← The Official SaaStr Podcast: SaaS | Founders | Investors
The Official SaaStr Podcast: SaaS | Founders | Investors
SaaStr 781: How to Think About Product-Led Growth, Bootstrapping vs VC, and Early Exits with Jason Lemkin
00:38:25
SaaStr 781: How to Think About Product-Led Growth, Bootstrapping vs VC, and Early Exits with Jason Lemkin At the closing AMA (Ask-Me-Anything) of SaaStr Annual, SaaStr CEO and Founder Jason Lemkin delves into key topics facing SaaS startups including...
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- [00:01]
Jason Lemkin
Welcome to the official Saster podcast where you can hear some of the best Saster speakers. This is where the cloud meets up today on the Saster podcast. I don't think there's a PLG motion to magically adopt at $0 in revenue. I think you have to step back for a minute. There's basically two ways to win. You can either get millions of people using your product if it's cheap, or you can get thousands of people using your product if it's expensive. Okay, there is middle ground. There's the mid market, but I'm oversimplifying it. If you can get thousands of people using your product for 10k a month or 10k a year or more, go sell it. If you can get millions of people using your product so that a few percent can convert, go build Canva. But don't be in the middle. Don't be a small number of folks that will convert. That's death. Hey everybody. Thanks to the 10,000 of you who came out to Saster Annual this year. We had a blast and big news. We'll be back in May of 2025 or in May of next year. That's right, SAS train will be a bit earlier next year. The 13th to 15th of May 2025. We'll still be back at the same venue in the SFBA in our 40 acre San Mateo county event center campus. And tickets are never cheaper than right now. So grab your tickets@saster annual.com with my code Jason50 for an extra discount on our very very best pricing. That's Jason50@saster annual.com. see you next May at Saster 2025. Hey, don't let sales tax slow your growth. It's important in SaaS now Anroc's all in One platform handles global tax compliance for fast growing companies like Notion and Vanta. Those are some of the best of the best. Ready to simplify tax. And to do visit anrok.com Sastraday a n r o k.com Sast Foreign.
- [01:59]
Founder from Digital Talk / Cargo Sakens / Various Founders
Hi, my name is Verpal and I'm a founder of Digital Talk. Before I start, I want to say a big thank you. It's our second time at Saster.
- [02:06]
Jason Lemkin
Oh, thanks for coming back every time.
- [02:08]
Founder from Digital Talk / Cargo Sakens / Various Founders
And thank you also for being so gracious with sharing the content. So we're a bootstrap company and my co founder Leila is attributed to $35 million in arrangement.
- [02:19]
Jason Lemkin
That's what she has to close this year. Layla has to close 35 million this year.
- [02:22]
Founder from Digital Talk / Cargo Sakens / Various Founders
No, the last six years.
- [02:23]
Jason Lemkin
Okay, so she's close. 35 million. Yes. So she's pretty good. She's phenomenal. She's pretty good. Yes.
- [02:29]
Founder from Digital Talk / Cargo Sakens / Various Founders
We want to continue our expansion and aggressive growth. You've been a proponent of raising very early and in small amount. And what I want to understand is how early, how little, because obviously that's going to impact the exit that we want.
- [02:41]
Jason Lemkin
Hold on. You. She's close. 35 million. How much ARR are you at today? 35. You're at 35 million. Error. Bootstrapped. Yes. Okay, listen. And you're growing at a decent enough rate today.
- [02:51]
Founder from Digital Talk / Cargo Sakens / Various Founders
Fairly decent.
- [02:51]
Jason Lemkin
Okay. You're growing more than 40%. No. Okay, so you're both. I. So let me simplify this. You're at 35 million and you, and you're at software. You have 80% gross margins.
- [03:01]
Founder from Digital Talk / Cargo Sakens / Various Founders
We've got about 60%.
