A Candid Conversation with Brian Halligan Chair and Co-Founder of HubSpot on CEO Comp Reality

We sat down on 20VC + SaaStr podcast with HubSpot co-founder and former CEO Brian Halligan for an unfiltered discussion about CEO compensation. What emerged was a masterclass in why our current approach is fundamentally broken — and what forward-thinking companies are doing differently.

“CEO comp is pretty broken at the moment,” Halligan said bluntly. “And there’s two things that I think are pretty broken about it.”

The conversation revealed insights that most compensation committees would rather not discuss publicly. But for companies serious about aligning leadership incentives with exponential growth, these uncomfortable truths are essential.

The $20 Million Problem That Doesn’t Matter

Here’s a thought experiment that’ll make your head spin: What if paying your CEO $20 million a year is actually… meaningless?

That’s the reality facing compensation committees today, especially when dealing with founder-CEOs who’ve already built significant wealth. Take Dylan Field at Figma — if you benchmarked his compensation against peers at similar market cap companies, he’d earn around $20 million annually. But here’s the kicker: that represents just 3% of his personal net worth. It literally doesn’t move the needle.

The core issue? We’re using outdated frameworks to solve modern compensation challenges.

The Two Fundamental Breaks in CEO Compensation

After analyzing hundreds of compensation packages across SaaS and tech companies, two critical problems emerge:

Break #1: The RSU Addiction That’s Killing Risk-Taking

The Old Days vs. Today:

• Pre-2006: CEO packages heavily weighted toward Incentive Stock Options (ISOs)
• Post-2006: Regulatory changes pushed companies toward Restricted Stock Units (RSUs)

“Everyone really relies heavily on RSUs,” Halligan explained. “And when I grew up in the industry — I hate to be that guy, like back in the old days — it was mostly ISOs. It was options until 2006 and regulations changed and the expensing of that changed. So the world kind of moved to RSUs.”

Why this matters: RSUs are essentially guaranteed money — they’re like options with a zero strike price. You get them regardless of performance (as long as you stay employed). This creates fundamentally risk-averse behavior.

“It just creates sort of a risk averse behavior in the CEO,” Halligan noted. “Like it’s basically cash comp goes up and down a little bit, let’s say, but an ISO you’re swinging for the fences like you got a strong incentive to swing and so it’s really had a dampening effect on the risk-seeking behavior of a CEO that I think more companies should want.”

The psychological impact is massive. ISOs forced CEOs to think like founders — your equity is only worth something if you create massive value. RSUs let CEOs think like employees — you get paid for showing up.

Break #2: The Peer Benchmarking Trap

Here’s how compensation committees typically work:

1. Identify 15-20 “peer” companies of similar size/stage
2. Target paying CEO at 75th percentile of peer group
3. Set compensation accordingly
4. Pat themselves on the back for being “market competitive”

Halligan walked us through the reality: “HubSpot’s got a compensation committee. Everyone’s got a compensation committee. And HubSpot wants to pay the CEO, let’s say, at the 75th percentile of what her peers make. And so we look at 20 different peers of similar size companies… And we peg her at that 75th percentile, which in her case is, you know, it’s 20 million bucks. A lot of money.”

The fatal flaw: This system assumes all CEOs have the same financial motivation profile.

“Now, if you did that for Dylan [Field], which would be in our comp group, similar market cap to HubSpot, he’d make 20 million bucks a year. But if you think about it, that’s less. That’s like 3% of Dylan’s market cap of his own personal net worth. It doesn’t move the needle an iota. It doesn’t matter at all to him.”

The Dylan Field Case Study: Getting Creative with Compensation

Figma’s approach to Dylan’s compensation package offers a fascinating glimpse into next-generation CEO comp design:

What they did differently:

• Heavy use of Performance Stock Units (PSUs) instead of traditional RSUs
• Compensation sized relative to CEO’s net worth, not just peer benchmarks
• Created a “$2 billion moonshot” structure (Elon Musk-style ambitious targets)

“And so, you have to get kind of creative,” Halligan observed. “And so, I actually like what they did with his comp. They use PSUs very heavily, not RSUs. And I like the idea of not pegging your comp to your peers, but you kind of have to peg the comp to the net worth.”

PSUs vs. RSUs — The Critical Difference:

RSU thinking: “Here are 10,000 shares, you get them no matter what”

PSU thinking: “Here are 10,000 shares, but you only get them if the stock hits $40”

PSUs effectively recreate the option-like incentives that got regulated away in 2006. You’re only rewarded if you create real value.

The Elon Precedent: When Traditional Benchmarking Breaks Down

Consider this absurdity: Mary Barra (GM’s CEO) makes $29 million annually. If you paid Elon Musk the same amount, would he care? Would it change his behavior or decision-making in any meaningful way?

