So a little while back I looked back at about 25 SaaS seed investments I’d made that had scaled well past $10m-$20m and reflected on the top themes. Including — the top mistakes founders make again and again as they cross $10m ARR. Trust me.
Here they are. They are all avoidable:
Ok really this is mistake #1, #2, #3, #4 and #5. I see way too many founders, in the transition from founder-led sales to their first (or second) VP of Sales, look to get that time back. This almost never works. Founders never get that time back. Instead, how they spend time in sales changes. You spend more time in the middle of deals, and less at the beginning (qualifiying) and end (closing). But you still have to do 10+ customer calls a week. Are you doing that?
More here.
I know this one may sound obvious, and yet, it’s not. Way, way too many founders never quite tame the burn rate as they scale past $10m ARR or so. The teams all get bigger. You start hiring faster. It starts to feel more like a “normal” company. And these additional costs just compound, and stack on top of each other. Pretty soon, that $300k burn has turned into $800k, and then … it never declines. It grows to $1m and beyond. Burn rates never seem to decline unless you take serious, and often radical,action. No matter what the model says. Whatever you do, at least do a rolling L4M model.
More here.
Once you really start to scale post $10m-$15m, the “internal” stuff starts taking up a ton of time. Keeping existing customers happy. Fixing long-standing product gaps and technical debt. Scaling DevOps and TechOps and FinOps and AllTheOps and HR and Recruiting and the SKO. Again, you’re finally building a real company. What can happen with all that internal focus is you lose a little focus on remaining ruthlessly competitive. Especially if your space is evolving. You might be the #1 vendor in your niche, but if that niche no longer is quite enough on its own, without more functionality, you can quietly fall behind. I’m constantly surprised how many founders are less close to the pulse of the competition once things start to scale.
More here.
If you hire everyone from outside the company to your leadership and senior teams, you lose what makes you special. The “outsiders” often never 100% get it. They never know all the features, the nooks and crannies, how the integrations really work, the nuances to parts of the sales playbook. But you also need them to inject new thinking and new experience into your startup.
As a rough rule, once you start scaling, try to have 50% of your leadership from internal promotions (you keep the special DNA and knowledge), and 50% from outsiders you bring in to mix things up and bring in new skills. Too few outsiders, and as you scale, everyone starts to make excuses when it gets harder. And the excuses are “right”. Too many outsiders and everything is done without true deep knowledge of what makes you special. They just never have the time, nor often the inclination, to learn what the insiders learned the past 2-3 years on the battlefield.
More here.
Look, we’ve all been there. I’ve made this mistake myself again and again. And all I can tell you, and every other successful startup CEO will tell you, is this — The Desperation VP Hire Never Works Out.
It usually goes like this: you go off to hire a VP you absolutely need to hire. Often VP of Sales, but it can be VP of Eng, Marketing, etc. as well. And 4, 5, 6 months go by and you just aren’t finding anyone great, and you get burnt out. You feel like you can’t be that Interim VP yourself any longer, than someone “OK” has to at least be better than how you’re doing now. And you hire someone, often someone that looks decent on paper, on LinkedIn — that you know isn’t great. They’re nice and seem OK. But they didn’t really do the 60 Day Plan. They don’t really have anyone great to bring with them. But hey, they look and sounds good. The team likes them, even if no one is blown away. So you make the Desperation VP Hire. They’re just always gone in 6 months or so, and leave a mediocre team you don’t need behind with them.
More here.