- [03:02]
Jason Lemkin
60%. Okay. But anyhow, you've got 20 million of that is capital each year. This thing about software, you're raised, you're, you're bringing in 35. 35 goes to COGS and the rest goes to play for people. Trips to Saster retreat. You have 20 million of funding a year. Yeah, Right. It doesn't feel like it, but actually you have 20 million of customer net customer funding a year, correct? Yeah. Okay. I would do the best you can with 20. Because if you're at 35 million, growing 20%. 30%. Okay. You're in a weird world. And it's an interesting world. You're basically unfundable by VCs. Okay. Traditionally people really would like you to be growing 100% at 35 because then you're on the path to IPO. Okay, triple, triple, double. We can talk about why triple double matters. It matters in good times or bad. I've written it. You to be a venture backed company, you have to go from 0 to 200 million in 10 years. Do a spreadsheet. If you don't triple, triple, double from a million, you will never get to 200 million in a decade. It just won't happen. And venture capital breaks. Not all venture bets have to work, but they at least have to work in theory when they're made. So if you're not on that path, or if the VC loves you close to the path, like they'll cut a corner or two. If you're close but you're not growing now at 35, you don't have. It'd be nice to double, right? Maybe you'd be worth 700 million. But maybe someone would say okay, at 50%, 60%. I'll take a bet for a VC, but they're not gonna. Now maybe you can tell me someone offered to invest at a high price, but I don't think any VC is gonna offer to invest in because of growth. Yeah, the growth's not good enough. But for a private equity firm, they should be. Unless I don't know exactly what you do, they should be drooling over you. You are their sweet spot. For a private equity firm, anything north of 20 million growing more than 20%, that's break even. They will buy with a hundred. And here's the key. With a hundred percent NRR or more, it is an asset to a PE firm. And because what they will do is they'll take your 35 and they will smash it into someone with 100. Okay? And all of a sudden that 100 company that's growing maybe 5% slower than you, all of a sudden that's a much better company that has much more enterprise value. And they'll try to take you public or sell you for 2 billion in a couple of years. If you haven't gotten calls from PE firms or met them. Yeah, okay. I would be shy. Then I would say go update your website. Okay. Because you should like the junior folks with this PE firms, they get fired if they don't talk to every candidate. They literally. What you don't know in these bigger funds is like if. Here's what happens at a big fund. So let's say you open up a PE or venture newsletter and it says digital Talk was acquired for 200 million by this PE firm. Then they go to the kid who's in charge of industry and they say, lemkin, Jason, why didn't we see that deal? And you're like, I didn't know about it. Lemkin gets fired. Gets fired or you get fired at the big. People don't talk about this at the. It's not always this literal. But at Bessemer, Lightspeed, Andreessen, Sequoia, they don't win every deal, okay? For a lot of reasons. And they pass on them. But your job is to get them into the deals. Sequoia thinks it's a fail. Sequoia thinks it's terrible if they don't get into the biggest deal. But where they get mad is when they never saw it the best one. So your job at both these top, these multibillion dollar VC funds, the junior people, anti firms, is to see everything. So you're seeing everything. Okay, I'm sharing Extra details for the rest of the team because you see them up. Dude, I don't know what you're worth, but you're worth more than a hundred billion dollars to a PE firm. Maybe you already know this, right? You're bootstrapped, right? Any venture deal is gonna be terrible. You do you really want to sell? You're worth a hundred million. It could depend on the industry. And PE is really weird. They start off really cheap, okay. That you get really low ball. 2 times revenue, 3 times revenue. And generally they want to go at majority as well. Or again majority or 100%. We can talk about that next. It's. It's different than venture. And now we'll talk about some fun stories. But my point is I. I'm not all about optionality. I'm not all about keeping your options open. I think that's a fool's errand. I like burning the bridges behind you. But Jesus, if you get past 20 million ARR. Bootstraps growing 20, 30, 40%, but not 100, you're in this world where you're not valuable to VCs, you're. You're not handsome enough or pretty enough for the VCs, okay? But for the P firms, you're like the hot date. So I would never raise personally, unless I'm missing something, I would never raise venture capital with your number. It's. They're going to expect you to be worth billions. They're going to not be happy. If you sell to a PE firm for anything more than much more than you're worth today. And you may kick yourself, even if you don't want to do it today, you may kick yourself in a year or two that you gave up this PE option. And we can talk about it briefly more because I think it will help people. But yes, if you raise some private equity firms, they're very different VC firms. They'll buy less and they'll buy more. And if folks want, we can talk about how ownership targets work at VC firms. But roughly, in an ideal world, a VC would own 20%. They might have to own 2%. If it's a hot YC company, they might do 10 or 15 or 30, but they want to own 20. There's some exceptions, but most private equity firms either want to own 51% or 100%. Then there's two models, right? Like Nick Meta, I don't know if you saw him from Gainsight. He. They sold Gainsight to Vista for a billion dollars. I don't know all the mechanics, but I Think they sold half the they cashed out most of the VCs and I think the way it worked none of my business okay if I actually knew I wouldn't tell you but I think the way it worked with Nick as the CEO is I think they all got all the management team and the employees got to cash out half so it's like the 51 like they got cash at a billion for half their equity and then they got to roll over the next right I invested I co led the seed round in sales loft Vista bought them for two and a half billion same deal most investors got cashed out and the rest of the folks wanted to stay and it was a 5050 deal you roll 15 so but net net however you do it they didn't need to own 100% but they needed to have majority control of the asset he is not it's not like super fun like it's not going to camp there's a different level of rigor they approach metrics differently right I think Kyle told me once Salesloft was acquired by Vista their board meetings became 120 pages of numbers and metrics before it was out product and like how are we going to kill outreach and then after that it was 120 pages of how the rep and Tesco Pelosi did on the 1 8k deal or so it just became my so it's a but they don't dislike it so listen we're all we're so passionate about what we do but I wouldn't even though it might be less fun I don't know that it's a bad outcome so long rambly way of saying my zenview these P options these good exit options that aren't great but they're good I used to be like frat don't do it I wish I Never sold it 12 million growing 100 with 120% interim profitable like that was the dumbest thing I ever did with those numbers Now I'm a little more zen I'm like if it's a pretty good deal after everything we've been through maybe take it not saying take it but like maybe take it and I I know a couple founders that I've worked with that in 2021 got multi billion dollar cash exits to buy the company that said no and I know several that are worth essentially have no exit at the moment have it's not just that they're worth less they have there's no exit potential for them nothing from multi billion to now I'm not saying it's intrinsically worthless, but no chance to IPO and no acquirers at the moment. That's rough. Right? So don't give up the pe. Don't shut off the PE option. I would just take the meetings, be nice, be respectful and say, maybe not today, but if you raise vc, you don't lose that option, but it just makes it so much harder. You have, you have 20 million of cash from your customers. I wouldn't do it. So appreciate that. Thank you very much. Thank you. Yeah.
