This Week in SaaS: PluralSight Goes to Zero, Salesforce and Mongo Hit Hard, The Next IPO Candidates and How Do We Solve the Problem of Liquidity in Venture Capital

Jason Lemkin
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. Hello and welcome to a new show for 20 vc. You are listening to the very first episode of this week in SaaS. This is a weekly show where Jason Lemkin and me sit down to discuss the biggest news in SaaS, analysis, breakdowns on company performance, you name it.

Harry Stebbings
And we could not have chosen a better week to start. This week we saw Salesforce Crater to their worst drop since 2004. MongodB sank 20% 93% and Uipath CEO Daniel Dines announced his return with the stock dropping 30% on the news. And so we have a lot to cover in this first episode. Let us know what you think of the new style of show on Twitter.

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Speaker C
Jason, I am so excited for this dude first. This is the first one we've ever done in person. I am so excited. It is great. The studio's great.

Jason Lemkin
Just so proud of the team. Everything at 20 vc, it's great. So it's great to be here. It is so lovely to make it happen in person. Now, this is like a new show in the way that we're calling it this week in SaaS.

I want to. You're gonna do it 52 weeks of this? Well, I'm gonna do 52 weeks, and you are too. Okay, very good. You didn't get the map?

I did not. The Google Docs shared now. Yeah. Okay, well, so basically it's like this week in SaaS. So we go through the biggest stories.

Speaker C
From the prior week in SaaS and unpack them. Okay. All right. You picked a heck of a week. I paid one hell of a week.

And so we're gonna start at, like, all positivity in mind. Pluralsight, right? Pluralsight. Yeah. So the pluralsight news was that Vista.

Wrote down that $3.5 billion buyout of pluralsight last week to zero. Crazy. Can you unpack just what actually happened for those that didn't hear about it? I mean, they bought pluralsight for three and a half billion, and they couldn't service the debt. They raised 1.5 billion of debt, which is the PE playbook, and I assume they had to refinance it.

Jason Lemkin
Press said that pluralsight had about almost 30% operating margins now. So let's say they're doing 300 million in ARR, 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. 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, that's devastating. More worrisome is you had mark sister on the show recently, right?

And he was talking about how PE is going to be the big savior because they're going to come in. This is what we've seen in SaaS and cloud the last couple of years. PE bought a lot of things that couldn't quite ipo. You and I talked about some exits. I had.

I had a bunch of exits to Vista and others and founders and investors. This reduced a lot of stress. Right. And it's just been a relief. But if this is falling apart, it's tough.

It's harder for founders. If you want to talk about my theme for this week in SaaS, actually parts of SaaS are really good. What I call b, two b to c is good. B, two b to b is bad. But it's harder for founders.

Speaker C
Okay, so b, two b, two c is good. What is that? Just so we have an example. Canva, or broadly b, two b. Two b is selling b, two b software to tech.

Jason Lemkin
That got cratered. That's salesforce. That's Mongo. That's all these. That's Uipath.

That was the hottest thing in 2021. I think it's an overaction. But everyone in tech is 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. Is this not just like a reflection of where we are in the adoption curve of newer PLG models? When you look at canva, which is absolutely rocketing in the consumer subscription space with their 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?

Speaker C
And we will. I don't think it's PlG. You know, you had Aaron Levy here the other day, too, right, from Vox. He said something a couple years ago. He's like, PlG is just what we used to do just with a new label.

Jason Lemkin
PlG is just freemium with better analytics. We've been doing freemium since the early days of the Internet, right. A lot of us started. I started freemium, box started freemium 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. Most of the global economy remains strong.

Unemployment's almost nothing. Right. Canva is selling to normal consumers and small businesses. And they're growing 40% at $2.3 billion in revenue. $2.3 billion revenue.

It's essentially accelerating. That hasn't changed. But tech companies are just continuing app layoffs. We thought it would be over. They're still cutting, cutting, cutting, cutting, cutting, cutting to the bone.

Right? We see it at zoom info. We see it at zoom. We see it. So many others are still cutting and it's brutal.

Speaker C
I do just want to go back to the plural side story because I understand marxist. You said about our show, he said that actually P would be the primary buyers 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?

Jason Lemkin
I hope he's right. Losing 3.5 billion, you can only do one of those every four or five years, right? The loss ratio can't be very high. Maybe. Maybe some of these deals, you can't.

Speaker C
Be interviewed, they say. I mean, by the other. Actually the real goal of P is if you use debt correctly, even when you lose, you win. You've taken so much out, right? Or you've put so little equity.

Jason Lemkin
And if you could put in 1020 percent 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 going to be writing off billions because there's so many of these, there's Avalara, there's plural sites, there's Zendesk. You mentioned Zendesk for 10 billion.

What if Zendesk was 10 billion? Anaplan was close to 10 billion. Right? What if that debt can't be serviced? Then we're right.

Enough. 20 billion. Like this is not a trillion dollar industry, right? I don't know. The average size of.

You had founder of Tom Abravu was great. That was a good one. Right? But even that's like a $20 billion fund, isn't it? The last Vista one was 20 billion.

Speaker C
I think that was a $30 billion. 30 billion. Yeah. So it's just maybe you do one of these on a blue on a blue moon. But if a lot of these big deals, which seemed like you couldn't lose, right?

Jason Lemkin
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 gold. Okay, so we have this litany of companies that's to come in this field, potentially, will we see lp's shifting allocations away from PE towards publics and more liquid assets towards venture? Will they continue the same and just say, it's fine, you can have your shitty funds? It was a tough vintage. The recent conversations I've had with my lP's is if you're still investing, if you're still committing capital to managers, there's still optimism and there is tolerance of a bad fund or two.

The only fear I heard was crazy AI deals. The best folks have made 20% irrs from these alternative asset classes, and that's the goal. How else are you going to make. It just on that? I know it's a tough one, but what is a crazy AI ideal versus a not crazy AI deal?

Speaker C
Because I see some of them too, and I go, God. But then I look at the people involved and I look at the quality of those investors and I'm like, maybe I'm wrong. I look at thrives and sequoias and dsps. Conservative folks like Bessemer, right? Conservative folks like Bessemer potentially doing perplexity.

Jason Lemkin
At 3 billion, right, Bessemer, good, good, but conservative in a good way. They've got to have high confidence. They can do to three to five x in that, including dilution and a genuine belief of ten x, right? So you've got to believe that perplexity is going to be $100 billion company. You've got to believe that there is room for what, ten hundred billion dollar companies coming out of this.

Listen, if OpenAI essentially in three years went to over 2 billion in array, maybe there is room for ten hundred billion dollars outcomes, right? It's crazy, but AI is the amount of spend is huge. If we maintain this spend, just look at Nvidia, we say this spend is. Huge and it's getting bigger and bigger. Is the spend being created net new or is it being taken from elsewhere?

