As the conference tagline notes, the first $1 million in ARR is always the hardest. But great CEOs can make it happen – and Jason Lemkin, along with Draper Fisher Jurveston partner Josh Stein, are here to help out. They discuss culture, scaling and the three breakpoints all CEOs hit.
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In a nutshell:
- When you’re going from $5 million in revenue to $10, build an organization that can reach $20 million. If not, you’ll cap out pretty quickly.
- Culture is king.
- A CEO should be inspirational. Everything else can be learned along the way, but you can’t teach vision.
The role of a CEO and founder is to be a magnet, says Stein. She needs to set a vision, communicate that vision, and attract talent and capital. That’s the most critical, and least coachable, quality. Other aspects can be learned along the way. He cited two case studies: Dropbox and Twilio.
Dropbox started out as a consumer product, but the company quickly learned that its best customers were enterprises. The CEO did a complete 180 and turned himself into a SaaS leader – he networked, read, and sought out mentors like nobody’s business, and now he’s a thought leader in the space. This ability to adapt is key for a bigger company CEO.
Twilio set its culture first and went from there. They have nine clearly communicated values, which reduces stress and provides guidance. Stein called out one value in particular: “no shenanigans.” This means no “call us for enterprise plans” or hidden upcharges. Transparent pricing has won over customers and helped build the brand.
The three breakpoints
Stein identified three major transitions a CEO has to go through:
- Hitting 40-50 people: Communications can break down, as informally updating and collaborating with team members becomes difficult.
- Hitting 200 people: The CEO has to delegate, and his delegators delegate. Now, he faces a loss of control.
- Hitting 1,000 people: At this point, the CEO becomes a figurehead instead of a manager.
Stein finished with some words of advice for SaaS CEO’s:
- Bring in people with clearly defined roles – for example, an executive with go-to-market experience, a head of product, or a CTO. Don’t hire for nebulous roles.
- Be completely aligned with your investors (and founders if you’re not one of them). If you win, they should win, and vice versa.
- When you’re going from $5 million in revenue to $10 million, lay the groundwork to go to $20 million. If you don’t, you’ll cap out at around $12 million.
- Good news: If you’ve gotten to $1 million ARR, you’re clearly smart enough to build something big.