68 saas startup learnings

68 Learnings on the Things Not to Do in Your SaaS Startup

In 2017, Anand Sanwal, CEO of CB Insights did a talk at SaaStr to share his learnings on scaling whilst bootstrapped to $10 million in ARR.

Whilst you may know some of them, they’re great reminders to apply to yourself. First, we have the 68 bullet points for quick reading. If you want to read the transcript, that’s at the end if you want to dig in for a long read.

68 SaaS learnings for startups

1 DON’T take advice from non-customers

“Only take advice from those who have to live with the consequences”

2 DON’T tolerate high-performing assholes

They might provide short-term benefits but are cancerous to culture long-term.

3 DON’T fall in love with pedigree

There are plenty of smart folks who aren’t Google or Stanford alums.

4 DON’T half-ass onboarding of new teammates

Teammates make decisions to stay quickly. First impressions matter.

5 DON’T believe you have to raise VC

This narrative is great for VCs but is BS. Revenue is the best funding.

6 DON’T be pressured into raising VC

Just because a competitor did doesn’t mean anything.

7 DON’T let them call you a lifestyle business

You can revenue-fund a giant (Mailchimp, Atlassian)

8 DON’T waste money on PR to get customers

Especially early, do it on your own. Know what PR is good for.

9 DON’T chase press in sexy but irrelevant media

It’s easier to go after niche media which is less sexy and more useful.

10 DON’T believe your own hype

People are saying your co is amazing. Enjoy & forget. Stay paranoid.

11 DON’T get fixated on losses

If you’re doing it right, you’ll probably lose a lot. It sucks but try to forget.

12 DON’T think you know your end- market from day one

Be promiscuous in the early days. Sometimes, customers show up you didn’t expect.

13 DON’T be promiscuous about your market forever

At some point, you have enough data. Pick a market and attack it.

14 DON’T hire smart people and “figure it out later”

People do better with clear goals and priorities especially early on.

15 DON’T hire under pressure

Every time we’ve rushed a hiring decision, we’ve regretted it.

16 DON’T fire slow

Easier said than done TBH but culture is driven by people you hire and fire.

17 DON’T inflate people’s titles

When your startup scales, the inflated title holders get demoted. Not good.

18 DON’T be afraid to hire expert advisors

We did too much non-core stuff on our own in the beginning. Made mistakes.

19 DON’T be afraid to fire expert advisors

Sometimes, people/firms coast by on reputation. If you find this, run.

20 DON’T do what Slack, Dropbox, Evernote do

Everyone is super smart until they’re not. Do what is good for your biz.

21 DON’T believe the easy hype BS

You can’t growth hack your way to $100M in revenue.

22 DON’T don’t believe being outfunded matters

Money buys you time. It doesn’t buy you the ability to execute.

23 DON’T only celebrate big wins or sales wins

Highlight big and small milestones and recognize folks behind them.

24 DON’T sell to startups

No money. High churn. They die. The definition of SaaS hell.

25 DON’T be the lowest priced product in the market

This path generally sucks. Trust me.

26 DON’T get cute with pricing

It’s confusing and nobody is buying your important, awesome product cuz of this.

27 DON’T be afraid to ask if your product idea sucks

Customers will tell you if it’s something they’d pay for. They want you to win.

28 DON’T respond to trolls

Obvious but don’t. (TBH, I still do this to F with them from time-to-time)

29 DON’T worry about perfecting your tech too early

Revenues > technical debt. This will change as you scale.

30 DON’T be boring

So much software marketing is boring. Have a voice. Be interesting.

31 DON’T chase startup fads

Badges, AI. Big Data. Does it help customers?

32 DON’T think biz dev / CS will learn through osmosis

Not investing in training as you scale will hurt you.

33 DON’T wait to hire customer success

Even if churn is low, hire CS folks to ensure customers love you.

34 DON’T believe in the one hire messiah

If you’ve got a mess, someone may fix it. But don’t bank on it.

35 DON’T half-ass reference checks

Whether it’s a new teammate, investor, or important advisor, vet them hard.

36 DON’T meet with VCs unless you’re ready to raise

If you meet them, even casually, it’s a pitch.

37 DON’T price based on competition

If you’re indistinguishable from competition, that’s a problem.