- [10:52]
Kendra / Kin / Various Founders
Hi, Jason. Hi, it's Kendra. First time Sasser.
- [10:55]
Jason Lemkin
Thanks for coming.
- [10:57]
Kendra / Kin / Various Founders
So basically my question was in the next few weeks, my co founder and I were going to be like publicly launching officially after having some alpha and beta testers. We think product led growth is like the best route. Now I really want to try the product LED route first because I know it's like good value, good product. What's the best advice you can say for starting product LED growth?
- [11:20]
Jason Lemkin
Okay, first of all, a lot of folks that have been around for a while, Aaron Levy and I discussed this at 2021 annual out here, a lot of folks like me that have been around for a while, we don't really believe there's any such thing as product LED growth. And what I mean is, look, the Trump's taken over. I'm not, I can't argue when cloud became a term. I'm like, this isn't the cloud. And I lost that argument. I think I lost software as a service, as an argument. So I've lost the plgr. But what Aaron and I, folks like Aaron and me, that started off with freemium products and self serve products, we just think PLG is a slightly better instrumented version of it. Slightly. There's much better tools, there's much better analytics. There's in product. The whole counter of in product analytics didn't exist. It's wonderful. But the idea of building a product that is self serve, that is somewhat viral and that is so easy to use, you don't need onboarding. It's not so new. WebEx created it on the web. Zoom kind of perfected it. But none of this is new. And what my, my. So my point is, what folks like Aaron and I think are a little cynical about is that there are these three magic letters plg that solve your problems. I don't think there's a PLG motion to magically adopt it. $0 in revenue. I think you have to step back for a minute. There's basically two ways to win you can either get millions of people using your product if it's cheap or you can get thousands of people using your product if it's expensive. Okay, there is middle ground, there's the mid market. But I'm oversimplifying it. If you can get thousands of people using your product for 10k a month, a year or 10k a year or more, go sell it. If you can get millions of people using your product so that a few percent can convert, go build Canva. But don't be in the middle, don't be a small number of folks that will convert. That's death. Just putting three initials on your homepage won't do it. Okay, so first you have to make sure the market is truly not prefer tend truly large enough to support millions of users for PLG to work in my opinion. Okay, if you've got and since you're sales driven and I'll come to the next point, make sure there's millions. And then second, this is the other mistake a lot of folks make that come from a sales background. They don't realize how great a self serve product has to be. Like so much better than enterprise, any enterprise or even mid market product in the world. Like the onboarding doesn't have to be that good because you have a customer success team and I have a deployment team and I have solutions or I just have a person. Lemkin does it. Lemkin sets up the thing. Lemkin flies out to the customer. Lemkin gets on Zoom. Right. To have a self serve model, onboarding has to be instant. Can you build a product as good as Zoom or Canva or better? Most can't. Most think they can, but they can't. So if you can't build a product that is epic and self onboarding and reproducing, you got to go sales led because you've got to fill that gap with humans. Okay? So got to have a ton, got to be able to build an ultra elegant product. And then third, just so many folks that have only done self serve typically delay too long going into sales. I'm not saying this is you at all but a lot of folks I know that have been in sales a long time, they're like, oh sales is hard. Every quarter the dials go back to zero. The quota. Like it doesn't scale. I need more and more. It's terrible. I need 10 reps, then a hundred reps. I'm going to do next time plg. Cause sales is so hard. I'm going to do PLG and they just way over index and they're looking for a solution to a problem and it's not the solution. The solution is fall back in love with sales more. The solution is look to your husband, look to your significant other and fall in love with them again. Don't run for them for the plg guy. Right at the club. Right. It's not better. Okay. Maybe what you know to do and you're pretty good at sales is the place you should be. So some ideas to think about. Thank you. Yeah.