It is all being taken. There is no net new. There is no net new. Gartner just did a report the other day and they slightly upgraded, actually the amount of spend in SAS this year to 20% growth. This year, 20% growth.

And they said Geni 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, from a large public company, but that's struggling a little bit in their category. They were going to churn twelve apps this year and buy one AI app with some of the budget kill twelve, buy one. That's a substitution budget.

Right. For classic B. Two B SaaS. It's stressful. Like, 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, ERP and CRM and the same tools, and we kept buying more and more and our stacks got bigger and bigger and arguably bloated and bloated.

Er. Now every founder needs to actually, for real know where budget's coming from. You've got to know. 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. If you actually happy customers, if you.

Speaker C
Advise me as a founder that I'm in your portfolio, okay, I have to know where budget's coming from. Do I say to my champion, Jason, just out of interest, where am I coming from in your budget line? All the best salespeople ask that question first discovery call Harry, when I'm meeting an enterprise customer. So tell me, is this purchase budgeted for this year? Is it budgeted?

Jason Lemkin
First time I heard this from a sales rep, I kind of scorned them. Like, that's a little salesy, isn't it? 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. I'm not going to tell you how much, but it is budgeted. It's a fair game question. It's a fair game question.

Speaker C
What's the story about not playing the game on the field? And do you think it's important to play the game on the field? Bill Gurley said when it was crazy 21 times, you got to play the game on the field. You got to play the game on the field. Yes.

You are not really investing heavily in AI like every other fund or the majority of other funds. Yes. And you invest slowly. Do you worry about not playing the game on the field? Yeah, I think my strategy is wrong.

Jason Lemkin
So I've never lost money, ever. Anything, ever. I've always. Every fund, every startup, everything, always made, always made money. There is some conservatism in that.

And when I started inventure, I think it served well. That's a good fee. What's that? Do you think that was good for you? And I don't mean that badly, but I've lost money.

Speaker C
I have actually lost money, ridden off. And actually it was the time of deepest self reflection. Yes. And learning this will 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?

Jason Lemkin
They'll still do fine. I do think it's bad. I think that I took lp's money too seriously. I certainly took it way too seriously when I started investing, when I worked with someone else's fund, I shouldn't have given a rat's ass about whether I lost money or made money. And I think I've cared too much.

I've treated. The only thing that matters then, is you're building your track for something else. Whatever. Yeah, just roll the dice. If I win, I win.

If I lose, I don't tell anybody about it. If it's not your own fund, you could only win. If it's not your own fund, you can only win. I took every deal. My first deal was 800k.

My first check, I sweated bullets. I did 10,000 reference calls. I did everything. I took weeks to do all the diligence. There was no need to do that.

It wasn't my money. And that was pipedrive. It did well. It sold for a billion and a half, but the first check was tiny. It was 800k.

Like, there are advantages to doing that, right? And the biggest advantage is you don't have a lot of stress. But no, I do think you should take your LP's money less seriously than I do. I genuinely think it's a bad thing. Just like when you raise money from VC's, the more you raise, the more serious you should take the capital.

But I worried too much, as a founder, about losing single digit millions for my VC's. I shouldn't have worried about it. It was bad for them and it was bad for me. I stressed it too much. Like, they can survive, you know, a $400 million fund can survive emergence, whatever.

Two, which is like a ten x fund, could survive losing $3 million on my investment. Right. You always talk about being the asterisks in their return. Yes. I shouldn't have worried about it.

I shouldn't have worried. I shouldn't have worried about any. And I would have made different decisions. I think it's bad for. And you know what I see with 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. But I would have invested two to three times more if I had just spool those sbvs up if they don't make it, or the valuation.

So I just, just hide it. I genuinely think that's probably the way you should play venture, but it's just, it's not my DNA. I do want to discuss Salesforce. You mentioned that b, two b, two B. And like the challenge of a spend being so hit, but actually also gotten a saying up 20%.

Speaker C
The news from Salesforce this week was shares tumbled 20%, the worst since 2004, with the news of weaker than the expected results for Q one. Salesforce lost $50 billion in market cap. Brutal on a miss, though, of 0.14. That's not the issue. The issue is that Salesforce said we have fallen to single digit growth and we're not coming back.

Jason Lemkin
As far as we know, next quarter, they're predicting like four 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.

These devastating falls from Salesforce and Mongo and workday and others are about 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 it. Salesforce is saying it is not getting any better.

And because of that, we are falling to single digit growth. Why does that matter? First of all, it's not a growth stock with single digits. Yes, they're at 30 something percent margin, but it really makes you, when I was thinking about this, that's why the market crashed and created this whole cascading effect. Mongo said growth is going to be in the teens from 40% 18 months ago.

But the troubling thing, Harry, is that in b, two B in SaaS for more enterprise stuff, we kind of rely on this 115 120% NRR to carry us. Yeah. Fastly last year grew 15% with no new, zero new customers. They didn't close a single net new customer. Now how did they do that?

115% NRR. He didn't close a single new customer. Not Ned. I mean it's not one of the top performing ones, but it's, I hold it and yeah, it's, on the one hand it shows that the market is passing them by. On the other hand, it shows the power of what you're supposed to do with mid market enterprise deals, which is have the triple digit NR Salesforce is the most enterprise there is.

Right. That, that, and you know, I mean, ServiceNow is more enterprise. But why isn't 115% NRR playbook working for them? That's the troubling thing to unpack. 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. And so they say that it's layoffs and stuff, but it's not really layoffs. Again, unemployment's pretty low, but tech is very specific. 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 mule soft or other pieces.

And they're just rationalizing, rationalizing, rationalizing. And I don't know what the effective nr is for salesforce, but it's crummy. People kind of fake NR net revenue retention, like how much they'll cut out their smallest customers, they'll cut out segments. But how could the enterprise leader grow 7%? It shouldn't be possible.

It could happen with an SMB one that stumbles. It could happen. But this wasn't supposed to be possible with enterprise SaaS just because NRR should last forever. So that is troubling. And again, that's also kind of the engine behind PE and everything is that traditionally a lot of these PE firms have not done SMB stuff.

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. That's not the playbook. The playbook is, look, we're going to go in and buy marketo, which was Vista's first big deal. We won't add a feature for four years, but it won't matter because of 120% rr. We'll go in, we'll buy it at 200 million, then it'll be 240 and then it'll be 300 and maybe in ten years it'll fall apart.

But why isn't that not working at Salesforce? It should worry all of us. It should worry all of us. Is there not a direct correlation between that and HubSpot's growth? When you look at actually HubSpot's growth of CRM, compare that to Salesforce's deteriorating NR.

Speaker C
Is that not combined for sure? And HubSpot is still growing almost 30%. Right at 2.5 billion. But HubSpot's NRR is down too. It's down from 110 to 100.