38 DON’T think channel partnerships will save you

It’s hard to get someone else to do the selling for you.

39 DON’T dominate conversations w/ customers

The more customers talk during conversations, the better.

40 DON’T try to delegate product management too early

In the beginning, the product managers are the founders & engineers.

41 DON’T forget to ask for the sale

A quick yes is amazing. And a quick no is also pretty good. Don’t get strung along.

42 DON’T listen to people w/ no $ who want to “integrate”

99% of the time, these people are colossal wastes of time. Show me the money.

43 DON’T fear non-scalable work

Elegant solutions are often not worth the effort. Love the grind.

44 DON’T worry about competition

Focus on the customer night and day. (Hint: Read Jeff Bezos on this topic)

45 DON’T give a shit about Hacker News

God – we wasted so much time trying to get on the HN front page.

46 DON’T try to innovate in HR

Focus your innovation efforts on your product.

47 DON’T give perks you can’t give forever

If the market turns downward, and the perk wouldn’t survive, don’t give it.

48 DON’T hire salespeople till you can sell it yourself

If you’re the founder and can’t sell the shit out of it, nobody else will.

49 DON’T think all leads are created equal

Double down on best ones. Some will never buy. Forget them.

50 DON’T try to please everyone

You’ll build a crappy product that doesn’t get anyone fired up.

51 DON’T worry about your personal brand

Unless it helps recruit teammates or customers, why bother?

52 DON’T try to act like a “salesperson”

There is not one way to sell. Do what’s comfortable.

53 DON’T ignore sales advice

There is a lot of wisdom out there. Use it.

54 DON’T do ‘demos’. Have conversations

You’re not a tool with buttons and features. Position yourself as more.

55 DON’T be lazy after your first conversation

People are busy and aren’t fixated on you. You have to keep them interested.

56 DON’T buy whole grape / piece of watermelon thing

Focus on the narrative that works for you. Not one foisted upon you.

57 DON’T believe the media/VC survivorship bias

79% of exits are < $200M. Google and Facebook are freaks.

58 DON’T always look for new channels

It’s better to be a killer at a few channels than suck at many.

59 DON’T pointlessly network

If you’re emailing to pick people’s brains, swap notes, etc, stop it. Now.

60 DON’T be a ‘conference ho’

See the earlier point on pointless networking. Don’t mistake activity for progress.

61 DON’T hesitate to ”flood the zone”

Once you find something works, milk the hell out of it.

62 DON’T deceive yourself on the size of your market

Build a product and price with your market in mind.

63 DON’T fetishize failure

Failure blows. Don’t make it ok and say it was a learning experience.

64 DON’T worry about your name & logo too much

Cuz you will never do worse than us. CB Insights began as ChubbyBrain.

65 DON’T expect clients to tell you what product to build

First, it is not their job. Second, their feedback will often be incremental.

66 DON’T do feature demos

Nobody really cares. They want to know why it makes their lives better.

67 DON’T ever forget WIIFM

Nobody gives a shit about your product. They care about What’s In It For Me?

68 DON’T blindly follow this advice

There is no playbook. Anyone who tells you there is one is stupid and/or a charlatan

Saas financial model feedback

Transcript

If you want some more details on these points, here is a transcript on the talk:

 

Number one, don’t take advice from noncustomers. I’m not going to spend a lot of time on each slide because I’ve got 70 more to go.

This is a big one. We’ve had people who are killing it on their sales quota, but who are just dicks and we had to fire them. They were inappropriate, so you just get rid of those people even if it hurts your bottom line. It will be good for culture long term.

Don’t fall in love with pedigree. I think we are generally a company of misfits. Maybe we have a couple of ex Googlers now, but in general, we’re just scrappy. Don’t get enamored with that nonsense.

This is really important. There’s a great article and I should have linked to it here. It’s on first-round review about the importance of onboarding new people into your organization. We used to just give them a laptop and say, “Hey, go to it.” Now we spend a lot of time on onboarding. They say that people make a decision about whether they’re going to stay at an organization within the first 30 days.

I’d say it’s probably in the first week, so make sure you really get people acclimated in the organization. This is a challenge as you scale. If you’re the first 10 people, I think somebody who’s joining in the first 10 knows what to expect. Don’t over-engineer it at that point.

