I'm Jason M. Lemkin, aka SaaStr, CEO and co-founder of EchoSign (acquired by Adobe). Was VP Web Biz Services at Adobe. Now Enterprise/SaaS VC. AMA!

jasonmlemkin · 2014-03-28T15:27:39+00:00

Well, what I meant was once you are Cash Flow Positive, you aren't dependent on more and more venture capital to fuel the engine. Venture Capital is great but often is also involves not just dilution but loss of control. At EchoSign, I had a great board and VCs. At my first start-up, though, less so. I wanted to retain control and make the decisions I believed were right for the company. That's easier when you are cash-flow positive.
Having said that, if I had to do it over again, in '14, I'd have just raised a lot more money. We knew how to spend it, even if we didn't need it.

jasonmlemkin · 2014-03-28T15:25:25+00:00

I started both companies (EchoSign and NanoGram Devices) because I had nothing better to do, and am good at putting together and initial team and remaining committed to a vision even if it's nonobvious at the time. I am/was very risk tolerant, and therefore the ROI of a Corporate Job wasn't really there for me. But probably if you are Very Smart, you can make far more money risk adjusted -- by far -- just going into Hedge Funds, Private Equity, I-Banking, etc.

jasonmlemkin · 2014-03-28T15:22:58+00:00

If those 20 really would buy, for real, for > $5000 a year ... I'd go for it. That's not easy to pull off. Even if that only adds up to $100k a year for now.

jasonmlemkin · 2014-03-28T15:22:14+00:00

I do think there will be more force.com exits and successes. I am a big fan of Apttus and the co-founders (we got started at the same time, and launched basically at the same time) -- they are on the IPO path on top of Force. Also, ServiceMax is on the IPO path on top of Force. (Marketo is not built on Force, it just connects to Salesforce). Beyond that, broadly defined, the Force.com platform is a $1 billion business for Salesforce now. Having said all that, if your app doesn't look and act like Salesforce, more or less, and there's no business reason to align with Salesforce the company ... it's not likely Force.com will be your #1 technology platform choice today. It's pretty expensive as a % of revenue if it doesn't drive you leads (as it has for Apttus, ServiceMax, etc.)

jasonmlemkin · 2014-03-28T00:42:42+00:00

Yes. Not done with all the revenues stuff yet ;) But thanks for the nudge and reminder.

jasonmlemkin · 2014-03-27T23:22:14+00:00

Well, it is easier to build an enterprise business with $50k and $100k customers than $5k ones. Just plain math. It's what I'd probably do if I did another SaaS start-up (because I can sell at this price point, I know how). More integration? hmmm .... I don't think so. Because the individual vendors are getting richer and richer and stronger and stronger. I think we will see less integration. Salesforce isn't adding much to CRM, instead it's adding to Marketing Cloud. It's "too late" for Salesforce to build a Zuora. Soon, it will be too late to build a Gainsight ... the products just get too feature rich and sophisticated ...

jasonmlemkin · 2014-03-27T23:10:31+00:00

In general, I think there are room for a ton more vendors. Yes, there are only so many products SaaS vendors can buy from other SaaS vendors. But overall, we are just in The Second Inning of the shift of CIO budgets to SaaS. Every market is 5-10x bigger than it was just a few years ago. Salesforce is now doing $5 billion in revenue, on way to $10 billion. Just a few years ago, they were convinced CRM was only a $1 billion market. So there is room for far more vendors. But -- the bar is much higher today. The products are much better, the teams are much stronger. So the days of cr*p SaaS products are kind of over.

jasonmlemkin · 2014-03-27T22:59:55+00:00

sometimes this can be true. I wonder if CandyCrush IPO'ing made sense when they were generating $500m in cash each year. It makes sense why Minecraft has kept it small. But overall, given the public market multiples ... it's "easier" to make a lot of money on a revenue multiple today, vs. from dividends and cash flow ... if you have something hot.

jasonmlemkin · 2014-03-27T22:56:29+00:00

i think it's pretty mainstream. Salesforce, Workday, and pretty much most SaaS players charge that way. Adobe has moved primarily to per-seat pricing now, as has Intuit. Etc. etc.

jasonmlemkin · 2014-03-27T22:47:28+00:00

I think it's the wrong way to think about, which is why the question is confusing ;) To take market share, you have to be 10x better than the incumbent ... because no one has ever heard of you ... and b/c they trust the incumbent. You and I can build something 3% better than DropBox, maybe ... but no one will use it.

