In March, YPO and Techstars launched a partnership to support high-growth entrepreneurship and innovation. As a kickoff to that, Techstars co-sponsored YPO Innovation Week.
I did a one hour interview with Kate Rogers from CNBC last Friday. It was a fun interview for me and I felt like we covered a lot of good stuff.
Steve Case kicked off YPO Innovation Week with an interview, also with Kate Rogers. I listened to it in advance of my interview and thought it was extremely well done.
Amazingly, I still haven’t conditioned myself to turn my phone horizontally when I take a video. I feel old.
I’m sitting in my condo downtown, drinking coffee, listening to Soundgarden, and contemplating the dissonance of so many things. I just got off a Facetime saying good morning to Amy and talking to Brooks and Cooper.
Both Chris Cornell and Roger Ailes died in the past 24 hours and I saw both alerts within 15 minutes of each other this morning.
I love Soundgarden, but I try not to listen to the lyrics too carefully. Unlike Pink Floyd, where I’ve got most of the albums memorized, I hang on to individual riffs. For me, Like Suicide is a love song, rather than an appeal for help, but it rattles me this morning as the snow comes down. I replace it in my head with all that you touch, all that you taste, all that you feel, all that you love, all that you hate, all you distrust, all you save, all that you give, all that you deal, all that you buy, beg, borrow or steal …
Things are amazing. Things are awful.
Life is complex. Dissonance abounds. And the Dude abides.
Strikes and gutters. Ups and downs.
There’s a tenuous balance between telling someone what to do and giving advice. It’s especially difficult as a mentor, especially if you’ve previously been a CEO and are used to being “the decider.”
As a mentor, you aren’t the decider. The CEO you are mentoring is the decider.
This dynamic is also true for many board / CEO relationships, where the board wants the CEO to make the ultimate decision. As I’ve often said, my goal as a VC is only to make one decision about a company – whether or not I support the CEO. If I do, I work for the CEO. If I don’t, it’s my job to do something about the CEO.
While this is nice in theory, it’s difficult in practice. One of my strengths is that I tell a lot of stories. One of my weaknesses is that, according to my wife Amy, my stories go on 20% too long (she is correct.) Here’s an example.
I’m at a board meeting. The CEO, which I love working with, is trying to figure out what to do about a particularly thorny issue. I tell a story. He reacts with a little more data. I tell another story. Another board member asks a question. I tell another story. This one goes on a bit too long.
The CEO looks directly at me and says, very firmly, “Will you just tell me the fucking answer for once?”
I tell him the answer.
He was looking for specific, actionable advice. I was telling him stories. If he spent enough time processing the stories, he might be able to come up with the right answer. Or, since they are stories, he might draw the wrong inference and decide to do something different from where the stories were leading him. This CEO was aware of that and, in real time was having trouble processing the point of the stories in his context.
Fortunately, this CEO was self-aware enough to ask for specific, actionable advice in a moment where he needed it.
I’ve written this post in the style Geraldine used in her book. As you read this, assume that I’ve failed miserably at it and Geraldine is 1000x funnier and more clever than I am.
I had a weekend of books. Amy’s cold drifted over into my part of the world so I slept a lot, ran a little to try to clear out the goo in my head, and read until I feel asleep again. And I ate nachos, several times, which I never do at home.
Last week I ordered 51 hardcover copies of Geraldine DeRuiter‘s new book, All Over the Place: Adventures in Travel, True Love, and Petty Theft, from Amazon. I did it to celebrate that my 51st year on this planet coincided with the publication of Geraldine’s first book. I brought two of the books home – one for me, and one for Amy. I think I’ll make a chair out of the other 49.
Geraldine writes a popular travel blog called The Everywhereist. Amy has characterized it as “pee in your pants funny” which I’ve never actually experienced, but I think I understand. Geraldine’s book doesn’t disappoint, as I wandered to the bathroom several times while consuming the 274 pages on Saturday. I laughed out loud a lot, but I also drank two bottles of Pellegrino in an attempt to stay hydrated.
All Over the Place is a memoir masquerading as a travel book. Geraldine starts off strong with a disclaimer which points you at what the journey of this book will actually be.
“So, if there is any advice I could dispense, it would be this: it’s absolutely incredible, the things you can learn from not having a clue about where you’re going – lessons that emerge after making a wrong turn, or saying the wrong thing, or even after accidentally doing something right. And in my case, this was all undertaken not in the company of a new love, but one that has enough miles on it to circle the earth three, maybe four times, is now sufficiently jet lagged, and lost its pants somewhere over Greenland.”