Jason Lemkin
So they're seeing pressures too. It's not any easier then 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 I think their third biggest cloud. It's not even their top product. What happens if these companies are no longer growth stocks? What happens if we just accept the new norm that they are growing at five to 7%? It feels like Dropbox has settled into that.

It feels like maybe even as much as I love them, maybe even Aaron Levy settled into that too. I love Aaron's very aggressive and 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 go buy something that it is the world, right? It is the world. I have Aaron Avi on the show and he was like, we're going to go from 1 billion error to 2 billion arrow, you will in as fast as possible.

Speaker C
That is my goal. Yeah, but at 6% growth, it's still going to take him how long? Ten years or I'm doing my compounding wrong, eight to ten years. Right. But he's not saying we're going to get back to 30% growth.

Just help me understand why. We have seen the tapering of growth. Is it like just incredible saturation of market? Is it lack of growth in market? Why is this?

Jason Lemkin
Everyone on Twitter thinks there's one root cause again, if canvas at 2.4 billion growing 40%, if Samsara is growing over 40% at 1.3 billion in revenue, okay. Zscaler, I think is growing 40% at 2 billion in revenue. On the security side, it's not like we're in a downturn, Harry. We're in now segments are in a downturn, but you can't say all of all is bad. It's not all bad.

Toast is growing 30 something percent at $1.3 billion in revenue. There are portions. Vertical SaaS is strong. SaaS to consumer is strong. Security is strong.

Just this thing that to tech is bad. Klaviyo, you look at your gorgeous klaviyo is. Yeah, look at klaviyo for a minute. They're growing, I think 50% at 750 million in ARR. So all these woe woo me, people are like, you know, this klaviyo sells to real merchants, but it's really a five K product.

It's SMB. Right. They are growing at epic rates. So it's not a downturn everywhere but the tech one. It's brutal.

But I think, to answer your question, I think so. First of all, let's make sure that consumer SaaS, vertical SaaS and security are all excluded because they're doing pretty well. And then let's realize there's a couple different root causes, okay? I would argue Salesforce is massive cuts, budget cuts. It's brutal.

Salesforce also just said that now they need three x pipeline coverage versus two x historically. So in other words, if they want to close a billion dollars, they used to need $2 billion of deal and flight. Now they need three because 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.

HubSpot also got this right. HubSpot. 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 multiproduct.

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 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 company is very different than Salesforce getting that right. But seeing saturation in multiple products, final. One on this, does AI not allow them to have so much more juice in their customer base. And what I mean by that is like Salesforce have the distribution box, have the, we've mentioned that incredibly high saturation. They can integrate generative AI, you name it, like Aaron on the show talked about integrating AI into their storage solutions so you could extract knowledge way more efficiently from the docs you have.

Speaker C
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. You know, we'll see. Dell also had a miss. It wasn't as big a deal as Salesforce and Mongo and DB.

Jason Lemkin
And what Dell said is 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. Mark Benioff on the earnings call talked about how amazing their AI products are. Amazing. Like they couldn't.

Even the analysts kept asking him to talk about other things. He went on and on for half an hour. But is it increasing this revenue 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 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 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. 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. How do you communicate with a document?

If AI allows me to finally communicate with my 10 million documents in box I think box could be a ten time 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 going to, they're going to do great things with AI. The product's going to be much better but it's not clear they're going to get any revenue boost from it.

Even the great ones like Aaron talk for an hour. But right now we're not seeing a boost. It is worrisome and there is an experiment budget and it is a substitution budget and I think it's going to take us another 24 to 36 months to figure it out. But the only one thing I will say you got to do it. If you're competing with box you got to at least have as good AI as box.

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 resist this, you are going to 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. Do you not think we will have an AI budget line item created for all CFO's? Because right now we don't actually have no. You don't think we'll have.

Do you know any CFO's 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? They're substituting. We mentioned box.

Speaker C
When I had Aaron on the show and live in the show, I was like checking his market cap and he's like billionaire and it was 3.9 billion market cap. I said, dude, this is so depressing. I was brought up on like the six to eight acts at least, and you're like 3.9 x. And my next stop was UIpath, which is $6.9 billion market cap which is 4.2 x revenue. Basically, my question to you is, are you as concerned as I am by the compression that we're seeing in market caps or revenues?

Jason Lemkin
I'm concerned. I'm not concerned about the boxes and the UIpath. I'm concerned that we've only had two sash ipos since 2021. Only two since Hashicorp was the last one of the bubble of December 2021 just got bought for IBM. We've only had two.

We've only had Klaviyo and Rubrik. Both essentially were at 500 million, going much more, going 50% for Rubric and 70% for Klaviyo. They're both trading at like six x. I don't mind if box and Dropbox and a few others trade at modest multiples because the growth isn't there. The fact that a Klaviyo or Rubrik isn't trading at 20 x 15 x to 20 x.

I don't mean to be a Debbie downer, but 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. And this is forget about the unicorn rounds and the craze. 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. Can't make any money. Listen, I agree. You said you're not concerned by Uipath.

Speaker C
Uipath had grown 31% last quarter. Yes, 22% I think, year on year. Yeah, yeah. I just met the drama with Daniel coming back and the market hit. I think that'll pass.

Jason Lemkin
Right? The market when we had a CEO turnover and change, how did you read that? Because for me, I was like, great companies are most often run by the founders themselves. That should have been a confident surge. In some respects, but it was in like seven months.

Listen, I think that the salesforce crash was merited based on the projections, not on the mist. Based on the projections. I think the Mongo crash was merited based on them saying, hey, we're only going to grow in the teens. Like, Mongo was always supposed to be a high flyer. But there is some overreaction here, right?

There is some overreaction. But listen, I don't know about you, ipath, I think it's definitely positive. The vast majority of SaaS companies that are public are still run by their founders. Eventually people get tired. People, they can't do it.

I mean, you can't do it for 100 years. This is kind of hard, but yeah, it should be positive, but I think it will be positive maybe in a quarter. Right? Okay. Super hard.

Speaker C
When you mentioned founders get tired, things change. HubSpot's founders are less involved now. Obviously, they've got Yemeni as CEO, and then there's a rumored $33 billion Google acquisition. Yes. Do you think that goes through?

Jason Lemkin
Initially 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, I worked briefly, I was briefly a VP at Adobe and I saw how M and a worked and there's targets. Okay. And actually I love to see you. Like a swipe called going into Adobe.

Well, my ideas were pretty different for the targets. We could talk about that. But, you know, a couple years ago, Business Insider published a leak from Salesforce where they had all their m and a targets. And it was very interesting. At the bottom, they had receptivity.

I remember box, it was not uninterested in selling. So they had all the potential, like the top 20 targets. It was one of the, I mean, business insiders 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.

Of course they should be looking at every leader and saying, okay, listen, in some ways Uipath is a good match for like the enterprise push of Google Cloud, but maybe that type of automation is not where they really want to be. If they want to go SMB, if they want to combine with G suite, it's a good fit, right? Because they have this 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. It feels like people are a little quiet at HubSpot when you see the executives go a little quiet. Yeah, that's my towel, right? Not like, just like so, you know.