- [15:09]
Kendra / Kin / Various Founders
Jason, thank you for hosting this.
- [15:11]
Jason Lemkin
Thank you again.
- [15:12]
Kendra / Kin / Various Founders
I'm Kin, founder and CEO of Emotions Leveraging generative AI to reduce ram of time for new hires like sales. So I there are a lot of people who talk about product. The product needs to be good first before putting an oil gas to the go to market. So just curious, what do you see as the way to making sure the product meets the product market fit? Right now we're piloting with okay, small companies and also big companies. Pallets.
- [15:36]
Jason Lemkin
You want to know what product market fit is in SaaS, it's super simple. Okay, you have more customers than you know why. Okay, you don't have product market fit until you have no customer. More customers than you know why. If you know exactly how you got every customer and it's hard and you're not and you're like our other guy who was great, he said a million but they don't know how to get to two. He's got happy customers. Great. You can have in SaaS, you can have happy customers and good customers, but not you can be at the edge of product market fit. I figure out I'm hardworking, I'm a hustler. I know how to get 10 customers in a hundred. But the product's not so disruptive that it's being pulled by the market. Okay, you don't have product market this. There's too many vendors. There's thousands of vendors in every category. Right? Even in gen I for sales, there's like a couple of vendors. Even if it's not just training all at some point, your job as founders is to push so much that then the market pulls. That's product market fit. Right? And you get it. When you finally get a couple customers and you're like, where the hell did they come from? Like, I heard about you. My friend at Sastra said you were great. I found I tried you on my own. That's when you have product market fit. When you turn around and realize, hey, I don't know where I got these 10 customers. That's when you put fuel on the fire, that's when you put gas on the fire. Right. Or whatever.
- [16:46]
Kendra / Kin / Various Founders
The expression that's helpful is that it means like word of mouth. People come for you.
- [16:50]
Jason Lemkin
Word of mouth is ultimately the only way you can build a great product. In SaaS, HubSpot had a slide. They used to put in their investor decks and until a million, a billion in revenue. I go to an older Saster post for five interesting learnings for upside, up to a billion and they would always stack rank where they got their customers from. And number one was always word of mouth all the way up to a billion in revenue at HubSpot. Yeah. Yeah. For everybody. Yeah.
- [17:11]
Kendra / Kin / Various Founders
So my question is, how do you find the right design partner, first 10 pilot the first 10 early customer design partner to make sure we get the product market that is.
- [17:19]
Jason Lemkin
Okay. I'm going to answer your question that you're not going to love. I tell you the I my first five investments all became literally worth over a billion. Okay. And then I took more risk. Okay. And I went earlier and did some other things. All the investments I've since done that had good founders that went to zero. Good founders that went to zero. They had a lot of design partners. They didn't hustle, they didn't go get real customers, they didn't get to product market fit. I had a founder who had a built a friend of mine who we started together, one of the best ctos I know sold his first company for 200 million as CTO, second one for a billion. This was his first time as CEO. You want to bet on that guy, right? You want to bet that? But he raised 4 million because he had a little bit of a track record in two years he had a lot of design partners, never got a customer. Design partners love this product. I don't think it's real. And I think you can get misleading feedback from pseudo market research. I think they're fake customers. So I'm not saying there isn't something there, but boy, I just feel like founders are misled by the fact that there's any great answers to these so called design customers. Whatever it is, I worry about it. So I know it's not exactly we're asking, but I would just skip them and go find real customers. I would not waste one second with these so called design partners. Get real ones. Get someone that will pay you money for real, not favors, not pretend. And also ask for the most money you can. You're selling an AI prom Tool that's going to help with sales and training, right? Go out and charge $20,000 for it or $10,000. You're tenacious. Go get that meeting. Go find some CRO and say that has training for onboarding problems. Say I have an AI tool. Give me $20,000. I will train 200 reps for you. Screw the design partners. Go find that person. Get someone to take a bet on you. You'll probably stumble. You'll probably have to fix it on the fly and stay up all night and your co founder will probably almost kill you. But if you get through that for a real customer, you got something.
- [19:15]
Kendra / Kin / Various Founders
So usually through like friends interaction or.
- [19:19]
Jason Lemkin
Cold outreach, just get them to pay.
- [19:21]
Kendra / Kin / Various Founders
The way to find them is they every.
