Published 6 May 2022; actually recorded November 2021
Link to podcast: https://www.thetwentyminutevc.com/podcast/jason-lemkin/
Link to transcript: https://docs.google.com/document/d/12lNTBioepnqM8xV8O4hwDKOkFOJwv5NT/edit
(20VC doesn’t release transcripts; so I got this done via Temi.com with additional reviews by @core_chirag; you are welcome!)
SPW: Good, no, great podcast, covering the changing venture industry, how to think about seed, how to look at SaaS sales and setting up the sales team for success. Highlights below.
Jason Lemkin is the Founder and Managing Partner @ SaaStr, a social community of 500,000+ SaaS founders and a $100M venture fund. In the past, Jason has made investments in the likes of Algolia, Talkdesk, Pipedrive, and RevenueCat to name a few. Prior to SaaStr, Jason was the Co-Founder and CEO @ Echosign, backed by Emergence Capital, Echosign was bought by Adobe and is Adobe Sign as we know it today.
Harry (05:52): You know, the one thing that I continuously hear from VC is the markets are a 1000x as big or a 100x as big as you mentioned and so ownership doesn't matter as much anymore. How do you think about that?
Jason (06:02): I think it's a great argument on a spreadsheet, certainly owning 1 or 2% of a DataDog. We look at all the individual investors in Uber that became Decamillionaires out of (it), and you're like, wow, I could have done that. I don't know. I'm not smart enough. But when I look over my eight-year history of investing, it's the ones with the double-digit ownership that move the needle. When I look at what the companies I'm sitting on today, obviously you regret ones you missed or you didn't (invest in). But all of my core positions are double digit ownership, largest investor. In most of them, that one puts you in a good position, if you get a unicorn, owning 20% of a unicorn still works today. If you give up a decacorn, it was a miss, I guess it all boils down to…one rule. When you meet a winner, you buy all the shares. Now, if you can buy a quarter of the company, you buy a quarter of the company. If you can buy 2% of the company, you buy 2% of the company, whether you either buy all of them or none. And I think that's the way you solved through this. I mean, if all you could buy was 2% of a Decacorn and it's you get 200 million, that's pretty good, but buying less doesn't help.
Don’t hire a VP Sales without having at least 2 AEs / sales reps
Jason (10:41): I would say the majority of B2B companies that are successful that you and I have worked with, Harry, the majority, but not all, the founder has been the first head of sales. My first decacorn, SaaStr podcast #001, you did with Tiago from TalkDesk. He was the only salesperson through the first 2 million of revenue.
Jason (11:56): We've learned over time. What works 80% of the time is 80% of the great cloud SaaS CEOs we've worked with. They hire two quirky sales reps and get them doing pretty well, hitting quota or beyond often one of them is just crazy good, right? And we can talk about what that persona looks like. And when you've hired two, you're generally ready to hire a VP to hire a 300 (more). You have just enough of an engine, just enough of a playbook, just as importantly, a playbook that works that you can start reproducing that playbook from three to 300. If you don't have those two AEs and you hire a VP of sales, 80% of the time, it doesn't work because there's nothing for them to work with, right? And importantly, today, a good VP of sales usually doesn’t join a startup at that phase. That's one thing that's changed. The last five years we could chat about the great VPs of sales who are waiting for 10 million (ARR). The ones that used to join at 1 million, they're all waiting for a 10 million ARR startup today or a unicorn, whichever comes earlier. But if you possibly can get two performing reps yourself, it's gonna make that whole process 10 times easier.
Founder dependency in sales / Founder as the Chief Sales Officer
Jason: One is I've found that in true enterprise, like real enterprise, the founder is often the VP of sales until 10 million. I've seen this again and again and again. Now I'm not saying they don't have a VP of sales, but I think in SMB, you can be hands off at a million or two in revenue. Even if you did found online sales, I find that in enterprise, there are so good at speaking to the big customers. They're so trusted, Harry. We know like we trust him. All the customers, trust him, Google trusts him, whoever trusts him. And so, Harry is already in every deal until this brand is so established that Harry just gets pulled into the deal. So, I actually think to tell founders that are pulling their hair out in enterprise, keep pulling it out, ‘cause it's not going to get better. It's just going to get more repeatable and you will be the head of sales till 10 million.
And when I started doing these SaaStr events, I would interview all the CEOs in the early days, I would ask the Jeff Lawsons from Twilio and the Peter Gassner from Veeva. I would say, how much time do you spend in sales? Like in the early days before they all, they were all bigger and they're like more than ever. I'm like really Jeff, you just went public in Twilio in 2017. You're a developer focus company. You're spending more time in sales than ever. Now, sometimes that means more time with customers. It's not always prospects, right? As you get bigger, you talk about 10-year customers. You want to move your time as CEO more to customers and prospects, but it never goes down. And that, I think that's emblematic of this level of founder dependency.