I’m going to hammer this theme. I have 68 of these, this one you’ll see a lot.

This is nonsense. You don’t have to raise venture capital. That whole pitch is great for the VC industrial complex. Revenue is the best funding ever that you’ll get. It is the cheapest. It is the best validator, go for that.

Second, when we have had competitors that have raised money, and then we get lots of calls from VCs saying like, “So and so raised. You guys should probably raise. You need a war chest,” or some other nonsense. If you want to raise, raise because it makes sense for you to raise not because some third party did.

Do not let them do this. This is such garbage. A lifestyle business is like, “You’re building this cute little business.” You can revenue fund a beast and MailChimp and Atlassian are examples of that. I think that’s increasingly going to happen. If you look at, I think, the $7 billion exits that have happened recently in the last six, eight months, three of them are bootstrapped.

The narrative that you need to raise a bunch of money and own the market and whatever is not real.

PR, so when we raise money, we tried some things we wouldn’t have done as a bootstrap company. We hired a PR firm. We fired a PR firm. It’s good for certain things.

I don’t think it’s in our experience and talking to other founders, it’s not good for getting customers. It’s great for HR. It’s great for recruitment. It’s great at getting the team riled up, but especially early, I think do it on your own.

People in the media want to talk to founders. They don’t want to talk to your agent. Don’t waste money on PR.

If you are in a niche, if you’re targeting the insurance sector, get coverage in the insurance trade rags. People in United Healthcare aren’t necessarily reading TechCrunch. Go for the places where your customers are.

I repeated that one. I’m bad at this. I get fixated on when we lose and it’s not a good thing for the team. You just gotta let them roll off your back.

In the beginning we were extremely promiscuous about the market we were targeting and that’s actually helped us. I would say don’t be fixated and don’t think you know the market you’re going to be attacking. We thought we were going to attack a certain market. We ended up going after a very different one as a result.

Be open minded to feedback. That said, don’t be promiscuous forever. Now we know that sales teams are not a market we’re going to go after, and so we don’t chase that. Once you’ve found the right market, you have enough data. Pick a market and then just go flood the zone on it. I did a lot of this.

Like, “Oh, we’re going to hire this really smart person, we’ll figure it out later.” Generally, smart people get frustrated because they don’t have a lot of structure around what they’re doing. No, I shouldn’t say structure. They just don’t have a lot of contexts, so give them clear goals, give them clear priorities.

Don’t hire under pressure. We’re way behind our hiring goals because we’re just really anal about who we’re going to hire. Every time we’ve said, “Hey, we just need somebody in that position. Maybe this person will get better or maybe they’re not annoying, hire them.” They always end up being annoying and they always are terrible. Don’t do that.

Don’t fire slowly. This one, it’s like hire slow, fire quick, or whatever. I think I got it right. It’s really hard. It’s great advice. It’s great for Medium blog posts. These are people that you’re going to potentially put out of a job. Try to do it. It is hard. Don’t be a Terminator about it.

I was talking to a friend of mine here out in the Valley and he’s like, “I’m at a three-person startup. I’m the CTO. My other co-founder is the COO and then we have the CEO.” I was like, “What are you guys doing?”

The problem with this is like it sounds good to be the CTO, but once you scale, you might not have the skills to be a CTO, and then you’re going to get demoted.

Whether you’re like, “I’m cool with that.” When everybody knows like, “Joe is no longer the CTO. We’ve brought in this person who’s like scaled companies.” Joe doesn’t look great. I think to be careful about the titles. I would try not to overpromote on the titles.

We were terrible at this. For the first like three years, I did payroll by hand. Not a good idea. Outsource the non-core stuff. Find good expert advisors. That said, expert advisors don’t always turn out to be experts, you should fire them ruthlessly as well. They are vendors. They should deliver their service. If not, say bye.

Don’t follow whatever the soup de jour of the software world is. Slack is hot. Dropbox was hot. Evernote was hot. We should do what they do and badges or whatever is like the thing. Everybody is super smart until they’re not. You have to do what’s good for you and not what is popular.

Again if you go back to my earlier point, if you’re trying to raise VC, sometimes doing what’s popular is good. If you’re in this room and you want to raise VC, my biggest piece of advice right now is to sprinkle AI into your pitch deck like hell because you will get funded way, way quicker.