- [19:23]
Jason Lemkin
Yes. The answer for your early, early customers is yes. Are you good at outbound? Go do it. Your friends. Are you good? Are you good at hustling at Sasser? Do it. Are you good at. Are you good at getting on product? On. Do it. Are you good at TechCrunch? Do it. Are you good at content marketing and blog writing? Good. Are you actually good at social media? Not pretending you're good at social media? Good. Can you get a million people to listen to your podcast? Not three. Great. Do it.
- [19:44]
Kendra / Kin / Various Founders
Thank you so much.
- [19:45]
Jason Lemkin
Thank you. Yeah.
- [19:47]
Founder from Digital Talk / Cargo Sakens / Various Founders
Hi.
- [19:47]
Jason Lemkin
Jason Matteo from Peru. But basically, thanks for coming city, second year here. So thank you for having me. Buenos Aires. So my question is, I've read on the Internet that usually they recommend that it's a founder sales led motion until you reach around one or two mil. I've said the same. Yes, yes, correct. But what would you recommend in demand generation in the early days? And would you recommend to only hire SDRs at first or go. Or go Very aggressive on marketing because earlier today the CRO of Rippling spoke. Yeah. And they said that they had 150 SDR. Yeah. And it's badass. And they took the model. Parker and Sam built that model at Zenefits and then they reproduced it at Rippling. Massive outbound model. Yes, but I won. I was wondering, I suppose that in the early days they didn't have 150sdr, so it was probably impossible. Look, you're asking a good question. Just two things. Do whatever you know how to do and do anything that works at all. If you could, if you've never done outbound and you're scared to send an email or pick up the phone and you've tried a couple times and you're freaked out and no one reads it or answers it, your Emails are terrible. Let's move over to marketing. Okay. If you're pretty good at it yourself, like you're pretty tenacious and you're getting pretty good open rates on emails and you're closing deals, then go hire a couple SCRs and professionalize it. Right. Most founders that are engineers or product focused, they get consultative sales. They don't get how to deal with outbound or SDRs. Okay, so a lot of folks from a product or engineering background, not all, but most of them are not great at this raw Outbound motion. Others are. I was a pre revenue investor in greenhouse, which sold 300 million and the CEO for whatever reason in the early days, maybe loved is the wrong word, but he enjoyed managing. He managed 12 SDRs himself before he hired a sales leader. I'm like, I would have pulled out my hair. Like I had one week where I had to manage our sales team between my two VP sales and I almost died for one week managing our sales team. Okay, it wasn't me, but Daniel from Greenhouse. You can look him up. He's at there at all. Coming up on 250 million revenue. He didn't mind as a non Sales founder managing 12 SDRs who need to talk eight times a day and I would have burnout in minutes managing these folks. So he was good at that. So that, so Greenhouse got to 10 million through Outbound. Right. I was personally pretty darn good at hustle marketing, getting us in media, getting us, getting other folks to promote us, getting Webex and Salesforce and Zoho and a million people to promote us. So I did more of that. I did. I went early on our API, I went early on our partner systems early on that I was good at. But I didn't know how to do Outbound. We didn't do Outbound until Sam Blonde who was zero Perex. He was our first sdr. That was the first time we ever did outbound and that probably was around 2 million in revenue. We didn't have an SDR person. Whoa. But I'd never, I'd done enterprise out. Like I closed million dollar deals before. I had no idea how to close a 3K deal in software, so we never did until Sam did. So that's an extreme example, but go with your DNA. And then the last point, the other mistake founders make, especially when it's early, is they're like, yeah, I tried Outbound but I only got four customers. I tried Outbound but I only have, I only am able to close a few deals from it. No, just keep Going, anything that works in the early days, keep doing it. Because so much stuff won't work at all. Every category is so crowded, there's so many vendors. And even worse, we don't really none of us need more software. No, no business in the world, no business in the United States is failing. A few security issues aside because they don't have a software vendor like the world kind of works on a day to day basis. We actually don't need any new products. So it's hard enough to get anyone to buy you in the early days. If anything works, press, PR partnerships, open ecosystem, outbound, inbound, leftbound, bound, growth, marketing, enterprise, self service, mid market, global. Just do what anything gets you. One customer, get two. Even if it's frustrating, just do it. So thanks for the question. Thank you. And see you next year. Next year. Thank you.
- [23:50]
Founder from Digital Talk / Cargo Sakens / Various Founders
Hi, Jason David from Brazil.
- [23:52]
Jason Lemkin
Thanks for coming.
- [23:53]
Founder from Digital Talk / Cargo Sakens / Various Founders
I'm a big fan. Jason, my question is.
- [23:56]
Jason Lemkin
Yes.
