$30M Series C Retrospective

We (Salsify) just raised a $30 million C round, making $55 million total funds raised to date.

Rather than write a “ra ra!” post talking about the success of the company, I wanted to look back over the last 4.5 years and think about what things, in retrospect, we did and didn’t do so well to get us here.

First, some quick background for those not familiar with Salsify: Salsify is a B2B enterprise SaaS company based in Boston. The founders — Jason, Jeremy, and I — sat down to write our first line of code on September 4, 2012. Four and a half years later, global brands like Coca-Cola, Bosch, Harman, and hundreds of others rely on our platform to drive the growth of their businesses by empowering them to create and distribute the quality content that powers today’s shopping experiences. We’ve raised $55 million to date from Matrix, Venrock, _Underscore.VC, and North Bridge, have about 130 employees, and closed our last year at over 3x YoY ARR growth. We’re currently in scale mode (we’re hiring!).

Mistakes

Looking back, many of the mistakes we’ve made that actually hurt had the shape of, “we should have done THAT earlier!” Here are a few examples:

• Not hiring more sales management earlier. When planning for both 2015 and 2016 sales team growth, we did not build in enough sales management and training capacity. The big reason is that, on paper, if you hire a few sales managers when you start scaling, then you end up with a top-heavy org with high manager-to-rep ratios that make the entire sales team (and corporate metrics like CAC) look pretty wonky. However, good sales managers take a long time to find, have their own ramp time once you find them, and immediately make their reps more productive. I believe that, even in the early days of expanding the team, we would have been well-served getting a couple managers in. Instead, we found ourselves in a position last year in which one single sales director had 16 direct reports and we were covering the lack of sales management bandwidth with time from founders and others. We’ve since largely addressed this problem, but could have had an even better 2016 had we grown management ahead of immediate need in 2015.
• Not bringing on recruiters earlier. For a couple years now — since reaching product/market fit with a repeatable enough sales model — our growth has been gated on (a) how fast can we hire good sales reps, (b) how fast can we ramp good sales reps, (c) how fast can we expand engineering capacity to help product drive retention and expansion. We didn’t bring our first recruiter, May, in-house until August 2015, and then didn’t add a recruiting coordinator for months, and then didn’t hire a second recruiter until September 2016. I’m cringing as I’m writing this. We should have had a recruiter specifically focus on sales and nothing else sometime in 2015 at least, and possibly earlier. If you’re spending money on external recruiters, just get an in-house recruiter, even if the math doesn’t immediately make sense from a strict cost-analysis perspective. Fortunately in our case we were able to fill nearly every open position via our networks, referrals, and inbound interest (96% last year!), but we always found ourself hiring slower than plan, and it absolutely limited how fast we could grow.
• Not focusing on manager training earlier. One of the benefits of working for a fast-growing startup vs. a more established company is that there is more opportunity for promotion. We have about 30 managers and team leads across the company right now, and many were promoted from within and are managing other people for the first time. For the first couple such promotions we had assumed that direct mentorship from executives would be enough to make a new manager successful. Instead, what we found is that direct mentorship is necessary but not sufficient, and especially for larger teams of 4+ requires a lot of time from the new manager’s manager. We brought Allison, our Director of Talent, on in Q2 2016, and have since invested in third party management education for all managers (new and experienced). We should have focused on manager skill development earlier.
• Not hiring product management & UX capacity earlier. This one may be more specific to Salsify than the others given the background of all 3 founders, but I’m listing it here because the pattern is probably common to most companies: we took too long to hire people to do things that we ourselves are very good at. Jeremy, Jason, and I were all successful product managers, and we’re also all capable engineers. Jeremy is the VP Product and has more individual capacity than just about anyone I’ve ever worked with. And so we didn’t think we needed more bandwidth in the product department until we obviously did. We should have brought on a couple experienced PMs back as early as 2014 instead of waiting until August 2015, as doing so would have meaningfully increased engineering velocity during that intervening year, and a year is a long time to have increased engineering velocity.

