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Jason Lemkin: PluralSight S*** the Bed & The Next IPO Candidates | E1160

Jason Lemkin is one of the OG SaaS investors with all of his first five investments turning into unicorns with Pipedrive, Algolia, Talkdesk, Salesloft and RevenueCat all in his portfolio. SaaStr is the largest global community in SaaS and he has taught a generation the fundamentals of SaaS on saastr.com. ----------------------------------------------- In Our First Ever Episode of This Week in SaaS: 1. PluralSight Goes to Zero: WTF happened to PluralSight? How did it go from $3.5BN to $0? Will this have a wider impact on the willingness of PE to buy tech companies? Who are the next contenders to go from hero to zero? Zendesk? Anaplan? Will this generation of PE funds be let off by their LPs for a poor vintage? 2. Salesforce’s Worst Stock Market Drop Since 2004 + Mongo Takes a 23% Hit: Why did Salesforce lose $50BN of market cap in a single day? Is the same true for MongoDB taking a 23% hit in one day? What does it mean when the new normal is these once hyper-growth companies now growing only 6% per annum? 3. The Settlers into Slow Growth: Why does Jason believe that Dropbox and Box have both settled into a world of slow growth? What happens to Twilio from here in a world post Jeff Lawson? What happens to Retool from this point on? Would Jason be a buyer of Notion at $10BN? 4. Venture Capital is Broken: Why does Jason believe that we need to see a relation of public multiples for the math in venture capital to work again? Why does Jason believe that the way we mark portfolios with TVPI leads to corrupt and bad behaviour? How does Jason think we will solve the problem of liquidity with IPOs being shut, M&A being out of the window and now PE being a doubt as the source of buyers? ----------------------------------------------- Subscribe on Spotify: https://open.spotify.com/show/3j2KMcZTtgTNBKwtZBMHvl?si=85bc9196860e4466 Subscribe on Apple Podcasts: https://podcasts.apple.com/us/podcast/the-twenty-minute-vc-20vc-venture-capital-startup/id958230465 Follow Harry Stebbings on Twitter: https://twitter.com/HarryStebbings Follow Jason Lemkin on Twitter: https://twitter.com/jasonlk Follow 20VC on Instagram: https://www.instagram.com/20vchq Follow 20VC on TikTok: https://www.tiktok.com/@20vc_tok Visit our Website: https://www.20vc.com Subscribe to our Newsletter: https://www.thetwentyminutevc.com/contact ----------------------------------------------- #20vc #harrystebbings #jasonlemkin #saastr #saas #founder #ceo #venturecapital #startup #salesforce #pluralsight #mongodb #dropbox #twilio #notion

Jason LemkinguestHarry Stebbingshost
Jun 3, 20241h 20mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 1:02

    Launching “This Week in SaaS” and the week’s big shocks

    1. JL

      Salesforce lost $50 billion in market cap. The issue is that Salesforce said, "We have fallen to single digit growth and we're not coming back." (guitar music plays) Ready to go?

    2. HS

      Jason, I am so excited for this, dude. First, this is the first one we've ever done in person.

    3. JL

      I- I am so excited. Uh, it- it is great. The studio's great. Um, this is better. I'm- I'm just so proud of the team, everything at 20VC. It's great. So it's great to be here.

    4. HS

      Dude, it is so lovely to make it happen in person.

    5. JL

      Yes.

    6. HS

      Now, this is, like, a new show in the way that we're calling it This Week in SaaS. I want to do a-

    7. JL

      Yes. You're gonna do it 52 weeks for this?

    8. HS

      Oh, we're gonna do 52 weeks, and you are too.

    9. JL

      Okay, very good.

    10. HS

      Yeah. No, you didn't... You didn't get the memo? (laughs)

    11. JL

      (laughs) I did not. I- the- the Google Doc share did not work properly, but okay.

    12. HS

      Oh, right. Okay, well, so basically it's like This Week in SaaS.

    13. JL

      Yeah.

    14. HS

      We go through the biggest stories from the prior week in SaaS-

    15. JL

      Okay.

    16. HS

      ... and unpack them. Okay?

    17. JL

      All right. You picked a heck of a week.

    18. HS

      I picked one hell of a week.

    19. JL

      (laughs)

    20. HS

      And so we're gonna start at, like, all positivity in mind.

    21. JL

      Go ahead.

  2. 1:02 – 4:57

    Pluralsight written down to zero: how a $3.5B PE buyout breaks

    1. HS

      Pluralsight, right?

    2. JL

      Pluralsight.

    3. HS

      Yeah. Uh, so-

    4. JL

      Okay. (laughs)

    5. HS

      So the Pluralsight news was that Vista wrote down their three and a half billion dollar buyout of Pluralsight last week to zero.

    6. JL

      Crazy. Crazy.

    7. HS

      Crazy.

    8. JL

      Yeah.

    9. HS

      Can you unpack just what actually happened, for those that didn't hear about it?

    10. JL

      I mean, they- they bought Pluralsight for, you know, three and a half billion, and they couldn't service the debt. They raised one point-... They used 1.5 billion of debt, which is the PE playbook, right? And I assume, I assume they had to refinance it, right? So let's... They said, the press said that Pluralsight had about almost 30% operating margins now. So let's say they're doing 300 million in ARR.

    11. HS

      Yeah.

    12. JL

      So they're generating 100 million of free cash. Maybe let's handicap it to 80. But the debt service on a billion and a half was too much, right? The debt service. So they walked away. The story seems odd, and I also read that they put some of their IP in another, second company, so there may be some other odd things going. But literally, to mark down three and a half billion out of, what, a $20 billion fund probably, something like that, right? That's- that's- that's devastating. More- more worrisome is, you had Mark Suster on the show recently, right?

    13. HS

      Mm-hmm.

    14. JL

      And he was talking about how PE is gonna be the big savior.

    15. HS

      Mm-hmm.

    16. JL

      'Cause they're gonna come in... This is what we've seen in SaaS, in cloud the last couple years. PE bought a lot of things that couldn't quite IPO, right, that couldn't quite get there. We ta-... You and I talked about some exits I had. I had a bunch of exits to Vista and others, and this is-

    17. HS

      I think your two biggest, actually. Yeah.

    18. JL

      Yeah, and- and it- it for v-... And founders and investors, this reduced a lot of stress. It's just been a relief. But if this is falling apart, uh, it's tough. It's harder for founders. If you wanna talk about my theme for This Week in SaaS, I- there are... Actually, parts of SaaS are really good. B2... What I call B2B2C is good. B2B2B is bad, but it's harder for founders.

    19. HS

      Okay, so B2B2C is good. What is that? Just so we have an example.

    20. JL

      Canva.

    21. HS

      Okay.

    22. JL

      Uh, or broadly, B2B2B is selling B2B software to tech. That got cratered. That's Salesforce, that's Mongo, that's all these f-... That's UiPath. That was the hottest thing in 2021. That's how we all had these raised big funds in exit, and I- I think it's an overreaction, but everyone in tech is cut- still cutting. It's 2024. They're still cutting. Benioff was on his earnings call the other day saying they're still cutting. People are still cutting back their tech spend in tech.

    23. HS

      Is this not just, like, a reflection of where we are in the adoption curve of newer PLG models, though? When you look at, like, Canva, which is-

    24. JL

      Right.