- [23:57]
Founder from Digital Talk / Cargo Sakens / Various Founders
I'm the founder of Cargo Sakens, which is the first electronic procurement for international freight in Brazil. And I would like to get your thoughts on this context. Imagine you're facing my situation in my shoes. Okay.
- [24:10]
Jason Lemkin
Okay.
- [24:11]
Founder from Digital Talk / Cargo Sakens / Various Founders
I have bootstrapped the B2B startup for six years with a strong focus on product improvement. During this time, build a customer base of over a hundred clients, many of them large enterprise without the sales team. Okay. Just founder led sales.
- [24:29]
Jason Lemkin
Okay. How many employees?
- [24:31]
Founder from Digital Talk / Cargo Sakens / Various Founders
33.
- [24:31]
Jason Lemkin
Okay.
- [24:32]
Founder from Digital Talk / Cargo Sakens / Various Founders
33 have reached break even in the second year. Established clear product market fit. Maintained a very low churn rate, Capture less than 1% market share, plenty of room to grow. Ended attracting the attention of investors. We just raised US$1.5 million 12 months ago. Doubled the revenue, surpassing 1 million in ARR.
- [24:55]
Jason Lemkin
Great.
- [24:55]
Founder from Digital Talk / Cargo Sakens / Various Founders
And another startup in the Brazilian market with a product that has synergy with over 20 million in ARR. With more than 2,000 customers, the exact same ICP. Okay.
- [25:05]
Jason Lemkin
Yep.
- [25:06]
Founder from Digital Talk / Cargo Sakens / Various Founders
These guys, almost 100 people in the sales team, they raised a Series B and they're looking to expand through M and A. And they approach me with a build or buy narrative. Okay. So what would you do if you were in my shoes?
- [25:20]
Jason Lemkin
Let's step back for a minute. The I've gotten the builder buy speech before. Some of the nicest founders and CEOs have used it. But it's a bullying tactic. It's a bullying tactic because it's often true. Right. Build versus buy. But it's also an attempt to instill fear and incent someone that might be on the fence to selling to sell. Okay. Adobe did it to me, they said, listen, if you don't sell to us, we're either going to go to try to buy DocuSign or buy this third one that you've never heard of, or we'll rebuild our effort. They said it was a bullying effort. Okay. And even for me, at a million a month in revenue, it worked. It didn't work, but it did flavor the thinking. Right. It also maybe poisoned the relationship a little bit. But it's. I've heard it. Other folks have heard it. It's just because when you approach someone, when you're on the other side, it's a vulnerable position, isn't it? I know you're. I know you got to always, in any deals, think about the other side, right? You might know them a little bit, that you don't know how they're going to react. They have some level of interest, whether it's 5% or 95%, they are actually doing a proposal.
- [26:23]
Founder from Digital Talk / Cargo Sakens / Various Founders
They're actually on the way to put something in.
- [26:26]
Jason Lemkin
So high. So that's high. So the build versus VI is probably true. But bear in mind whether it's intentional, not it's a. It's a threat, a sort of a bullying tactic. That doesn't sound like it because it's very logical. Right. It's usually what you hear is build by our partner. This is what corporate M and A folks say, Acquisition. We're thinking about build, buyer and partner. We've heard good things, but we're also talking to other folks in the space. So if it's not you, we'll see who to buy or whether we build it ourselves or whether we actually just partner with you or somebody else. So all of a sudden you're competing with build, buyer, bill buyer or partner. But maybe if they're giving you a term sheet, it's beyond that. Listen, I don't have a magic answer to you. These are. When you're bootstrapped, it's always interesting because it's up to you whether to take any offer. Right. It's true. Anyway. But once you're. Oh, you've raised a million and a half from investors, right? Yeah.
- [27:11]
Founder from Digital Talk / Cargo Sakens / Various Founders
One year ago. Yeah.
- [27:12]
Jason Lemkin
Okay. As long as the investors. So let me step back for a minute. Maybe it's not what. There's a couple of things. Like, first of all, bear in mind, when you get an early exit offer like you have, bear in mind, many investors will have very different perspectives. Maybe you know this, right. And this might not be what you're asking, but I would say they. They Just invested a million and a half in the last year. Right. Okay. Bigger funds that are in Silicon Valley that have been around for a year, if they invest a million and a half and you get an offer and they make money, like they make a profit, they're like, whatever, like, I'm going hunting. Anthropic and open AI and glean and klaviyo and like, more. As long as if they invested a million half and they ideally make 3 million or more, like, if they double their money, that doesn't. That's not like enough for a vc. They're like, more power to you, my friend. Let's do the next one together. Okay. Now, VCs outside of Silicon Valley, smaller funds, others, sometimes they're not so cool about the early exit. Right. Because it's a much bigger deal to them. Right. A $2 billion fund gives you a bill, a million and a half, and you make some money moving on. Right. Yeah. You don't even count a small $20 million fund where they don't have that many good investments and they're counting on you to go big, there may be some friction. So might not be what you're asking. I can't predict the friction with your investors. Right. But bigger, more sophisticated investors, probably, if you want to do it, they'd be like, I'm a little bummed, but it's cool. So assuming it clears your investors because it's not all your decision anymore. Right. No matter what the documents say, it's not. You're not the only shareholder. Like you and the, the team, then. Look, if it, I don't know, if it feels right and it's reasonably fair and it's what you want to do, then do it. Obviously, as a founder, selling your company to someone bigger and they take it over, it's not the same.
