is also multi-faceted and needs to be a connective part of the corpus, and not just an appendage. Idea is it is critical and needs to be at the center of things instead of a fringe side item.

Role of the CEO in Marketing — it depends on organizational needs. If you have a VP of Marketing you need to counterbalance their weaknesses or gaps. One area that can’t be abdicated is around the overall positioning of the company, how you want the company to be perceived, and work with marketing to create the messaging. One of the challenges of startup CEO is what does your company need and how can you contribute best. For different market segments, different level of involvement is needed. As a marketer you need to play the hand you’re dealt — get the CEO out there on stage if he’s charismatic but don’t make her be out there if she’s not. Sometimes people ask the CMO to create market position and do some of the CEO’s jobs.

Work with marketing to define 4 or 5 basic answers. Who are we? How are we different? What are the benefits of our product? Positioning happens in the mind of the customer, and it’s usually about very simple things. Valuable internally too once you get beyond a certain scale so that everyone can understand your purpose and mission.

PR Comments — expensive, when do you start, how involved is CEO in PR? Can be lease expensive marketing you can get, question is internal or use an agency. Usually hire a person, then hire an agency, then churn agencies. Bad cycle. Once you have your message nailed it’s worth investing in, once you have stories worth telling, it’s worth investing in. The Muse used an agency that knew a specific field (HR) and helped them penetrate that market. PR is about knowing your audience. If you’re selling to tech they’re very useful. If you’re selling to targeted niche people, the less a general purpose PR firm will help you. Think of it like a gym membership — they’re going to charge you either way, better to use contractors for cheaper fees that are specialists rather than an agency. To start PR you need to have customers that are willing to talk to reporters. Reports get really tired of talking to CEOs boast about the features of their products, they want to talk to customers. If you don’t have someone in the company who really knows how to work with an agency you aren’t going to get your money’s worth.

Writing/blogging? How to prioritize? HA CEO Doesn’t recommend ghostwriting, he had already been doing it and it was things he was really interested in it. Would like to use it to generate leads but for him it is more general awareness of the company. The Muse — question is what’s the purpose of the writing? What’s the goal? The Muse built up a blog around career, had a bunch of volunteers creating content and then they picked the best from the submissions and had free UGC. You’d know it was working because people would write “Contributor to the Muse” on their LinkedIn profile. Muse tries to leverage when other platforms are going to have an inflection point. If you can find a platform that’s opening something new or has an imbalance between content producers and consumers it’s an opportunity to capture a bunch of followers.

Marketing serves Sales — every department in the company should be focused on driving revenue. How do you feel about Sales and marketing alignment and the importance between those connections? Nothing more important for Marketing than thinking about how to drive revenue for the company. Need to do more than focus on leads, it’s about GOOD leads and things that will actually drive revenue. #1 cause of death for CMO is CRO — need to make sure those two people are aligned. Marketing is there to make Sales easier — that’s the North Star. Lots of different ways to do it but that’s the guiding light. Demand gen model, starts with bookings target, work back to determine how much pipeline is needed, how many leads to build that pipeline, it’s for Sales and Marketing to do together. They are there to generate BOOKINGS, not leads. Is the Sales team coming to the CEO saying the Marketing team is doing a great job? Not throwing a great event, etc. but actually driving Sales. If you don’t ensure alignment between Sales and Marketing you are screwed.

How do you decide how much money to allocate to a marketing team that’s always asking for more? Differentiate between short-term and long-term strategies. What does a lead cost across a variety of channels, over a couple of weeks, what’s the quality of those individual. Long term bets get money too but that’s measured differently. If you have the right person in the CMO role they aren’t saying the need more money to be effective, they’re looking at the ROI of everything they do. They might say if I get $X to spend I can deliver $Y revenue, but they shouldn’t just be asking for more money. If you hire the right person this shouldn’t be an issue. Industry benchmarks are useful as a % of revenue and a % of AR, demand gen model helps create budget.

*12 Levers of SaaS Success — David Skok/Matrix — Goal is to present a simple model to understand a SaaS Business and show the levers the CEO can pull. Search for repeatable, scalable, profitable growth model phase is the key phase and focus of the talk. After that it’s just about scaling. One sign that you’re there is that you’re consistently growing bookings quarter over quarter.

Presentation link:

Model is a funnel — the complete model has onboard, retrain, expand, and then develop loyal advocates. Funnels are driven by simple math — 2 variables. How many things do you put in, and what is the conversion rate that you produce. 100 at 1% = 1 output. Average deal size, CAC, time are other factors not to focus on today. The two primary sales tactics are touchless self-serve, and then using sales people. Touchless — drive website visitors to free trials to conversion into paying users. Need to track trends and metrics at each stage. Different lead sources have different metrics, etc. Focus on conversion rates before worrying about filling funnel. Improve simplicity and clarity of messaging.

Asking “what would break if you tried to grow your ARR 10x?” identifies funnel issues and blockers. Blockers occur because you want a customer to do something they aren’t motivated to do. It is built for your desires, not customers. Assess friction and concerns from the blockers. You can redesign the step or address the underlying concern by creating a motivation big enough to pull them past the concern. Hubspot Website Grader as example of free tool that drives viral activity. Grade builds competitiveness and results in people wanting to reach out for help to increase conversion rate.

Draw micro funnel for broken aspects of Sales efforts and then identify blockers and incentives to overcome those issues. Identify “Wow!” moments and figure out how to capitalize on them by putting yourself in the mind of the customer. What is painful, what has friction, how can we address those concerns?

Why introduce SDRs into a process when we know Customers hate it? (side note: David recommends SDRs) The best way to sell is not to sell — make a deposit before you try to make a withdrawal. Need an intermediate item that SDRs can use to create a relationship and trust with the customer — then you end up in a consultative relationship and you can do better from that position. Invite them to webinar, conference, data, meeting with peers, but don’t mix selling with that intermediate thing or you’ll blow it.

Start with your customer, understand their business goals, identify their decision criteria, design and optimize a funnel around their buying process. More deals in funnel with same conversion rate = higher bookings. Sales people have capacity limits though, so unit of growth becomes Sales people (work with quota, then how many leads to get to that quota, etc.) The math is number of sales people multiplied by productivity per rep.