Speaker C
That'S the only reason why genuine questions from a regulatory stamp could it go through at 33 billion that passes the bar of meaningful to regulators? I was going to ask you about clear bit, which was required 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. I think it depends on the argument. I don't think Figma deserved the antitrust 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.

Jason Lemkin
Whole creative cloud. Figma is adjacent. 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 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 fine, this should be. 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 be interesting to see.

Antitrust is a bummer too. It's like PE, like it's a bummer for SaaS that it's hard to get acquired because it just creates a cloud across m and a. And the PE stuff's a cloud. These are double clouds. They are double clouds.

Speaker C
You said to me before about Figma and Adobe being seen as competitive. Yes. And you said actually canva is more competitive in that sense. You said it's a threat to the whole creative cloud. Why do you think that is?

Jason Lemkin
The majority of Adobe's revenue is still from designers designing assets in creative cloud. And that is exactly what canva does. It's not prototyping products, which is what Figma is great at. 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. Creative cloud is the bulk of it. It's still the majority. It's either the majority of the plurality of their revenue and it's exactly what canva did.

And canva snuck up on Adobe, I think, right. Every company uses canva even if your designers are using creative cloud. So it's much bigger deal. I do think the regulators got this one wrong, and this is why the Google HubSpot thing might be worrisome. Maybe it's how they were lobbied or manipulated, because I don't think it's competitive, nor 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 be taken out of competitor. They wanted to expand what Adobe did. Can you just help me out on the question of liquidity? Because we've just mentioned obviously pluralsight and what I think that could do to P and their willingness to buy. You mentioned their regulators and their withdrawal or their kind of intrusion, meaning less m and a lack of ipos with Rubrik and Hashicorp being the last ones, as you said.

Speaker C
How do we solve the problem of liquidity? How do you explain that to LP's who ask? It's tough. There's been essentially no liquidity since 2021. Two ipos, you can't even get liquid on Figma.

Jason Lemkin
The big stuff's blocked. So that's the easy way to get cash, right? It's just someone write you a check the day. A big deal if I can't get liquid on billion dollar plus deals and the multiples for the best companies are at six x and even worse, it's hard to say because one of these ipos hasn't happened in years, but basically folks that are close to public market say, look, for sure you can ipo at 200 million 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. Do you think you can ipo at 200 in an ARR? Yeah, for sure. Yeah. Maybe you'll ipo at a billion at market cap, and that was fine.

HubSpot, IPO at 800 million. Box IPO at 800 million. Shopify IPO to 700 million. The world will not end if you ipO. But if there's no liquidity, employees can sell their shares and you can do a little bit of m and a.

But how much m and a can you do at a billion? Like use 8% of your market cap, it's 80 million. What can you buy in today's world? Right? So what's the point?

If your VC's can't get out and you can't buy anything, then employee liquidity is critical. But maybe that's all it really does. There's random things that happen. We haven't had liquidity and 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, and this is part of the deal, or you should maybe panic. And this is why I tell almost every individual, do not invest in venture funds. Dumb for individuals. If you're managing an endowment, thinking about centuries, you can have 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 two x return? I say put it. Don't do that.

Speaker C
The final one that got slammed was Mongo. Mongo sinking 23%. Is that the same story as Salesforce? Is there anything different? It is.

Jason Lemkin
It is literally taking 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 fire, still had the multiple, still at everything. Right? People love Mongo. They run their companies on it.

It's very interesting in terms of having a long tail and being very enterprise, great CEO 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 Dev said his discretionary spend is still being managed very, very carefully and I'm sure that's the reason.

But everyone sort of thought we were bouncing off some bottom. And if you look at a lot of charts like John and Bell's charts are great and you can track a lot of folks, it does look like in the aggregate, we bounced off some bottoms in first half of 2023 in the aggregate. All cloud out, SaaS. But we're not seeing Mongo saying, hey, it's getting worse. Salesforce is saying it's basically getting worse.

Yamini got on the last call a couple of 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. What happens to Twilio? Twilio, obviously, Jeff Lawson now no longer. CEO, crazy, but people love the product. Brilliant idea.

Push out one of the greatest founders of our generation. Just, just push. Great idea. But people love the product. Great idea.

Harry Stebbings
People still use the product. It has great community, but the market caps in the fucking floor. It is not loved by Wall Street. Twilio is, you know, it's the stripe of communications, right? It has more competitors.

Speaker C
If, you know, it's the stripe of communications. It is egregious that it is, whatever it is, a five or $6 billion market cap company. It does. But if we want to, if we want to take a very short term view, one, the margins are lower. Margins have always been low.

Jason Lemkin
Two, it hasn't been able to make segment make any money, which it's paid billions of dollars for. So it has two existential issues. It's got a big product line that it doesn't want to divest. That's not profitable in a world where they need to be, have 30% margins. In the old days when they bought segment and Sendgrid and all these others, just breaking even was fine.

But now you have to be so profitable, it's an anchor. So they've got a bunch of existential issues. And maybe Jeff just is like, you think you're so smart and you can solve these problems, but honestly, those are the, I think the micro answer is what I generally try to be, positive, realistic. But man, it sucks because 99.9% of us will never build a Twilio. Twilio isn't just a good business.

It's an iconic platform and brand right. It is trusted. 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. Hide from all of this stuff.

Right. And to not have to deal with some of the market issues is the. Best place not to be. Actually, like your Carl, 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. I mean, I can't speak to gong in particular, but I think all of these folks, they're going to have to rebuild their entire management teams, if they haven't already.

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, they've left or leaving, and it's not because they don't believe, but it's just too much. It's too much change, it's too hard. You need new blood and you need fresh blood. Right.

Speaker C
You buy notion at ten. What do you think they're doing? 80 million in revenue? 150. What, like notion is worth over 30 billion?

Jason Lemkin
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, because if HubSpot's trading at 30, right, so you've got to believe it's going to be better than, you know, because even 30 is only three x. I want at least a shot at more. Is it going to be better than Datadog?

I guess Atlassian sort of. But notion just does a little tiny bit of what Atlassian does, because what's atlassian worth? We could look at 40 billion, 50 billion, 45 billion. So you're betting that notion is going to be bigger than Atlassian and it's newer, it's still cooler. I honestly don't.

When I look at, even across my own portfolio, I wonder at some of the growth bets being made. I don't fully, I'm happy for them, I'm supportive, but I. I think they. Actively seek out secondaries in those rounds. I think that there's no point in, even as a seed investor, selling before a billion.

It's not enough money. The impact on your fund is not enough. It took me a little while to figure this out, but even though I'm a little slow, it's just, that's my new rule. It's just, even if it's there, and even if you could make ten x on your investment or 15 x. You know what?