Halligan put it perfectly: “Same thing with Elon Musk. Like if you paid Elon Musk, like Mary Barra, Mary Barra makes $29 million a year. Do you think Elon cares about $29 million? So you have to kind of comp it to the CEO’s net worth as opposed to just the peers.”

The answer is obviously no.

This illustrates why peer benchmarking fails for ultra-high-net-worth founder-CEOs. The compensation has to be scaled to their wealth level to create meaningful behavioral incentives.

Why Stock Price Triggers Often Don’t Work

Here’s where even innovative approaches can fail: Many PSU packages use stock price as the performance trigger. Sounds logical, right?

The trap: If you set these triggers before an IPO during a bull market, you might accidentally set targets that get achieved immediately post-IPO, negating the incentive effect entirely.

Real example: Dylan’s compensation triggers were reportedly achieved shortly after implementation, essentially converting the PSUs back into guaranteed RSUs.

The Broader Strategic Implications

This isn’t just about fairness or optics — it’s about optimizing for the behaviors that drive exponential growth:

Risk-seeking vs. Risk-averse CEOs:

• ISO-heavy packages = More likely to pursue bold product bets, aggressive expansion, transformative M&A
• RSU-heavy packages = More likely to optimize for steady, predictable growth

For B2B and SaaS companies specifically:

• The difference between 25% and 40% annual growth often comes down to CEO risk tolerance
• Compensation structures directly influence willingness to invest in unproven channels, new markets, or breakthrough product development

A Framework for Better CEO Compensation

Based on these insights, here’s a more effective approach:

Step 1: Assess CEO Financial Context

• Current net worth and liquidity
• Wealth concentration (how much is tied to company stock)
• Personal financial obligations and lifestyle

Step 2: Design Incentives That Actually Incentivize

• Use PSUs with meaningful performance hurdles, not RSUs
• Set triggers based on business fundamentals, not just stock price
• Size compensation relative to CEO’s wealth, not just peer benchmarks

Step 3: Align Timeframes with Value Creation

• Multi-year performance periods for long-term thinking
• Clawback provisions for unsustainable short-term gains
• Vesting schedules that reward sustained performance

Real-World Case Studies: How Top B2B and SaaS Companies Are Solving CEO Compensation

The theory is one thing, but how are leading public companies actually designing compensation packages today? Here’s what our research uncovered:

The Salesforce Shareholder Revolt: When $39.6M Isn’t Enough

Marc Benioff’s 2024 compensation package of $39.6 million was rejected by shareholders in a rare display of compensation skepticism. Despite board recommendations, 53% of shareholders voted against the plan, largely due to concerns over a discretionary $20 million equity grant awarded in January.

What made this interesting: Benioff already owns over 2% of Salesforce (valued at $6 billion), yet advisory firms like Glass Lewis argued the additional PSUs were “unwarranted” because his interests were already aligned with shareholders.

This perfectly illustrates Halligan’s point about compensation needing to be sized relative to CEO net worth, not just peer benchmarks.

ServiceNow: The $38M “Moonshot” Structure

ServiceNow CEO Bill McDermott received $37.56 million in 2024 total compensation, with the vast majority ($31.46M) coming from stock awards. But the structure is what’s fascinating:

The Innovation: Heavy use of PSUs tied to long-term performance metrics rather than just stock price triggers. McDermott’s package reflects his track record of taking three companies through successful exits and massive value creation.

The compensation represents a premium to industry median ($17M for similar-sized software companies) but is justified by ServiceNow’s 149% three-year shareholder return and consistent 20%+ revenue growth.

Snowflake: The $108M Monthly Payout Model

Perhaps the most extreme example of creative CEO compensation was Frank Slootman’s Snowflake package, which awarded him options worth more than $108 million each month for four years, totaling approximately $5.2 billion by early 2023.

The Structure:

• 13.7 million options with $8.88 strike price
• Monthly vesting over four years
• $375,000 base salary (minimal compared to equity upside)

The Results: Slootman took Snowflake from a $3.5 billion private valuation to nearly $110 billion at peak, justifying the enormous equity package through value creation.

Workday: The Leadership Transition Model

Carl Eschenbach became sole CEO of Workday in February 2024 after serving as co-CEO, representing an interesting approach to succession planning and compensation design.

The Approach: Rather than traditional benchmarking, Workday appears to be designing compensation around leadership transitions and AI-focused growth strategies, with Eschenbach’s background in scaling enterprise software companies.

