[[Business anecdotes (private)]] ## Book - Sons of Wichita (Koch) Learnings - One toxic shareholder is enough to wreck your life for 20+ years. - One of the brothers had an inferiority complex since childhood, which led him to start an all out war, in his own words, agains his brothers. This involved hostile takeover attempts, tens of millions in legal fees, intense use of private investigators, leakage of sensitive info to the press, forcing their own mum to testify in court right after a heart attack, and many other dirty tricks. He kept on suing them decades after he was bought out. A nightmare. - In the defense of the toxic brother, their dad seemed better at business than at instilling self confidence and self awareness in his children. In other words, your strategy to increase shareholder value should include good parenting. - Relationships matter - One of the two hostile takeovers from the toxic brother seems like it would have succeeded had a dad not pressured his son who inherited the control of 8% of Koch Industries stock into renouncing a $30M cash-out in 2025 dollars in the name of loyalty. - When the sons started in the family business, their dad paired them with an old exec who excelled at interpersonal relationships, to force them to grow soft skills as young engineers tend to underestimate their importance. - Giving teams full autonomy and P&L control seems to work. - Charles Koch calls it "Market-Based Management", a combo of flat hierarchy, full autonomy down to P&L control whenever possible, and focus on the value created instead of the amount of time worked. This allows for decentralized command, which is key when scaling a conglomerate that branched into hundreds of different activities. - For the record, Koch Industries outperformed the S&P 500 by ~26 to 1 since 1961. - One downside mentioned in the book is the development of "Koch Speak", whereby employees feel obliged to used market-based management lingo despite not getting nor caring out its concepts. - Not having people in Washington was a mistake. - Staunch libertarians, the Koch refused to build armies of Mouch style lobbyists in Washington, which cost them hundreds of millions of dollars in lawsuit punitive damage as well as in opportunity cost from not turning the laws in their favor. This forced them to accept the reality of living in statist society and invest accordingly, even if they pride themselves in always lobbying for free markets, even if it goes against their self interest. - Entering the political scene is exceedingly costly. - The brothers' feud forced them to go increasingly public about their donations and political opinions, which turned exceedingly costly in reputational damage, employer brand image, and life enshitification from having to drastically ramp up security and see GreenPeace airships plaster with your face and insults tour the sky. - Another example of this is Musk entering the political scene. Fun facts - Charles (CEO of Koch Industries) seems to be the single biggest libertarian donor of the last and current century. - The Koch brothers flooding right wing candidates with money forced Obama's presidential campaign team to focus on ruthless efficiency with hyper-tailored advertising, which won Obama the race. - At 50, one of the brothers was still a playboy hosting decadent orgies. Then a near death experience turned him into a generous philanthrope dad. ## SaaS general readings ### SaaStr - About SaaStr - Started by Jason Lemkin - Sold nanotech company for $50m just 13 months after founding - Sold EchoSign to Adobe and grew it to 100M ARR - VC at StormVentures, early funding - Launched the $70 million SaaStr Fund - $250k-$5m investments - Invested in RainforestQA, Algolia, Pipedrive - How to parse - Start with SaaStr University - Then, read the best-of - And finally, read about whichever topic is top of mind -- - **SaaStr University, to $1M ARR** - Lesson 1 - Get closer to clients - L4 - Waiting to hire a VP - Get physical to meet clients - Invest in keeping top logos - L5 - You need a VP who can own stuff - L6 - Implement Zero cash date - L7 - Track customer satisfaction. When aiming for the path of high ACV low customer count, aim to be on a texting basis with clients - L9 - Most marketers have never owned a number. So they suck. - L11 - Closing a VP Sales can take 20 months. Start early - L12 - Budget in a shit ton of money for a VP Sales. And clarify when to hire him/her - [https://www.saastr.com/category/best-of/](https://www.saastr.com/category/best-of/) - [https://www.saastr.com/popular/](https://www.saastr.com/popular/) - [https://www.saastr.com/academy/early/all/](https://www.saastr.com/academy/early/all/) - [https://www.saastr.com/knowing-and-sharing-your-zero-cash-date/](https://www.saastr.com/knowing-and-sharing-your-zero-cash-date/) - [How to gracefully miss a