InsightaaS: Jason Lemkin — Co-Founder and CEO of SaaS firm EchoSign (until it was acquired by Adobe) – provides, via the excellent Enterprise Irregulars blog site, extremely valuable perspectives on SaaS startup management. We have featured one of his pieces in the past (“Silos-in-the-Enterprise: Good. But Not All They Are Cracked Up to Be.“) and alluded to another, when we looked at a debate on the requirement for SaaS sales teams that Lemkin engaged in with Bob Warfield.
In the piece featured today, Lemkin extends his guidance to the CEOs of SaaS firms. “What the Second Time SaaS CEOs are All Doing” looks at commonalities across chief executives who have managed one firm to a successful (8-9 figure) exit, and are now ramping up new businesses. Lemkin believes that “what they all know is that, once you have product-market fit, once you hit Initial Traction – it’s all a playbook. For a given ACV, basically you scale everything the same way.” Lemkin goes on to explain some key components of the common approach: “committing time, people and capital for 2+ years from the get-go,” “leaning in heavily on customer success,” “More upmarket. Or at least, higher ACVs,” forgetting about optionality,” “hiring more seasoned VPs and managers.” He closes by acknowledging that “if you’re a first time SaaS CEO you can’t do all of this,” but urges readers to “Run as many proven plays as you can in your SaaS company – the ones that are already proven. Leave innovation for the product side” as a means of building successful businesses.
Lemkin uses terms – such as initial traction, ACV and second order effects – that may not be familiar to all managers within (or looking for a way into) SaaS companies. Those who fit this description are urged to spend the time needed to follow Lemkin’s internal links and learn more about the subjects. The playbook may not be quite so clear as Lemkin implies, but it is becoming better understood – and building a solid grasp of the “players,” their actions and the ways in which these actions fit together is important to building viable cloud businesses.
We’re in the third generation of SaaS companies by my reckoning.
The first generation was Salesforce, Netsuite, Webex, morphed-into-SaaS companies like Concur, etc. The next generation came of age and often leveraged Salesforce or other web platforms or paradigms to scale.
Now, every business process is being webified. Markets that just a few years ago were too small (e.g., search-as-a-service, see our discussion on Algolia) and buyers that just a few years ago didn’t have SaaS budgets (e.g., see our discussion on GuideSpark and selling SaaS to VPs of HR) are just exploding.
Along with that (and we’ll talk more about SaaS 3.0) is the rise of the Second Timers. I don’t mean folks who did some little SaaS start-up that didn’t make it or was acqui-hired. I mean, enough time has gone by, that folks with a success under their belt in SaaS (defined as their last SaaS company having gotten to eight-figures or more in ARR) are doing the next one…
CEOs / founders doing it the second time in SaaS after a success the first time building a real SaaS business.
And what they all know is that, once you have product-market fit, once you hit Initial Traction – it’s all a playbook…