    25. HS

      ... like, absolutely rocketing in the consumer subscription space with their i- idea, thesis, that that will then lead to people bringing it into the enterprises they work in, and then they adopt from the enterprise as well. Are we not just early on that adoption cycle for Canva, for some of these players, and we will then-

    26. JL

      I don't think it's PLG. Uh, I think... You know, you had Aaron Levie here the other day too, right?

    27. HS

      Yeah.

    28. JL

      From Box. That, you know... He said something a couple years ago. He was like, "PLG is just what, like, we used to do, we d-... Just with a new label." PLG is just freemium with better analytics. We all... We've been doing freemium since the early days of the internet, right? Uh, a lot of us started... I started freemium. Box started freemium. Lot of the o- OG folks started freemium, right? Even Salesforce started very SMB, almost, almost freemium at the edge. So I don't think that's new. PLG is just a new way to describe more sophisticated motions, but this is not new in software. We have been trying software on the internet since WebEx, since the early days. So I think Canva more is a reflection of two things. One, the US economy and prob-... And most of the global economy remains strong. Unemployment's almost nothing, right?

    29. HS

      Mm-hmm.

    30. JL

      And so Canva is selling to normal consumers and small businesses, and they're growing 40% at 2.3 billion in revenue.

  3. 4:57 – 6:20

    Is PE still the “savior” for SaaS exits after Pluralsight?

    1. HS

      I do just wanna go back to the Pluralsight story 'cause-

    2. JL

      Yes.

    3. HS

      ... I just want an understanding of Mark Suster, you said about our show. He said that actually PE would be the primary buyers-

    4. JL

      Yes.

    5. HS

      ... for the next generation of software companies. With news like this, does that make it more difficult? Will we see less? Do you think he is wrong with news like this coming out?

    6. JL

      I hope he's right. I thought he was right. (laughs)

    7. HS

      (laughs)

    8. JL

      I- I am... Listen, h-... L- losing three and a half billion, you can only do one of those every four or five years, right? Listen, I... You- you've had PE guests. You can do more of them. It's interesting. I think it's int-... very interesting for SaaS. But the loss ratio can't be very high. Right? It c-... You can maybe- maybe some of these deals, you- you- traditionally-

    9. HS

      They can't be high at all. I interviewed them. They say, I mean, barely up.

    10. JL

      Yeah. And- and the real goal... Actually, the real goal of PE is if you use debt correctly, even when you lose, you win.... because you have, you've taken so much out, right? Or you've put so little equity. And if you can put in 10, 20% equity and leverage it up, like you win... Even if you lose, you win. As long as you have an exit, you win, right? If folks are gonna be writing off billions, because there's so many of these. There's Avalaras, there's Pluralsights, there's, there's, there's an infinite amount-

    11. HS

      Uh, we mentioned, we mentioned Zendesk, you mentioned Anaplan-

    12. JL

      Zendesk for 10 billion.

    13. HS

      Yeah, Anaplan for-

    14. JL

      What if it, what if t- Zendesk was 10 billion, Anaplan was close to 10 billion, right?

    15. HS

      Yeah.

    16. JL

      What if that debt can't be serviced? Then we're writing off 20 billion? Like, this is not a trillion-dollar industry, right? I don't know the average size of... You had, you had, uh, founder of Thoma

  4. 6:20 – 7:43

    B2B2C vs B2B2B: why selling into tech is uniquely brutal right now

    1. JL

      Bravo, who was great, that w- that was a good one, right?

    2. HS

      Yeah.

    3. JL

      But even that's like a $20 billion fund, isn't it? The last Vista one was 20 billion.

    4. HS

      I think theirs was a $30 billion fund.

    5. JL

      30 billion.

    6. HS

      That- that's the lot of the fund.

    7. JL

      Yeah. So it's just... Maybe you do one of these on a blue, on a blue moon. But if, if a lot of these big deals, which seemed like you couldn't lose, right? You buy Zendesk for 10 billion, you invest a little, you take some pressure off, and then you take it public four years later. That was, that was gold. That was gold.

    8. HS

      Okay, so we have this kind of, um, litany of companies that's to come in this field, potentially.

    9. JL

      Yeah.

    10. HS

      Will we see LPs shifting allocations away from PE towards publics and more liquid assets, towards venture? Or will they continue the same and just say, "It's fine, you can have your shitty funds. It was a tough vintage."

    11. JL

      You would know better than me, but I've... The recent conversations I've had with my LPs is I do think there remains... If you're, if you're still investing, if you're still committing capital to managers, there's still optimism.

    12. HS

      Hmm.

    13. JL

      There still is optimism in these asset classes, and there is tolerance of a bad fund or two. Whether there should be or shouldn't, I'd be curious what you have to say, but I, I did about three LP calls. And again, my universe is small. I didn't hear... The only fear I heard was crazy AI deals.

    14. HS

      Hmm.

    15. JL

      I didn't hear any, any other, any other fear, right? The best folks have made 20% IRRs from these alternative asset classes, and that's the goal. How else are you gonna make it?

    16. HS

      Can I ask you-

    17. JL

      How else are you gonna make it?

  5. 7:43 – 11:13

    AI spending is substitution, not net-new: the budget reality founders face

    1. HS

      Just on that. I know it's, it's a tough one, but what is a crazy AI deal versus a not-crazy AI deal? 'Cause I, I see some of them too, and I go, "God." But then I look at the people involved, and I look at, you know, the quality of those investors, and I'm like, "Maybe I'm wrong." I look at Thrives and Sequoias and DSTs.

    2. JL

      Or conver- conservative folks like Bessemer, right?

    3. HS

      Conservative folks like Bessemer potentially doing Perplexity, which is really f-

    4. JL

      At 3 billion, right?

    5. HS

      Yeah. Bessemer are good.

    6. JL

      Good, but conservative.

    7. HS

      Yeah.

    8. JL

      In a good way, but conservative, right? So they've got to believe, they've got to have high confidence they can do the three to five X in that.

    9. HS

      Yeah.

    10. JL

      Including dilution, and, and a genuine belief of 10 X, right? So you've got to believe that Perplexity is gonna be a, $100-billion company. You've got to believe that there is room for what? Ten $100-billion companies coming out of this?

    11. HS

      Yeah.

    12. JL

      Um, you know, the bull... I guess, listen, we're still, we're all learning, right? If OpenAI literally essentially in three years went to over two billion in ARR, and you, you're, you have the bull case and you keep tracing that out, uh, maybe there is room for ten $100-billion outcomes, right? It's crazy, but AI is, the amount of spend is huge. Can we, if we maintain this spend... Just look at NVIDIA, right? Just look at... And so-

    13. HS

      But we say-

    14. JL

      ... if we maintain the spend.

    15. HS

      We say the spend is huge and it's getting bigger and bigger. Is the spend being created net new or is it being taken from elsewhere?

    16. JL

      It is all being taken. There is no net new. There is no net new. Gartner just up- did a report, uh, the other day and they, they slightly upgraded actually the amount of spend in SaaS this year to 20% growth this year. 20% growth. Pretty big, right?

    17. HS

      Yeah.

    18. JL

      And they said GenAI, AI is fueling it, but it's substitution. It's substitution. I literally was listening to a gong call the other day from a portfolio company.