Reason for missing plan — didn’t hire Sales people fast enough. Need to build recruiting machine to hire Grade A Sales people. Miss bookings goal due to slow hiring. Performance to quota should be ~85%. Productivity per Rep is quality of sales hires and then training and onboarding activity. Onboarding and training can make a big impact and can be controlled — less control over hiring. Color-coded chart by rep to identify who is consistently doing well and who is not. If everyone is consistently doing well then you have a scalable business.

Summary — using the funnel is a simple and great way to develop alignment on how to make your company successful. Optimize the funnel and address the different elements where things break by thinking about the customers’ mindset. Draw the funnel with different people is key. Involve Sales, Marketing and Product (“Sparketing”).

*How 10M Freemium Users Built our Enterprise Sales — LucidScape CEO and VP of Sales. Basically a flow chart tool, over 10 million users. Starting free and with paywalls was an easy way to start monetizing the business. They invested some in SEM and SEO, then used data scientists to optimize the funnel for conversion to paying, then hired a great support team to make users happy, and a product team to make a great product and UX customers loved. After about 3 years of freemium model they decided to look into enterprise customers to become a $100M business.

The CEO lacked a Sales background and was concerned adding a Sales team would add cost and change the unit economics and business model. Freemium / No Touch / Light Touch ISR / High Touch ISR / Field Sales / Field Sales with SEs. Each step is higher cost and more complexity. 4 Key functions evolved when they added Sales: Support Sales, Digital Marketing DemandGen, Support Customer Success, End User Focused Enterprise Focused.

They developed processes for sending users from Support to Sales based on perceived Sales interest and intent. Support team did a great job of creating referrals from these support requests. Also had questions about integrations, so a Sales rep would engage and get involved. Over a period of time they added 6 figure ARR. Lots of value spending time in the Support channel.

Moved from Digital Marketing to DemandGen. Added a phone number to the pricing page, forms for people to reach out, also using marketing automation based on what pages people visited. If they get a response they engage. Essentially they found ways to connect with customers who demonstrated certain activities in order to feed the funnel.

Taking some customers from Support to Customer Success. They needed extra handholding and admin level support. Larger customers want T&C, security audits, etc. which enables you to spend time and effort up front, but you can move forward and do lots of bigger deals later. They worked on integrating LucidChart with other tools and enabling them to be found through other platforms.

Shifted focus from end users to enterprise from a product perspective. They added features and functionality that enterprise users needed that added little value to end users. The product team responded by delivering the features and functionality enterprise customers required. They had to do some custom development work to satisfy enterprise customers, which they didn’t initially want to do.

They penetrated an enterprise by going from individual user to IT buyer, to adding enterprise features needed, and then upselling at renewals. Go from 1 to 6,000 users for the customer over a 3 year period.

How the Relationship between CEO and VP of Sales Changes After Funding — CEO and VP of Dynamic Signal. 6 years old, has raised $75 million across multiple rounds of financing, 25 country presence, 150 people. At Series A stage, who knows what is going on with product/market — VP of Sales or CEO? CEO needs to be primary person in front of customers. Investors may blame the VP of Sales when in reality the problem may be with the product.

First VP of Sales roles typically is moving from a Director role into a step-up role. The question should be, am I scaling this business or selling to customers? Having to get into direct Sales role as VP of Sales can be tough for some people who feel like they’ve already been there and done that. If you don’t understand product-market fit, sales cycle, all the metrics, it’s really hard to evaluate the Sales team. Need to interview every single customer and understand what they’re doing with your product and what they think about you.

At Series B stage — the CEO still should be spending at least half your time with customers. VP of Sales needs to be able to scale and hire and build process and engage with customers as well. Consider who you want to bring into the organization. Book called “Never Hire a Bad Salesperson Again” — helps assess drive and energy. You need to have optimistic people who are competitive in a friendly way, set goals, good cultural fit. Can’t just hire based on resume or perceived translatable skills. Need to have someone who can make their own decks, do their own prospecting etc. Comp plans need to be set up that can make sales people rich but has to be aligned with organizational goals.

Over time learned from customers how to develop product and that shift and listening to customers has enabled them to grow and learn where they needed to direct product efforts. Critical to continually speak with customers to understand what they want if you want to build something truly valuable and not just something you hope people will buy from you. Focus on long-term growth and opportunity, not short-term growth that hurts long-term value.

When you’re Series C and beyond it’s easy to spend your time with your very best and worst customers. Need to do that, but also need to spend time with mid-tier customers and all of them really. Even today, the CEO spends half of his time with customers and prospects. Every day the CEO asks for a daily report of what good and bad happened each day, so VP of Sales created a daily report for him.

Traits you look for in a VP of Sales. You must be honest with yourself about where you really are as a company. If your company isn’t far enough along to attract someone of a top caliber, the pool of candidates won’t be great and you’ll end up with a sub-par VP. Always hard to hire an executive, do lots of reference checks, find someone who isn’t so obsessed with being a manger that they don’t like to do actual Sales with customers.

How the Best Outbound Sales Teams are Managed — Panel: Author of Predictable Revenue, CRO of Hubspot, SDR Manager at Box, SDR Manager at ServiceNow.

What are mistakes you see people make over and over? Not getting loud when ratio of direct reports got too high. Had 20, 10 is a fairer number. Had too many SDRs throwing meetings to AEs. Created issue with alignment and numbers of SDRs vs. number of AEs due to numbers. Should have comped on revenue success of deals — not on setting meetings. Need to get SDRs to focus on how they’re branding themselves in the marketplace — LinkedIn profile, social media, pictures, etc. They’re obscure to the marketplace, so if someone looks them up they need to seem credible.

How do you manage expectations and career path/promotions for young SDRs? They had discussions with new hires about career path and they didn’t really understand it. So they created a 6 tier career path that wasn’t based on time. It was about passing a test, setting X appointments and close Y deals, close over $Z in new deals. There were rewards for each promotion — additional equity or base, etc. Made it exciting for the team members. By the time they graduated they were basically an AE. Show a macro statistic that if you make over $40K you’re in the top 3.5% in the US. Creates gratitude for them.

Day-to-day motivation — can be a grind — how do you handle it? Most people can only stay in that role for 8–12 months. Position the SDR role as a pat to AE, training program. Tie skills you’re learning to future role. Yelp CEO has set their SDR area to be like a dance club. Tables of 20 SDRs separated by class (when they joined) SDR of the month painting on the wall. Dollar bills float down when they close a deal. Creative, fun culture. Can create burnout though. ServiceNow shows that there are multiple career paths for SDRs — not just Sales. Try to give SDRs exposure to other areas so they can roll out within 2 years, big assessment after 1 year.

