At SaaStr Miami, former Founder’s Fund Partner and CRO of Brex Sam Blond — host of the SaaStr CRO Confidential Podcast — sat down with SaaStr CEO and founder Jason Lemkin for a fireside chat about finding success as a SaaS company in 2024. They discuss Sam’s learnings at Founders Fund, what the 2024 playbook looks like, hiring and motivating sales teams, and a handful of audience questions.
Sam just finished 18 months at Founders Fund after joining in mid-to-late 2022. We were coming off an environment where startup funding was as fruitful as ever. With personal experience from Brex, Rippling, Zenefits, EchoSign and other high-growth companies, he was spoiled when it came to those companies raising money from exceptional VCs.
What he’s learned on both sides of the VC table is that the bar is really high for most VCs. Higher than he imagined in terms of the founder quality bar and, the stage of the business, and growth and efficiency metrics.
Learnings as a Partner at Founders Fund
Some nuances prevent deals from happening that Sam wasn’t aware of at the beginning. Each VC has a different “flavor.” For instance, Founders Fund doesn’t really invest in AI, health tech, or edtech, even if you’re growing 5x. It’s wasn’t 1 out of 10 companies he spoke with that the fund was really excited about. It was more like 1 out of 100, and the filter to get into that top 100 is extremely high.
As a founder, that high bar means you have to meet with more investors because of those flavors, even more so if you’re not in a hot category.
The bar is so high, that the power laws in venture mean that even an exceptional company, like let’s say a fast-growing Series A company raising $30-$40M today, even with a billion-dollar outcome for that company down the road doesn’t actually move the needle for the fund. That’s how hard it can be to get funded. So, unless you can make the argument that it’s going to return the fund, it’s not that interesting. And that’s what makes the bar that much higher.
For folks in SaaS, what got confusing in 2021 is that growth blew up so much in SaaS that the venture bar got lower. Not lower growth, but suddenly, it seemed there could be 20 payroll companies and 40 analytics companies. There was so much budget flowing into B2B that it seemed like there could be 1,000 unicorns, even if 800 of those turned out to be junk. But it didn’t matter because of how they were deploying money then.
We might have several years of whiplash from that time, and it’s still confusing where the bar is now.
What works well from the classic playbook in 2024, and what should we walk back or modify?
There is less money to spend today, and even if you have money, there is so much more focus on efficiency metrics in addition to growth, and you might not be encouraged to spend it as you once were.
In 2021 and 2022, the money was a net negative, and what GTM organizations did was twofold.
- On the marketing side, people got ‘lazy’ under the guise of, “Let’s increase our paid online ad spend and turn that dial up and spend more.” It was too easy to spend money and check the box of doing your job instead of getting creative on campaigns that drove outsized returns.
- On the sales side, people hired way too much. More salespeople do not equal more sales. This manifested in layoffs over the last 18 months. People said, “We need more salespeople to make more sales, so let’s hire more salespeople.” They often did so in decreasing spending environments. Companies weren’t buying or interested in buying as often, so conversion rates and demand were down.
Today, it’s not that different whether you have a lot of venture cash or not. People need to be scrappy, creative, and accountable to numbers that make sense for the business. You can’t scale either of those channels or people until you’re happy with the efficiency of those people and processes.
Do you have to double your headcount to make it from $10M to $20M or even $2M to $5M?
This isn’t a one-size-fits-all answer. What Sam sees people doing often, regardless of the environment, is when something is working, they try and find other things to work. It shifts focus away from the things that are working.
The right thing to do is double, triple, and quadruple down on the things that are working for your business. For headcount specifically, make sure that the constraint to growing faster is that you don’t have enough salespeople to work the demand that exists for your business. If that’s true, then you should absolutely hire more salespeople.
However, if you’re scaling efficiently and quickly and sales reps are well-fed but not at a breaking point, you might not want to add more salespeople.
You could even present it to the sales team as options one and two:
- We can continue hiring more salespeople and keep quotas the same.
- We can not hire more salespeople, increase quotas, and make more money.
Thought exercises like the above can be valuable to determine when and if it’s the right time to expand the sales team.
When you hire a Head of Sales, Demand Gen, or Marketing who thinks they need a team to get going, how do you handle that in 2024 when there isn’t budget to hire more people on day one?
In 2020, 2021 and 2022, the trend in SaaS was to expand hires in sales, marketing, and other resources ahead of actually having the demand to feed them. It didn’t matter for these years because there was so much capital to deploy, that now there’s almost a shock to the system in 2024 when you go to re-hire these heads of Sales, Marketing, and Demand Gen because they were trained for the last 3 years to automatically need five or ten people to get going.
Now the big difference being that many companies don’t have the budget to hire ten people, an SDR team, or a whole ops team on day one. So, do you still give those hires a shot?
For founders today, it’s ultimately your responsibility and decision around this hire.
The ideal course of action is to explain why that hire can’t have a team yet and clearly define what needs to happen for them to get one. When those outcomes are achieved, the hire gets their headcount.
The distributed workforce has also radically changed what people do. Jason did a survey on LinkedIn with 2000+ people who said they were working more than one job. That genie won’t go back in the bottle.
When recruiting, that first VP of Sales, Marketing, CS, and Product has to carry a bag for real. If they don’t, they never will, and they’ll never learn the product. Whether it’s a little team or portfolio companies, Jason guesses that 80% of candidates who say they’ll do that end up quitting the interview process.