    19. HS

      Hmm.

    20. JL

      From, uh, a large public company, but that's struggling a little bit. In, in their category, they were gonna churn 12 apps this year and buy one AI app with some of the budget. Kill 12, buy one. That's a substitution budget, right?

    21. HS

      That is.

    22. JL

      Um, and so, I think it is con- confusing. It's confusing, right? And I think for classic B2B SaaS it's stressful. Like we, we, for the last, you know, I would say th- until 18 months ago, we never fully had to figure out where this budget was coming from because SaaS kept growing 20% a year like clockwork. And it went into the same stuff. It went into ERP (laughs) and CRM and the same tools, and we kept buying more and more and our stacks got bigger and bigger, and arguably bloated and bloater. Um, now every founder needs to actually for real know where budget's coming from. You've got to know, right? And I, and I... It's sad when I talk to some founders or even listen to some portfolio companies where very happy customers are churning, to create AI budget, to free up AI budget.

    23. HS

      If you actually ad-

    24. JL

      Happy customers.

    25. HS

      If you advise me as a founder that I'm in your portfolio-

    26. JL

      Yeah.

    27. HS

      ... "Okay, I have to know where our budget's coming from." Do I say to my champion, "Jason, just out of interest, where am I coming from in your budget line?"

    28. JL

      All the best salespeople ask that question. On a first discovery call, Harry, when I'm meeting an enterprise customer. "So tell me, is, is this purchase budgeted for this year? Is it budgeted?" First time you work with... First time I heard this from a sales rep, I kind of squirmed. I'm like, "That's, that's, that's a little, that's a little salesy, isn't it?" (laughs)

    29. HS

      (laughs) It's like asking .........................

    30. JL

      But an enterprise buyer doesn't mind that's been buying apps for decades, because they just want to frame the conversation. "No, Harry, it's not budgeted. I'm hoping to get a little extra budget or some discretionary, but it's not budgeted." Or, "Yes, Harry, this is a multi-year project we're doing. It is budgeted. Um, I'm not gonna tell you how much, but it is budgeted." It's a f- it's a fair game question. It's a fair game question.

  6. 11:13 – 14:23

    “Play the game on the field”: investing conservatism vs AI-era pressure

    1. HS

      Do you worry about not playing the game on the field? And do you, do you think it's important to play the game on the field? Bill Gurley said, you know, when it was, um, kind of crazy 21 times, "You gotta play the game on the field. You gotta play the game on the field."

    2. JL

      Yes.

    3. HS

      You are not really investing heavily in AI like every other fund or the majority of other funds.

    4. JL

      Yes.

    5. HS

      And you invest slowly. Do you worry about not playing the game on the field?

    6. JL

      Yeah, I think my strategy is wrong. Uh, so I've never lost money, ever. Anything, ever. I've always, every fund, every startup, everything, always made, always made money. Always made decent, pretty decent returns, right? And so, there is some conservatism in that. And when I started in venture, I think it...... serve well-

    7. HS

      Do you think that was good for you?

    8. JL

      What's that?

    9. HS

      Do you think that was good for you? And I don't mean that badly. But I've lost money. I have actually lost money, written off, and actually it was the time of deepest self-reflection-

    10. JL

      Yes.

    11. HS

      ... and learning.

    12. JL

      Do I think... Well, listen, I've, I've had inve- I've had... This'll be the first year I've ever had any investments that I had to write off, was this year. But the funds will still do fine, right? They'll still do fine. I do think it's bad. I think that I took LPs' money too seriously. I certainly took it way too seriously when I started investing, when I worked at someone else's fund. I shouldn't have given a rat's ass about whether I lost money or made money. Um, and I think I've cared too much. I've treated-

    13. HS

      Why? 'Cause the only thing that matters then is you're building your track for something else.

    14. JL

      Whatever, yeah. Just roll the dice. If I win, I win. If I lose, I don't tell anybody about it.

    15. HS

      (laughs)

    16. JL

      It's not, it's not your own fund (laughs) . You can only win if it's not your own fund. You can only wi-... I took every deal. My first deal f- was 800K, my first check. I sweated bullets. I did 10,000 reference calls. I did everything. I, I, uh, it took weeks to do all the due diligence. And, uh, it was, uh, it wa- I, there was no need to do that. It wasn't, wasn't my money. And i- th- that was Pipedrive. It did well. It sold for a billion and a half, but the first check was tiny. It was 800K. Like I... There are advantages to doing that, right? In f- s- and the biggest advantage is you don't have a lot of stress, right? You don't have a lot of stress. Like, you don't have a, like, you're-gonna-lose-your-shirt kind of stress. But no, I do think you should take your LPs' money less seriously than I do. I genuinely think it's b- a bad thing. Just like for... When you raise money from VCs, the more you raise, the m- more serious you should take the capital. But I worried too much as a founder, I remem- about losing single-digit millions for my VCs. I shouldn't have worried about it. It was bad for them and it was bad for me. I should... I s- stressed it too much. Like, they can survive. You know, a $400 million fund can survive. Emergence whatever two, which is like a 10X fund, could survive losing $3 million on my investment, right?

    17. HS

      You always talk about being the asterisk in their returns.

    18. JL

      Yes.

    19. HS

      And it's like, well, you know.

    20. JL

      I shouldn't have worried about it. I shouldn't have wor- I shouldn't have worried about any... And I would've made different decisions. I think it's bad for... And you know, I, what I see with, um, so many managers, especially with SBVs and opportunity funds, they literally don't care if the SBV goes to zero. They don't care at all. They don't give a rat's ass. I've never done that. I've never done... I have two opportunity funds, but I've never done an SBV where I didn't give a rat's ass. Uh, but I would've invested two to three times more if I had. Just spool those SBVs up. If they don't make it or the valuation's high, just, just, just hide it. Just, just, just ignore it. That's, I th- I genuinely think that's probably the way you should play venture. And, um, but it's just, I don't... It's not in my DNA. Not worth it.

  7. 14:23 – 20:10

    Salesforce’s $50B drop: guidance shock and the collapse of the NRR “engine”

    1. HS

      (laughs) I do want to discuss Salesforce.

    2. JL

      Yes.

    3. HS

      You mentioned that kind of B2B2B and, like, the challenge of, uh, spend being so hit-

    4. JL

      Yeah.

    5. HS

      ... but actually also going and saying up 20%. The, the news from Salesforce this week was shares tumbled 20%, the worst since 2004, with the news of weaker-than-expected results for Q1.

    6. JL

      Salesforce lost $50 billion in market cap. Yeah, brutal. Brutal. Brutal.

    7. HS

      On, on a miss, though, of .14 or .3?

    8. JL

      That's not the issue. The issue is that Salesforce said, "We have fallen to single-digit growth. And we're not coming back, as far as we know." They're... I think next quarter they're predicting like 4 or 5% growth, and for the full year, single-digit growth. People misunderstood. It was not the miss. No one really... I mean, missing this quarter is minor. The- these, these devastating falls from Salesforce and Mongo and, and Workday and others are about th- that they're all ratcheting down where they think things are going the next year. That's kind of the discouraging thing, that we haven't come out of it. We haven't come out of... Salesforce is saying it's getting, it is not getting any better. And because of that, we are falling to single-digit growth. And, you know, why does that matter? First of all, it's not a growth stock with single digits, right? Yes, they're at 30-something percent margin. That's why the market crashed and, and, and created this whole cascading effect. Um, Mongo said growth's gonna be in the teens from like 40, 40% 18 months ago, right? Huge, huge change. Trying to get tech companies. They're tech customers. But the troubling thing, Harry, is that in B2B and SaaS, um, for more enterprise stuff, we kind of rely on this 115, 120% NRR to carry us.