How do you juggle life and work and what do you tell your team on this front? ServiceNow has 130 people around the world, he views this as a vocation more so than a career. Have to straddle being a parent vs. doing your job, but build one team, one mission mentality. Hubspot CRO puts a lot of effort into time management. Critical list of 3 things that need to happen and assess progress towards those goals. Leave early Wednesdays and Fridays but the rest of the week stay late. Never worked on the weekend except after kids go to sleep. Box SDR manager has a husband who travels 300 days a year, tries to separate between the end of the day until kids go to bed. Encourages her reps to take days off, go home after a certain hour, etc.

ServiceNow has SDRs build bookends at the start and end of the week so that’s when they do their admin stuff. Hubspot CRO built a model in a medium post to show how many people you need to hire in order to hit your quotas and goals. Audiobook from impossible to inevitable is now out.

Building your First Outbound Team — How to Get it Right the First Time — Panel: Author of Predictable Revenue, Activate SDR Manager, SDR Manager at VenMinder, SDR Manager at Square.

How long does it take to build a working team? Usually much longer than expected… probably 2–3 months. 4–6 months before you have data you can use to help understand what’s happening, set quotas, comprehend market. Took up to a year to really build and optimize a model for SDRs.

What’s a mistake you made building a team or that people generally make? Purchasing the wrong tool for SDRs, in that it doesn’t help reps become more efficient and track data. Needs to fit your process. Didn’t ask the right questions about the tools, ended up with bad products. Build process first before looking at tools. Putting the wrong leader in place for the team as the first hire is a major downfall. Super hard to find great SDR managers as it’s a relatively new role. Need operational mindset as well as manager and coach.

Everyone wants to know about email templates — how important is that? People over-obsess about it, spend hours tweaking language intentionally misspell words to make it seem more human. Care more about action after email, not the specific verbiage. Test a bunch of templates and go with whatever produces results. Refine over time.

Different vertical/industries — what is the impact on SDRs? Even within one company, switching verticals can be night and day different. Conversation can be different, tactics can be different, messaging can be different. Need to build into process. Need to nail the niche. Launch into verticals and see performance compared to others, kind of a test approach to see where traction is strongest. Some verticals people answer the phone (travel), others you never reach anyone (financial). Don’t just stay behind your computer and email all the time — sometimes you need to make calls.

How do you view email vs. phone vs. social? Phone is number 1 tool for SDRs. Email is important, but it’s a tactic to try to make the cold call not as much of a cold call. Customer might have seen the name so it triggers something in the prospects mind when you call them. 75% of meetings booked by phone. Track how many conversations lead to meetings, determine efficiency and copy those with highest conversion rate, not highest throughput.

Final tip — Don’t underestimate the infrastructure required to build an outbound Sales team. Product-centric companies discount this. Couldn’t even put a comp plan in for 6 months. If you put it in too early and it’s too low people get excited and then you raise it and they get mad or you set it too high and they get frustrated and quit. Put in a training program that helps them be successful and then build a process that helps them be efficient. Brought in an experienced SDR manager to watch how they do things. Create a solid process for hiring. Need builders, not growers initially.


How to Build Your First Management Team Panel — Workable, WalkMe, Zapier, DialPad RPX on panel.

Hardest problem to solve — open discussion on when to level up management, what/who to look for, how to manage dynamics on team post-hire. When you start, you hire people who are super smart generalists who can learn quickly and are willing to work hard. At some point, you need to bring in experts and experienced folks in particular niches that relate to your business and have industry-specific relationships etc. Basically at some point you need to switch from the first type to the second type.

170 people CEO, hired VPs of Product, Engineering, Design initially. As the company evolved they expanded to VP of Marketing with enterprise experience, then VP of Sales with enterprise experience, CFO after that. Would’ve hired CFO earlier in retrospect — has made his life so much better. Lacked enterprise DNA so when they moved to larger customers they had to shift skills and add maturity.

500 people CEO, different offices around the world, very flat structure. No formula or “right time” to hire a VP. Want to enable people to grow and have opportunity. As the company grows, you build processes so you know how it works at YOUR company. Tried to bring in some managers and they were bad hires that hurt managers. Worst thing that can happen is to bring in a senior person and have it not work out, because the damage takes a long time to fix their mistakes. Problem was they hired people from a big company and they came in and tried to replicate what worked at their prior company. This created a bunch of issues. Need to set expectation with management of what they must do, they use KPIs. Management needs to teach the CEO what to do, not vice versa, but there is a KPI.

Nikos/Workable: wants executive with experience, but they need to use appropriate discretion.

Wade/Zapier: best folks can bring their experience but also mold themselves to the culture and tactics of the current company. Zapier has no office, 70 people, all remote. Started as a side project so evolved from there. Hired through their personal networks irrespective of their location. Had enough structure in place to make things work when adding new people onto the team. Echo sentiment that CFO was hugely valuable addition, hired former CFO of Mailchimp in Atlanta. They took baby steps on remote relationship but it has worked out.

Craig/DialPad — first 30 people had worked together before. Once they added a VP around 100 people using a headhunter, they acclimated successfully without too much internal angst. Craig thinks headhunters really helped select for that.

Dan/WalkMe — small groups worked better. Manager of small groups, a number of groups. Bringing a macro manager created challenges. Started with VP of Sales since the CEO had CTO background.

First hire was based on the biggest weakness of the CEO. CFO critical — help financing, comp plans, pricing, budgets, cash flow, help the CEO understand how much they can spend. CFO vs. VP of Finance — different level of rigor and strategy and metrics behind how to operationalize the business.

Discussion about hiring friends from prior companies and then bring into the new company. Dan and Craig are positive on it, Nikos sees benefit to fresh faces. Trust is the most important piece.

If you don’t know exactly what you need, you probably shouldn’t make the hire. If you have a need, meet with people to learn more about what you need before looking for a candidate. On the flip side, if you hire someone who isn’t working out, trust your gut and fire them quickly.