MongoDB: The Performance-Driven Minimalist

Dev Ittycheria’s 2024 compensation of approximately $15.3 million consisted of just a $400,000 base salary (3.2% of total) with the remaining 96.8% in performance-based equity.

The Philosophy: MongoDB emphasizes pay-for-performance alignment, with annual bonuses based on corporate performance goals and a maximum payout of 150% of target for exceptional results.

This represents the extreme end of the “skin in the game” philosophy, with minimal cash compensation and maximum equity alignment.

Three Emerging Patterns in Modern CEO Compensation

From these real-world examples, three clear trends emerge:

1. The “Shareholder Skepticism” Factor

Traditional peer benchmarking is increasingly questioned by shareholders and advisory firms. Companies can no longer assume that “market competitive” packages will be approved without scrutiny.

2. The “Value Creation Multiple” Approach

The most successful packages tie compensation directly to measurable value creation rather than tenure or traditional metrics. Slootman’s monthly option grants and McDermott’s performance-based structure both reward executives for genuine business building.

3. The “Founder Economics” Challenge

For founder-CEOs with substantial existing wealth, traditional compensation approaches become meaningless. The industry is still experimenting with how to create meaningful incentives for executives who are already worth hundreds of millions or billions.

The Verdict: Evolution, Not Revolution

The data reveals that CEO compensation isn’t broken in the way most people think. It’s not about amounts being too high or too low—it’s about the industry slowly evolving from outdated frameworks toward more sophisticated alignment mechanisms.

The companies getting this right are the ones asking better questions: “What behaviors do we want to incentivize?” rather than “What do our peers pay?” and “How do we create meaningful upside for someone who’s already wealthy?” rather than “How do we hit the 75th percentile?”

The Path Forward

For compensation committees: Stop defaulting to peer benchmarking as your primary framework. Start with the question: “What compensation structure will drive the behaviors we need to achieve our strategic goals?”

For founder-CEOs: Be transparent with your board about what actually motivates you. A $10 million package that drives the right behaviors is better than a $30 million package that doesn’t.

For investors: Pay attention to compensation design, not just compensation amounts. It’s a leading indicator of management’s risk tolerance and growth ambitions.

The Bottom Line

CEO compensation isn’t broken because we’re paying too much or too little — it’s broken because we’re not paying for the right things in the right way.

The future belongs to companies that master this evolution. The rest will continue optimizing for mediocrity while wondering why their “competitive” packages aren’t driving competitive results.

Run toward bad news

Sometimes you need a moment. That's OK. But after that, hiding makes it worse.

Process it … Then:

Address it
Share it
Talk about it
Make a plan
Act on it

Your team and investors will rally

— Jason ✨👾SaaStr 2025 is May 13-15✨ Lemkin (@jasonlk) April 24, 2025

The past 12+ years I’ve had a chance to observe a lot of SaaS founders, as an investor, as an advisor and more … and the vast majority I’ve worked with have in the end just killed it.  Gone on to bigger and better things.  Five of the first six VC I investments I made became unicorns.  Three sold at billion+ valuations.  Many are just getting going.

But … it’s never all roses.  We know this.  And in fact, many, if not most, of you will have a Year of Hell.  And right now for some of you can be extra stressful, given the challenges in venture and the public markets at the moment.

And one thing I’ve observed is many founders and CEOs don’t handle bad news the right way.  In the early days — probably most.  I wasn’t perfect either, I went too far on the transparency side, and maybe spooked my investors a little too much some times. 🙂

But hiding the ball can end up being a disaster.  Even best case, it creates anxiety.

Here’s behavior I’ve observed:

• Investor updates are delayed, or never sent, in bad months.
• Strategic changes aren’t communicated before they are executed.
• Informal meetings and catch-ups stop or aren’t scheduled in rougher times.
• Rough months and quarters, and challenging metrics, are glossed over.

This may be natural for some of you.  But let me tell you it’s a terrible idea.

Everyone that’s been around start-ups knows there are ups and downs.  We expect it.  And investors especially expect it.

What people don’t expect is not getting a heads-up on the unexpected.  Ideally, an extremely thoughtful one.  

Then, confidence evaporates.  Investors stop boasting about their investments.  The Next Investors get nervous when they don’t see unqualified support.

And the ‘confidence’ game then all falls apart.  Because the rough quarter wasn’t communicated and managed right.   Everyone in SaaS — everyone — ends up with a rough quarter.  Maybe even really, a Year of Hell (more on that here).

If you are not just transparent, but consistently transparent — you’ll get through it.