When you start your career venture, like, oh, 15 x, that, that sounds, and it does sound great. When you go to raise your own funds later on, it doesn't matter how any individual investment does. You got to find fund returners. You got to find fund returners. And this is where the disalignment between founders and VC's always has been.

Still an issue. Like, you gotta, if the investment's struggling, you'll take a dollar. Hooray. I'll take. I look so excited.

I got a million dollars back on my $2 million check if it was going to be zero. But the tough one for venture, I think, is when the investment's doing reasonably well. Would you take liquidity at 500 million if you invested at 5 million? It sounds like 100 x, but it's really 50 x with dilution. It sounds great, but let's say you're diluted to 5%, so you're going to sell your entire position.

People talk about selling a little piece. It's difficult to sell in top positions, just like, feasibly. It's difficult, yeah. Okay, so great. So let's say you have a $25 million position in a hundred million dollar fund.

First of all, the entire thing is only a quarter of your fund. What if you sell 10%, you get $2 million back. We have a co investment. We'll leave it nameless. That just did around at 300 something million.

And one of the early investors, seed investors, sold a little bit in this round, and, like, they made like 50 x. They only got like 2 million. What's the, what's the. And that was a fund? Yeah.

Fund. Yeah. Well, let's not name any names. It's a great company. Great thing they were both in.

But I'm like, I get it. That it? And sometimes that's a good proof point for your LP's, you know? But it doesn't make any difference, right? If it was your own money, you might sell these shares, you know, you put 50 grand in, and then someone, you know, five years later offers you 3 million.

You should take that. I was laughing with our CFO this morning because we've got a company where we did the first round for, when it was a SaaS company, pivoted to a foundation model, and now it's worth 3 billion. Wow. You can't get fucking liquidity on it, Jason. So, like, we own 2% of it, which is like $60 million in a $30 million fund.

Shit. It's two acts of fund. That is great. It means nothing. I can't get any liquidity on it.

Yeah, it is. What surprises me is numbers still matter to LP's. And what I mean by that is TVPI numbers still carry a lot of weight. I thought everyone knew that. The TVPI numbers like that is actually relatively meaningless and it's a shift towards DPI if you've been in the game long enough.

Speaker C
But no, TVpi still is a big focus. What? A lot of people on challenge me on this, but they're wrong. They're wrong. So many LP's are judged on TVPI, the paper markups.

Jason Lemkin
If you're judged as a manager at an LP on your paper markups, of course you're going to care. You can mock it and you can be Moolin, the Kula, DPi, all this stuff. It's true. But how are you judged? If you're only judged as an LP, as cash distributions, then great, hopefully in 23 years you get a promotion because even if 20 VC does really well, you've got 20 managers.

And so altogether it's going to take you 20 years to make enough money on this to prove yourself. Should it be discounted? Do we account for tv? I don't think we account for it properly. That's my criticism of TVPI.

But you got to use, you got to use a KPI. You have to use a KPI. We don't account for it properly. I think markups are corrupt behavior. Should we have mark to market not to get down the venture road?

Versus this week in SaaS? Should we force people like, you know, crossover funds who would have to revalue their investments every quarter? Maybe just a little bit. Maybe that would be better. Are you very reflective of your book?

Speaker C
Like, do you mark down your book very proactively? At the end of 1231, I took a big red marker and I went overboard. I cut everything that needed to be cut. In fact, I just had a liquidity, I mean, an extremely minor liquidity event. It's three times what I marked it down to in December.

Jason Lemkin
It ain't much, but it is three times I marked the investment down. How did LP's respond to the rab pattern to the portfolio? They didn't care. They didn't care. My sense is that that was unusual last year.

My sense is people were still holding on to valuations, but I'm like, listen, I'm going to cut everything back to the bone. So there's only upside. I don't want anything to only go up. There's only upside. I think people are still holding on structured rounds, inside rounds, they're continuing to keep prices high.

That's why TVPI is corrupting for this. Because if you didn't value companies like this, no one would do endless extensions on unicorn rounds to prop up valuation. That's bad. That's bad. Should you have no markups at all?

I actually think that's not the dumbest idea, but it's too exhausting for LP's what happens. It's too exhausting. Like Retool, who was super hot and then continued but lose the heat over time. And it's what happens there on this. Week in SaaS, one of the more discouraged.

Okay, so the multiples are discouraging. The lack of any two ipos since 2021 is discouraging. We're going to guess as a positive canvas, growing 40% at 2.3 billion and monstrously profitable. And it'll be a great. There's going to be some great ipos coming, which we could talk about.

One of the most discouraging things I saw was Thomas Tungus did something a couple weeks ago. I put it up on Sastra. You can search for him and that the number of 50 million plus software exits in the US that can be tracked and some aren't tracked for a variety of reasons. It's averaged about 57 or so for a decade and it's stuck at 57. So the problem is we have so many retools now.

If you think about it for a minute, if the number of 50 million plus exits is constant for a decade and all startups have exploded, what, 20 x 30 x, it has to mean it's harder to get acquired. Forget about Hart, Scott, Rodino and Figma. It has to be harder if it's still only 57 deals and how many deals are VC's doing? Like M and A. And so this, I think quietly, was the most discouraging thing I saw, which is getting acquired as hard as f.

We all think like, hey, let's just get the company to 5 million or 10 million and someone will buy it and HubSpot will buy it. Or it's 57. 57. I think it needs to be 570 for venture math to pencil out. It's worrisome.

It's worse. When does SaaS companies micro brands get. To a stage where you start to. See reduction in cacs because of micro brands? You've said before, like when you get to 10 million in AR, I think it was 10 million in.

Speaker C
You get a micro brand, maybe in. A vertical, maybe early, maybe a couple. Million, maybe a couple of million. When do you start? I really think to this quote of yours, often when I'm investing, because I'm looking at CAC going, when does the micro brand CAC reduction happen?

Jason Lemkin
But I actually find it happens by a couple million in revenue. You often will get half of your deals from not just inbound deals, but folks that heard about you, folks that in your little niche, in your little niche, but other folks, just like your customers, they start talking about you. They go to events, they meet up, they have their own little communities, they talk about you. So you get like, you start approaching 50% of your leads are free and they're inbound and they're great. And so if you did nothing else, your CAC would go to zero.

And frankly, that's what I accidentally did as a founder. That's why I went profitable, 5 million in revenue is I just, I went to a zero cost marketing model. But the problem with that is, right when that happens is when we start to raise money and invest in sales and marketing, it works like that's, that propels us up the curve to scale. But we don't really get a net CAC benefit because we layer in more paid along with the free. One good thing we learned in SaaS is until the Salesforce decline, we learned that generally high NRR lasts forever.

It lasts to a billion, 2 billion, 10 billion. But we also learned that CAC never comes down. And actually the public SaaS companies have the highest cacs of all. We said about positivity. Yes, because we want to be more positive in this week in SaaS.