*How to Avoid Problems of Scaling — Lessons from Stripe COO Claire Johnson — Easy to underestimate how complicated a SaaS model can get. 600+ people today, she joined at 170 people ~2 years ago. They recruited her by meeting her personal needs of a company and mission she really believed in. A lot of the interview process was around understanding the company’s vision and mission. Every new person that is added brings their own challenges and personality. There was a lot of complexity already at 170 people, so scaling challenges were about creating infrastructure to support adding new customers, employees and things to build.

Go to market has changed in building the funnel — it was built developer-out and focused on that developer community, so wanted to stay true to that user base. Lots of inbound demand of people starting using the product and then contacting support with questions. Managing employees, no Head of Happiness or anything like that. Pay salespeople on quarterly commission structure.

Salespeople need to know the business and not rely on a Sales Engineer. Everyone on the leadership team has spent time with the users and everyone looks at usage and user cases. Have built teams around larger users and different stages where more dedicated account management is required.

What is Marketing’s job at Stripe? They have so much inbound interest and leads it’s a bit non-traditional. They try to penetrate new markets and learn how to get to those target groups. They try to understand and measure usage of users, where people are coming from, how they’re converting, etc.

Recruiting and team building — learnings from building the team. Early on they had founders and engineers doing recruiting, and you do that in ways that are very true to your company. Nothing wrong with that, but the key is to take the interview style and then build a recruiting organization to manage the day-to-day process, be much more intentional about who and why you want to hire. There’s a step function in the hiring where you can’t go 1–2 hires per month to have full time focus on hiring. Google took over hiring from managers at some point, but Claire isn’t a believer in that model.

At Stripe the hiring manager helps write job description, interview framework, meets with group interviewing candidates, develops assessment criteria together, so the recruiter is more of the coordinator of the process than the person running the whole show. Buy into mission is critical for hires, and retention is keeping that fire burning and passion about the business. Claire tells people if they don’t understand how what they do connects to the impact of the business they need to talk to her or their managers because they aren’t doing their jobs if that’s the case. They do an employee engagement survey and assess results, see if they can make changes if results aren’t great.

*How to Manage Up and Have Happy a Board. Even When You Miss a Quarter — Aaref Hilaly, Partner of Sequoia Capital. In the context of startups, one of the worst things that can happen is that you miss a quarter. It’s like a break of the implicit agreement you have with the stakeholders of the business and doubt starts to creep in. Doubt leads to questioning if the company will be successful, if the CEO and management know what they’re doing and so forth.

As a CEO and executive, Aaref has missed a lot of quarters. As an investor, his companies including some great ones, have missed a lot of quarters. It’s not because the founders aren’t great, etc. it’s just that life is unpredictable and at some point you will miss no matter how great you are. The purpose of this talk is to explain what to do when this happens. There are 4 Lessons, 2 to do before you miss and 2 to do when it happens.

Lesson #1 — Don’t manage the board, engage them. When his company which Mike Moritz had invested in, at the first board meeting (Aaref’s first, with 6 people in the company) he put together slides and walked through them. Moritz is doodling cartoon characters. Someone slipped him a note mid presentation that said, “You’re losing him, do something.” He asked him what’s going on, and he said “I want to know what’s on your mind”. Aaref threw a bunch of questions about, hiring people, etc. and it turned into a 90 minute discussion around how to build an executive team. He walked out with a much clearer picture about what to do. The board meeting is there for the Entrepreneur, not the investor. It’s a chance to think bigger picture about what you’re doing and need to be doing in a 6–12 month timeframe. The guide for what to talk about is what is most on your mind.

Lesson #2 — Focus on product and vision over metrics. This goes against the mantra at SaaStr a bit. At Aaref’s company Clearwell they continually changed focus a bit and Jim Goetz (investor) would push on the logic and decisions about building product all the time. All the talk was around product and vision, and what would be needed in 6–12 months’ time. SaaS lends itself to metrics, so people can get lost in the metrics and lose sight of what it is they’re doing in the first place. Then suddenly when the metrics don’t look good people freak out because they’ve forgotten what they even mean. Train the board to know in 3 sentence what you do, why it’s better than the competition and how you will win an important market. If they can’t do that there’s going to be problems.

Lesson #3 — Own the miss. Everyone misses sometimes. DON’T say I know we missed this number but we did all these other things. That’s Denial. Don’t say we missed but we’re going to get there if we do the same things. Or if we just fire the Sales guy or do this one thing it’ll solve all our problems. That’s Hope. Don’t say we missed, we’re screwed, there’s no hope. That’s Doom and gloom.

You need to own the miss. Any good investor will have seen all of this many times before. Your reaction is more important than the miss. Show the board it matters to you and you take it personally. Be hard on yourself. Be honest about what you and the team did wrong. Help the board process what went wrong and how they should think about it.

Once an investor asked him “What do you think happened here” when they missed. He sketched on the whiteboard the steps and decision tree of why they weren’t selling effectively. He explained the problem and what they needed to do (expand their value and impact) and that made the conversation productive and useful and charted a path forward. Totally changed the tone of the meeting.

Recommendation: send out the information in advance. Own and control the meeting. Address it right away when the meeting starts.

Lesson #4 — Put the board to work. The reason you have a board is to help you in the hard times. This is when you can get some valuable advice and guidance. Not about busy work, but intro to 5 customers in the financial services vertical, or let’s walk through the product and simplify the UX, or intro me to a VP of Marketing. Think it through in advance and go into the meeting with a set of requests and ask. After you explain the problem and proposed solution engage them with specific asks to support those tasks.

Before you’re anywhere NEAR missing the numbers, engage them on product and vision over metrics. Aaref is often more enthusiastic about a company after they miss than before. It can strengthen the relationship with a founder because we all know how hard it is to build a company and founders with the grit to survive the hard times are much more likely to succeed in the long run.

The Best of the Best: YC SaaS Founders — Sam Altman, CEOs of Gusto, PlanGrid and Amplitude Analytics. Gusto is HR, PlanGrid is construction software, Amplitude Analytics helps people understand what users do. Theme is the difference between good and great SaaS companies. 5 years ago there wasn’t separation between these companies and other YC, now there is. Want to explore what they did that went well and helped them grow.

Gusto — fixing the problem, serving the company well is a big part of the company and culture and how they hire, how they define success. NPS is as important as MRR. Established core philosophy and culture very early and have had to refactor as they grow but always kept it front and center.