So this is a simple post, but so many founders get this wrong.  Let me summarize what to share in tougher times:

• Make sure everyone that is going to be an important advocate for you in the future — investors, key advisors, board members, etc. — gets a crisp and prompt monthly update, always.  Always.  Do not delay in bad months.  Don’t let it stretch past the 10th of the month … especially on bad months.  I see way too many founders skip, or slow down, their updates when times are tough.  This is backwards.  It completely undermines confidence.  Everyone notices when the updates stop.
• Meet all your key stakeholders and champions every quarter, at least on Zoom.  This is more than just an obligatory board meeting.  Do a Zoom at least once a quarter, as a group or individuals, with all your key investors and allies.  And don’t leave behind your third or fourth largest investors, just because they aren’t on your board.  They can often be your biggest advocates and champions.
• Don’t explain it after the fact.  Great founders can always see it coming.  Always explain the stumble even before it shows up.  And tell us what you are doing to mitigate it.  Investors, employees, really all start-up people are wired to take some tough news.  But there’s no reason to not hear about it when it happens.  In fact, since revenue recurs in SaaS, everyone should hear about bad news before it materially impacts your MRR.
• Don’t dismiss concerns folks have or tell them “I told you about this issue”.  That not only doesn’t help, it dis-instills confidence.  Weak CEOs and founders consistently dismiss concerns from their team and investors by saying I Told You So.  Well, if you’d told everyone so properly, AND had a plan to do something about it, there would have been no reason to say so.
• When you have a stumble, dispassionately and logically re-forecast.  When is our Zero Cash Date now?  Does this change when we get to $2m or $5m or $10m ARR?  Does it change anything fundamental about what we are doing?  This will install an almost unimaginable amount of confidence.  But if your investors, team, board members, etc. have to try to re-forecast on their own — they’ll quickly lose confidence in your ability to do so.
• Know the current funding landscape cold.  You should know if you are fundable or not at the moment, and what to do about it.
• Don’t take any criticism personally from investors.  Or really, in general.  You’re the founders.  It’s your job to take it.  But understand especially VCs can be pretty direct.  I know personally, I’ve gotten even more direct over time.  Listen, be thoughtful, and realize there’s usually at least 1 germ of truth in that tough criticism from investors.
• Force your VPs to come up with a plan to improve if they haven’t already (and the best ones do this on their own).  Don’t let them blame others on the team, or holes on the org chart.  Every functional area can always improve.
• Again, how will we do better going forward?  This is what everyone wants to know.  If you aren’t 100% sure how to do much better going forward, at least explain how we are going to do a bit better in the future.  That’s often enough for now.  There just has to be a plan now.

Everyone — your team, your investors, your advisors, your customers — is making a long-term bet here.  Everyone expects a few bumps, and maybe even, one really tough one every few years or so.

So just … EXPLAIN IT TO US.  Tell us what happened, and why, before we even see it coming.

As Todd McKinnon, CEO of Okta said at SaaStr Scale: “99 times out of 100, Truth is Your Friend.”

Great founders see the future.  Just make sure we all know that — all the stakeholders.

If we know you can truly see the future, and it’s still a bright (and data-driven) one — then we can take some interim bad news.  Really, we can.

If Times Are Tough — Don’t Hide. Be Present.

The best VPs can recruit in ways I barely understand

You need someone for a key role? They somehow have 2-3 strong candidates in a week or two

This is so, so hard

But the very best VPs make it somehow look almost effortless

It's also the only way to scale

— Jason ✨👾SaaStr.Ai✨ Lemkin (@jasonlk) January 13, 2025

It’s a bit of a bummer that oftentimes, once you finally hire a few great VPs at $1m, $2m, $3m ARR … and they do a great job … that they then don’t scale.  They don’t turn out to be the right folks for the next level (as you approach and pass $10m ARR) and beyond.

A few signs I see again and again of VPs that can’t scale beyond $5m-$10m ARR:

#1. Lack of organization.

You can get to $5m ARR, maybe even $10m ARR, being only sort of organized. After that, though, you really have to get organized as a VP. Either by yourself, or with a Rev Ops / Marketing Ops / Some Sort of Ops leader under you. Look for dashboards, strong project management, strong pipeline projection after $5m ARR. If you don’t see things getting more organized, that manager can’t scale.

#2. Inability to Hire Great Directors and Managers Under Them.

To scale as a VP, you need to find a way to recruit folks better than you and, in some cases, more experienced than you — as your reports.  As your directors and then VPs under you.  Even by $5m-$6m in ARR, the best managers have already begun to recruit great managers under them. Not mediocre ones. If you hear a lot of excuses about how their managers perform, it isn’t working. If you see too many weak and inexperienced managers being hired under her/him, it isn’t going to scale.

#3.  Only Hire Folks that Look, Act, and Talk Just Like Them.