Speaker C
Otherwise we'll just have people jumping bridge. When we think about the ipos that come, who are the next contenders? Who do we think is going out next? Canva Figma. These will be great ipos.

Jason Lemkin
Stripe will be a great IPO. Stripe will be a great public company. Canva will be a great public company. Plaid will probably be a great public company. Like a lot of these names that we know, they're not going to ipo at 100 million or 200 million IPo.

Canvas can ipo with 3 billion in revenue. So these are great ones and the markets will love them. What's that? What is that? IPo at canva, they had secondary at 26 billion earlier this year.

So let's say that, I mean, what's the highest possible multiple in the market would be 15, right? So that could be 45 billion. So that sort of ties to the secondary hoping to double their money in an ipo. Right. There's just would be no precedent in today's.

World for it to be higher than 15. And again, it sucks that Klaviyo is at six x because I don't know that, I mean, canva is bigger. I don't know that it's better than Klaviyo. So six x or eight x would be like a bummer, right? Then you'd have like a $15 to $20 million market cap.

But from the founders and the early investors, it is what it is, right? It is what it is. But it could be flat, right? Frankly, for a growth investor, if the secondary was at 20, there was a round of 40, right? It was around at 40.

Speaker C
And then the secondary, reportedly he was 26. But maybe that's okay, Harry, because maybe if you invest in a great name and you only end up making one x on some of them, maybe it's not the end of the world. You hope to get three x on a lot. You hope one per fund in this growth stage is like a ten xer. And if some of them are one x, but you're pretty confident, maybe it's not the end of the world.

So Canva agreed, I'll take a bet with you. I think stripe will still be private in four years time. Well, look, I don't think the Carlsons. Ever want to go public with it. If you and I were running a startup together at their size, and we personally didn't need to create a lot of liquidity for ourselves, and we could literally create structured secondary every six months, why wouldn't you stay in that in the world of being a builder?

Jason Lemkin
Because you look at Salesforce, the problem with public companies here, here's the problem for the weakness. And again, I do want to be positive. Here's the real problem. I think we've made a terrible pact with the devil in public SaaS companies, a terrible pact, which is the markets told everyone they had to get efficient, but there's no money for R and D, there's no money for R and D. How can you, if Salesforce is going to get to 40%, it's coming up on 40% margins.

Where's the money for engineers? Where's the money for sale, sales tax down, engineering headcount is I don't know if it's down, where is the money? And so I would stay private as long as I could. So I keep investing in the product and then when I finally had to find I've got to be profitable. But no one cares if you're profitable six years before your ipo, they care if you're there when you ipO, Palantir ran that playbook, their metrics were atrocious.

Before the IPO, they weren't even SaaS. They had like 20% gross margins. Forget about profits. Then magically their margins were in the 70 the year before the ipO. And they've done pretty well.

Speaker C
Is there anything else positive that we should discuss in this week? In SaaS, there's more good news out there than bad. Multiples are down. That's not fun. Canva, 40% at 2.3 billion in revenue.

Jason Lemkin
Toast, 32% growth at 1.3 billion. Samsara, 39% at 1.1 billion. Monday. Okay, now this is a super interesting one. You know who Monday doesn't really sell to tech.

They sell to non tech. Salesforce. Single digit growth Monday, 34% at 900 million in revenue. 34%. But let's just go through those.

Speaker C
Canva sells to end consumer. Post sells to end consumer. Being restaurant owners, Monday sells to SMB's small creators. Yeah. Samsara is selling to the end economy.

Jason Lemkin
Not consumers, businesses, but the end economy. Right. Zscaler, 32% at 2.2 billion. Right. Security remains on fire.

And then Klaviyo, we talked about 42% at 800 million. So we can look at all the mongos and the workdays and the sales. They looked down, but I found six leaders that are all growing at not so now. They're not 2021 not so rates. So you basically have a couple choices.

You can hibernate, you can blame, you can say woe is me, or you can say, listen, maybe I'm not selling to restaurants or to end designer, but what can I find in here? Where are the gems? I remember Henry Schuck from Zoominfo like a year and a half ago, said this thing, it was early, but he was obviously seeing everything early. He's like, the good news is our non tech customers are growing 20 something percent. The bad news is our tech customers are going like 6% now.

It's worse now. I think they're negative because their nr has fallen to like 85% at Zoom in. Would you be a buyer or short on Zoom in info? Generally speaking, when you have great founders that are committed? I'm a buyer, so I would buy those negative things.

But like, Henry's a great founder who's done this from scratch, basically bootstrapped all the way here, totally committed to the space, will never quit. Now that there's Apollo, there's others, but you're going to ultimately outlast the ones that quit. Can I ask? Actually, one we mentioned the hypergrowth companies that are now non growth stocks, be. It your boxes, be it your dropboxes.

Speaker C
Be it your sales forces. Which one that has transitioned from growth to stable four to 6% grower do you think will reflate in the next few years? And what do you think will be the next one? That is a hypergrower will go into a slow growth stock. I think the zoom info and the bills that have gone through a patch with incredible founders that have been have a multi decade commitment will crush it.

Jason Lemkin
I don't know how some of the zooms will do it. They got dealt the worst Covid card. It seemed that they did the best one to 4 billion in one year, but they got dealt a tough hand. Right? That, that's a tough one.

I'm going to say that folks that are going through a patch like a Zoom info or bill, they're going to pull out. Folks that maybe like Dropbox have decided to lean into this world. The tough thing is, we've learned that. We've learned you got to sequence these next acts like HubSpot did. And if you don't, it's so hard to do it later.

It's so. It's not impossible, but it is. It is so hard. Okay, so I want to do a tweet of the week. You said one large accidental mistake founders can make in fundraising is to ask for too much money.

Yes. What did you mean by this? And how does that impact the advice that you would give to founders? Listening. Too many founders are still giving you terrible advice from 2021.

Run a process. Give people 1 hour to decide. I literally got an email while I was here. Harry, the email was pretty good. Okay.

From this founder, I think they're at 100K AR and they're doubling, they're growing. But like, this is not a rocket ship yesterday. And in bold, it's like the deal's moving really fast. 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 going to be great, right? So much of the advice is bad. People are still asking for too much money.

They're asking for too much money. And, you know, I was pulling this up for Sasuke, but, you know, gong, series A was 7 million. Series A was 7 million. That wasn't that long ago. That was 2017.

That used to be a series A. Now it's a seed round. And so you see these numbers in the media and you hear about them, but be very careful that that's appropriate for you, because you can just rule yourself out from investors. It's just such an unforced error. There's things if a founder's listening.

Speaker C
What do you mean? You can rule yourself out for investors? If a fund size isn't big enough to meet your ask, most good investors will quietly opt out because there's too many deals. Okay, the biggest check I can write, you can tell me what yours is next. The biggest check I can write is $4 million.

