Every SaaS company wants to unlock the secrets of rapid growth.
Seeking to learn those secrets, I recently attended the first-ever SaaStr Annual Conference in San Francisco – an elite event bringing together nearly 2,000 SaaS executives, founders, VPs and leaders looking to scale their businesses fast. It was hosted talk-show style by Jason Lemkin, the co-founder of two successful SaaS startups and creator of the SaaS-focused blog SaaStr. The goal of the event:
“Help SaaS founders get from $0 to $100 Annual Recurring Revenue (ARR) faster, with less stress and more success.”
And it delivered. I was surprised to find SaaStr Annual wasn’t much like the usual business conference. There were no break out sessions, just one main stage where Lemkin held intimate and honest interviews with successful SaaS CEOs and founders. The executives on stage talked openly about the business challenges they’ve faced and detailed exactly how they’ve found success.
As the Director of Sales at a SaaS company, I found myself nodding and thinking, “This is exactly what our business is facing right now.” SaaStr Annual felt like a fraternity of SaaS business leaders who were all there to learn from each other. I learned some powerful strategies and business tactics that I will be sure to implement at our company, and that I’d like to share with you.
Customers are #1
Unsurprisingly, many of the successful SaaS leaders who shared their stories emphasized the importance of building powerful and lasting customer relationships. Churn is always a nightmare scenario for SaaS companies, cutting into building reliable ARR. Many of the leaders focused on tactics for reducing churn, increasing customer engagement, and improving upsell potential.
Lemkin’s first guest onstage was Aaron Levie, the CEO of Box, who shared how his company grew so quickly, culminating in the recent IPO. Levie said that initially, he was very product-focused, but realized he had to shift gears as the company grew beyond their early adopters. He advised CEOs to spend at least 50% of their time working with existing customers, rather than chasing new ones. This will help CEOs learn how to better serve customers with the product, rather than building something that no one wants to buy. Becoming a customer-centric organization is the true key to reducing churn and driving customer happiness.
Build the Right Sales Structure
Every company has to find the sales organization that works best for selling their product, and many of the SaaS leaders shared how they found their ideal sales process. Bob Tinker, CEO of MobileIron, said that in the early stages of a SaaS startup, you shouldn’t argue with customers about how they want to buy. So many SaaS companies debate whether they should do subscriptions or contracts, offer pro services for an extra cost, or what the licensing model should be. In the beginning, Tinker said the company is just trying to close deals, so you should sell however your customers want to buy.
Tinker advised startups to then build sales process around how your customers buy. As you grow, you should organize your sales structure around this process, and build out a detailed sales playbook. But Tinker also warned against startups hiring a Sales VP too soon. He said CEOs should spend a lot of time with customers before scaling sales too aggressively, and wait to hire the executive until they know what type of leader they really need.
Know Your Metrics
Nearly every executive on stage shared the metrics that they rely on to track growth, and emphasized the importance of running a SaaS business by the numbers at every stage. In the afternoon session, a panel of Venture Capitalists shared the specific metrics they look for when they consider funding a new startup, and what numbers make investors run in the opposite direction. Jason Green of Emergence Capital, Mamoom Hamid of Social + Capital and Mallun Yen of RPX Corporation talked about the metrics that make SaaS companies stand out.
Hamid said that he specifically invests in companies with a great founding team that reach $1 million in ARR about 12 months after launch, with about a 1% growth rate in Monthly Recurring Revenue. However, it’s not just about growth; it’s also about low churn rates. A company worth investing in also must have less than 3% Gross MRR Churn. In other words, SaaS companies have to achieve negative churn in order to be funded.
Don’t Be Afraid to Aim High
Knowing your metrics isn’t just important for funding – it’s also vital to know your own capabilities for growth. Parker Conrad and Sam Blond, the CEO and SVP of Zenefits, shared a story with Lemkin of how they went to their board meeting at the end of last year and presented their plan for the coming year. A board member said, “That’s great, but why don’t you triple that goal?” Conrad and Blond were aghast, and started to list what they would have to do to reach that goal.
They explained they’d have to hire this many people, reach these new market segments, spend this much money, etc. In the midst of explaining why they couldn’t triple the goal, they realized they actually knew exactly how they could reach that number. Instead of backing down, they tripled their business goal just a few months into the year. A lot of startups talk about making iterations early and often, but sometimes they forget that this also applies to growth and goals. Even if you don’t hit that huge number, why not aim for it? If you miss, you still may surpass your original goal and grow your business faster than you ever thought possible.
These are just a few of the lessons I took away from SaaStr Annual, but there were many more. SaaS leaders anywhere can learn from the successes of CEOs like Lemkin, Levie and Tinker. If you’re building a SaaS company, I definitely recommend that you attend this event next year.