If you know Geraldine’s husband Rand Fishkin, you may recognize him as the not a new love. I learned a lot about Geraldine and Rand in this book, including their experience with poop and toilets, but is gender reversed from the experiences Amy and I have had (hint: Rand and Amy are the heroes of those particular stories.)
The chapter titles give you a feel for what you are in for:
I think y’all know I’m a big fan of chocolate gelato. Which is what I went out and got after I had an extremely uncomfortable phone call with Geraldine after realizing that she’d found out that FG Press wasn’t going to publish her book by noticing that we’d taken her off the FG Press website as a future author. Of course, this was totally my fault, as I’d told the FG Press gang a month or so earlier that I’d call Geraldine to tell her we were shutting FG Press down and, as a result, wouldn’t be publishing her, or any other, books. I apologized 49 times, went out and found a chair to sit in, and had a chocolate gelato. I think she eventually accepted my apology, kept working on her book, and found a serious publisher (PublicAffairs/Hachette) who did an awesome job with All Over the Place.
I’m extremely proud Geraldine. Her first book is extremely true to her writing, her soul, and her soulmate. I learned a lot while reading it, and not just about Geraldine and Rand, but about life.
There’s a long-standing cliche concerning SaaS companies that once you get to $10m in ARR you are unkillable. As Jason Lemkin says in his post from early 2013:
Inevitability in SaaS comes around $10m in ARR, plus or minus. Once you hit this point, you have a brand, you have a fully baked team, you have a robust product, and you have a self-generating stream of new leads and new business. Will you get from $10m ARR to $100M ARR? I don’t know. Is an IPO in your future? Not sure. But once you hit $10m in ARR or so, you cannot be killed by anything. That’s the power of compounding SaaS revenue. And actually, as we’ll get to, $10m in ARR — this is when it really gets fun.
I’ve struggled with this concept and how to translate it into action in my world. While the phrase “you cannot be killed by anything” is evocative, your actual value can be killed, as there are many problems getting from this stage (whatever we are going to call it) to the next level.
I don’t like to think in ARR when I’m working with SaaS companies. I’ve always found MRR easier to process, especially when thinking about derivative measures, like growth rate and churn, that are so important to pay attention to on a monthly basis. And, instead of ARR thresholds ($10m ARR, $25m ARR, $50m ARR, $100m ARR), I like to use MRR thresholds, which I talked about extensively in a post from 2015 titled The Illusion of Product/Market Fit for SaaS Companies. The MRR thresholds I focus on are $1, $10k, $100k, $500k, and $1m. And $1m MRR is the particular moment that is analogous to the $10m ARR inevitability.
If you can blast through the $500k MRR mark and march to $1m MRR, you’ve found product/market fit. You are now at the magical point some people call “Initial Scale.” Cool – you’ve got a business.
If you believe the cliche, you are now unkillable. I’d suggest that instead, you are now in an entirely different zone as a company, where you will be evaluated on a different set of characteristics and will face different struggles. If you want a hint, read Fred Wilson’s recent post titled Team and Strategy.
If you are a CEO, the real work of scaling a company begins about now. The question you’ll be facing will have a lot less to do with product (and the product strategy), and a lot more to do with – well – strategy!
You can start exploring questions like: Are you the market leader? Who are your competitors? What are you doing to build a moat around your business? If this sounds like Competitive Strategy, instead of Strategy, it is, but it’s a critical starting point. If you don’t want to read Porter’s classic book (or read it again if you read it a long time ago), try a Wikipedia shortcut on Competitive Advantage.
You can shift to more specific questions around a category like sales such as: Are you making progress on lowering churn? Have you moved from monthly to annual deals? Are you trying to get three-year deals done? What is the composition and health of your channel?
These are all things that you likely ignored, or didn’t even think of when you were in the $100k to $500k MRR zone. Well – maybe you thought about churn, especially if it spiked up to a point as to undermine your growth rate and cause another cliche – the leaky bucket – to appear in all of your board discussions. But did you shift from monthly to annual deals so that you could lower your long-term capital needs significantly? If you did – great job!
We have many companies in our portfolio in the $1m MRR to $2m MRR zone. It’s fun, but challenging in a different way than the up to $1m MRR zone is. And, once you blast through $2m MRR, all the things you focus on as a CEO change again.