Jason Lemkin
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 to, like, has to work. Will, yours is seven, 8% of your fund.

Yeah, that's a lot. Right? So it has to work. 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 ten, not only do I not have money, but maybe I can get Harry to do the deal with me. Right. But I have to believe it will absolutely crush it to do a ten, because then I got to 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 getting going, what do we get, 40 or 50 of these emails a week?

It's just easier to not respond or to be kind. Now, that same company, similar metrics, says, I want to raise, like, four to 5 million, or even they do something dumb like two to five, 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. If they're asking for ten 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 you have to check every single box. It's easier to just say, listen, this founder doesn't get it. I'm just the wrong match for that. This is unpopular. I don't like big ranges.

Harry Stebbings
Two to five. What you do with two is completely different to what you do. I said it intentionally. That wasn't a great answer, but I'll still engage. Now, if it's a third time founder and they're asking for two to five, I'm skeptical.

Jason Lemkin
If it's the first time they've raised any capital, they don't know. You got to cut people a little bit of slack. Four to five is better. Four to six is a good answer. Right?

Speaker C
How many Fonda meetings do you take a week? Try to do two. I try to interact for real with every single good email. Like, for real. That's good.

Jason Lemkin
But I try to do as much as I can. How many emails do you get a week? Two good ones. Really good ones a week. And if you're lucky, if you get an insane one a month.

Speaker C
Am I allowed to ask some really unfair questions now? Person, you can tell anything. How much does Sasa do in revenue? This will be our first crappy year. But, like 25 million.

Why is it a crappy year? This is the first year where we've just had so many unicorn sasters that imploded. So we probably lost 60 sponsors. 70, 80. Wow.

Jason Lemkin
Now, it's not that they're bankrupt, but lost them, and so that's a flat year for revenue or they'll be down. Do you think that is also because events are less exciting than they were? Like, events in SaaS used to be the thing. Now content is the thing. I don't.

Well, listen, it's a. If I'm pushing you like you. No, no, no. It's a nuance. It's a nuanced question.

Let me answer it at a tactical level. For revenue, it's mixed because on the one hand, every report I've read recently field is still 40% of all marketing spend field marketing. So the budgets are still there, but some people don't even want to deploy them. Okay, so that's one issue. Right?

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. 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 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 we've had to learn about this, but a lot of people just don't want to get out of the house. 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 to leave the home. I mean, we got in. It's funny. I'll tell you a little. It is tiny, but if you're.

This is a niche topic. Amelia, who runs a lot of Sasser 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 gonna argue. You have your 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 wanna come.

They wanted the benefits. They didn't wanna come. So all this stuff cuts both ways. And I think that we all kinda thought the world would pendulum back in certain ways. I'll say I don't know the answer.

Speaker C
And this is us. It's me being really unfair turning this into a show as well. But I'm like, I get the event strategy helps the investing strategy ten years. Ago, but I look, it never helped. I disagree with you there.

When you look at the founders having. A community help, there was no need to do an event. Then why do it? It is the hardest form. Like, content is so very hard.

You can write a Reddit in your own home with a coffee, and we can chat on a podcast from our own homes. Why do all this shit? I mean, I was walking around city with mom today and I said to her, God, I got a way better deal than Jason. This advanced business is hard. Two reasons.

Jason Lemkin
One does make a difference in a lot of people's lives, and you only have so many orbits around the planet. Maybe it's hard or the time RoI is tough. If you really can do something that other people can't do. Not people can't. Very few people can do an event for 15,000 people in the US, Harry.

Totally. And, you know, the classic Saul Maltman who was here thing, you know, saying, you know, his classic thing is say, do the things that other. That are easy for you, that are hard for other people. This is something that's hard for us, but much harder for other people. So one is we're good at it.

Two, it's impactful. And then the third one, this I learned from Aaron Levy. I asked him, I don't do very many podcasts, but I do a few, right? And the last few months I've asked people, why do you still do it? It's my opener.

I asked Jennifer Texada. I asked Aaron Levy. He said a bunch of things about AI in the future on this thing, but he's like, it's a jigsaw puzzle box is doing a billion ish a year a little bit more, right? 200 million goes to cogs to servers and support, and he's got 800 million to play with each year. And for him, he's like, this is what's interesting to me.

I mean, the technology is interesting, but it's a like, it's. It's engaging. What I mean is it's engaging. So putting together a jigsaw puzzle. You have a jigsaw puzzle at 20 vc.

You're putting this together all the time. So we don't always choose our jigsaw puzzles. And maybe in a. In a certain world, we would choose the easiest jigsaw puzzle. That's the simplest one.

But I think sometimes our jigsaw puzzles pick us. And what I do know is that I've never been depressed, but the closest I've been is the two times I sold my companies. So I would be reluctant to give up a jigsaw puzzle that we're good at. And what happens to Saster in 2025? You're saying at 25 million in revenue declined from last year.

Speaker C
What was last year's 30? Yeah, almost 30. What happens in 2025 is that reflate. You know, if you'd asked me in 2021, it would have. Not for myself, but for other people, I would have given you some bullish number just for the two troops.

Jason Lemkin
Here's the exact path to 100 million. And a lot of the. I don't know the answers today. I don't know all the answers. All the stuff we talked about today.

Speaker C
What's the marginal events business? I fast. Basically, you need to get above 20 to make money. But once you're above 20, then you start to get very high margins. But it's very high.

Jason Lemkin
So when you look at the public companies in the space, they do have, like 30% to 40% operating margins. You have to get above a $20 million nut to do it as a business. Right? Not that we started as a business, but you do have to stay above that. Right.

So you do 30 or 40, then it can be very lucrative. If you want to take cash out of the business, you could make a lot of money. The question everyone asks me is, like, financially speaking, are you a media company or are you a fund? And always push back incredibly fast and say, I'm a fund, leverage media to find great entrepreneurs and win the right to invest in them. Is that the same answer for you?

I think of Saster as a community first. I do think that that's powerful, but it's a little bit different than media. Right. If the only goal is to invest, then you don't want to put one more ounce of energy into marketing than you need to do to close the next figma. You don't want to do one more 20 vc podcast.

You don't want to do one more thing. There's not an infinite supply of figmas. Right. So if you view all of this as marketing for a fund, that's great, right? And certainly folks are much more aware of marketing for funds than they used to be, but you don't want to.

You could argue that. For me, I way cross the line. It's way too much time and energy just to try to make a couple of investments. How much time do you spend on the advanced business versus. On all community building versus investing?

I mean, this is a lot of detail. It used to be before 2020, it was actually more time because the team was terrible.

Oh, my God. Every week, terrible things would just happen. Like, we almost died. And, like, I mean, we had. We had one head of events who forgot to reserve the venue.

The convention center. She forgot to reserve it. Do you know how stressful that is? We can always redo the pod. How did you find out?