PlanGrid — getting the team right is critical. What’s worked is that they’re motivated to build great productivity tools for people who have never had that before, so there is genuine excitement about serving those customers.

AA — culture is really bottom-up, not top-down, so being really intentional about who you hire and fire and structure the org is the key. What do the people you hire do to culture?

How do you find the right person? First exec hire at AA didn’t work out. One of the things that worked was retaining search firms for executives. Also have to think about alignment with values and mission and not just track record. Ownership mindset is key at AA. Are you a driver and do you understand why you did what you did? Gusto CEO did the first 60 hires, then had to step back. They do a watermill interview based on how the CEO trained the others. 6 core values but not on wall or t-shirt. Should be inward-facing introspective journey as to why you founded the company in the first place. 6 values are Ownership mentality. Don’t optimize for the short term. Take action. Do the right thing. Go the extra mile. Transparency. Gusto includes current cash in the hiring offer, even at 440 employees.

What do you evaluate for VP of Sales? Tell me about your best reps and why you hire them. If they don’t know it that’s a red flag. Just hired an engineering leader. The person they hired was a leader first and an engineer second. Two-way conversation, trying to sell the person on the company but also evaluate them to see if they would be a good fit.

Biggest mistake for a hire was staying in the loop with hires underneath direct reports. Need to let that person develop the relationship and not go around their managers. One of the hardest thing for CEOs because they want to stay in control. Hear someone is unhappy and instinct is to dig in but you have to resist and let them handle it. That’s why you hire an exec.

Just focus on the customer, don’t get caught up in the noise or hype to grow by X% year over year.

How do you spend your time? (G-440, PG-280, AA-60 employees) Responsibility to staff but try to spend at least half of time on hiring, investor relations, fundraising, PR, customers. After getting past 100 people have to focus on 2 things per quarter you really want to happen and put energy there. Figuring out how to use CEO time is maybe the most important and high leverage item and people don’t spend enough time on it.

Waited to focus on growth until they understood the customer so well that they perfected product-market fit. Then deployed capital on Sales. Too many companies put the money to work before they’re ready. Probably the number 1 thing that can kill a company. You can fake growth for a little while, but if NPS and retention aren’t where they need to be it doesn’t matter. Retention is a better predictor of success than growth rate. Have really gotten into the shoes of customers and spent so much time understanding them that it becomes a part of the company mentality.

How to scale from $1 to $10M? Get even more focused on customer. More planning and budgeting needed.

Brad Feld 1-on-1 — Still managing Mobius III (2000 vintage fund). Segmenting a company into 3 teams — Product machine, Customer machine, Company machine.

How does the CEO interact with each of these groups? Early on, the founding CEO will likely spend too much time in their core discipline. Some people can scale and perform, but you need to experiment to discover who they are. Key leadership roles need to have people who understand what is involved in the work or making sure you help them grasp it if they don’t.

Hate the phrase culture. It’s a cop-out of whatever is happening in your company. The interesting phrase is cultural norms. As founders and early employees you can define those norms, and then define what they mean as the company evolves. Just saying you’re transparent is bullshit because when you’re 5 people it’s easy but when you’re 500 it’s radically different.

Foundry Group Values: Brutal honesty delivered kindly. Give up your veto (if you agree you go all-in and trust). Try not to press each other’s big red button. They are good friends, but they want to be BEST friends, so act like that. Jason got married and his 3 best men were the other partners.

VCs can be your friends but they don’t have to be. It’s sort of irrelevant to Brad. Depends on the person in the relationship and the dynamics are more nuanced. Steve Blank says have advisors but no board for as long as you can. Brad says start the discipline of having a board that you’re accountable to early. Doesn’t have to be an outside board, and the board should be working for you as the CEO, but they’re job is to help you grow and succeed. Once you’ve been on a lot of boards you stop thinking about Board duties and being a fiduciary, and start thinking about how can I help this CEO and company?

Development as a board member? Experience was linked directly to the boards he was on and fell into the cadence. That changed in 2000/2001 as the bubble burst. He was a founder of some of the boards he was on, he was on 25 boards, and they were being used to share company info. As a result, every day was a crisis that had been ignored up until that point. Now his focus is continuous involvement as appropriate. Some CEOs want to talk a lot, others want to speak monthly but it’s up to the CEO. CEO needs to be clear with the structure they prefer best, but one that enables the board to be proactive instead of reactive.

There’s a belief that you have to grow at a fast pace to generate a higher valuation and ultimately a big return that’s interesting for investors. Sometimes that’s not entirely true, as you can have churn or you can have other problems that you create. Getting everything in balance is really important. Many successful SaaS companies Foundry invests in stall at some point but then regain their momentum. It’s hard and you have to do work, but it’s not a universal truth.

Quick-fire round: CAC is a nonsense metric because it’s easy to game. You can create fake LTV and bastardize gross margins and so forth. Most profound moment in 2016 was his day in prison meeting with prisoner entrepreneurs with Defy Ventures. Q: What would you most like to see change in VC? Answer: Nothing, it’s been really good lately.

Navigating your Career in the SaaS World — Panels with SVPs of Sales. Box, Oracle, Marketo and Campaign Monitor. Lots of talk about Sales enablement and having the CEO go with reps on sales calls on the road as a training mechanism and also reinforcing the company message. Also helps get everyone delivering the same message.

Discussion around recruiting. During boom cycles they had to accommodate the Sales people more and move offices to where people wanted to be. Question about millennials — do they want to go work for companies that are the “hot” unicorn companies and stick around for a big exit? Responder felt that culture is a big factor as well, and it’s not just about expected return. This feeling is forcing companies to have to deliver more on the soft touch areas and build companies with more feedback and praise.

Discussion around terminating leaders. As the CEO, you are typically the last person to recognize that a VP or senior leader needs to be fire, so by the time you become aware of it you need to act. The point was other people who report to that person have recognized the person’s shortcomings much sooner than you have and are already frustrated with them. If you don’t act they will become frustrated with you and the company in general.

During interviews, suggestion to say “What skills are you looking for in this role?” and then sell yourself to those criteria. Other comment — if a resume looks too good it’s actually a red flag, as usually the very best people are not available. Focus on getting a level of detail for process and steps and sales tactics, and if they can’t explain it in detail that’s a problem. Look for people who have been somewhere for a period of time, had some success and progress, and can tell a story of how they accomplished it. One guy asks for references before the interview promising he won’t call them unless he gets to that stage, but if there are no direct managers in the reference list that person is out.


