I’ve been reflecting on my three days at SaaStr. Overwhelming, overcrowded and over the top maybe. But also compelling, fascinating and thought provoking – and three things have been bouncing around in my head that distill what I heard.
People, purpose and product.
- Every SaaS company is setting out to build a product that solves a massive problem.
- The bigger and better the sense of purpose that business has, the greater the alignment across the organisation of why they exist and why they and their customers should care.
- And at the end of the day, it is all about people. Exceptional entrepreneurs, becoming leaders; building high performing leadership teams; and the people that team in turn employs.
When you get those three right, a 4th P comes into play – playbook. Here are 15 lessons from SaaStr on how to successfully scale through the start up, grow up and scale up phases:
1. CEO builds the team, the team builds the company
2. Recruiting is your biggest sales job
3. Hire with an ever-rising bar and move fast when people don’t work out
One message that ran through every session at SaaStr was the importance of people: The CEO builds the leadership team and the team builds the company; hiring is the most important thing you do.
Recruit like you sell big customers. When hiring makes people feel loved, act like it’s a really big deal, because it is. – Josh James, CEO, Domo
4. Expect to make mistakes and move fast when things don’t work out, but exit people with grace when you need to. Be prepared to make difficult decisions.
Hire with a high bar, and one that is constantly raising. And get real with people who don’t work out. – Dave Barrett, CEO, Expensify
5. Plan to spend at least 50 per cent of your time hiring, conscious of the strengths and weaknesses of the others in the team. You need diversity of ideas, beliefs and skills, and people with passion, excellence but also humility.
Hire leaders who are mission driven and people with a clear presence of strengths aligned to priorities, and don’t try and coach them on weaknesses, that’s a mistake. Hire other people to mitigate weaknesses with strengths. And always go for awesome over experience. – Chris O’Neill, CEO, Evernote
6. Your first mission? Don’t go bust.
7. Your 2nd? Find a problem that is truly worth solving.
8. Your third? Make money.
As entrepreneurs we obsess about the importance of the big vision, mission or true north. But at the start the priority is far more prosaic; don’t go bust. Stay in business, use money wisely, be frugal with your capital as only by staying alive can you find, and deliver, on your fundamental purpose.
Every founder starts with the challenge of isolating a problem that is truly worth solving.
If you are solving a big problem and the problem is growing then have courage and keep going. – Peter Gassner, CEO, Veeva Systems
9. As the company evolves, the focus on the initial problem or pain translates into the essence of the company purpose.
That purpose is critical, the deep sense of why the company exists, Tim Gueliri of Sierra Ventures talked about the importance of “defining, developing and dominating a category” as the route to scale and value.
10. But make sure throughout you have a clear understanding of how to make money.
Businesses that last make money. For ever. That’s the rule. – Peter Gassner, Veeva
11. This doesn’t mean you have to be profitable, even at the point of an IPO, but ultimately you must be able to generate free cash flow.
You don’t have to be profitable for a successful IPO, the valuation is based on growth and future earnings. But ultimately you must make money. – Tim Guleri, Managing Partner Sierra Ventures
12. Build for the big problem.
13. Validate product market fit and wait until you feel it in your gut that you are ready to scale.
14. Then get the product out fast and hard and sell it to the largest companies as possible.
There are two really interesting intersections here. First is the constant self questioning of whether you are solving the biggest pain in the market you are choosing to serve and then whether the product delivers sufficient value. A simple challenge is to ask yourself, are our customers realising significantly more value from our solution than we are?
Customers are rational, says Peter Gassner, CEO of Veeva. So look at yourself, if people aren’t buying you need to question if your products or services good enough.
As investors we are wary of investing too much money before a company has achieved product market fit, ensuring there is maximum learning, and when ready investing for growth. I loved the sentiment of Tracy Young, the CEO of Plandgrid.
When it comes to product market fit, you should feel you are ready in every fibre of your being. Until then keep iterating and testing, look for more validation and then when you are ready go for it. –Tracy Young, Plangrid
15. As the business grows play close attention to packaging and pricing. Packaging and pricing is critical.
Zendesk is one example where poor decisions about pricing were calamitous. You can read more here.
Being really flexible can be very disruptive and pricing in a way that meets their needs can be differentiating. – Mikkel Svane, CEO, Zendesk
The 4th P = Playbook
What all the founders interviewed re-enforce is that with these fundamentals in place and a certain scale, its then all the playbook.
And what they all know is that, once you have product-market fit, once you hit Initial Traction — it’s all a playbook. For a given ACV, basically you scale everything the same way. – Jason Lemkin, Saastr
Successful founders know how the organisational challenges will play out as they grow from 50 to 200 to 1,000 people. They understand the critical importance of alignment around shared vision and values. They understand the importance of customer success, selling to higher ACV and expanding revenues. They understand the importance of strong underlying economic viability: high gross margin, rapid payback on CAC, reducing churn and expanding existing revenues. And they understand the importance of dominating a category.
But they also know that while many come up with great ideas, and many of those may achieve product market fit, most will fail on execution. And that what you do between years three and six when you add most scale, is what will add most value.
Peter Gassner, who built a $500m recurring revenue business, Veeva Systems, in less than ten years with less than $5m of investment, sums it up best:
Execution matters most. This week this month. Execution is enduring. It’s what separates you. – Peter Gassner, Veeva.
Posted by Stephen Millard, Chief Platform Officer at Notion Capital.