Hiring your friends, and folks like them, can work OK in the early days, if your friends are pretty good at what you do. But it doesn’t scale. You need a village, a diverse one of all types, to scale.

#4.  Fear of Large Numbers.

Yes, the number gets bigger every year and every quarter in SaaS. It has to. The top leaders that scale embrace it. If you had a record $1m quarter last year, you may need a $1m month this year. And later, a $1m week. That can be very intimidating to those that can’t scale.  If you start hearing too many excuses about how big the number has gotten, that’s a sign.  A little if this is OK.  Too much isn’t.

#5. Threatens to Quit if You Talk About Bringing in Someone As Their Boss.

This is a tough one, but the best managers get that if they can’t scale, you’ll need to bring in someone that can. They get it. In fact, they say the same thing to their managers. If by contrast, a VP threatens to quit if you ever bring in a CRO or SVP above them, that’s a sign.

#6. Things Have Flattened in Their Functional Area for 2+ Quarters.

Everyone has a rough quarter.  But if bookings don’t increase materially in 2 quarters, your VP of Sales has reached their limits.  At least, without a boss helping them.  Same with lead gen, story points, etc.

If you see too much of this, start recruiting a VP Sales / CRO for the next stage.  This doesn’t mean moving on from the current VP.

It may instead mean hiring an SVP or CRO or CMO to help them get to the next level.

A great deep dive on this with the CRO of Owner here:

And a bit more here: Around Year 5, You’ll Have to Build Your Third Management Team | SaaStr

The best VPs can recruit in ways I barely understand

You need someone for a key role? They somehow have 2-3 strong candidates in a week or two

This is so, so hard

But the very best VPs make it somehow look almost effortless

It's also the only way to scale

— Jason ✨👾SaaStr 2025 is May 13-15✨ Lemkin (@jasonlk) January 13, 2025

Perhaps the single most important thing you can ever do in SaaS, at least after $1m in ARR or so, is hire the best VPs you can.  We’ve talked a lot over the years about how not to hire a wrong VP of Sales — 70%+ of the first VPs of Sales don’t make it even 10 months.

But there’s a related, larger issue for basically all your first VPs of Every Area.  You’re probably going to hire 1-2 VPs that themselves are smart, driven and successful — but that can’t themselves hire great people under them.

This is something you have to be hyper-aware of.  Because sometimes, these VPs That Can’t Hire are super smart, super engaging, and super competent.  You may really like these candidates.  Up-and-comers are a powerful force to tap into.  You need to hire up-and-comers.

But you have to do more diligence to believe it’s not a stretch too far.  Don’t just check who they managed at their last company.  Check who they hired.  Not inherited as a manager.  But hired themselves.  And make sure they hired at least 2 good folks.  And ask to talk to both of those 2 great hires.  And figure out if they really are great:

• For your prospective VP of Sales, did her top 2 hires at least crush it and blow out their quotas?  If they didn’t …
• For your prospective VP of Product, did her top 2 hires ship amazing software?  Can they explain every facet of how their best, and worst, features came into the world?  If they can’t …
• For your prospective VP of Engineering, were her top 2 hires just jaw-droppingly good?  You or your CTO can figure this out.  Talk to them.  Not over Slack, not over email.  Talk.
• For your prospective VP of Marketing, did her top 2 hires deliver leads?  For real?  How many?  Did they grow month-over-month?   Find out.  For real.
• For your prospective VP of Customer Success, did her top 2 hires generate net negative churn?  Drive up NPS and CSAT?  Drive down absolute churn?  Get on jets?  Get at least 2 badges (more on that here)?  Which badges?  What was the top customer they saved, and the top customer they lost?  What’s the story here?  Do you feel like you’d be lucky to have these 2 work at your company?

Most founders don’t go the extra yard here in talking to their prospective VPs’ two best hires.  And you end up with hires that can’t recruit great people.  Not because they aren’t smart, or weren’t great Individual Contributors, or even great team leads.  But because they’ve never truly recruited someone great before.  95 times out of 100, that’s not a risk you should take.

This is job #1 for all your VPs.  Recruiting.

You’ll feel the pain fastest with a VP of Sales that can’t hire, because they’ll miss their number quickly. The impact for a VP of Product that can’t hire will be more delayed. It may take 6+ months, and several releases, to fully manifest itself. A VP of Marketing that can’t hire will hire terrible people — but it may take you a while to see it if they aren’t judged quantitatively. So the tangible effects of a VP That Can’t Hire may take you from 45-180 days to see, based on position.

But it will wreck you as you scale. Yes, maybe you can backfill a few hires. But not all of them.

So my first piece of advice is go the extra yard in recruiting. Talk not just to the VP’s references, but to the top 2 direct reports that they hired.