Don’t believe the growth hacker advice. There’s a lot of great skills that you can learn there. You can’t hack your way to $100 million revenue business. This morning, somebody reached out to me.

He was like, “Hey, I love your newsletter. I saw it’s 235,000. Do you have any tips on how we can get there? I’m at like 9,000 and my boss wants me to get there in 18 months.”

I was like, “I don’t think there’s a great way to do that. I don’t have a trick. We’ve been at it for five years there and we finally got there, but there’s no trick. It was a five-year overnight success.”

Back to my VC point, money buys you time. It doesn’t buy the ability to execute. We’ve had multiple, more well-funded competitors come into our space. They all die. You have to be able to execute. It buys you time, it buys you some hype, it creates some noise amongst your employees potentially, but it’s not the metric for success.

Don’t only celebrate your big wins. There’s a challenge here where sales often is what you celebrate, but there are lots of other things that are worthy of celebration, small and big. Make sure you do that. If you have a gong or whatever ritual that you might use, make sure that everybody in the organization is ringing that, or hitting that, or whatever it might be.

Do not sell to startups. If you’re selling the startups, please for the love of God, don’t do this. They’re the worst market that you could imagine for SaaS. It is the definition of SaaS hell. They die, they’re cheap, and they churn quickly. We tried this in the beginning and it’s just the worst thing ever.

Don’t be the lowest-priced product in the market. If you’re competing on a price vector, it’s a very tough place to build a big company. You have to find some other value that you’re going to be successful on.

Don’t get cute with pricing. We put up this insane, stupid pricing at one point. People are like, “Oh, what’s the difference between town car and limo?” We’re just laughing on the phone like, “I can’t believe we’re having this conversation.” Just don’t try to be cute, right? Nobody is going to see this…

We saw something on “Hacker News” once and we’re like, “Oh, that’s such a cool…” Somebody who’s like a Doberman and like a bulldog, and we’re like, “Oh, that’s so creative.” Enterprise people will love that because they’ll just be like, “Oh, you guys are so avant-garde,” and it’s like, “No, it’s such garbage.” Don’t do stuff like this. Don’t be cute on your pricing page. Just have pricing and be normal.

Don’t be afraid to ask if your product sucks. If you get a conversation with somebody, unless they’re just a horrible person, they want you to succeed. They’ve taken that meeting because they want you to solve a pain for them, but you have to be honest with yourself and get feedback.

If they’re like, “This isn’t the right direction for us,” understand why. See if there’s something that you’re doing is better.

We dodged a big bullet by asking lots of questions and we were going to go down this path that I think we’d be dead if we went down, and a lot of it was because we kept asking like, “Why do you hate what we’re doing?” and they were honest about that.

I do this, you shouldn’t do it.

In the beginning, with technical debt, you’re going to have it and that’s part of…at an early stage, you should have technical debt. If you’re trying to over-engineer your tech stack in the beginning or you’re trying to do whatever is the hot new technology, you’re just optimizing for the wrong things.

In the beginning, revenues is greater than technical debt. As you start to scale, you do have to pay down that technical debt. That’s where we’re at now, but that’s something you do later.

If you’re in enterprise, especially you have to realize people that you’re selling to our people and they’re not at home talking synergy.

That’s not the way people talk. That’s just corporate nonsense. Talk to them like people and you’ll actually get out from the noise.

A lot of you submit your data to CB Insights. When you do it, please, if you’re six people, don’t say you’re world-leading. You’re not, right? Don’t say you’re best in class. Just say what you do and be normal. That would be really awesome.

Don’t chase startup fads, or badges, AI, big data. CBI, over time, we first were big data and VCs called us. They’re like, “Oh, you guys are big data. We’re interested in big data.” Predictive analytics became big, so then they’d call us like, “Oh, are you predictive analytics?” We’re like, “Yeah, I guess so.” Now, they’re calling us AI and we’re like, “Yeah, cool.” Don’t do that.

You have to train your biz dev and CS people. You can’t just say like, “Hey, listen to me do some calls and pick it up.” You can do that and you’ll have a couple of AEs who are really good who’ll get it. If you invest in training, they will all get really good.

