Game Notes from My Rookie Year at SaaStr Annual

By Mia Hegazy

Catalyst has been investing in SaaS since before the term was coined (we funded MessageLabs, an enterprise email security SaaS offering, in 2000). Since then, we have invested in several other growth stage SaaS businesses, including MINDBODY (NASDAQ:MB, business management software for health and wellness studios), Ascentis (human resources management software), Jobvite (social recruiting software), and Conductor (content intelligence software for marketers), among others. Over the years, we have shared our views on how the SaaS space is evolving, including a research piece (SaaS Investors: Mind the Valuation GAP (Growth at Any Price)) that introduced our proprietary equation for valuing SaaS companies.


Given our long history of SaaS investing, it surprised some of my fellow attendees that 2017 was our first year attending SaaStr Annual in San Francisco, an event dedicated to SaaS entrepreneurs, operators and investors with businesses generating $1 million to $100 million in ARR. The conference is a forum for SaaS enthusiasts to connect and learn from industry luminaries who were successfully able to grow and scale their own SaaS businesses. I was one of about 10,000 attendees, many of which were from outside of the Bay Area and hundreds of which were from outside of the US. I don’t have the official stats of company stage, but based on the sample size of attendees I met, my guess is that most of the attendees were closer to the $1M ARR end of the spectrum.


The content ranged from strategic to hyper-tactical, and below are my key takeaways:

1. Hiring is the biggest challenge for growing businesses, regardless of ARR. 

Every single operational panel included a discussion on people. Executives estimated that about half of their time is spent recruiting, and there was more than one reference to Dunbar’s Number (one can only have meaningful relationships with 150 people, and after that, something breaks in the organization). Almost everyone believed in hiring the aspirational “stretch” player vs. the tenured veteran. Eric Yuan, Founder and CEO of newly minted unicorn, Zoom Video Communications, said that he hires people with the potential for growth because “they’re more humble, more loyal, more trainable.” As companies grow, hiring requirements change – we see this firsthand with our portfolio company Jobvite’s customers. From $1-10M ARR, you can hire what Katy Keim, CMO of Lithium, calls the “cheap and cheerful” generalists, but as you scale, you need specialists. And reassuringly (at least for me as an investor), several executives brought up that free lunch ≠ culture, and instead, they emphasized the importance of having a shared purpose and company values (remember the Netflix culture deck?).

2. Empowerment throughout the organization is key.

See above – if hiring is the biggest challenge to scaling, you need to make the most of the resources you have. Training is imperative – Twilio CEO Jeff Lawson discussed his team’s focus on “agility with resiliency” – quick but quality deployments are made possible thanks to an internal training program that provides engineers with the framework to make decisions. I loved this insight from Lindsey Armstrong, COO of Insidesales.Com: “The CEO has two responsibilities: drive the vision of the company and make decisions.” To successfully accomplish the second part of the CEO job, there must be a tolerance for failure. As panelist Hilarie Koplow, President of New Relic said, “If it can be reversed, push it down in the organization. If it’s irreversible, push it up.” And to make decision making even easier, Promise Phelon, CEO of TapInfluence, said, “If you need to make a pro/con list, the answer is *#&$-ing ‘no!’”

3. Operators are DESPERATE for metrics.

I think attendees were salivating when our co-investor in Conductor, David Skok, Partner at Matrix Partners, went through his deck on the 12 Key Levers of SaaS Success, which included insights on optimizing the SaaS funnel (“get inside your customer’s head, break down the funnel into micro-steps, identify bottlenecks, use funnel math to make improvements”). Our co-investor in MINDBODY, Bessemer Venture Partners, gave a State of the Cloud 2017 talk that was also well-attended – VC Kristina Shen discussed trade-offs for growth vs. profitability and the Efficiency Ratio (% Annual CARR Growth + % Burn). Even in the sessions that were not explicitly dedicated to metrics, formulas were presented left and right. I heard a growth “formula” that resonated with me:

4. Treat your prospective customer like a bank account – deposit before you withdraw!

This includes a crucial idea that was repeated in several sessions: the product must be in sync with sales and marketing (and customer success). Per Skok, “The product team can impact the sales funnel. They can drive lead flow by making it easy for the customer to trial the product.” He also discussed Hubspot’s concept of “sparketing,” which is collaboration between the sales, product and marketing teams to deliver customer value. Mark Suster from Upfront Ventures Snapstormed something along these lines right after the conference: “You gotta give before you get.” His comment was about networking dynamics, but it applies to the vendor / customer relationship as well.

5. There are a LOT of lead management, sales enablement and customer success companies.

I walked the vendor floor and every other company was either selling a sales productivity or anti-churn solution. (Maybe these were the folks salivating at Skok’s presentation?) While there is definitely a market and need for these solutions, I worry that for early stage companies, they are really Band-Aids for underlying product/market fit issues. The go-to-market focus extended beyond the vendor floor to the hyper-tactical stage. The best was a discussion on Sales Mistakes that Can Kill Your SaaS Business… and How to Avoid Them by Michele Law, former CRO of Castlight Health, and Mark Roberge, Senior Lecturer at HBS. They identified “going into growth mode too early” as the #1 sales mistake in a SaaS business and outlined the following phases – first, establish customer success (i.e., product/market fit), then prove unit economics, then drive growth:

6. Focus on execution.

Veeva Systems Founder and CEO Peter Gassner talked about how most ideas get copied, but “execution is enduring and separates you.” Gassner, a founder who raised $7 million, spent only $3 million of it, and now runs a $6 billion business, was extremely pragmatic and to the point. Another gem from his talk: “The price you set will determine the quality of your product – it is self-fulfilling. If you charge a premium, you will feel compelled to continue to improve your product.”

7. Profitability – where action will be more powerful than words.

EVERYONE talked about capital efficiency, and how CEOs should raise funding when they can, not when they need it. Given the number of companies seeking growth financing with very high burn and no discernable path to breakeven, I’m not sure that the founders in the audience have taken this to heart just yet, but I agree with the several panelists who admonished that CEOs NEED to know how business could get to cash flow positive without raising another penny. At Catalyst, we run this “Get CF+” analysis before every investment just to make sure it is possible (you’d be surprised how often it isn’t!) – it would be great if more companies came into conversations with their own view on how to reach profitability.

8. Diversity and inclusion are top of mind.

Given my involvement with the National Venture Capital Association’s Diversity Task Force, I really enjoyed the candid discussion on inclusion, not only as it relates to gender and race but also geography (reminder: Catalyst is seeking to invest across the US!). Bessemer’s slides included the case for diverse teams (prediction for 2017: Diverse Teams Win), and Phelon drew a roaring applause at the event’s largest stage when 15-minutes into her panel, she said: “I don’t know if you have noticed, but I am not a 27-year-old white male…” SaaStr Founder Jason Lemkin and his event team did a fantastic job of curating the panels with operators representing diverse genders, races, ages, and backgrounds, and the attendees noticed and appreciated it.

It was inspiring to be among so many attendees who were excited to learn and exchange SaaS / operations / investing war stories. It reminded me of how lucky I am to work with the inspiring founders and executives in Catalyst’s portfolio, and how excited I am to continue finding and support great growth businesses. Overall, it was a great three days in SF – made even better by the puppies up for adoption during the breaks between sessions (another great move by the SaaStr team).

If you are a growth stage SaaS company and we weren’t able to connect at the conference, let’s chat! Would love to hear your takeaways and trade notes. Email me at mia at catalyst dot com.

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