quarter](https://www.saastr.com/how-to-gracefully-miss-a-quarter/) - Have a quarter base plan (60% chance of hitting it) and a stretch plan. - Manage cash to the base plan and reforecast regularly. - Accept you’ll never make up for missed targets - [You need a sales team](https://www.saastr.com/turns-out-85-of-the-world-likes-contact-me-even-though-you-dont/) - SaaS founders are biased towards free trial models - 85% of people don’t want to think, they want your sales people to help them convince their manager. Having a sales force requires an increase in price, but customers don’t care - the funds don't come from their pocket but from the “budget” - [https://www.saastr.com/i-never-lost-a-customer-i-actually-visited/](https://www.saastr.com/i-never-lost-a-customer-i-actually-visited/) - [What to do if your business decelerates/](https://www.saastr.com/what-to-do-if-your-business-decelerates/) - Redefine your market - Look at outliers customers - [Incentivizing bad customers](https://www.saastr.com/money-bonuses-customers-that-waste-my-time-and-greed-you-get-what-you-pay-for/) - If a lot of customers behave badly, that your fault. Look at incentives and framing. - [What 2nd time CEOs do](https://www.saastr.com/what-the-second-time-saas-ceos-are-doing/) - Second timers know it might take 2+ years before seeing any traction - They hire more than the usual 1 customer success person for $1-2M ARR - They focus on higher ACV - [Hiring VP Sales](https://www.saastr.com/how-to-hire-a-great-vp-sales-the-full-video-and-transcript/) - VP Sales - CEO must act as VP Sales until ~$1M ARR - You have much more leverage to hire a good VP if you have 2 performing reps - Their no.1 duty will be to recruit a great team - VP shouldn’t have a personal quota for more than a year - 4 types of VPs - Evangelist - Repeatable - Go big - Dashboard - A great VP of Sales will fire at least a rep as you probably didn’t know what you were doing and hired at least a C player - Great VP of sales - Similar ACV experience - Ask who they will bring on board - 2+ people will follow them almost no question asked - [2x pricing](https://www.saastr.com/on-your-next-big-deal-double-your-pricing/) - Regularly 2X your price - [Discussion on switch from B2C to B2B](https://www.saastr.com/a-discussion-with-jon-bischke-of-entelo-on-successfully-switching-from-b2c-to-b2b-and-saas/) - The playbook in B2B is highly learnable. Here are a few of the things I’ve done: - **Read every post on [SaaStr](http://www.saastr.com/) and blogs like [David Skok’s](http://www.forentrepreneurs.com/), [Mark Suster’s](http://www.bothsidesofthetable.com/) and [Joel York’s](http://chaotic-flow.com/saas-metrics-joels-magic-number-for-saas-companies/).** - Listen to as much of the industry dialogue as possible. In our space we have excellent podcasts like [The Bill Kutik Radio Show](http://billkutik.appirio.com/) (which I was recently a featured guest on) and [HR Happy Hour](http://www.blogtalkradio.com/steve-boese). - Spend time with as many successful entrepreneurs and executives in B2B as possible. There are literally too many people to list who’ve helped me over the last few years. And I’m excited to “pay it forward” by helping up-and-coming SaaS entrepreneurs as I better understand the playbook - [Accretive revenue at 2m](https://www.saastr.com/at-about-2m-in-arr-every-great-hire-will-be-accretive-dont-wait/) - As soon as you hit 2M, any increase in 10% of any metric will payback the executive in max 4 months - When you hit 2M, allow people to hire whoever they want (only if zero cash date > +12 mths of cash) - [Investing in Algolia](https://www.saastr.com/eating-my-own-saastr-dogfood-why-i-invested-in-aloglia-search-as-a-service/) - A key investment criteria is that founders are committed to developing great sales and customer success teams. Even more important for technical founders. - [https://www.saastr.com/you-really-have-to-love-your-vps/](https://www.saastr.com/you-really-have-to-love-your-vps/) - [Boxworks interview/](https://www.saastr.com/building-the-enterprise-saas-startup-an-interview-with-boxworks-speaker-jason-lemkin/) - Founders are 10X better than VCs at everything, except, maybe, benchmarking companies - Great founders can forecast the future in their field (and know every single present datapoint) - [Sales comp](https://www.saastr.com/your-1-sales-rep-should-be-driving-an-m6-convertible-and-not-buying-a-panerai-watch/) - Top sales reps should make 2-3x more than the others - [https://www.saastr.com/the-greatest-sales-teams-just-kill-it-on-dec-31-when-everyone-else-has-gone-home/](https://www.saastr.com/the-greatest-sales-teams-just-kill-it-on-dec-31-when-everyone-else-has-gone-home/) - [When to add a second product](https://www.saastr.com/add-second-product/) - Wait until a few M in ARR, except if you have a strong reason like TAM being below $100M - [Pricing tips](https://www.saastr.com/3-simple-tips-for-pricing-saas-products-in-the-early-days/) - Anchor high and then give a discount in exchange for something else, such as a testimony - Pricing: linked to what KPI? Comparing you to other players? What are their pricing? - [10 tips I'd give myself](https://www.saastr.com/the-top-10-tips-id-give-to-myself-doing-it-over-again/) - Budget and extra 12 more months - Charge money from day 1 - Get mentors and pay them, even if they are already rich - [https://www.saastr.com/outbound-always-works/](https://www.saastr.com/outbound-always-works/) - [https://www.saastr.com/benchmarks-in-saas-for-seed-and-series-a-rounds/](https://www.saastr.com/benchmarks-in-saas-for-seed-and-series-a-rounds/) - [https://www.saastr.com/your-quickest-way-to-grow-faster-move-from-quarterly-to-monthly-quotas-today/](https://www.saastr.com/your-quickest-way-to-grow-faster-move-from-quarterly-to-monthly-quotas-today/) - Monthly quots (bi-weekly at the beginning?) - [2017 SaaS valuations](https://www.saastr.com/2017-private-saas-valuation-data-and-why-your-company-is-probably-not-worth-10x-revenue/) - Market prices at 5x revenue. Based on valuation of public companies - risk premium and growth rate. - [https://www.saastr.com/academy/?fwp_resource=blog-posts&fwp_company_stage=early-stage&fwp_topic=career-growth-advice](https://www.saastr.com/academy/?fwp_resource=blog-posts&fwp_company_stage=early-stage&fwp_topic=career-growth-advice) - [2 paths to $100M ARR](https://www.quora.com/How-big-should-the-addressable-market-be-to-go-into-vertical-SaaS-Is-it-a-good-idea-to-avoid-the-addressable-market-if-it-appears-small/answer/Jason-M.-Lemkin?share=e0124fe2) - 10^3 customers with 10^5 ACV - 10^5 customers with 10^3 ACV - [https://www.youtube.com/watch?time_continue=1&v=bN5Zstc_v4A](https://www.youtube.com/watch?time_continue=1&v=bN5Zstc_v4A) - Early Siebel, VP Tech @ SalesForce - Launches a CRM for - Get to a dozen great people ASAP and see afterwards - Raised 7M, burned 3M - Sacrifice topline revenue by - Execution is *everything* → spend 95% of your time executing. Take a break every 3weeks to meet different people in different verticals to challenge your thinking ### Resources - https://christophjanz.blogspot.com - http://tomtunguz.com - close.io - a16z - https://m.signalvnoise.com/ Basecamp (Jason Fried) ### Podcasts - SaaStr - Starting from nothing (ex: SFN 226) - https://techcrunch.com/2015/08/29/the-saas-success-database/ - https://medium.com/point-nine-news/vertical-saas-2017-table-stakes-2ceac8e91496#.bdn0ihvv2 - https://medium.com/point-nine-news/7-trends-that-will-shape-the-saas-industry-in-2016-3bf367d898cc#.phcnss1w3 - https://medium.com/point-nine-news/the-unbundling-of-traditional-saas-products-d7f4eee2c9e7#.dicuon4qc - https://developer.intuit.com/hub/blog/2015/04/14/why-the-small-business-market-is-the-next-big-thing-for-developers - https://blog.intercom.com/your-future-customers-are-using-another-product/ - http://saascribe.com/7-habits-of-successful-saas-startups/ - https://www.salesforce.com/assets/pdf/misc/WP_7Secrets_0408.pdf - https://www.saastr.com/the-best-of-saastr/ - https://www.saastr.com/if-you-have-10-unaffiliated-customers-in-saas-you-have-something/ - https://medium.com/point-nine-news/saas-three-checklists-to-chose-your-sales-model-17da9680df4b#.o0l53dz47 - https://blog.baremetrics.com/how-we-went-from-weeks-of-cash-left-in-the-bank-to-profitable-in-8-months-cfad6f2d6523#.hdo1dqdqq - https://medium.com/point-nine-news/5-ways-to-build-a-100-million-business-c5066181bf50 - https://financesonline.com/uploads/2016/12/saas2.jpg - https://medium.com/point-nine-news/self-service-transactional-or-enterprise-challenges-when-changing-your-saas-sales-model-dcf704608d0a - https://montclare.com/saas-250/ - https://seekingalpha.com/article/3967118-just-far-along-saas - https://www.slideshare.net/hiten1/the-rise-of-allinone-saas/22-Sign_up_by_email_and - http://www.insightsquared.com/saas-sales-resources/#five - https://saas.community/saas-stash/ - https://www.saastr.com/my-top-10-mistakes-as-a-successful-saas-entrepreneur/ - https://www.cbinsights.com/reports/saas-startup-mistakes.pdf - http://tomtunguz.com/five-characteristics-of-an-ideal-saas-company/ - https://www.saastr.com/if-youre-going-to-do-a-saas-start-up-you-have-to-give-it-24-months/ ## [**TalkDesk Story**](https://www.notion.so/TalkDesk-Story-SaaStr-youtube-e52d1bc14ca84b2583c2f57d813cd668) - **1m ARR with 6 people and 0 sales** **Trends** - Browser improvement - Moving from shitty Flash to WebRTC → enable chat from browsers - Increase in # and importance of calls **Early Growth** - 90% came from partnerships with SalesForce and ZenDesk - ZenDesk, $1B business at the time, had a voice product! But it was limited + **they sent leads that were too small for them** - Your get complex around 30-40-50 seats **Near Death Experience** - ZenDesk launched ZenDesk voice at the same conference as "TalkDesk, the ZenDesk for voice", was launched! 