If you’ve hired the right people, they want to get good, but they need to be shown how to be good. Investing in training as you scale will help you and if you don’t, it will hurt you. Don’t wait to hire customer success. Even if churn is low, just invest in that early.

The one hire messiah, it’s like, “Hey, this thing is broken in the organization, but if we get X, they’ll fix it.” Maybe they will, but if you bank on it, it’s a risky proposition. Don’t half-ass reference check. Somebody who’s been through the interview process ask hard questions.

We disqualify probably a third of people that have made it through the interview process at the reference check stage because we’re just not getting the feedback that we need at the reference check, at that part of the process.

Meet with VCs only when you’re ready to raise. Don’t price based on the competition. If you are indistinguishable from the competition, and price again is the vector you have to compete on, that’s a problem. Think about that.

Channel partnerships, we’ve had a bunch of people who are like, “Oh, we’ll distribute CBI and we’ll do all these things.” They’ve resulted in a grand total of $0. It’s hard to get somebody else motivated to sell for you. You got to rely on yourself.

I know there are people who’ve done channel partnerships very well. We look at Salesforce and Twilio and other folks. Especially in the beginning, it’s hard to do and it’s a very specific set of characteristics that probably enable you to do that.

When you’re talking to customers, you’re having a conversation. Don’t dominate that conversation. I’ve done this, where we’ll be on a 30-minute call and I’ve talked for 28 minutes, that’s pretty much a recipe for not getting that sale. You need to have whatever the right mix is, 50/50. I’d say if you can have two-thirds of the time the customer talking, you’re in a good place.

Early on, don’t try to delegate product management. This is what the founders and the early engineers need to do. As you get bigger, the product managers you can hire.

You got to ask for the sale. I’m not a salesperson by training. I’m a chemical engineer and a finance guy. Asking for the sale was a little uncomfortable, but nobody’s going to give you money unless you ask for it.-

People who are like, “Oh, I don’t have money, but I want a partner,” just run the hell away. Don’t fear nonscalable work. Elegant solutions are often not worth the time. We’re a New York City-based company and I run into a bunch of our Valley peers.

The valley guys love it, they want to use machine learning to get the data. Sometimes, like for us, you just have to get dirty and get in the PDFs and manually do the work. That’s the best way to do it versus looking for some elegant ML solution to everything.

Don’t focus on the competition, customer night and day. Jeff Bezos, if you read his stuff on why they only think about the customer, it’s phenomenal. It will change your world. Just read anything you can find that he writes about.

We spend so much time trying to get on the front page of Hacker News. I have no idea why we did this now. It is such a colossal waste of time.

The people who are there, unless you’re maybe selling developer tools, I’ll give you that one market. Unless you’re there, everything else is just vanity. It’s like, “Oh, we’re on Hacker News,” and then just the worst types of people sign up. It’s just horrible.

My view is that you have to focus your innovation efforts on your product. That’s the only thing to focus on. I see all these people doing all these cool things in HR.

There’s a little bit of science to HR, and people are like, “Oh, we’re super transparent,” and like, “You can bring your dog and we send your dog on vacation.” Just pay people well, give them time off, treat them with respect, and then innovate on your product. Don’t try to be like some innovation guru in HR, it’s just bizarre.

When you think about perks, think about if the market turns and the shit hits the fan and you have to cut costs, is that perk going to stay? The thing with perks is they become entitlements, and people begin to expect them.

When you pull back, then they’re not like, “Oh, yeah, it was a perk. Cool. I understand things are not going well.” What ends up happening is like, “Hey, I really like that green tea. Why isn’t that green tea available anymore?” You’re having a conversation about some stupid shit that you shouldn’t be having.

Hire salespeople only when you can sell it yourself. If you can’t sell the product yourself as a founder or early employee, it’s back to the one hire messiah idea.

Not all leads are created equal. This is obvious. In the beginning, especially, you’re so eager to get a sale. You’re like, “Hey, let’s make it work.” You’re desperate. You just have to double down on the best ones and just understand who’s not good.

Don’t try to please everybody, so you end up building a generic product. Pick your market again is really important.

This is my personal one. I don’t know. There’s a lot of personal brand nonsense. I think your employees see that when you’re positioning yourself to like, “Well, if things don’t go well, I’ve got a brand.” Smart people see through that as like, it’s nonsense.