Did they really hire at least 2 great reports? Oftentimes, they didn’t. And if they did — are they really great? If they can’t find you 2 great ones to talk to — that’s a huge flag

My second piece of advice is top (i.e., hire above) these VPs That Can’t Hire fast if you do end up hiring them.

If you ignore the advice, or take it but ignore the results, and do hire a VP That Can’t Hire … so be it. But as soon as you see they are unable to hire even one great report – don’t wait for the 3d failed hire. Top them then and there. That doesn’t mean fire them. But you have to hire a real VP. Who will be their boss.

You’ll need a Real VP that can recruit great people.  Not just whomever will join them.

Dear SaaStr: Is it True VCs Don’t Like to Invest Where Founders’ Equity is Fully Vested?

Yes, it’s true but …

#1.  VCs Are Less Rigid Here Than They Used To Be

If all founders started off with 10-year vesting,

I suspect this would reduce and minimize like 50% of co-founder issues

* It forces you to have the tough conversation up front
* It protects the ones that stay from the ones that quit
* It better aligns expectations

— Jason ✨👾SaaStr 2025 is May 13-15✨ Lemkin (@jasonlk) July 30, 2021

If you are reading this, you’re probably up for that 7-10+ year commitment, assuming you’re fortunate enough to get there.> But what about your prospective co-founders?

Are you all sufficiently committed enough to make it in SaaS, over the extended term?  You guys can talk about it.  And say all the right things.

Per Carta, 25% of co-founders leave at least by Year 4:

Not you?  Here’s the thing: do you know for sure?  As Mark Suster wrote a while back, the #1 thing founders privately tell him is they got this wrong.  They thought they had a cofounder that would stay and go the distance.  But they were wrong.

So I’ve got a simple test for you.  For you and your co-founders in SaaS at least, do this with your founder stock:

• An 8-10 year vesting schedule (not the traditional 4), with
• A 1 year cliff starting 12 months after you close seed funding, or launch of MVP — whichever comes later.  (I.e., if you leave before those 12 months, you leave with 0 shares.  Zero).
• No vesting at all for all the hard work you’ve already done prior to that cliff.  None.
• With full acceleration / 100% vesting if terminated after an acquisition (so-called “double trigger”).

Ok, what does this do?  Well, it will force you all to have an honest conversation.

Because it’s perfectly aligned with the 7-10 year journey in SaaS.  With the fact that there’s no tornado, no viral explosion in SaaS.  There’s not going to be any Instagram insta-hit.  That’s there’s zero value in SaaS until you’ve at least built a real business, with real customers.

>> If your co-founders all agree to this, intuitively and quickly — including yourself, no exceptions — I’d argue you’re on the right path, as a team.  And if for some reason someone later then doesn’t work out, and steps off — all or most or at least enough of their equity will come back in the right ratio relative to the journey.

[Note the acceleration in acquisition won’t really matter too much — all this can and will be renegotiated in any acquisition.  But it doesn’t hurt and will make you feel better, that if for some reason it’s out of all of your hands — you’re no longer in charge of the journey, because you’ve been acquired — you at least have nominal protection then.]

But …

If you can’t all agree to this.  To take the modest risk inherent in this schedule, to the compounding, to the longer-term journey … Then it just isn’t going to work out, as a team.

Don't pick a cofounder that

– has something better to do
– wants to see how it goes
– has a clear backup plan
– sees it as risky
– argues over who should be CEO
– doesn't 100% believe

You'll see

— Jason ✨👾SaaStr 2025 is May 13-15✨ Lemkin (@jasonlk) October 7, 2024

>> In that case … Fix it now.  This simple test will likely ferret it out, if your team isn’t committed enough for SaaS.

Anyone that fails it should move from founder status to early employee, with commensurate economics.

I remember when 8 months in, with 5 months of cash left, my co-founder walked out the door and didn't return

And I didn't really know how to build software

Yes, we survived. Yes, in the end, we pushed through.

But pick your partners wisely.

We never really got that time back

— Jason ✨👾SaaStr 2025 is May 13-15✨ Lemkin (@jasonlk) October 16, 2020

Dear SaaStr: What Are The Unspoken Downsides of Being a VC or Angel Investor?

Look the downsides are small folks.

As a founder, you are often days away from total failure.  This basically never happens for VCs, and even when it does, it happens over a decade+ (life of a fund).