1h away! Thought he'd die. Now unicorn - Lemkin: Abode launched a competitor product, when he already reached 2m. Thought he'd die. Adobe acquired them. **Going Enterprise** - Partnerships - Partnerships : need to have common drinks, dinners, etc - Regret: going entreprise - Suuuuper complicated, took years longer than expected - Chose to drop SMB and focu solely on entreprise because raised only $15-20m, which wasn't enough to focus on two things at the same time - Going from closing in 3 calls to having 14 people chatting with all different stakeholders - Had to fire almost everyone! Given cultures are incredibly different **Raising** - Would have rather raised twice what he had: 15-20m. Dilution would be worth the reduction in stress. Without money, every failed shot kills your company. **Hiring order** - VP Sales - When you hire the wrong one, you litteraly loose a year - Brand fucking matters - Would had hired marketing muuuuch earlier ## ## Musk Algorithm Musk algorithm as shared by Isaacson, including its corollaries: 1. Question every requirement. Each should come with the name of the person who made it. You should never accept that a requirement came from a department, such as from "the legal department" or "the safety department "You need to know the name of the real person who made that requirement. Then you should question it, no matter how smart that person is. Requirements from smart people are the most dangerous, because people are less likely to question them. Always do so, even if the requirement came from me. Then make the requirements less dumb. 2. Delete any part or process you can. You may have to add them back later. In fact, if you do not end up adding back at least 10% of them, then you didn't delete enough. 3. Simplify and optimize. This should come after step two. A common mistake is to simplify and optimize a part or a process that should not exist. 4. Accelerate cycle time. Every process can be speeded up. But only do this after you have followed the first three steps. In the Tesla factory, I mistakenly spent a lot of time accelerating processes that I later realized should have been deleted. 5. Automate. That comes last. The big mistake in Nevada and at Fremont was that I began by trying to automate every step. We should have waited until all the requirements had been questioned, parts and processes deleted, and the bugs were shaken out. Here ends the algorithm and start its corollaries, which include: - All technical managers must have hands-on experience. For example, managers of software teams must spend at least 20% of their time coding. Solar roof managers must spend time on the roofs doing installations. Otherwise, they are like a cavalry leader who can't ride a horse or a general who can't use a sword. - Comradery is dangerous. It makes it hard for people to challenge each other's work. There is a tendency to not want to throw a colleague under the bus. That needs to be avoided. - It's OK to be wrong. Just don't be confident and wrong. - Never ask your troops to do something you're not willing to do. - Whenever there are problems to solve, don't just meet with your managers. Do a skip level, where you meet with the level right below your managers. - When hiring, look for people with the right attitude. Skills can be taught. Attitude changes require a brain transplant. - A maniacal sense of urgency is our operating principle. - The only rules are the ones dictated by the laws of physics. Everything else is a recommendation. ## How to Start a Startup PG https://paulgraham.com/start.html, the summary: You need three things to build a successful startup: 1. Good people 2. Make something customers want 3. Spend as little money as possible The idea: - You don't need a brilliant idea to start a startup - Look at something people are trying to do, and figure out how to do it in a way that doesn't suck - Find a middle-sized non-technology company and spend a couple weeks just watching what they do with computers - Ideas are just starting points; execution matters more People: - Look for "animals" - obsessive people, take their work a little too seriously - Call the person's image to mind and imagine the sentence "so-and-so is an animal." If you laugh, they're not. - Ideal number of founders: 2-4 - One person would find the moral weight of starting a company hard to bear - Don't want so many founders that the company starts to look like a group photo - You have to resolve disputes immediately or perish - If you can't understand users, you should either learn how or find a co-founder who can. What customers want: - Focus on creating something customers actually want - In nearly every failed startup, the real problem