Other than things of that nature, the biggest thing we could have improved:

• Not proactively updating internal communication patterns to match company growth stage. This is a hard one to put on the list, because we have actually put a lot of time and thought into how we communicate between departments and different levels of the company. We’re very transparent with our employees, and essentially have no secrets. Even so, communication has broken down several times while scaling. Looking back, as a basic pattern I’d say things broke down roughly every time we doubled. When we were 10 people, we all worked around one conference room table, bumping knees underneath it (except for Emily & I, who are too short to have had that problem). When we were 20 we spread out, and all of a sudden the product team wasn’t listening to every discussion about customer messaging, and we didn’t do a good job connecting the dots at first. But even at 20 we still had “Burger Friday” and had most of our meals together. Between 20 and 40 people that broke down, and there were even fewer built-in touchpoints for connecting people across the company. Between 40 and 80 all of a sudden we had a bunch more managers, meaning a layer between execs and most employees, and had to compensate for that. We’re about halfway between 80 and 160 employees now, and at least one problem has become that lots of people are traveling, remote, and otherwise not around, so updating people on strategic developments not just during all-hands but asynchronously has been a problem. We’ve always corrected, but after the fact, and there’s always been some damage to mitigate. This is one that we’re still focusing on actively, but feel that we could have done better transitioning between each phase.

Wins

Many of these wins have the opposite shape of the mistakes, which is to say we chose specific areas of the company to invest in early, and they’ve paid off big time.

• Focusing on culture from the beginning, especially when hiring/firing/promoting. This is one that I’m particularly proud of, in particularly because it’s been hard. We’ve made mistakes in hiring that set us back culturally at times, and we still don’t do as good a job as we’d like empowering our team members to make decisions at the edges of the company. Still, from day 1 we’ve been concerned about the kind of company we wanted to create, and without relentless focus on culture and continual honest self-examination on how we’re doing — mistakes and all — I don’t think we’d be even close to our vision. All 3 of us wanted to create a work environment that we and others were really excited about, and that everyone would look back at years later and say, “man, that was awesome.” Michael Skok of _Underscore.VC wrote about our early focus years ago in Just Do It — Right from the Start! Despite our missteps and areas that still need improvement, we are listed as one of Fortune’s Great Places to Work, an award based entirely on ratings from employees.
• As an aside: I could (and will!) write a whole post on what culture is, why it matters, and how you create it, but I’ll just say this for now: if you’re not using your cultural values as a bar to judge who you hire, fire, and promote, then your values, whatever they are, will dilute over time.
• Over-hiring in customer success. I’m far from the first person to write about this, so I’ll just say that customer success matters so very much in the early days. With superior support, your customers will love you and even forgive product shortcomings as your build out your whole solution. Even public SaaS companies run break-even (or even negative) gross margins on customer success for this reason (meaning they invest money into it as a cost center vs. treating “professional services” as a profit center in the old Oracle/IBM model). Our renewal and expansion rates are best-in-class for an enterprise B2B SaaS business, and global brands are willing to talk about us publicly and rate us publicly (which rarely happens with enterprise businesses). We have a great product, but those wins would not be possible without substantial investments in customer success.
• Another aside: we took too long to invest in account management capacity in sales to work alongside customer success for our customer base, primarily to support ongoing executive-level conversations. I debated about putting this in the Mistakes list since it really is important, but I think it’s sufficient to state that you need BOTH early.
• Hiring strong support staff early. Based in no small part on the advice of the internet, we hired an office manager, Brandy, and controller, John Milligan, pretty early. Even then, we founders debated it! Was hiring an office manager in our first 30 employees a luxury? Were we mis-using investor (including our own) dollars? In retrospect, absolutely not; both hires were major sanity-saving investments, and I encourage any fast-growing company to make them early. Brandy has overseen 2 major office moves and build-outs in < 2 years, and keeps things humming. John manages everything financial, billing, HR program, etc., related which really adds up once you hit 50 or 60 employees.
• Having patience when filling out executive team. This may seem self-serving and braggy, but in all honesty I couldn’t be happier with the exec team we have. Hiring execs is hard and critically important to get right as a bad exec running any department can cripple the entire company. We really took our time to find people with strong, complementary experience and points of view to the founders, and who were great cultural fits. As an example, our VP Sales search, resulting in John Davagian’s hire, took nearly 9 months. It hurt to not have a VP Sales during that time (I was keeping the seat warm, but really doing Sales leadership only part time). We were introduced to dozens of candidates with really impressive resumes that just weren’t the right fit in terms of experience (e.g. all inbound, all enterprise, no SaaS) and culture (I’ll just say that I don’t love many sales leaders out there). It’s worth it to wait. For example, John has hired directors, managers, and other leaders into the organization that fit our values and profile because he shares the same values, and since sales is such a large % of our company that really matters. I could tell similar stories of the rest of the team. We didn’t always get it right — we did make some mistakes in hiring — but we avoided being overly gunshy going forward.

Onward

Whether you’re a founder or startup employee, I hope you found this perspective and the details helpful. May you make different mistakes than we have and also find your own successes.

I’m very proud of the value we’ve delivered to our customers, the success that our employees have made possible, and the culture we’ve created. In many ways, I believe 2017 will be the best year we’ve had as a company.