- [28:58]
Founder from Digital Talk / Cargo Sakens / Various Founders
It's much more a dilemma of whether to go for the synergy. They have 2,000 customers of my ICP. There's a lot of synergy. They want me to keep going for now.
- [29:09]
Jason Lemkin
Yeah, but for now? Yeah.
- [29:11]
Founder from Digital Talk / Cargo Sakens / Various Founders
No, they, they don't want to cash me out completely. They want to put earn out and give incentives for me to keep going. But at the same time, it's a dilemma because I know I have a lot of room to grow and I don't think they can build the product to take a lot of time just thinking about whether. But at the same time, I, I could go to work with another competitor that I don't have in the space. I don't need to have so that's.
- [29:35]
Jason Lemkin
Like, well, look, it's a complicated situation, okay? And, and, and if you get the offer, even if there is an NDA in it, ask a lot of people their advice, okay? And then I'm going to give you my advice. Ask a lot of people because you're going to get a lot of different opinions. You got to get advice, okay? You, maybe you can't, don't literally violate it, but if it says you can't tell anybody, you got to tell your friends, okay? You got to tell you, because you got to get a lot of it, in my opinion. And just to help you come to your own conclusion, talk to multiple. Talk to folks that have been through it, talk to folks that have had a bad experience, a good experience, folks that are investors, folks that just did it, folks that didn't do it, just get like 10 opinions is my number one advice, okay? My personal learning over the last 13 years of this, including going through it myself twice as a founder, multiple exits as an investor, Again, as I said earlier, I've slightly changed my mind in the last three years on this. If the offer is crappy, and sometimes it is from a competitor, right? If it's crappy, probably don't do it. Unless you're running out of money, right? Don't do a crappy offer. Life's too short, right? Better to roll the dice. If the offer is even mediocre, but it clears financially, it clears whatever that means for you and your co founders, it clears at a personal level, okay? Whatever you, wherever you are in life, if you're sure you want to keep going, say no way. If you're sure, no way. Because this is SaaS, it keeps getting bigger. If you're good, it compounds with 100NR. It keeps going. So if your heart and soul says don't do it, but the money's okay to not do it, don't do it. But if the money's okay and you and your co founders are like, you know what, competition is pretty good. And you know what? We are worried that our growth is good but not great. And we are worried that we're not that good at the Gen AI side or we're worried about this, whether those worries are surmountable or not, if the team isn't sure and the offer is good, I would take it. That's what. Because I've just seen too many stories now where the founders regretted that scenario, where the good offer came in, the team wasn't great, and they said no, and there was never another one. There was never another one. Because M and A, what you don't see, I didn't really see this until I was a VP at Adobe. I didn't realize how fickle M and A is. Okay. People have targets. And then the next year your business changes, Adobe's business changes, or Klaviyo's business changes or Bill's changes, and they don't want to do the deal. Renee was here at Nephews Out. They Bought Divvy for 2 1/2 billion dollars in 2021. Turned out to be a great deal. It's like the fastest growing part of Bill. But I'm pretty sure if it were today, he might not buy it for a variety of reasons, might not buy it. So these. You think that M and A is quirky and weird and priority driven and so if you say no, make sure, make sure you don't want another date, make sure you're willing. It's the relationship here. You're willing to give it up forever and don't say no because you just want more money or, or just whatever if it clears. So I don't know if that's rambly, but that's how I think about the framework. Right.
- [32:44]
Founder from Digital Talk / Cargo Sakens / Various Founders
Thank you very much.