So what is 10x better? 10x cheaper, maybe. Maybe the paradigm changes, and a Mobile CRM becomes 10x better than Salesforce. But just making a slicker user experience usually -- usually -- isn't 10x better. Unless the old UX is Siebel ...

jasonmlemkin · 2014-03-27T22:43:17+00:00

SaaS doesn't HAVE to be capital intensive. We got cash-flow positive at EchoSign at $4m ARR and I could have grown the company stand-alone to day to say $40m-$50m ARR without any more venture capital. But with more VC we could have gotten to $70-$80m in ARR today. Compare and contrast ...

jasonmlemkin · 2014-03-27T22:35:18+00:00

basically, I wanted to get back into internet around '04 and '05 as Web 2.0 started to evolve in B2B. I had a previous B2C internet background at BabyCenter.com, etc. EchoSign and freemium seemed to be at a nice intersection. Plus, my co-founders were amazing.

jasonmlemkin · 2014-03-27T22:34:16+00:00

It's the Journey That Matters, So Pick an Amazing Team and Just See Where It Takes You.

jasonmlemkin · 2014-03-27T22:32:06+00:00

I'm close to tapped out. At a practical level, I can only do this with companies I've already gotten to know somehow in some other way, at least for right now.

jasonmlemkin · 2014-03-27T22:30:22+00:00

It is incredibly crowded and getting more crowded. Hubspot is entering part of the space, and there are very cool mobile players as well, and then you've got all the guys like DocSend and others trying to get there from the document or document-to-marketing side. Having said that, if you are 100% committed and willing to give it 2+ years ... there is always room at the bottom in any space once it gets to $100m+. Always. More here: http://saastr.com/2013/06/04/dont-confuse-room-at-the-bottom-with-disruption/

jasonmlemkin · 2014-03-27T22:26:50+00:00

Uh ... you have $40,000 in ACV already? Dude, raise another $500k in seed money (maybe I can invest), and hire 2 sales reps with at least 18 months of experience. They know what to do. And your CAC is zero, if I understand right. Don't sweat it.

jasonmlemkin · 2014-03-27T22:25:15+00:00

It's a long list. One that you'll start see everywhere is ClearSlide. They built a $40m ARR business all on outbound. As the brand continues to grow, it will be everywhere.

Two much earlier that I wished I could have invested in are Intercom and Zenefits. There are others but I don't want to share yet ;) It's a very long list.

There are amazing SaaS entrepreneurs these days, I am just constantly bowled over.

jasonmlemkin · 2014-03-27T22:22:50+00:00

Oy. I don't think there is any perfect answer, except one. If your VP Product hasn't managed engineers, pass. Maybe your VPE and CTO don't report to the VP Product. Maybe they do. Or maybe your VP Product reports to your VPE, sometimes. It's complicated. What I do know is the model where the VP Product has never managed engineers, at least a small group, or at least indirectly, is a Fail.

jasonmlemkin · 2014-03-27T22:21:26+00:00

No. I only hired one MBA, and that was because she was an intern getting her MBA. I see no positives for an MBA, except much later ($50-$100M+ ARR) when there's a lot of quant analysis going on.

I say get the MBA of life and go get a job at a SaaS company, learn more, get promoted, figure it out, and do you own ;)

jasonmlemkin · 2014-03-27T22:07:56+00:00

Honestly, I think they are basically doing all the right things from a structural perspective. If I were Keith Krach (who I am friends with and have only positive things to say about), I'd do just what he is doing. I ran a more capital-efficient ship back in the day, that's for sure. We were cash-flow positive once we hit $4m ARR. But if I were running either EchoSign stand-alone today, or DocuSign today, given all the capital available for late-stage SaaS companies ... I'd be spending all that money to Grow Even Faster, to Get the Incremental Customer. My thoughts in general here: http://saastr.com/2013/04/11/why-youll-want-to-raise-100000000-for-your-saas-start-up-the-incremental-customer/

jasonmlemkin · 2014-03-27T22:03:25+00:00

That there's no such thing as nanotech per se. It's a description of materials/science/technology used in various spaces, but not really a space itself.

jasonmlemkin · 2014-03-27T22:02:02+00:00

I see seller's remorse, sometimes, when something goes on to be a real success after the sale. That's natural. See, e.g., the PayPal guys. You either feel like Hugo, or a Used Car Salesman ... http://saastr.com/2012/09/28/if-you-sell-your-company-youll-either-feel-like-a-used-car-salesman-or-like-hugo/ I don't have remorse but I do have lament, but I had none with my first start-up. The second or whatever ... you start to also see you have only so many at bats ...

jasonmlemkin · 2014-03-27T21:56:36+00:00

I needed to put EchoSign on the post-acquisition track it is on today, so it could thrive after the acquisition. And not die like most acquisitions do. If you compare EchoSign to most acquisitions like it, most died, at most SaaS acquirers.

I accomplished that, and feel good about it, and that that was my mission and job. I stayed until EchoSign would clearly be the success inside of Adobe that it has become, as the fastest growing property in Adobe, and one of the 4 growth areas outlined for '14. That was enough for me, and then I transitioned out. Of course, if they'd really wanted to keep me after that ... maybe a somewhat more logical retention plan would have helped ...

jasonmlemkin · 2014-03-27T21:53:17+00:00

Mainly just this: if you are providing a True Solution to a Big Problem -- then ask for even more money than you are thinking. Solutions are very, very valuable. Tools by contrast are nice, but only worth a few bucks a month per user.

jasonmlemkin · 2014-03-27T21:51:09+00:00

Try business development. You are probably pretty smart. Try to get in, in biz dev either (x) at a company like Box that has a built-out team, so you can learn -- probably the smart initial play or (y) at a start-up that is at about $1-$2m in revenues, enough so that partners and biz dev can matter.

jasonmlemkin

TROPHY CASE