was that customers didn't want the product - Only way to make something customers want is to get a prototype in front of them and refine it based on their reactions. - Start with smaller companies as customers, it's easier to sell to them Not spending money: - Cultivate a culture of frugality - Avoid unnecessary hiring and expensive offices. Choose apartments over offices initially. - The slower you burn through your funding, the more time you have to learn Hiring: - Hire only when absolutely necessary - Hiring a lot of people slows you down. Small teams move faster. - The most important way to not spend money is by not hiring people Who should start a startup: - Good hackers, typically between 23 and 38 years old - People willing to compress their working life into a short, intense period ## Miscellanious **[PMF - Superhuman](https://firstround.com/review/how-superhuman-built-an-engine-to-find-product-market-fit/) article** **[9 Steps by David Skok](https://www.forentrepreneurs.com/9-steps-podcast/)** **How Retool got to ~$90M ARR in 5 years** - [link](https://www.reddit.com/r/ycombinator/comments/1busc4d/i_studied_how_retool_yc_w17_went_from_zero_to_a/) 1. Be default alive 2. Outbound sales led motion at the start is perfect 3. You cant do PLG before you have PMF 4. **Language market fit is as important as PMF** 5. Stay lean as much as you can 6. Price high and negotiate at the middle 7. Optimize for customer support and retention at the start 8. Cant go wrong with content / brand marketing 9. Community led growth creates a moat **Chat with one of Google's first employees** - Everything was about banners, no one wanted to pay for any other ad format - Sold text banners for 4y before they got the ad auction system to work - Adsense (competing with own AdWords) PMF: got 1 application a second on launch day! [McDonald milkshakes](https://www.youtube.com/watch?v=Q63PZR7mG70) - **Job to be done** - McDonalds tries to improve their milkshakes. They invite people and ask them how to improve milkshakes. No impact on sales - He sends a student who spends 17h at McDonald and jots down careful notes. Only males, come early in the morning, alone, drive. - The next day they ask people who get milkshakes why. They drive alone with an empty hand, need something to suck at to not fall asleep. - Conclusion: make it thicker so that it takes longer to drink, also add fruits to make it unpredictable, and make it a separate line so people don’t have to wait. - Competitors: not milkshakes but bananas, donuts, bars, any food you can eat while driving - \=> sales multiplied by 4 **Segway - choose your competition wisely** - Segway pensait être un substitut de la voiture (et donc en vendre 10k / semaine) mais s’est révélé être un substitut de la marche à pieds (et donc faillite car ventes de 24k en 5 ans) [**Atlassian**](https://usefyi.com/atlassian-history/) - Overall strat - Built best-in-class project management tool for engineering teams - Strategically expanded their product offerings through acquisitions to broaden their customer base to teams around the dev teams - Doubled down on freemium distribution and horizontal use-cases in their recent acquisitions to make the top of their funnel even wider across teams - History - Australians, 2002 => no funding. Can’t afford sales teams => freemium - Launched Jira. Super difficult but thorough and customisable - 2y later, surf the wiki wave to launch Confluence - Seamless transitions between the two - M&A - instead of building new tools they acquired and integrated - Doesn’t interrupt service, just move all the product info and doc to the Atlassian website - 2010 - 50M ARR (8 y.o.) - Raised 60M to fuel M&A - 2013 - 100+M ARR - \=> SEO to Jira+Confluence+Bitbucke+etc ecosystem => spend 20% on CAC instead of 50 to 100% industry average - Tools like Jira are increasing in complexity => too complex for small teams => instead of launching lightweight versions, they acquire lightweight products (Trello) [**Trello mistakes**](https://usefyi.com/trello-history/) - Failed to become a Billion dollar business - Didn’t monetize fast enough. - No use paying for Trello Gold - Not sticky enough for SMB - Build better integrations → central system - Didn’t build for enterprise [**Airtable Risky Move of Outsourcing API Integration to Zapier**](https://usefyi.com/airtable-history/) - Key feature: API integrations - Risky move: unrolling automation with Zapier => dependent on Zapier, but thus saved dev time and millions in salaries **Brian Chesky on loneliness** - [link](https://youtu.be/ia6Di_ytiSE?si=5EJ1FVPvm3V5i8kw&t=1080) - When you're known to work hard, people are afraid to bother you. They think that if you want to see them, you'll reach out to them. But when you work hard, you're endlessly busy answering incoming inbound from the business. - If you're lonely, reach out