- [32:45]
Jason Lemkin
Yeah. Good luck. Thank you. Hey, Jason. So we have a basic plan, an enhanced plan and a premium plan. Okay. And nobody. Why don't you have a super premium plan? We do. We've never. But nobody buys our basic plan. Is that good or a bad thing? Who cares? Either get rid of it or say maybe it's a benefit because it seems like it adds more value to other plans. That's the best advice I can give you. The main advice I can give you, I think at scale, when you're, at. When you're really big, pricing super important. Right. Because as growth slows and more and more of your growth comes from your installed base, even small changes to prices are huge. Right. Atlassian just said they're raising prices for the third year in the row. Okay. Slack raised pricing last year for the first time ever. Canva just radically increased pricing for Enterprise because when you get big, not only does growth slow, but more of the growth comes from the base. And even small tweaks in price are huge. Right. I remember when we got acquired by Adobe at again at 12 million in revenue. I remember that the CMO for a group said I was totally against this deal because I could just raise price of acrobat for $1 and that would be more revenue than you have. Right. $1. Right. Illustrates the point in the early days, just get close the customers. It almost doesn't matter whether you get. You don't need to optimize pricing. Kill basic, keep it do. Do a little AB testing if you can. But it don't matter. Just close them. Right. Thank you. Thank you. Yeah. Hey, Jason, thank you for the talk. I don't know how everyone else is thinking, but I think it just paid off for the whole ticket. Okay, good. So I am already founder and I have a question about bootstrapping versus okay, real quick. Cause we're running out of time. But yeah, summarize. That's a big topic. So summarize the one question. Say, I see a lot of friends around for just discouraged by vc, especially for the couple of last years. And they're like, okay, never do this again. I'm going to go, what's your take? And if you do bootstrapping, what's your take on fundraising? If you look, here's the symbol. It's a false choice. Very few folks. There are folks who choose who some VCs says, hey, I'll give you 10 million at 100 million valuation for almost no dilution. And they say, hey, I'll bootstrap. In the early days when they have no revenue. It don't really happen that way. The truth is we talk about on the Internet that like it's a choice, but the truth is the venture capital is a niche product. It's a weird product. It requires T3 D2 growth. Most folks are not experiencing D3.2 growth or don't appear to have the potential for it in the early days. So they just can't raise. Okay. There are horror stories of venture. I've watched them. I've only partially experienced them as a founder, but it's really not a choice. And two years ago, two years ago, Ben Chestnut from Mailchimp came here bootstrapped to a $12 billion exit. Watch that session. His discussion was great. He's. I could never raise venture capital until we were so profitable, I didn't need it. That kind of summarizes the thing. It wasn't even a choice for him. So it. It sounds like a choice on the Internet. Drown out the Debbie Downers and the naysayers. If you can be venture funded, then just analytically look at it. Hey, I'm in this weird, not just high, but weird niche. Great. Should I do it or should I not? Some of our speakers who have millions in revenue, should I do it? I told the p guy at 2030 million not to do it. Maybe you should. But don't view it as a choice or a positive or negative. Just see, it's a. It's an option for a select few on a growth path. And if you have the option, analytically decide. It's just that simple. So, thank you, Jason. I'm Devon from Hawaii. Thanks for having me. This is my first. Yeah. Aloha. Yeah. Question is, I own three profitable businesses, fortunately. And I've become the. I'm the CEO of all of them. Terrific. So I've got about 23 direct reports. Okay. And I decided here that I gotta focus on one. I'm gonna hire a CEO for the other two. Any advice on hiring CEOs? Never done it before. No, I. I do think it's a good idea. I think it. I think just. Oh, I. It's a big topic. And actually, I'm not a total expert in this. I'll just tell you two things I've learned. Find someone that's doing it for the right reasons to accelerate their career. Okay. Not someone that's a fuddy duddy. Not someone that's been a CEO 11 times. They're not gonna have the energy you have and it's not gonna work out. They've got to have a reason that this is their shot. Hire someone who is their shot. That's why. Like at Rippling, whereas before Parker Conrad loves to hire failed founders to run his divisions like his little five products. He gets a failed or a modestly successful founder because they have a reason. Right? Yeah. My company didn't quite. I built a great product, but it didn't quite make it. Now I get to be the GM or mini CEO of payroll at Rippling or whatever. That's a reason to do it. To kill yourself and do it. So make sure they have a reason to kill themselves or do it. Second, this is true for any executive, VP or CEO. Make sure you love them. It's a lot of trust. I know you can't run all of this yourself, but if you hire someone that you don't 100% believe in it, 0% chance it's going to work out. So thanks for coming, everybody. Thank you. Hey everybody. Thanks to the 10,000 of you who came out to Saster Annual this year. We. We had a blast. And big news. We'll be back in May of 2025 or in May of next year. That's right. SAS train will be a bit earlier next year. The 13th to 15th of May 2025. We'll still be back at the same venue in the SF Barri on our 40 acre San Mateo County Event center campus. And tickets are never cheaper than right now. So grab your tickets@saster annual.com with my code Jason50 for an extra discount on our very very best pricing. That's Jason50@saster annual.com See you next May at Saster 2020.