*AI: The New Platform for SaaS with Tom Tunguz — Why machine learning will be so impactful for SaaS — in 2016 it was everywhere in the news, GO, self-driving car, Alexa, all just in consumer world. Every startup says they’re an ML or AI company now. Machine learning finds patterns in data, identifies objects, find anomalies (i.e. fraud), and segments user groups and customers. Convergence of 3 trends, really cheap compute, more data storage and algorithm advances. Neural networks are the result of that convergence.

Two different steps: Feature selection and model tuning. Feature selection is picking the data sets to optimize. Model tuning is putting data through the algorithm and seeing which one produces the best results. Deep learning automates both of these processes. Impacts are fundamental: Google has a computer that speaks so well it sounds like a human, Microsoft has a machine that can understand human speech as well as a human Google has a translator that can handle languages including those it has never seen before.

Insurance company laid off 30% of its staff because an algorithm can determine the damage from a picture. Self-driving cars, construction self-laying bricks, MRI assessment faster and more accurate, just examples of what machines can do better and faster. This can result in an expansion in vertical SaaS. Huge potential for innovation, similar to cloud and big data. Redpoint wants to invest in proprietary access to data, end-to-end applications (not platforms), strong GTM enabled by machine learning (fundamental innovation), experts in the field (need special talent too), potential algorithmic advances.

Ludo of SF — they engage with startups and have an incubator. Invested and acquired a lot of companies with ML technologies. Anything that can change the GTM strategy is appealing

How do you see your portfolio companies exploit AI/ML? Started dictating emails using Dragon. Appreciate HCI advances and interactions. ML succeeds when it’s in the background and not in your face doing the work behind the scenes. Voice recognition SW and natural language processing was very interesting and appealing. Help sales people sell better by analyzing conversations in real time. Doesn’t feel like a different experience, but it’s helping subtly guide and direct conversations.

Can you pitch your startup without saying ML? If so you’re focused not on technology, but on the benefits and impact/value to the buyer. AI as new UI.

How do you help coach the companies to make the pitch simple and accessible? Hollywood has created a fear about AI. Whenever someone interacts with AI they have an irrational fear somewhere inside of them. The new field is Human Robot Interaction, not HCI. How do you get people to interact with it without being afraid of it? You have to set the expectation that it has limitations or else people will get frustrated — like chatbot. If chatbot fails without expectation setting they get irritated and quit. If the AI/ML is wrong you lose the trust of the user. The second it gives them bad advice or something that doesn’t work out, people will not trust it in the future. Need to build trust like with humans.

Natural language processing becoming commoditized. What value can you add on top? For example, experts in the field. Assume generic NLP is commodity, so beyond that what value are you creating?

What kind of proprietary data do you care about? First strategy is to create it yourself. You create a data set that you can mine that becomes proprietary. That data set needs to be really big for the algorithms to work so you have to be patient. LinkedIn has huge data network and can build products on top because of that base. Second example would be early stage SaaS company approaching large enterprise customer, asks for proprietary access to their data, and then use that system with other companies. Caterpillar is doing this for predictive maintenance. Or recruiting company that uses hiring, recruiting and promoting information to adjust how job descriptions are written. One they haven’t see is startups getting together and forming a cabal to share data.

How to get bought for $1B or more — the future of SaaS M&A — August Capital, SAP, LinkedIn, Vista Equity Partners on panel.

What was holding LinkedIn back from doing more acquisitions? Emilie says they have been fairly active but many of them have been small. Roots of the company are R&D, data driven, collaborative, so they are very thoughtful and picky about what they buy and integrate successfully. She feels it is more responsible to be pessimistic than optimistic from a Corp Dev role.

What were the most insightful differences for SAP to acquire a typical infrastructure company vs. a cloud company? They are all different ways to perceive and value the business. Is there healthy growth, quality of bookings, new vs. upsell, churn, CAC, so they look at the metrics and assess how they translate into the on-premise world. You have more control of the stack when you’re acquiring a SaaS company How do you bring a business into another geography, that favors cloud? 5 years ago it was more challenging to acquire a SaaS company, today it’s about the same.

Vista has been doing more SaaS deals lately — what do they see happening in SaaS? Once the people in charge wear suits and ties it’s a sign that the market is more mature. The TAM is improving for Marketo and other SaaS companies they look at. The opportunistically look for companies of that scale to buy and take private. They used to make dramatic reductions in operating costs for typical companies, but in SaaS companies that’s not the case. The PE playbook has had to change a bit for SaaS. They think developers are overvalued in certain areas of the country, and they can relocate dev teams to save money. The plan will be to continue to stay active in SaaS, but probably more private companies.

Size and scale for when to acquire a company (to SAP)? SuccessFactors acquisition helped them understand the aspects of the cloud business and then they started looking at ancillary topics they could purchase, such as Concur. A good part of their organic portfolio is now SaaS. Looking forward, they assess their entire portfolio and look to see where they can fill gaps.

How do you look at a company doing $10-$20 million in ARR (to SAP)? There’s a large acquisition cost because they take the onus of integration complexity. The more big deals they do the more complexity they have. They’re trying to be prescriptive about what they do. $10-$20 million ARR has demonstrated some level of product-market fit but the question is how big can it scale?

Do you think a time will come when SaaS consolidates or is fragmentation here to stay (to LinkedIn)? Less expensive to develop those companies, so hard to differentiate at the early stage levels who is going to win in those markets. Their experience has been to meet with a lot of the relevant early-stage companies and learn about them, evaluate fit, rather than waiting to see who will win the market and paying up. At the highest levels you’re seeing large strategic investors and PE firms take the big fish on, but on the smaller side there will be increased M&A activity and consolidation. Harder to get from $10M to $50M or $100M than it is to go from $0 to $10M.

A lot of the acquisitions have been on the high-end of the market, high ARR companies, why aren’t we seeing more activity on the lower and mid end of the market? SaaS is becoming ubiquitous so it’s almost a question of what’s happening with enterprise software in general. There will be healthy M&A going forward. Vista just raised a $500 million fund to go after the lower-end of the market. Not sure why people have neglected it but they are excited about it.