Like a lot of mediocre people, she hid it until the very end, until three months before she hit it. And then she said, I'm sorry. She never told anybody. Every year, I had multiple issues like that, Harry. It literally almost killed me.

Right. So actually, it used to take more time than it takes now. It was near death experience for you. What's that? What was the biggest near death experience that you remember?

We did lose $10 million in March 2020. We were the first major event shut down by Covid. RSA got done, and then San Jose shut us down when there was one case off the coast. So we lost Ditlo's 10 million. That was not the most stressful, but it was pretty.

It was pretty stressful. The woman forgetting to book the convention center was pretty bad. Have you become a better CEO over time? Oh, much worse. Why are you worse?

Speaker C
And then we'll do a quick fire. I care much more. I care, like, 20 times more about my team than I used to. But I can't bullshit anymore. I can't tell people it's great.

Jason Lemkin
Great job. I'm too transparent. I'm no bullshit. I used to be a pretty good team. Rallier.

Right now, I'm like, you want to work with me? Great. If you don't, the door is right there, and I'll pay you 60 days. But, like, I'm not going to convince you to work with me anymore. So there's a set of that kind of tools that I just don't have the patience for.

Right. Team rally or is an important skill. So, so important. When things were hard at Echo sign, I had. I had this huge thing on the wall, and it was our journey from one to 10 million ARR.

And I had this little animated guy, and I would just move it every week at our team meeting. 1.62.1. It was pretty funny. We'd move it up and I'd rally. Yeah, we're 3.182 million ARR.

And I cheer them and you just rally. It was such a great vehicle because it felt like it took fucking forever to go from one to 10 million ar. But today, no way. I could not do that. So I think about it a lot.

And the odd thing about Harry is just I actually struggle with this all the time because I care so much more about people now than I used to. So much more. Like, we had such a great sales team, you know, Sam Blonde, Sierra, Brex Jameson, who just left his svv sales at gong. So many folks. Like, most of those folks, I never even talked to him.

But I kept moving the thing up. The thing and bringing lunch in. That's what I did. Now I care so much more about every single person, and I think it might be a negative. Right.

Speaker C
We're gonna do a quick find, my friend. Otherwise, do a cool day. Sorry. You brought it up. No, no.

I love this. What's the best first founder meeting you've ever had? I will say the best founder meeting I probably had was with Parker Conrad in the beginning of zenefits. I introduced him to Sam Belon, and that's how I got going. Why didn't you invest?

Jason Lemkin
You know, I told him I would, and then he went and took the money from Andreessen. Would you have done it with them at 35? Yeah. I told him I would give him. I would do whatever he wanted.

He took Andreessen. That's okay. But I'll tell you why. Because that was the first founder I met. It was very early on.

I barely started investing where you could just see the future through the founder and those the meetings. Then you should never do anyone where you can't see the future through the founders. You're the founder of a SaaS company today. You can choose any board member. Who would you choose?

I think I'd pick Toby from Shopify. Cause I think he'd frigging kick my ass. We have too many founder friendly Yahoo. Great job. Harry's on boards.

I'm just so sick of it. Toby just seems like he just doesn't suffer fools. And maybe you don't want to work. Maybe not everyone would want to work for that. I would work for him.

I mean, I've never met him. Right, but that's what you want on your board. What are the first signs that are found as quiet? Quitting. Too many excuses for mediocre vps.

Too many excuses. Harry, my vp of sales, Jim. I mean, I don't. I know we only closed 8% the last couple quarters, but Jim's doing a fine job. When a founder has acquiesced, it's hard.

It is hard to rebuild the management team, right? Especially when think growth is slow. But when you've decided that's fine, when you've acquiesced to having a mediocre management team, it's. It's over. How you ever going to regrow if you're with a mediocre management team?

So when you start covering for a mediocre management team, I'm not saying fire them. That's a more nuanced topic. But if behind the closed doors of a board meeting, you're covering for mediocre vps, I give up on the founders. I almost instantly give up on the founders. Final one.

Speaker C
You need to have another bet. What do you fancy as the bet? Boy, I really blew the IPO one. I really thought I was right. That one was a whiffer, but I believed in it.

Jason Lemkin
I really thought there were so many folks at 200 million. I know. Cause you took a three x leverage on it. Yeah, I really thought I was gonna win. I really thought I was gonna win that one.

Speaker C
But listen, you met my mother this morning, said thank you for paying for a Christmas present. You're welcome. I'm good for it. What's the next bet? This is a tough week in SaaS to make the bullish bet.

Jason Lemkin
But the best bet is because we're all making it, is, you know what. What will multiples be at the end of next year? If we're going to a fourth year of crummy multiples, well, then we'll adapt. But that. That would be a bummer.

Right? But I got to quantify it perfectly. So we need to be in an eight X world. We need the median or average SaaS public company to be at eight x. Obviously some can drag it down, but the good ones will drag it up.

Right? So we're in a six x world today. 5.86 point. Whatever version you use, I think we need to be in eight X world for all this to be worth it. Let's do that as the bet average eight x end of 25.

I think I'm going to only bet you 20 grand on this one because I'm not sure. I was confident of the ipos. I was confident it would be an ipo a week in the second half of this year. This is my worst bet ever. Just gotta lose left and right.

There are reasons to believe that. The worst one, this one I just need. I want to believe. I need it to be true. And so you're going to take the over on that?

Yeah, I'll do 20 grand. That at 1231. At the end of 2025, we're back to an eight x world. Great. I'll take the under that.

Speaker C
Well done. Okay. Good job. Jason, thank you so much for doing okay. This has been so much fun and what a joy to do it in person.

Jason Lemkin
Yeah, it's great. It's great. It's great to be at the worldwide headquarters for 20 vc. What is it, about 100,000 sqft that we're at here? Yeah, something about that.

Yeah. The 50 analysts above look tired. You make them all work on Saturday? On Saturday, I don't know whether you're watching or listening, but there is an army. It looks like we're at point 72 or some hedge fund.

Up above there's literally. And there's no. Right down here it's nice, but up above there's no ac. And so there's like 100 analysts scouring scouring crunchbase for deals. Scouring them for deals.

You don't feed them, it's eat what you kill. Right? There's no salary. It's deal by deal. A half percent carry if you find a good deal.

And that's the way it's 100 up there. More nasty. Dude, you're a star. I have to say I just love hanging out with Jason. He is one of my oldest friends.

Harry Stebbings
They are always fantastic discussions. I want to hear what you think of this new style of show. So let us know on Twitter or LinkedIn. You can also watch the full episode. We recorded it live in the studio.

You can watch that on YouTube by searching for 20 vc. Again, I would love to hear your thoughts. What can we do to make it better? But before we leave you today, we're all trying to grow our businesses here. So let's be real for a second.

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This Week in SaaS: PluralSight Goes to Zero, Salesforce and Mongo Hit Hard, The Next IPO Candidates and How Do We Solve the Problem of Liquidity in Venture Capital

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