Build the brand of the company, unless your personal brand is going to help you recruit people or get new customers. If it’s going to be additive to the business, then sure.

I tried to do this. I thought I knew what a salesperson acted like, like the guy who does all that shit, and that’s not me. It’s just the sales were horrible. Those demos were terrible.

Be yourself. At the same time, don’t ignore sales advice. There’s a lot of wisdom out there. There’s probably a lot that you’ve gleaned at this conference. Pay attention to that. There’s lots of conflicting advice, but don’t think you know it all. There’s definitely a lot of wisdom out there.

This is something we’re trying to do with our team, is talk less about having a demo and more about having a conversation with a client. This is back to the idea of engaging and having a dialogue with folks. Try not to be a tool with buttons and features, but something that you’re positioning yourself as more.

After you have that first conversation, this is when we are myopic as founders, if you’re a founder in the room, that people really care about your product. They have other things to do. You have to make sure you can make them care. It means adding value after that first conversation.

This is back to the VC thing. There’s this Maxim or they’re like, “Well, would you rather have the whole grape or the slice of the watermelon.” It’s like this, “You got to raise money, because if you want a slice of the watermelon, who doesn’t want a slice of watermelon?”

You have to focus on the narrative that works for you and sometimes the whole grape’s pretty good, and I’m torturing this analogy. The media VC survivorship bias is really excessive. Most of your exits are less than $200 million, so Google and Facebook are freaks.

This is exits, what they actually look like. The vast majority of exits are sub $200 million. Yes, go try to build $1 billion company, the math is such, this is the math, so pay attention to that.

Don’t always look for new channels. We did this in the beginning. We’re like, “Oh, let’s put our infographics up on Pinterest. That will be amazing.” Chief Innovation Officers and CIOs are not looking for infographics on Pinterest. It was just a waste of time. We realized what channels work for us and now we double down on those.

Pointlessly networking. If you’re sending emails, it’s like, “Hey, I wanted to pick your brain or I want to swap notes,” just stop doing that. It’s a colossal waste of their time and your time.

I have become this. Last year, I did 40 events. This year, I’m not going to do that. Conferences can be good but don’t ho it up too much.

Flood the zones. When you find something that works, milk the hell out of it. Basically, if you’ve seen our periodic tables, we found that worked. We will do a periodic table of anything now.

We know that people love that and we’ll just keep doing that. The newsletter works, that’s all we care about. We’re myopic in terms of what things we know work and we’re just going to keep doing those until maybe we use them up and they don’t work.

Oh, shit, I’m out of time.

Don’t deceive yourself on the size of your market. This is by Christoph Janz at Point Nine Capital is the best framework I’ve seen, “Five Ways to Build a $100 Million Business.”

You have to think about, if you’re selling a $100 a month product, is the market big enough that you’re going to be able to get to $100 million? Again, I’m presupposing that that’s your ambition, but if that is your ambition, this framework is really fantastic.

Don’t fetishize failure. Failure, it’s one of the things that’s remarkable about the States, and the Valley in particular, that you can fail and come back from it, but failure sucks.

Don’t be like, “Oh, I’ll just learn something and I’ll go on to my next thing.” You should just not want to fucking fail. That’s what you should be working on.

Don’t worry about your name and logo too much. This is what we started with. It cannot get worse. The CB in CB Insights is chubby brain actually, so yeah. You’re not going to get worse than that.

Don’t expect clients to tell you what product to build. It’s not their job. I’d say, generally, clients give you incremental feedback. They don’t give you the game-changer feedback, so just be cognizant of that. They’re not going to just take you to the Promised Land. You have to understand them really well.

Don’t do feature demos. Nobody really cares. They want to know what’s good for them. I didn’t know if that was my warning because I’m over. Sorry.

This is a great illustration. People want to feel that’s what customers buy. They don’t buy what to click around in your presentation. Don’t ever forget “what’s in it for me”. Nobody gives a shit about your product. They care about what it’s going to enable them to do.

This is my last one. Don’t blindly follow this advice. There’s no playbook. Anyone who tells you there is is a charlatan and/or stupid. Some of this might have been useful. I hope so. That’s it. If you want the presentation, email me or hit me up on Twitter. Do not email me. Thanks.

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