    9. HS

      Yeah.

    10. JL

      Like, Fastly last year grew 15% with no new, zero new customers. So (laughs) not a- they didn't close a single net new customer. Now, how'd they do that? 115% NRR. (laughs)

    11. HS

      They didn't close a single new customer? (laughs)

    12. JL

      Not mad. I mean, it's not one of the top performing ones, but it's, it's not-

    13. HS

      Not one of the top per- I hold it and it was... (laughs) sh-

    14. JL

      Yeah. It's a- on the one hand, it shows that the market is passing them by. On the other hand, it shows the power of, of what you're supposed to do with mid-market enterprise deals, which is have the triple-digit NRR. Salesforce is the most enterprise there is, right? That, that, and, you know, I mean, ServiceNow is more enterprise. But why isn't the 115% NRR playbook working for them? Right? That's a s- that's the troubling thing to unpack, right?

    15. HS

      Well, why, why isn't it?

    16. JL

      Bet- well, the short-term reason is everyone is cutting seats. Everyone is cutting seats, right? And what Mark said on the earnings call, what the team said is, and also because of that, so many deals that have closed are a fraction of the size that they were projecting. Much smaller deals, much smaller deals. And so, they say that it's layoffs and stuff, but it's not really layoffs. Again, th- unemployment's pretty low, but it, but tech is very specific. Te- layoffs have been tougher in tech. But now people are like, "Maybe we can get by with 100 seats, maybe 200 seats. Maybe we don't need as much Slack or as much Mulesoft or other pieces." And they're just rationalizing, rationalizing, rationalizing. And I don't know what the effective NRR is for Salesforce, but it's crummy. They c- you know, people s- people kind of fake NRR, net revenue retention, like how much d- how much recurs. And people, people, like, they'll, they'll cut out their smallest customers, they'll cut out segments. But how, how could the enterprise leader grow 7%? It shouldn't be possible. It should, it should, could happen with an SMB1 that stumbles. It could hap-... But it sh- this wasn't supposed to be possible with enterprise SaaS, just because NRR should last forever. So, that is troubling. And a- again, that's also kind of the engine behind PE and everything is that, you know, traditionally, a lot of these PE firms have not done SMB stuff, right? When, when Vista bought Pipedrive, I wasn't there, but a lot of discussion was how unusual it was because it was a high churn, very small business. They're like, "That's not the playbook." The playbook is, "Look, we're gonna go in and buy Marketo," which was Vista's-... first big deal, um, peer of mine and, you know, what- what we want to add a feature for four years, but it won't matter because of 120% RR, right? We'll go in, we'll buy it at 200 million, then it'll be 240 and then it'll be 300. And like as... You know, yeah, maybe in 10 years it'll fall apart, but- but- but if why isn't that not working at Salesforce? It is... It should worry all of us, right? It should worry all of us.

    17. HS

      Is there not a direct correlation though between that and HubSpot's growth? Like when you look at actually HubSpot's growth of CRM-

    18. JL

      Yes.

    19. HS

      ... and compare that to Salesforce's zero rating ARR, is that not combined?

    20. JL

      You know, for sure. And- and HubSpot is still growing almost 30%, right? Uh, at two and a half billion. But HubSpot's ARR is down too. It's down from 110 to 100. So they're seeing pressures too. It's not any early- easier than. For sure, the fact that HubSpot is coming up, I think on 700 million in revenue from CRM is a dent for Salesforce, but there's always competition, right? And Salesforce has five clouds, and sales is not their... Is- is I think their third biggest cloud. It's not even their top product.

    21. HS

      What happens if these companies are no longer growth stocks? What happens if we just accept the new norm-

    22. JL

      Yes.

    23. HS

      ... that they are growing at 5 to 7%?

    24. JL

      You know, it feels like Dropbox has settled into that.

    25. HS

      Yeah.

    26. JL

      It feels like Dro- And maybe even-

    27. HS

      At two and a half billion in ARR.

    28. JL

      As much as I love them, maybe even Aaron Levie settled into that too, right? I love Aaron's very aggressive in Builder, but I think they have such high saturation of the market. I think we are seeing some great companies like Dropbox and Box settle into that and just feel that they... Without... Unless they have a huge market cap and they can go buy something, then it- it is- it is- it is the world, right? It is the world.

    29. HS

      Uh, yeah. I- I don't know. I had Aaron Levie on the show and he was like-

    30. JL

      Yeah.

  8. 20:10 – 22:50

    Why some SaaS segments still thrive: vertical SaaS, security, and real-economy buyers

    1. JL

      Everyone on Twitter thinks there's one root cause. Again, if Canva's at 2.4 billion growing 40%, if Samsara is growing over 40% at 1.3 billion in revenue, okay? Um, if Zscaler, I think, is growing 40% at two billion in revenue on the security side, it's not like we're in a downturn, Harry.

    2. HS

      No.

    3. JL

      We're in... Now segments are in a downturn, but you can't say all- all is bad. It's not all bad. Toast is growing 30 something percent at 1.3 billion in revenue, okay?

    4. HS

      Wow.

    5. JL

      Like there are portions... Vertical SaaS is strong. Um, SaaS to consumer is strong. Security is strong. Just this- this thing that T- Tech is bad. Um-

    6. HS

      You look at your Klaviyo, you look at your-

    7. JL

      Kla- Klaviyo is...

    8. HS

      These companies did well.

    9. JL

      Yeah, look at Klaviyo for a minute. They're growing. I mean, the growth's come down a little bit, but they're growing, I think 50% at 750 million in ARR.

    10. HS

      Oh, yeah.

    11. JL

      Right? So all these woe is me people that are like... You know, this Klaviyo sells to- to real merchants, to- to- (laughs) to real... You know, how about... Th- th- they're going more enterprise, but it's really a 5K product. It's SMB, right? And, um, they are growing at epic rates. So it's- it's not a- a downturn everywhere, but- but it is... But the tech one, it's- it's- it's brutal. It is. It's brutal and it's across, it's across the board in tech.

    12. HS

      Yeah.

    13. JL

      Um, but I think to answer your question, I think... So first of all, let's make sure that, you know, consumer SaaS, vertical SaaS, and security are all excluded 'cause they're doing pretty well. And then let's realize there's... 'Cause everyone's so brilliant on social media, let's realize there's a couple different root causes, okay? I would... And this is just my, my learnings. I'm not sure I'm right. I would argue Salesforce is massive cuts, budget cuts. It's brutal. It's brutal out there. Everything's harder. Salesforce also just said that now they need 3X pipeline coverage versus 2X historically. So in other words, if they wanna close a billion dollars, they used to need $2 billion of deal in flight, now they need three 'cause it's just 50% harder to close. So that's one set of issues. What Salesforce got right was they have a lot of clouds. (laughs)

    14. HS

      (laughs)

    15. JL

      HubSpot also got this right. HubSpot, if- if it didn't have five core products, it would be slowing. When we look at the Boxes and the Dropboxes, and I think both Aaron and Drew are honest here, they were very late to go multi-product and arguably Dropbox isn't multi-product at all. Arguably it's one product. Box is kind of getting there, but I would say it's like, uh, multiple facets of the same product. So that's a different existential issue that founders need to be laser focused on after a certain amount of customers, just to not exhaust the one product world. We're getting better at it, but I think getting caught as a one product, uh, uh, um, company is very different than Salesforce getting that right, but- but seeing saturation in multiple products.

