Thursday, 6 May 2021

SaaStr

SaaStr

A Simple 4 Part Test to Know If You’ve Hired the Right VP

Posted: 05 May 2021 07:43 AM PDT

Hiring your VPs as a founder is tough.  Wait too long, and the business stalls out.  Underhire, and you don’t get an owner.  Overhire, all the money is gone.   And simply getting it wrong?  Well, that can set you back a year — if you wait to take action.

So how do you know?  How do you know, quickly, if you’ve hired a “good enough” VP?  Or if you hired someone that talked the talk, but isn’t the right fit for your startup?

Let’s break it down to 4 simple criteria.  Then, I want you to be honest about them.

Criterion #1:  Did they hire someone great in the first 60 days?  Real VPs know half their job is about hiring great people, at first maybe just a few, and then later, tons of them.  50% of the job of a real VP is recruiting.  And the best ones always have at least 1 or 2 great candidates in their back pocket.  So if they haven’t hired anyone great in the first 30-60 days … they probably never will.  And they probably aren’t a real VP.  And that means, you probably need to move on.

Criterion #2:  Did their #1 key metric improve?  You can’t expect magic from a VP.  But you can expect in the first 60 days for one key metric to improve.  Sales — for a VPS.  Leads and Opportunities — for a VPM.  CSAT or NPS for a VP of Customer Success.  More product velocity for a VPE or VPP.  A real VP makes some real improvements in Job #1 in their first 60 days.  Someone that isn’t a fit tells you why they can’t make progress that quickly.  If you hear that excuse, you probably need to move on.  A related post here.

Criterion #3:  Did they take part of their job off your plate?  Your first VPs especially will be taking over functions the co-founders own.  You may still need to spend just as much time in sales when you hire a great VP of Sales — but you shouldn’t have to own it as much.  Some of the job just has to come off your plate, pretty quickly.  Or you didn’t hire a real VP.

Criterion #4: Does the team believe?  The team knows.  They’ve been working there for a while.  They know if someone comes in and improves things — or doesn’t.  When you don’t see the team’s confidence build fairly quickly, ideally in the first 30 days — you didn’t hire a real VP.  You almost certainly need to move on.

Ok you probably agree with these 4 criteria, at least mostly.  Now is the real challenge.  To move on if your new VP doesn’t pass this 4-part test.  No excuses.  No thinking meeting 3/4 or 2/4 of the 4 point test is OK for now.  Especially, no giving them more time.

You can hire a stretch candidate, someone who’s only done some of the job before, someone that has a lot to prove.  More on that here.  That’s OK and often the right choice.  But they have to get the core of the VP job done.  If they haven’t, move on.  The damage will only compound from there.

The post A Simple 4 Part Test to Know If You’ve Hired the Right VP appeared first on SaaStr.

Dear SaaStr: Why is Stripe Waiting to IPO?

Posted: 05 May 2021 05:59 AM PDT

Q:  Why is Stripe waiting so long to IPO?

Stripe will IPO. It's just not in a rush.

Why do private companies and startups IPO, anyway?  There are 5 basic reasons:

  • Raise capital. But Stripe can raise all the capital it needs pre-IPO.  So no need to IPO just for working capital.
  • A currency for M&A. At some point this will help Stripe, to be public to make mega-acquisitions. But right now, it can and has funded acquisitions with stock and cash.
  • Liquidity for employees. There is enough liquidity Stripe can cash out employees now.  Secondary transactions that provide employees partial liquidity is pretty common in late-stage startups now, at least the ones with far more investor demand than supply.
  • Liquidity for investors. There is enough liquidity Stripe can cash out early investors now, if they want to cash out.
  • More credibility, especially with enterprise customers.  It’s not clear this much matters from companies with big brands like Stripe.  But in the enterprise, vendors that are public tend to be seen as more stable by larger buyers.

These are great benefits for many private companies.  But Stripe already has the first 4 of the 5 benefits.

So for now, Stripe gets no direct benefit from an IPO (or direct listing).

But the time will come. Right now, Stripe can focus 100% on top-line growth and investment in its product and team without the distractions of having to show bottom-line improvements each quarter.  Post-IPO, profitability or at least a path to profitability will matter much more. Losses will need to narrow at first, and then cross over to true profitability.

Better to invent even more in growth now, if you don't need to IPO right now.

And yes, Stripe will still IPO / direct list. Just later.

The post Dear SaaStr: Why is Stripe Waiting to IPO? appeared first on SaaStr.

How to Avoid Being Replaced as CEO by Your VCs

Posted: 05 May 2021 05:20 AM PDT

Worried about a bunch of VCs replacing you?  You should be a little worried, probably.

A ways back, a CEO that I know fairly well was fired by a VC.  Strange thing was, the VC didn’t talk to the rest of the board.  Who didn’t agree.  So he got un-fired.

Awkward.

CEOs getting replaced and fired in start-ups doesn’t happen every day.  But it does happen all the time.  Fairly often. Just not usually.

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A few high-level things to think about.

  • First, if you really screw up, and couldn’t make it happen, and someone else could … shouldn't you be replaced?
  • Second, if you don't end up being a great CEO in the long-run, shouldn't you be replaced when someone can do the next stage materially better than you can? This will make you more money as a shareholder, no?

OK you probably agree with both in theory. But you're really worried about the grey area in the middle. You give it 110%. For years. The company does reasonably well, or at least, doesn't fail. You don't think anyone could have done any better, or will do any better. But a bunch of VCs want to replace you anyway.