But. Some non-obvious ones to outsiders, some downsides to being a VC:

• You’re just a number. As a founder, success matters, but on many levels. On how happy your customers are. Your team. Your impact on the market. As a VC, one number matters. Your returns.
• It’s kinda gossipy. Not a big deal if you are top decile. But there’s quite a bit of gossip around who can’t raise a fund, who did bad deals, etc. etc.
• Partner disalignment is unavoidable at most VC firms. At most bigger, older firms, the partners are a cumulative assemblage of individuals over many years that probably wouldn’t assemble this way today. It’s just a byproduct of layered partnerships and how VC firms come together over decades and source LP capital. It’s just … different. Than being co-founders.
• Power law behavior. Once a fund is much larger than $100m-$150m or so, you need Unicorns to make real money. More on why that is here: Why VCs Need Unicorns Just to Survive This sort of de-sensitizes you to startups that can’t become Unicorns, and to any of their sub-Unicorn concerns.
• It’s “small”. Most smaller VC firms just have a couple of investing professionals. Maybe even one. It’s not necessarily lonely, because you tend to co-invest with other investors and that can be a lot of fun, because it’s a share journey. But most VC firms are “smaller” than even the smallest start-ups.
• Lots and lots and lots and lots of meetings. This can be hard for founder/CEOs going into venture. Meeting with great founders is always great. But the other 20 meetings. Not so much.
• Harder to start your own firm than you’d think. There is a recent explosion of micro-VCs and new firms, but most of them, the principals already have strong track records and brands. It’s much harder to start even a very small new VC firm than you’d think. And the economic returns of very small funds aren’t always all that attractive.
• Deal flow is stressful, and weird. Almost every VC, even the very best, lacks a surplus of A++ level investment candidates. Every investor can meet with an infinite number of B+ start-ups, and even, plenty of A- ones. But the true A+’s … there are only so many. And if you don’t want to lower the bar just a smidge … it’s hard. And if you don’t have a strong brand AND source of founder intros … how do you really get the best ones? You know. You don’t. And even if you do. There aren’t enough of them. It’s sort of low-level, constant, semi-latent stress here. Not daily stress. But constant low-level stress.

Most of the top VCs I know sit in the lobby until the founder takes their term sheet. Sometimes for hours.

Or sit on the chair outside their desk or office and just wait until they will meet

Or wait in the parking lot

It's a business of hustle

— Jason ✨👾SaaStr 2025 is May 13-15✨ Lemkin (@jasonlk) March 31, 2025

Beyond all this, one thing to keep in mind. VC can look lucrative when you are a first-time founder without any savings in the bank. It did to me. And it can be lucrative, and at bigger VC firms, the salaries are high.  More on that here: Why if You are a VC You Should be Insanely Rich

But … the very best founders, the very best ones … can make much more money. With a bigger and better team. And more control. And in the end, matter more.  Change the world.  Being founders.

Dear SaaStr: What Are Great Examples of Fast Follower Companies That Become Market Leaders?

In many ways, All of Them.

• Microsoft. Bought 86-DOS, turned into MS-DOS (which Gates did not invent), which in turn was an improved clone of CP/M. Did not invent BASIC, either. Office in many ways built in part on top of Lotus 1–2–3’s success. Windows after/alongside Mac OS. Etc. etc. etc.
• Facebook. MySpace, Friendster, whatever.
• Google. Yahoo, Altavista, whatever.
• Salesforce. Maybe not a fast follower, but already Siebel Sales.com, etc.
• Apple. Copied Xerox, Altair, everything.
• Square. Very innovative, but a mobile PayPal, etc.
• Zoom.  More a slow follower, but still.
• HubSpot, Marketo, etc. Neither invented the space.  HubSpot’s original CRM was in many ways a clone of Pipedrive.
• Slack. Very innovative, especially in integrations. But we had so many point solutions before, and since.
• Datadog.  Datadog caught up with and blew past New Relic.  Even though in its day, New Relic was just as beloved.
• Almost everything in cybersecurity.  New vendors, new approaches, but the threats are evergreen 😉

This may not be 100% fair and certainly is an over-simplification.   And OpenAI launching ChatGPT first certainly created a huge tidal wave the likes of which we haven’t seen in a generation, even if it was in some ways an unexpected one at first.

A lot of people hate email.

We love it. It's your passport to the internet. Your life's history.

And it can be so much better. https://t.co/1k9k6vAMcQ

— Notion Mail (@NotionMail) March 3, 2025

But in general, software is about innovating by copying what works, but doing it a lot better, and taking advantage of paradigm changes (AI, Cloud, Mobile, etc.).

This is why you can start a lot of startups pretty green and young.

Even if you really do something brand new, you usually still copy UI/UX elements and paradigms that are already well-proven.

In fact, 70% or so of public SaaS companies are “just” new versions of older categories and products.  Perhaps AI will change this, at least a bit.