  9. 22:50 – 26:03

    AI as product table stakes—but not yet a revenue accelerator for incumbents

    1. HS

      A final one on this. Does AI not allow them to have so much more juice in their customer base? (laughs) And what I mean by that is like Salesforce have the distribution, Box have the dist- We've mentioned that incredibly high saturation. They can integrate generative AI or-

    2. JL

      Yes.

    3. HS

      ... you name it. Like Aaron on the show talks about integrating AI into their storage solution so you could extract knowledge way more efficiently from the docs you have. Does that not allow for a much more increased ability to price far higher? And actually they will be able to leverage AI to get a lot more money out of their existing customers.

    4. JL

      You know, we'll see. Um, you know, Dell also had a miss, it wasn't as big a deal as Salesforce and MongoDB. And what Dell said is, "Look, there are a little bit of benefits from AI and that we're shipping more servers, but our margins are down and net-net we're not doing any better. It's not helping us net-net." Salesforce, Marc Benioff on the earnings call talked about how amazing their AI products are, amazing. Like they- they couldn't even... The- the analysts kept asking him to talk about other things. He went on and on and on for half an hour. But is there... Is it increasing this revenue, right? Even ServiceNow, like it seems like it's doing well, but the average ServiceNow customer signs over a three year contract with 99% retention. How can we even tell? Like, he's a great CEO, but like we don't know if it's really making any difference in terms of the top or bottom line. I'm not saying our... All... I think all the products are gonna get better. I bet Box in a year will be a much better product than it ever has been.... much better. And Aaron's right. The problem with all these products, and I've built one, is it's very hard to deal with this unstructured data. It's very hard to c- how do you communicate with a document? It's very difficult, right? So if, if AI allows me to finally communicate with my 10 million documents in Box, I think Box could be a 10 times better product in a year. But will that lead to any revenue growth for Box versus OpenAI or, or Google Cloud? So far the evidence is no. So far it says the incumbents are gonna, they're gonna do great things with AI, great, great things. Their product's gonna be much better, but they're, but it's not clear they're gonna get any revenue boost from it. No one's saying that, who, none of these leaders are saying they've gotten any revenue boosts. They could talk and talk and talk, right? Even the great ones like Aaron talk for an hour, but right now we're not seeing a boost. So th- it is worr- it is worrisome, and there is an experiment budget and it is a substitution budget, and I think it's gonna take us another 24 to 36 months to figure it out. But the only one thing I will say, you gotta do it. You gotta do it. If you c- if you're competing with Box, you gotta at least have as good AI as Box. If you're competing, it is table stakes now. So even if, as frustrating it is that your engineers have to drop everything and build these cool products and deal with hallucinations and deal with the cogs and all the issues and all the integration, if you, if you resist this, you are gonna get steamrolled because the customers expect it. They're looking for it. How they pay for it is a different question, but I see too many founders still hiding or running from AI or mocking it or making fun of it, and I think it's a path to destruction.

    5. HS

      Do you not think we will have an AI budget line item created for all CFOs? 'Cause right now we don't actually have that, I don't think.

    6. JL

      No.

    7. HS

      You don't think we will have that?

    8. JL

      Do you h- do you know any CFOs that are creating an AI budget? And where did they get, where did they get the money? Where did Dad or Mom give them the money?

    9. HS

      I didn't know any that have it.

    10. JL

      No, uh, they're substituting. They're substituting. Um...

  10. 26:03 – 28:53

    Multiples compression and IPO drought: why venture math stops working at 6x

    1. HS

      We mentioned Box.

    2. JL

      Yeah.

    3. HS

      And, and when I had Aaron on the show, and live in the show I was like, "Check his market cap." (laughs)

    4. JL

      Yeah.

    5. HS

      And he's like, "Billionaire," and it was 3.9 billion market cap. I said, "Dude, this is so depressing." I was, I was brought up on like the six to eight X at least. And you're like 3.9 X.

    6. JL

      Yeah.

    7. HS

      And my next stop was UiPath.

    8. JL

      Right.

    9. HS

      Which, you know, is $6.9 billion market cap, which is 4.2X revenue basically. My question to you is like, are you as con- concerned as I am by the compression that we're seeing in market caps or revenues?

    10. JL

      I'm concerned.

    11. HS

      Yeah.

    12. JL

      Um, I'm not concerned about the Boxes and the UiPath. I'm concerned that we've only had two SaaS-ish IPOs since 2021. We've only had two since. HashiCorp was the last one of the bubble of, of December 2021, right? Just got bought for IBM. Um, we've only had two. We've only had Klaviyo and Rubrik. Both essentially were at 500 million growing fif- much more, growing 50% for Rubrik and 70% for Klaviyo. They're both trading at like 6X. I don't mind if... Uh, listen, I love Aaron, I love Box. I don't mind if Box and Dropbox and a few others trade at modest multiples, 'cause the growth isn't there. The fact that a Klaviyo or Rubrik isn't trading at 20X, 15X to 20X, um, I don't mean to be a Debbie Downer, but it is wor- it i- we need a re- for the math to pencil out, this is the truth in venture, and founders should understand this at some level. I think for the math to pencil out in venture, we do need a rebound. The math de- And this is, forget about the unicorn rounds and the crazy... We just, we do need some, we do need a 30 to 40% multiple reflation, or we just can't make any money on any round north of 100 million evaluation.

    13. HS

      L-

    14. JL

      Can't make any money.

    15. HS

      Listen, I, I, I agree. But you said you're not concerned by UiPath. UiPath are growing 31% last quarter.

    16. JL

      Yes.

    17. HS

      22% I think year on year. It's pretty good.

    18. JL

      Yeah, yeah. I just meant the drama with Daniel coming back and the market hit. I think that will, that, that'll pass, right? The, the, the mo- the, the market had a little panic when we had a CEO t- t- turnover and change.

    19. HS

      How did you read that? 'Cause for me, I was like...

    20. JL

      Yeah.

    21. HS

      ... actually, you know, great companies are most often run by the founders themselves. That should have been a confident surge in some respects.

    22. JL

      That he came back?

    23. HS

      Yeah.

    24. JL

      But it was in like seven months.

    25. HS

      It was short.

    26. JL

      It was short, right? Listen, I think that the Salesforce crash was merited based on the projections, not on the miss, based on the projections. I think the Mongo crash was merited based on them saying, "Hey, we're only gonna grow in the teens." Like, Mongo was always supposed to be a high-flyer. Um, but there is some overreaction here, right? There is some over- overreaction. But listen, I don't know about UiPath. I, I think it's definitely positive. I, I think, you know, the vast majority of SaaS companies that are public are still run by their founders. Eventually people get tired, right? Pe- people, they can't do it. I mean, you can't do it for 100 years. This, this is, this is kind of hard. Um, but yeah, it should, it should be positive. But I think it will be positive maybe in a quarter, right?

