Editors Note: The “Godfather of SaaS”, Jason Lemkin of SaaStr.com moderates an all-star panel with three of the best SaaS VCs around in Jason Green of Emergence Capital, Tomasz Tunguz of Redpoint Ventures, and Stacey Bishop of Scale Venture Partners.
There were so many insightful panels at this year’s Sales Stack Conference that we decided to sift through all the great pearls of wisdom being offered by our panel members in order to bring them to you in bite-sized chunks for anyone who wasn’t able to attend or as a refresher for those who did.
Name one sales/revenue tool you’ve invested in over the past 24 months and why?
Jason Green: “SalesLoft and SteelBrick — both are sitting on the sides of CRM. Great teams, significant customer adoption and traction, and no real leaders in the space. Our philosophy is that you’ve got to be a platform of record, not just a solution on top of another platform of record.
We’ve looked at a lot of companies that are building on top of SalesForce to be able to better slice & dice the data there, get better access, etc. The problem with that fundamentally is that you’re not really owning your own destiny. Salesforce can build something on top of that in a few months or even a few weeks and then all of the sudden you don’t have a sustaining business model.”
[Tweet “You’ve got to be a platform of record, not just a solution on top of another platform of record.”]
Tomasz Tunguz: One company is Looker, which is a BI tool and has a very interesting sales-specific use case. One of their customers, Hubspot, uses Looker to tell salespeople exactly how they’re performing on four key dimensions of their compensation plan at any point in time that they would like to know about it. Those dimensions are quota retirement, deal terms, months of cash upfront, and churn. All of those calculations actually sum up to the salesperson’s compensation.
“What’s happening in markets today where that is a big enough market?”
Tomasz Tunguz: The stack in BI has changed and so what ends up happening is you used to buy your BI with a database, data cube, and then a modeling/visualization layer on top and you did it because databases were super expensive back in the day. That’s no longer the case. You need a new tool on top. What most BI vendors do is they expect a fully formed data set to tableau. Looker models the data, takes what’s in the brain of a data scientist or an analyst and lets everyone else manipulate the data as if they knew what the data scientist knows.”
Stacey Bishop: Bizible, which is in the marketing attribution space. It understands where your marketing spend is having an impact on closed deals and understanding it all the way through the funnel. Our theory is ‘Go after the market and then try to find the best team going after that market.’ So we believe that markets determine the outcomes, teams determine whether or not you can get that #1 position.
[Tweet “Our theory is ‘Go after the market and then try to find the best team going after that market.’”]
Why are dashboards exciting today?
Stacey Bishop: I just think the world has gotten complicated. Understanding where your money’s going and how to get more insight into all the data. Just think in the last ten years how many channels have exploded. You now have social, you have email, you have mobile, you have web. It’s no longer a simple world where 15 years ago it might’ve just been your website and understanding that traffic. You’ve got all these other places you need to track. Plus, the marketing budget’s gone up significantly.
Is it a shift of buying dollars or are the buying dollars growing and what is driving marketing budgets up?
Stacey Bishop: I think the buying dollars are growing in marketing. There’s a whole shift where products are no longer sold, they’re bought. So buyers are going out and doing all kinds of research and they’re very knowledgeable before they engage with the sales rep. Marketing is driving a lot of that and putting the information out there through content marketing, through the social channels. Especially in developer marketing, it’s all about content marketing. You can’t just cold call up a developer and expect them to buy. They have to know about your product, be aware of it, be able to download it, try it. And so that’s just becoming a critical element in the whole process of the sales machine.
[Tweet “There’s a whole shift where products are no longer sold, they’re bought. @staceycurry”]
What’s the bar in 2015? Should everyone in this room be fired?
Tomasz Tunguz: Flywheel businesses are companies that generate revenue even when no one is working. For a Flywheel business model to work, you need two things: You need a buyer that is very difficult to sell to because if a buyer is easy to sell to then the traditional channels work just as well. The second thing is you need very little competition in the space.
Imagine marketing automation. One company that does flywheel business model that decides to do mostly by product, bottoms up. And you’ve got another company that raises a ton of money, coins the category, hires a sales team, defines the category, and creates a conference. The second one is going to win 9 times out 10. Because the awareness that that company is going to generate is going to allow them to dominate the category. The business will grow faster, they’ll be able raise more capital, hire more sales people, spend more on marketing, and that’s a flywheel in and of itself too.
How fast do I have to be growing to get significant capital?
Jason Green: Our best companies are growing at rates of 3-5x per year. If you aren’t demonstrating that, there better be a reason why you can’t.. and that you can get there at some point. But doubling year over year is just not interesting anymore.
[Tweet “Doubling year over year is just not interesting anymore. @jasonegreen”]
Jason Green: If you can raise the capital and you can invest it appropriately, you should be as aggressive as you possibly can. The only caveat is that financial markets can change, they can change dramatically. You never want to be in a position where you have to raise that next round of capital.
[Tweet “If you can raise the capital and invest it appropriately, you should be aggressive @jasonegreen”]
Stacey Bishop: If there’s a switching cost—if another company was going to win that deal and they didn’t get it, it was two years before they got a chance at that deal again. If you don’t win it now, you may never win that customer.
How important is it to dominate a market by taking VC?
Jason Green: When you take venture capital you are aiming high. You’re going for size of the pie. Otherwise I always say bootstrap your business, don’t take any VC, and own 100%. But don’t get stuck in the middle. That’s death valley.
[Tweet “I say bootstrap your business, don’t take any VC, and own 100%. @jasonegreen”]
Stacey Bishop: If you are stuck in the middle it’s not the end of the world, but make sure you have the cash to keep going and that you don’t need access to the VC.
Jason Green: If you’re growing 50-60% a year over 5 years you’re going to 10x your business. So you’re going to get there, just be patient and don’t pay any attention to the rest of the noise.
[Tweet “If you’re growing 50-60% year after year, be patient and don’t listen to the rest of the noise.”]
Tomasz Tunguz: Have a conversation with your cofounders early on about your plans, because if you have two founders with different points of view, it can cause a lot of complications.”