More on that here:

About 70% of SaaS Public Companies Are New Versions of Existing Categories of Software (Updated)

Dear SaaStr:  What’s the Harder Part About SaaS Companies, At Each Stage?

The hardest part changes every 12–24 months, and the whole company changes every 30-36 months or so.

But a few thoughts on “the hardest part” for the first few stages:

• From $1-$100k in ARR, the hardest part is often how little revenue you get from each customer. Most SaaS products are inexpensive. You work so, so hard to close 100 customers … at $10/mo/customer … and that’s only $1,000 a month! Not enough to pay even a single salary. So much work, so little revenue.
• From $100k-$1m in ARR, the hardest part is how slow it is. For a few high fliers in AI, it may be different.  But for everyone else, this stage … just seems to take too long to get anywhere. Yes, you now know how to make customers successful and happy now. But it is so slow. You have 2,000 customers now. But at $10/mo, that’s still just $20,000 a month. Enough to pay some salaries and AWS bills, but it’s not that much. And each month, you barely add enough new revenue to hire just one of those great engineers you need.
• From $1m-$10m in ARR, the hardest part is you don’t have enough people or patience. You finally sort of get the formula working, but you need 2x-4x the number of people you can afford, or even find.
• From $10m-$40m in ARR, the hardest part is growing fast enough. At this point, your customers start to generate most of your growth going forward, and you know you’ll grow X% a year, more or less. The hard part is growing 20% faster than that. So much work and stress to grow a smidge faster.
• From $40m-$100m in ARR, the hardest part is rebuilding the team. Again. And human churn. Here, you often have to start hiring B players because you just need so many people. And team members start to leave routinely. Your life becomes all about recruiting, even more than it was. It’s harder to find that Magical VP that can make a huge difference. You start making up for it in volume — with headcount.
• At $100m+ in ARR, the hardest part is you have to add a Unicorn each year.  And that often means adding entirely new products even bigger and more complex than what you’ve already built. If you are at $100m in ARR, and your goal is to grow $50m next year … that’s an entire, new, super-successful start-up itself! The absolute numbers begin to weigh on you after $100m+ in ARR. It’s just so much revenue to add in absolute terms.
• At $1B+ ARR, the hardest part is you have to be so Multi-Product that you are really running 2-5 SaaS companies.  Something it took us a while to figure out.

A related post here:

6 Things in SaaS That Are Only Obvious At Scale

Dear SaaStr: Should SaaS Startups Really Have CROs or COOs? Is That Too Many Management Layers?

A few years ago, I would have said No. There’s no way a SaaS startup needs a “CRO” or “COO” or other C-level Officers Without a Clear, Single Functional Area to Own Until $40m-50m+ in ARR.

But … like many things … my views have evolved 🙂

"The Rise of CRO: The Challenges of Unchecked Growth" @davegerhardt + @jasonlk pic.twitter.com/VL3S6MAFOw

— Jason ✨👾SaaStr 2025 is May 13-15✨ Lemkin (@jasonlk) June 11, 2024

Three trends have fueled the rise of hiring COOs and CROs closer to $10m ARR than $50M ARR:

• Faster Growth. If you are growing 40% at $10m in ARR, a COO may be a luxury. If you are growing 150%, it may be a necessity to get help in ASAP to run a material part of the business.
• Specialization. As we’ve all gotten more experienced in SaaS, we’ve specialized more. If your VP of Sales is your closer, you have a VP of Accounts, and a VP of CS … who is going to manage them all? CRO. You want each revenue leader doing what they do best. Not trying to manage departments they have less passion for and/or that distract from their core goals.
• Veterans. We now have a lot, lot more veterans in SaaS than we did 5–10 years ago. A great VP of Sales who took a company from $1m to $50m may want to try CRO now. Similarly, a VP of Product might want to own more as COO. If you get a great veteran that really has passion for a startup, and you are at $5m-$10m+ ARR … maybe carve out a portion of the company for her to run. COO or CRO are two good ways to do this.
• Title Inflation.  So many folks that would have been fine being a VP of Sales a few years back just want to be a CRO today.  You can fight this, or you can acquiesce.  Sometimes it’s easier to not fight it.

I’m having to update a lot of classic SaaStr posts on “VPs of Sales”

Why?

🎩 Title inflation

They are all “CROs” today

But it’s fine — if they’ll still do sales.

— Jason ✨👾SaaStr 2025 is May 13-15✨ Lemkin (@jasonlk) February 23, 2025

Nowadays, I like to see the conversation start as you approach $10m ARR, especially if you are growing quickly (>100% YoY). Is there a great #2 you could bring in? If so — let’s go find them!

(image from here)