What do you look for in the smaller ARR companies? They’re looking for features they can sell into their install base. Buy a large install base and technologies they can sell into that install base. $5M-$10M ARR companies often look like feature companies, not platforms. They want to build leaders in the space.

What are the tradeoffs and things you value at different stages of a company’s progression? Customers, IP, Product? Consistent with LinkedIn’s roots, everything early on is going to be about talent and quality of people and what they can contribute to the organization. Their 4 business lines are all run by acquired company entrepreneurs. In early days the focus will be on the quality of the technology to date, not that it will be deployed to all customers, but is it built in a way that matches how they view the world. At the larger size it’s more about business fundamentals, monetization metrics, customer success, etc.

Do you believe we’ll see PE play a bigger role in creating role-ups (to Vista)? If you can manage the technology risk and managing multiple clouds then PE firms have a lot of capital and SW has been a successful asset class, so everyone wants to have a piece of the sector. Marc thinks PE will play a much more active role in the sector going forward. Vista has a different approach to development than others, everything is tied to ROI, not just personal interest projects. On the compensation side, Vista comps people based on high-margin products.

What is the challenge of the multiple clouds? Still learning how to handle that, but it’s quite a bit different for them and a risk they’re wrapping their heads around.

What advice would you give to the founder or CEO of a SaaS startup as they think about an M&A exit?

SAP — scalability, how does it scale from a technology perspective, a financial perspective, unit economics, geographic — how does it become much larger.

LinkedIn — leverage your VCs and your networks to get to know people early and when appropriate. Start to build the relationship early so that later it’s not a reactive execution-oriented move but a pre-existing understanding of the business. Start with low-pressure, casual discussions. Provide updates.

Vista — Build a great company, not a company that looks great at exit. Focus on profitable growth, NPS scores, defensible technologies, not trends or what’s hot today because you think it’s going to result in a better valuation down the line. It might not be what’s best for the business. Focusing on the fundamentals will results in a better exit long-term.

How do you reach out to Vista? They have a business development team and there’s contact info on the website, or use bankers.

Who needs the Valley? How to Fund and Scale your SaaS Juggernaut Outside Silicon Valley — Anthony from Altos Ventures. 43/49 investments by Altos have been outside the Valley in last 5 years — many outside US. 71% of SaaS funding goes into California vs. the rest of the country. 60% of public cloud software companies are based outside the Valley. Where the money’s going and where it’s being created is a mismatch. It’s more expensive to do business in SV because of salaries, competition, etc.

Dropbox cafeteria has a Michelin star. Facebook has employee parking, all Teslas. Competition is brutal and pricing is super high — average SV engineer earns $200K per year. Plenty much higher than that. Altos has an efficiency metric = $1 invested / $ARR Great company <1/1, Valley average = 7/2 ($70 million of investment to hit $20 million ARR). It’s better outside the Valley due to Focus, Efficiency and Talent. You can focus on your niche and industry without distractions.

Capital efficiency and also the ability to find local talent and retain them. Churn is super high in SV, but outside the valley they stay 3x as long on average. It’s worse to be outside the valley due to slower Velocity, Proximity to customers, partners, investors and competitors, and lack of Senior Talent. When you get to the $10M ARR stage they can hit a wall in local markets and need to import talent. Advice: Spend time here, Raise money here, Recruit Execs here, and then go home and build a great business.

Velocity is hard to measure outside the Valley — try to see if entrepreneurs are learning quickly, getting into the network quickly, iterate on ideas and business models. Ambition and speed are the two factors. Important that companies aren’t lifestyle businesses and moving at part with those outside the Valley.

Top domestic areas in the US? Active in Austin. Lots of people moving there, lack of local capital creates an opportunity. New Orleans, look everywhere. Higher ARR benchmark for companies outside the Valley than inside. ARR is a proxy for maturity of Sales and product-market fit.

The Inside Story of AngelList and How Funding Is and Isn’t Being Disrupted — Naval Ravikant, CEO. Founded to help Founders raise money, recruit talent, and find customers. Free recruiting platform for startups, 20K companies use it, 750K candidates on the site, premium service called A-list on top of that. Recently acquired Product Hunt to help Founders find customers and early Beta-testers. Syndicate functionality for investment with micro-angel funds to get more leverage and follow-on capital on their deals. Eventually can be a platform for venture funds themselves. Effectively back office for the angels, they handle taxes, capital calls, etc. so they can focus on investment and finding deals.

Almost all the deals are now private, meaning only visible to lead investor and backers. That’s a shift from initially. Now companies can stay in stealth mode and not have a public announcement implicit in fundraising on AL. AngelList has ~200 syndicate leads on the platform, and they can multiply their check size by 10x or more using their backers. Evolution, not revolution from current business. Moving current business online rather than trying to cut people out. Additional benefits from being online for LPs in funds, like getting to invest in portfolio companies directly alongside the funds if they desire to do so.

1,250 companies have raised over $500M online, and then those companies have raised an additional $5B in follow-on funds. Naval had a seed fund in 2007 and is still waiting for liquidity from several companies. 10 years is about average time to liquidity, with some taking as long as 15–17 years. AL closing 40–60 deals a month, takes 5% of the carried interest from investors. Free for companies. Profitability is about a year out, but AL has an “embarrassingly large” amount of money in the bank that they’re not using. About 60 employees today.

VC is like refined sugar — can give you some energy but don’t want to be living off of it. AL has committed capital from large institutional investors to enable them to invest through downturns when some individual investors might pull out of the asset class temporarily. Last year seed stage financing was down 30% and late stage was down 80%, but now funds have more money and are putting it to work. The cat is out of the bag — people know that technology companies are driving almost all innovation, so it’s gone from being a niche industry to probably the most important on the planet.

Tech is still a small business when you look at the amount of money flowing in and the number of people involved. Should always have an inflow of cash from the outside looking to get in. Many companies today raise money because they can, not because they need to. This is due to the decreased cost to build a company today than it was 10–15 years ago. During a downturn most companies can cut expenses and survive. If you’re not protected for a downside then you’re in trouble.

Valuations are down relative to ARR, but in a competitive free-market sense. Not due to collusion. No such monolithic entity of “the VCs” setting pricing. It’s competitive and dynamic. Companies are further along than they used to be — definition of a seed company has completely changed. A seed company today used to be a Series A company in the past. Valuation definitely matters, makes it harder for investors to make money. Not a terrible time to be an investor but probably slightly favors entrepreneurs at the moment. Can’t play macro timing to maximize valuation if you’re a startup.