  11. 28:53 – 33:12

    HubSpot–Google acquisition rumor and antitrust: M&A uncertainty as a ‘cloud’

    1. HS

      Okay, super harv- And you mentioned founders get tired, things change.

    2. JL

      Yeah.

    3. HS

      HubSpot's founders are, are less involved now. Obviously they've got Yamineer as CEO, and then there's the rumored $33 b- billion Google acquisition.

    4. JL

      Yes.

    5. HS

      Do you think that goes through?

    6. JL

      I- initially I, I thought this was a creation of social media. When I read the first article about it, which was like self-referential, it didn't even attribute to anybody, it said... Because listen, it, I worked briefly, I was briefly a VP at Adobe and I saw how M&A worked, and there's targets, okay? And actually...

    7. HS

      (laughs) I would love to see you with like a swipe card going into Adobe. (laughs)

    8. JL

      (laughs) Well, my ideas were pretty different from the targets. We can talk about that. But you know, a couple years ago, Business Insider published a leak from Salesforce where they had all their M&A targets. And it was very interesting. And at, at the bottom they had receptivity. I remember Box, it was w- uh, uninterested in selling. So they had all the potential, like the top 20 targets. It was, it was one of the... I mean, Business Insider is up and down, but this was one of the good ones where they leaked it and talked through it. So the fact that Google Cloud would be looking at HubSpot is meaningless to me. Of course they should, right? Of course they should be looking at every leader and saying, "Okay, listen. Who's a good..." Like, in some ways UiPath is a good match for like the enterprise push of Google Cloud, but maybe that type of automation is not really where they want to be. If they want to go SMB, if they want to combine with G Suite...

    9. HS

      Right.

    10. JL

      ... then it's a good, it's a good fit, right? Because they have this, a great footprint. So when I first saw it, I thought this was stupid. It was like, yeah, it's on someone's slide and so are 40 other companies, but maybe it's possible. The only reason I say this, and listen, if I knew anything, of course, I would not say anything. I, it feels like people are a little quiet at HubSpot. (laughs)

    11. HS

      (laughs)

    12. JL

      When you see the executives go a little quiet, yeah. That's my tell, right? Not like s- just like, so, you know, a l- that's the only reason why I-

    13. HS

      But there's a genuine question of, like, from a regulatory standpoint-

    14. JL

      Yeah.

    15. HS

      ... could it go through? At 33 billion, that passes the bar of, uh, meaningful to regulators. You know, we, we-

    16. JL

      Yeah.

    17. HS

      I was gonna ask you about, um, Clearbit, which was acquired for $150 and just what you thought about that. Respectfully, it's too small for regulators to give a shit really, I think, bluntly, but 33 billion? Oh, they care.

    18. JL

      I don't think Figma deserved the antitrust, uh, ding that it got. I think if Adobe bought Canva, that'd be a much bigger issue. I think Canva's an existential threat to the whole Creative Cloud, whole Creative Cloud. Uh, Figma is adjacent. Um, if antitrust looks at Google and says, "Hey, Google is arguably the number one marketing platform on planet Earth," and HubSpot is a marketing company, I'd block it. If you slowed it down and said, "Listen, this is a CRM with support with all these other pieces and it does some email automation," you're like, "This is not... This is fine." Bl- this, you're s- this, this is, this, this should be... So I think, so I do think it's risky because a lot of folks do think that HubSpot is primarily a marketing company, which is no longer really the majority of the revenue. So I think it is a crapshoot. So I don't know. I don't know that they would agree to it. It'll, it'll be interesting to see. Antitrust is a bummer too. It's like PE.

    19. HS

      (laughs)

    20. JL

      Like, it's a bummer for SaaS that it's hard to get acquired because it just creates a, a, a, it creates a cloud across M&A, and the PE stuff's a cloud. These are like double clouds.

    21. HS

      Uh, they are double clouds.

    22. JL

      Yeah.

    23. HS

      You've said to me before about kind of Figma and Adobe being seen as competitive.

    24. JL

      Yes.

    25. HS

      And you said, "Eh, actually Canva is more competitive in that respect."

    26. JL

      Yes.

    27. HS

      You just said it's a threat to the whole Creative Cloud. Why do you think that is?

    28. JL

      Well, it's what, it's what... I mean, Adobe, the majority of Adobe's revenue is still from designers (laughs) designing assets in Creative Cloud, and that is exactly what Canva does. It's not prototyping products, which is what Figma is great at. Uh, Adobe had, I forget what it's called, is it XD or something? Adobe had a trivial product doing like $50 million in revenue out of what, $5 billion or so. Maybe Adobe's more bigger today. But, but, but Creative Cloud is the bulk of, it's, it's still the majority. It's either the majority or the plurality of their revenue, and it's exactly what Canva did, and Canva snuck up on Adobe, I think, right? So, I mean, we, when I, I think every company uses Canva, even if your designers are using Creative Cloud. So it's, it's much bigger deal. I think, I do think the regulators got this one wrong, and maybe even they got it wrong, who knows, because of... And this is why the, the Google-HubSpot thing might be worse, and maybe it's how they were lobbied or manipulated, 'cause I don't think it's competitive.

    29. HS

      Can you just-

    30. JL

      Nor would do I think they would have done the deal if they genuinely believed it was competitive. They wanted to expand their surface area. Scott wanted to... Scott Belsky, I mean, he's great. You've had him, right? They wanted to expand their surface area. They didn't want to take out a competitor. That would be trying to buy Canva would be taking out a competitor. They wanted to expand what Adobe did.

  12. 33:12 – 35:43

    Liquidity crisis explained: IPOs without tradable float, DPI vs TVPI, and valuation games

    1. HS

      Can you just help me out on the question of liquidity?

    2. JL

      Yeah.

    3. HS

      'Cause we've just mentioned obviously Pluralsight and what I think that could do to PE and their willingness to buy. We've mentioned their regulators and their withdrawal or their kind of intrusion, meaning, uh, less M&A, uh, the lack of IPOs with Rubrik and HashiCorp being the last ones as you said.

    4. JL

      Yeah.

    5. HS

      How do we solve the problem of liquidity? How do you explain that to LPs who ask?

    6. JL

      Yeah, look. You gotta either... Again, I, I think you either... It's tough. You've gotta be, you've gotta decide if your glass f- half full or glass half empty. If you're like, listen, there's been essentially no liquidity since 2021. You had two IPOs. Two IPOs. Um, you can't even get liquid on Figma. The big stuff's blocked. So that's the easy way to get cash, right? Is just someone write you a check the day a big deal closes. If y- if I can't get liquid on, you know, billion dollar plus deals and the multiples for the best companies are at 6X. And even worse, I, I think... Now, listen. This is, this, I don't... You know, it's hard to say 'cause one of these IPOs hasn't happened in years, but basic- folks that are close about the market say, "Look, for sure you can IPO at $200 million in ARR, in ARR, but there's no liquidity." If you can't distribute your stock, if you can't sell your stock, it doesn't matter much for venture.