That doesn't often happen. But it does happen regularly.

So … how do you protect yourself?

Six tips:

  • Don't sell too much of the company. This is key tip #1. Roughly, you will give away control in proportion to the ownership stake you sell. If you only sell 20–30% of the company, because you don't need that much capital … you'll remain in de facto and legal control. If you sell 90%+, you won't remain in control. Which is fair. It's not your company anymore at that point.
  • Pick VCs on your board, especially early stage VCs, that you trust. This will go a long way. If you have options, if more than one VC wants to invest in you — do reference checks. For real. On the individual partner, not just the firm.
  • Look at the track record of the Series A-B-C VCs you bring in. How often do they replace CEOs? It's not necessarily truly a negative if they replace many CEOs, just understand what you are getting yourself in for.
  • Be very transparent. If you are, your job is likely pretty safe as CEO. Don't hide stuff from your board. This >>spooks<< VCs. Every VC has lots of companies that unperform and even fail. But a surprise — that spooks people. Simple hack — send out a "flash report" the very first day of every month telling everyone how you did last month, the good and the less good.
  • Be better than anyone else. Even if the company struggles, if the board doesn't believe anyone else could do a better job, they won't replace the CEO, 9+ times out of 10. Sometimes, it really is just a B+ idea and/or a B- market, and no one else really could do better, even with so-so results.
  • Don't expect — or ask for — another check. This is key tip #2. The most common reason CEOs get fired is a third check. An unexpected check. VCs having to write another check into a company they don't want to write another check into. This creates huge stress at the partnership level for VCs. They don't want to write another check into their struggling companies. If you don't ask for any more money — the CEO's job is a lot safer.

Do those 6 things and your odds of ever being "fired" or replaced as CEO without your consent are very low.

More here: 5 Things To Be Wary of In VC Financings

 

The post How to Avoid Being Replaced as CEO by Your VCs appeared first on SaaStr.

Five Product Strategy Stages on the Path to $100M+ from Pendo

Posted: 05 May 2021 03:12 AM PDT

If there's one lesson I've learned from leading product at fast-growing startups, it's that there's no one way to lead product. You do, however, need to be intentional about how you lead product. That starts with acknowledging the differences between a company at $25 million in ARR and $75 million, and then mapping big team and organizational changes to critical stages along that growth trajectory.

Here's some advice for other product leaders from our journey at Pendo:

$0-5M ARR: All hands on deck.

Your primary focus in the earliest days of the company is achieving product-market fit. In most cases, this stage doesn't require a dedicated product executive. You need a passionate and dedicated founding team, all of whom are close to customers and working to solve their problems.

$5-25M: Hire a CPO early.

But there is something to be said for hiring a product executive before the business feels ready. I like to equate this stage to Warren Buffett's famous law of uninterrupted compounding interest—there is a significant difference between investing early and often into an IRA versus starting later in life. 

I joined Pendo as its first chief product officer during this stage, and my initial focus was to elevate our customer conversations from features and functionality, to understanding and having empathy for their jobs to be done. We built mission-based teams around areas of the product to ensure what we built helped customers be the very best at their jobs. The result was a more strategic roadmap, which helped us win customers faster. That structure also helped us take on customers we weren't quite ready for, at times testing our existing systems and processes, but mostly stretching my team to deliver an increasingly better product.

$25-50M: Create and/or mature your operating system.

But soon enough, we tested our systems enough to require an actual operating system for product. This lesson came the hard way: after a poorly executed product launch. My team had spent a year working on an exciting new capability, but we hadn't gotten enough feedback from customers prior to rollout. And we hadn't properly trained our customer-facing teams either. It was brutal.

This was the catalyst for product operations. We created a product ops team with transparency as a primary objective. They started off by interviewing internal teams to understand the pain they felt as our product grew and changed. Armed with these insights, product ops built templates and processes to make sure we communicate the right level of information at the right time to both customers and our go-to-market teams. Product ops holds us accountable for what we're delivering, and makes sure every launch is seamless. 

$50-75M: Determine your second act.

The prior stages were all about scaling our core product and our product function. But once we had momentum and structure in place, our board started asking the provocative question: What comes next? What is the next opportunity that could be even bigger than the first? This is the ideal stage for a fast-growing company to plot its next moves.

My team spent a lot of time reflecting on what we've learned about the business, and what opportunities are out there to explore—we considered whether our core capabilities could serve a new persona or if we should add features and functionality to meet the needs of a new customer base. Geoffrey Moore's bowling pin strategy provided a great framework for refreshing our product direction and strategy, and casting vision for a new and exciting roadmap. 

Invest the time and energy, and you'll leave this stage with clarity around the company's next revenue engine. 

$75-$100M+: Scale and structure your org to reflect your multi-horizon strategy.

Then it becomes time to execute. Your team and org need to change yet again to avoid the "Innovator's Dilemma" that many companies face when they try to balance the needs of a core business with a new one. A battle for resources is almost inevitable without an intentional strategy to drive innovation. 

At Pendo, we created an entirely separate product organization to focus on our second act. That has enabled us to continue to invest in the core product and serve the largest portion of our customers, while giving the new team independence from processes and structure that could slow them down. 

Be intentional about the decisions you make in these five stages, and your product team and organization will continue to innovate and drive growth for the business for years to come.

This blog post is brought to you by Pendo.

The post Five Product Strategy Stages on the Path to $100M+ from Pendo appeared first on SaaStr.
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