Jobs platform — A-List is the premium version of the jobs functionality. Matching system, specific to startup companies. is a service that does vetting and pre-screening for $10K per placed Engineer or Designer who stays on for some pre-determined amount of time. Also have Track which is a free applicant tracking system, provides intelligence and data about candidates. Almost like a hyper-optimized Trello just for recruiting.

One thing companies need help with is finding customers. Acquired Product Hunt to help with that. 20K makers have launched products and companies on that site. AL would like to help enterprise companies find customers as well, not just B2C. Want to make it much more systematic to help you get your first 10 high quality customers. It’ll take a little while, maybe by the end of the year.

Naval was prescient in calling the outcome of election. Felt that “elite” candidates like Hilary Clinton would not have a chance anymore. Feels we’re transitioning from a Republic to a Democracy, and he thinks this election was a minor version of that. Presidency has normally has been guarded by the elite (educated) in part due to cost required to run a campaign. Then media was the second part. The money side was being replaced by crowdfunding as proved by Bernie Sanders. The media allows people to bypass NBC, Fox and the other traditional groups which leads to a direct democracy that appeals to the average populist voter. Naval predicted that either Bernie or Trump would win, and that we will never have an “elite” candidate again. Pendulum is swinging wider and wider rather than established insiders.

Phones are super powerful because politicians can now effectively take a live survey from their constituents to get a sense for what they want before voting. Don’t have to rely on what the news media says or what the loudest person is saying. Enables candidates to quantitatively collect data to guide decision making. Analogy of a company listening to all their customers rather than just the single biggest or most unhappy. Too much power comes from Washington DC. Need more power and decision making at the State level, not the Federal level.

Lessons Learned from 200+ SaaS Investments– Mark Suster, Upfront Ventures, John Somorjai, EVP of Corp Dev for Salesforce Ventures.

Should companies work with corporate VC as Fred Wilson said? All different types of corporate VC. The goal of Salesforce Ventures is to create a portfolio of products for Salesforce customers. Goal is to help them grow rather than make a huge amount of money and hold rights like ROFRs. Salesforce asks for a notification right but no blocking right. Usually helpful to the companies because it helps them create a process. They ask for quarterly financials because they invest off their balance sheet, so they need to know whether to mark up or impair the valuation of a company. Not individually, just aggregate value of portfolio and how it changes quarter by quarter.

Upfront doesn’t mind notification rights but won’t work with someone who requires a ROFR (right of first refusal) because any other prospective buyer is going to be scared off by the idea they’ll be a stalking horse for the firm holding the ROFR.

How many deals do you do, what size? Trying to deliver more aggregated solutions for customers. Want to acquire customers that are strategic for customers so they can be integrated and sold on the app marketplace. They have a lightning fund which focuses on apps for the lightning platform. Invest in system integrator partners as well. 175+ investments, 40 exits, some notable IPOs like Twilio. Oracle, Amazon, Yahoo, Adobe have acquired some of their companies. Would never try to block a sale, in fact try to assist. Work with entrepreneur to try to maximize purchase amount. Model is to co-invest with VCs, typically don’t lead rounds. Usually deals under $10M. Will do any stage deal — $250K at seed stage all the way up to $10M at later stage.

Does Salesforce have internal resources to support a company that gets invested in? Yes, Salesforce provides advice, guidance around M&A, access to customers, make introductions to executives within Salesforce. 1–1–1 model at Salesforce for corporate philanthropy. They gave 1% of their equity to a foundation when the company started, employees also give 1% of their time for volunteer hours — up to 7 days a year for causes important to them, and allow non-profits to user their products for free (30K). Encourage portfolio companies to adopt the 1–1–1 model. 70 have adopted all 3 elements. Giving back is super important to employees and increases retention and job satisfaction.

What’s the best way to approach Salesforce Ventures? Approach them directly, they can then make intros to VCs in their network. They try to make the process easy.

M&A advice — if you want to sell a company, when should you approach a potential buyer and how should you do it? Build out a partnership with a potential acquirer or 2 or 3 of them is the best way to start. They get to know your technology, learn more about you, which provides proof points and can create champions within the company to vote for the acquisition. Start early, once you have a product in market and with early traction with customers. Don’t be secretive or stealth, you want to build a corporate relationship early to help you in the end.

How do you flip from the dialogue of working with a company to a corporate M&A discussion? Do the math and go through the exercise of assessing raising capital and dilution along with loss of control versus selling at a lower price now. Not many entrepreneurs do and instead focus on maximizing valuation or exit amount rather than actual money you will end up taking home. Good time to engage with your existing investors or a corporate person at that point and ask for advice or guidance that could lead to acquisition talk.

How do you feel about engaging multiple acquirers and running a process? Does that offend Salesforce? Focus on the best place for you and your employees and use that to guide the process. Be the person that’s controlling the process and find the best home for your company rather than maximizing price and placing your employees in a place where the might not be happy. It’s a delicate process, but if you stay true to what’s best for you and the company, you can get the deal done.

Would you tell a friend to hire a banker to maximize value or would you say be careful, you might piss off the acquirer? It’s a small industry, you don’t want to leave a wake of carnage around a deal where you’re doing everything you can to squeeze very last dollar from the buyer and creating animosity. If you’re going to hire a banker, find one that’s not focused solely on maximizing price. Otherwise even if you get a really high price you can set expectations too high and damage your potential future situation.

Suster’s team was acquired by John and Salesforce. His team stayed at the company at minimum 5 years after acquisition. They weren’t excited to be part of a big company at first, but they realized they could learn a lot from working with a big company. Half of the engineering team stayed and just had their 10 year anniversary. Some left and are now CEOs of their own companies because of what they learned.

In some companies corp dev is like legal, and it’s where deals go to die, and in some places it drives deals. How do you know when and where to go to corp dev? You always want to start off talking to the business. John takes his cues from the reaction of his Product and Sales teams before he engages, because they have to have a sponsor from one of those teams. Always better to get an intro to corp dev from one of those people anyway, as they’re inundated with cold calls.

Bill Bing

Written by

Bill Bing

Startups/strategic finance focus. 4 exits for > $1B (Upromise, Square 1, DAS Communications, TransLoc).