    7. HS

      Do you think you can IPO at $200 in ARR? Yeah, you can-

    8. JL

      Yeah, for sure. Yeah, yeah. Maybe you'll IPO at a billion in market cap, and that was fin- HubSpot IPO'd at $800 million. Box IPO'd at $800 million. Shopify IPO'd at $700 million. The world will not end if you IPO, but if there's no liquidity, uh, i- i- it sh- sh- Employees can sell their shares, and you can do a little bit of M&A, but how much M&A can you do at a billion? Like, se- bu- y- 8% of your market cap is $80 million. What can you buy in today's world, right? So what's the point if your VCs can't get out and, uh, you can't buy anything? Then employee liquidity is critical, but maybe that's all it really does.

    9. HS

      Yeah.

    10. JL

      We haven't had liquidity... There, there's random things that happen. We haven't had liquidity in venture since 2021. It's getting to be a while, and you either have to decide there's ups and downs in an illiquid asset class. There's, there's... And it, and like this is part of the, the, the deal, or you should maybe panic. And this is why I tell almost every individual, "Do not invest in venture funds." (laughs) Dumb for individuals.

    11. HS

      (laughs)

    12. JL

      If you're managing an endowment thinking about centuries, you can have a, a, a, a, a, an- sort of you can have a nuanced approach in liquidity, but even there they have liquidity crunches because they have capital calls and they have to reinvest money. And even folks that didn't think liquidity was important in endowments end up having liquidity crunches too, right? But as an individual, you really want to lock up your $100 grand for 16 years for a 2X return? I say put it... don't, don't (laughs) do that.

  13. 35:43 – 57:40

    MongoDB, Twilio, and the fate of former high-flyers

    1. HS

      (laughs) The final one that got slammed was Mongo.

    2. JL

      Yes.

    3. HS

      Mongo sinking 23%. Is that the same story as Salesforce? Is there anything different there?

    4. JL

      It is. It, it has literally taking a, a company that even when things started to get harder in 2022 into '23 still hit its numbers, still crushed it, still was a high fly, still had the multiples, still had everything, right? People love Mongo. They run their companies on it. Um, it's very interesting in terms of, you know, having a long tail and being very enterprised. Great CEO, uh, like everything competitive position, despite a lot of competitors, stronger than ever. But then saying, "Hey, growth has plummeted to the teens." It's not a growth stock anymore.That was just like a shock to the system. And, you know, Dev said his discretionary spend is being... is still being managed very, very carefully and I'm, I'm sure that's the reason. But seeing a high-flyer go to a m- a mid tee- it's just, it's, it's... I think folks, everyone sort of thought we were bouncing off some bottom. And if you look at a lot of charts, like Jamon Bell's charts are great and you can track a lot of folks, and it does look like in the aggregate we have... we bounced off some bottoms in first half of 2023, in the aggregate, all cloud out SaaS. But we're not seeing a... and Mongo is saying, "Hey, it's not getting... it's getting worse." Salesforce is saying it's basically getting worse. Yamini got on the last call a couple weeks ago and said, "Yeah, we saw a little bounce at the end of the year and HubSpot had a great quarter, but it's not any easier." She said, "It's not one lick easier right now." So HubSpot, not any easier, Mongo worse, Salesforce worse, Workday worse. Uh, it's tough.

    5. HS

      Can I ask you a weird one? What happens to Twilio? Twilio, obviously, Geoff Lawson now no longer CEO.

    6. JL

      Crazy.

    7. HS

      But people love the product.

    8. JL

      Brilliant idea. Push out one of the greatest founders of our generation. Just, just, just push. Great idea. (laughs)

    9. HS

      But people love the product.

    10. JL

      Great idea. (laughs)

    11. HS

      People still use the product.

    12. JL

      Yeah.

    13. HS

      It has great community, but the market cap's in the fucking floor.

    14. JL

      Yeah.

    15. HS

      It is not, uh, loved by Wall Street.

    16. JL

      Well, look, I'll... I don't know the answer. I'll... You know, it... Twilio has... Twilio is... you know, it is... it's the Stripe of communications, right? It- it- it- it, it has more competitors-

    17. HS

      But if Twilio is the Stripe of communications, it is egregious that it is whatever it is, a five or a $6 billion market cap company.

    18. JL

      It does, but if we wanna... if we wanna take a very short-term view, one, the margins are lower.

    19. HS

      Mm-hmm.

    20. JL

      Margins have always been low. Two, uh... an- and maybe the market's overreacted. It hasn't been able to make Segment make any money, which it's paid billions of dollars for. So it has like two existential issues. It's got like a big product line that it doesn't want to divest-

    21. HS

      Mm-hmm.

    22. JL

      ... that's not profitable in a world where they need to be... have 30% margins. So in the old days, buying... you know, when you bought... when they bought Segment and, and SendGrid and all these others, just breaking even was fine. But now you have to be so profitable, it's- it's an anchor. So they've got a bunch of existential issues and maybe Geoff just (laughs) is like, "If you... You think you're so smart (laughs) you can solve these problems?" But honestly, those are the- the... I think the micro answer is what I- I wanna... I generally try to be positive, realistic, but man, it sucks because n- 99.9% of us will never build a Twilio.

    23. HS

      Yeah.

    24. JL

      Twilio isn't just a good business, it's an iconic platform and brand, right? It is trusted. And, uh, yeah, this is the... I think it's good to kind of hide in series A land with five years of runway. This is the place to be today. (laughs) Hi- hide from all of this stuff, right? Uh, and to not have to deal with some of the market issues.

    25. HS

      Well, is- is there a better place not to be actually like your calls selling for two and a half billion to private equity versus your Gongs with the pressure now with your repricing being put on you, that is a hard place to be.

    26. JL

      It- it's hard, it's hard. It- it is, it is hard. And you know, you, you... I mean, I can't speak to Gong in particular, but I think all of these folks, they're- they're gonna have to rebuild their entire management teams if they haven't already. You need n- you just... it's too much for the team. Folks that I know that work at a lot of these unicorns that have done well, uh, they- they've left or leaving. And it's not because they don't believe, but it's just too... it's too much, it's too much change, it's too hard. You need, you need new blood and you need, you need fresh blood, right?

    27. HS

      Would you buy Notion at 10?

    28. JL

      What do you think they're doing? 80 million in revenue?

    29. HS

      150?

    30. JL

      Um. I mean, look, I don't... I... where's the... what, what, what like Notion is worth over 30 billion? You... I- I guess you have to believe it's bigger and better than HubSpot. I mean, it's not a perfect comp. You'd have to believe it's bigger 'cause if HubSpot's trading at 30, right?

  14. 57:40 – 1:03:19

    Founder fundraising mistake: asking for too much money and silently losing investors

    1. HS

      Okay, so I wanna do a tweet of the week. I mean, I love this.

    2. JL

      Go ahead, tweet of the week.

    3. HS

      You said, "One large accidental mistake founders can make in fundraising is to ask for too much money."

    4. JL

      Yes.

    5. HS

      What did you mean by this? And how does that impact the advice that you give to founders listening?