You have to find someone willing to visit customers in person and sell themselves. If you want to manage people and not do the work, it won’t work. People need to roll up their sleeves and do the hard work.
How do you decide whether to hire more reps or keep them the same but increase quota?
If you keep the same team and keep them motivated, would you close more revenue than if you continued building the team? That’s the question you should ask yourself. If the team is hitting quota but isn’t working 50 hours a week and doing closer to 25 or 30 hours, there’s capacity there.
Whether you present the option to the team or not is up to you. The real question is which avenue will generate the most revenue for the business.
As far as keeping people motivated, there’s a virtuous cycle that’s like magic. It’s a bit of a flywheel. If you can create an environment where there’s enough demand to feed the sales team and it’s right-sized, and reps are hitting quota and making money, they’ll stay motivated.
Why? Because sales reps who are hitting quota are motivated because they’re hitting quota and making money. They’re then motivated to generate more demand, which leads to more money. More money leads to being motivated, which leads to hustling and demand.
You should do everything you can to put that virtuous cycle in place. Quickly, you’ll find the people willing to jump on the flywheel and the people who aren’t.
When is PLG the right choice?
So many founders think the answer to stalled growth is PLG, but that’s a terrible idea. You can’t take a stalled sales motion and solve it with PLG. If you’ve stalled, it means you’ve fallen out of product market fit. Your next step is to turn your app back into mission-critical.
When it comes to PLG, you have to be passionate about it. If you don’t architect around it from the beginning, it’s almost impossible to add later. Sales-led and Enterprise motions have many benefits, and a PLG product must be magical.
If you’re going to do it, do it early out of passion, not as a hail mary.
How do you reach out to the right decision-makers? Bottoms-up or tops-down?
Initially, you follow your intuition around which decision maker will most likely convert a deal within the business. While many SDRs and BRDs can send a cadence right on their own, not many will have the maturity to really reach out to power and know how to target a CEO and actually say something that will add value. While CEOs read every email, they’re not going to respond unless there is a clear benefit to solve a problem for them or make their life easier.
A tactical example from Sam’s time at Brex shows what happens over time when you train SDRs to communicate with the right people. For smaller companies, go after the founders because they likely won’t have finance people yet. For Mid-Market companies, you might connect with people in finance or accounting. Generally, you want to start with the higher level title, a CFO over a VP of Finance over a Director of Finance.
You can track conversion rates by persona, which then leads to the strategy of who you’re targeting and prioritizing initially.
The who to reach out to is important, and the how to reach out is even harder. Any SDR two months out of college can send a cadence independently. But not that many have the maturity to reach out to power and to know how to target a CEO.
If you have a gem on your team, who can do that, lean into it. Jason hopes that in 3-4 years, with AI and efficiency, there will be a whole legion of SDRs that are paid for performance and make more money. Ideally, they won’t churn six months out. If you could have 4-5 SDRs on your team that stay for a decade and get better and better and reliably make 6-figure incomes, that would be incredible.
How do you know if a sales rep will work out or not?
There’s a subjective and objective way to categorize whether a rep will work out—cycle times, for example. If you have a six-month-long sales cycle, it will be hard from a purely revenue standpoint to determine whether a sales rep is successful.
You want clear expectations around what’s expected in the first 30 and 60 days, and to be as objective as possible.
From a subjective standpoint, what does your gut say? If your gut says it isn’t working 60 days in, it will probably not work out. In founder-led sales, you’ll likely know within 14 days because you can only hire people who work on your wavelength.
A tactical idea is to give Individual Contributors an offer letter, have them sign it, and give them two weeks to back out. That takes the pressure off recruiting. The last thing you want is for them to fail after 30 days, so give them two weeks to join meetings, listen to 50 Gong calls, and do everything they can to see if they think they’ll succeed.
In a startup today, everyone’s important. You don’t want to fire anybody because the cost is so high. So, destress the process as much as possible for everyone.
Measuring Sales Team Success Based on Three Criteria
There are three criteria you can use to measure the success of a sales team hire.
- Performance — this is objective. Over time, it’s about how much revenue the rep generates during the ramping period. Another performance metric could be pipeline activity with actual outputs.
- Effort
- Attitude
It’s that simple. If someone isn’t meeting performance measurements, look at effort and attitude. If someone is poor on either, you replace them without a conversation or with a one-time discussion, typically at more mature businesses.
As far as attitude, a negative one can spread like a disease. If you’re complaining about leads, products, or management, it goes to the other reps, and that person is adding negative value to the company.
And if you have to let someone go, do so in a way that when they reflect on their time in your business and about you as a person, they’re left with as positive an experience as possible.
Are fractional hires a good idea?
“There’s a lot of nuance between moments where consultants are helpful and snake oil salesmen who want to be fractional CMOs doing strategy,” Jason says. Startups get too many snake oil salespeople.
Why do people make fractional hires? Because they say they can’t afford it. Of course, there are no one-size-fits-all answers. The main situation where a fractional hire might make sense is when a business is at a time when there’s a leadership gap and someone with experience like Jason or Sam comes into an existing team that needs a little support.
An in-network trusted advisor type of person can come in and add value. But you need to be positive about the person you’re working with during an inflection point.
Doing it to save money doesn’t work because it doesn’t save money. You have to learn the accretive math. If you say you can’t afford a Head of Marketing, you can if it’s someone who will carry the bag.
The great ones are always accretive. They’ll take your 50 leads and turn them into more revenue. A fractional one is almost always more expensive.