    6. JL

      Let me give a, let me step back for a minute. Everyone's still giving, too many founders are still giving you terrible advice from 2021, 20, into 2022. They're still, they still give you, like, run a process, give people one hour to decide. I literally got an email while I was here, Harry. The, the email was pretty good, okay? From this founder, you know, we're at, I think they're at 100K ARR, okay? And they're doubling. Okay? So they're growing, but like this is not a rocket ship ye- yesterday. And the- the- and in bold it's like, "The deal's moving really fast." (laughs) I'm like, "I don't know who told you to write this or where you found this on the internet, but no, this is not..." The right way to approach it is, "Listen, we have something that's early. Let me tell you why it's gonna be great," right? So, so much of the advice is bad. And, uh, people are still asking for too much money. They're asking for too much money. And, um, you know, I was pulling this up for, for SaaStr Europe, but you know, Gong series A was seven million, series A was seven million. That wasn't that long ago. That was 2017.

    7. HS

      Yeah.

    8. JL

      That used to be a series A, now it's a seed round, okay? And so you see these numbers o- in the media and you hear about them, but be very careful that that's appropriate for you because along w- you can just rule yourself out from investors. It's just such an unforced error. It's, and it's har- Founders, there's things-

    9. HS

      So for founders listening, what do you mean you can rule yourself out for investors?

    10. JL

      You have t- uh, if a fund size isn't big enough to meet your ask, most good investors will m- maybe, many good investors will quietly opt out, 'cause there's too many deals, okay? The biggest check I can write, uh, you can tell me what yours is next. The biggest check I can write is four million bucks, okay? I've written quite a few $4 million checks. I could write a little more, but when I write a $4 million check, Harry, it has, like has to work. (laughs)

    11. HS

      Y- yours is 7, 8% of your fund.

    12. JL

      Yeah, it's a lot, right?

    13. HS

      Yes, it's a lot.

    14. JL

      So it has to work. I c- otherwise it's like Pluralsight, like I'm dead if that thing ... Like, I can survive it, of course, but it really sucks when I write a $4 million check. So when you ask for 10, not only do I not have enough money, but maybe I can get Harry to do the sh- deal with me, right? But I have to believe it, it will absolutely crush it to do a 10, 'cause then I gotta bring Harry in to do four, and then we'll find our friends to do two. So we can do it, but if you're just take, getting going, you know what I'm gonna con- con- 'cause how many ... I mean, you know, you get, what do we get, 40 or 50 of these emails a week. It's just easier to not respond or to be kind, right? Now, if that same company, uh, with similar, I mean, similar metrics says, we're, I wanna raise like 4 to 5 million, or even they do something dumb like 2 to 5, it's okay even if it doesn't make sense, then I'll take the meeting if the rest looks good. But I'm not, I'm not, if it, they're asking for 10 or 20 or crazy things, it's just not ... Once in a while I'll do the meeting when it's so amazing, right? When it literally leaps ... But, but you have to check every single box. It's easier to just say, "Listen, this founder doesn't get it. Like, I'm just the wrong match for that," right?

    15. HS

      This is unpopular. I don't like big ranges. Two to five? What you do with two is completely different to what you do with five.

    16. JL

      Well, I said it intentionally, like, that wasn't a great answer, but I, I'll still engage.... I'll just say, listen, if it's a- if it's a third time founder and they're asking for two to five, I'm skeptical.

    17. HS

      Mm.

    18. JL

      If it's the first time they've raised any capital and they don't know, you gotta cut people a little bit of slack, right?

    19. HS

      You do.

    20. JL

      Yeah. So, you know, uh, I mean, yeah, four to five is better, four to six is a good answer, right?

    21. HS

      How many founder meetings do you take a week?

    22. JL

      True meet- true meet- like, true Zooms?

    23. HS

      Yeah.

    24. JL

      Try to do two.

    25. HS

      Two a week?

    26. JL

      Yeah. I try to interact for real with every single good email. Like for real, that's good. Um, but I try to do as much as I can-

    27. HS

      How many good emails do you get a week? 3D.

    28. JL

      You know, it's prob- it should be more than ever because there's more good startups than ever, but I... What is super great or good? (laughs)

    29. HS

      When you're like, "Really, this is good."

    30. JL

      You know, you get... T- I would say you get two good ones, really good ones a week, and if you're lucky if you get an insane one a month. You're lucky if you get an insane one. If you're lucky-

  15. 1:03:19 – 1:15:51

    SaaStr economics and the brutal realities of running large events

    1. HS

      ... in person? You can tell anything. How much does SaaStr do in revenue?

    2. JL

      SaaStr?

    3. HS

      Yeah.

    4. JL

      This will be our first crappy year, but like 25 million.

    5. HS

      Why is it a crappy year?

    6. JL

      Because this is the first year where we've just had so many unicorn SaaStr's that imploded. So we probably lost 60 sponsors, 70, 80.

    7. HS

      Wow.

    8. JL

      Yeah. Now it's not that they're bankrupt, but lost them.

    9. HS

      Gotcha. And so it's a flat year for revenue or?

    10. JL

      It'll be down.

    11. HS

      Down year?

    12. JL

      Yeah.

    13. HS

      Do you think that is also because events are less exciting than they were? Events in SaaStr used to be the thing. Now content is the thing.

    14. JL

      It's mixed, because on the one hand, field... Every report I've read recently, field is still 40% of all marketing spend, field marketing. Okay? So the budgets are still there, but some people don't even want to deploy them. Okay, so that's one issue, right? Um, and then, yeah, there's a whole issue where we thought that when we came out of lockdown that people would want to be together more, right? And I think what I've learned from the events thing is it cuts two ways. On the one hand, there are... It is great, we're all... Look, even we're here in your office, your team is here, but almost everyone's at least running some kind of hybrid team. Okay, no... Almost everybody. And so- so- so we've- we've had to learn about this, but pe- a lot of people just don't want to get out of the house.

    15. HS

      Yeah.

    16. JL

      They don't want to get out of the house. And so events, on the one hand, they're very exciting for folks, but I think a lot of folks just literally don't want, don't want to leave the home. I mean, we've gotten... It's funny, I'll tell you a little. It's just tiny, but if you're... This is a niche topic. Uh, Amelia, who runs a lot of SaaStr, was saying she'd gotten the most cancellations this year ever for a very specific reason, people wanted refunds. We just... Anyone complains, we give them a refund. Like, we don't have... We have a tiny team. We're not going to argue. We give you a refund. People actually, they wanted to buy a ticket, but they just... Not only did they want the list, which they don't do, they didn't want to come. (laughs) They wanted the benefits, but they didn't-

    17. HS

      Oh.

    18. JL

      ... they didn't want to come. So all this stuff cuts both ways and I think that we all kind of thought the world would- would pendulum back in certain ways. I will say I don't- I don't know the answer. I- I don't know the answer. But, um, 'cause I-

    19. HS

      But, 'cause I- I- ... As like your friend, and this is us-

    20. JL

      Yeah.

    21. HS

      ... it's me being really unfair turning this into a show as well.

    22. JL

      Yeah.

    23. HS

      But I'm like, I get the event strategy helps the investing strategy 10 years ago, but I look at it-

    24. JL

      It never helped.

    25. HS

      I disagree with you there. No?

    26. JL

      No.

    27. HS

      Like when you look at the founders ........................

    28. JL

      Having the community helped. There was no need to do an event.

    29. HS

      Then why do it? It is the hardest form. Like content is so much easier.

    30. JL

      Very hard.

Episode duration: 1:20:50

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