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This question originally appeared on Quora: What are some pivotal moments that every successful SaaS company has?
Answer by Jason M. Lemkin, partner @ Storm Ventures; ceo/co-founder @ EchoSign (acq'd by Adobe), on Quora
Here's my list, focused on the earlier-stages from nothing to success:
- The first 10 Unaffiliated Customers. This won't feel like much, but it's a big deal. You've gotten ten folks you've never met to actually pay for your product. This really is amazing. Amazing. It won't pay the rent. But it's amazing.
- The moment you realize you'll never get there. You don't have enough customers, paying enough, to even get big enough to pay all the salaries and build everything you need. This often happens around $5k-$10k a month in MRR. It's real, but you're not growing fast enough to ever scale to something sustainable. Sigh.
- When there is just way too much to do for every single employee and it's not worth it. This usually comes in the long march from $1m to $10m in ARR. Too many customers, too many feature gaps, too many DevOps issues ... but no extra engineerings, SEs, CSMs, etc. to handle it. Time to step it up here and build a real scaleable company, one way or another.
- When one great VP / employee leaves and you almost die. Later, there's fat. But almost everyone hits $1m or so in revenue, some time here, and a great, irreplaceable VP or employee leaves. You just are beside yourself. But then you find a way to build a better team after it.
- When the recurring lead machine starts to hum. Typically, this is around $4m-$6m in ARR, maybe later. It's when the mini-brand creates enough leads on its own, together with your marketing and SDR engine ... that you could pretty much take a month off yourself as CEO and all the leads would come in to hit your plan. This is a great thing. You can usually tell as the CEO starts to become visibily healthier in this phase (more fit, trimmer, better looking hair, etc.).
- When you could be cash-flow positive at any time. If it's true SaaS, this usually happens somewhere again in $4m-$8m range. Enough renewals are coming in, enough upgrades = enough cash. You may not be cash flow positive, but you could be.
- When there's finally fat in the system. This is often around $6-$8m ARR, sometimes higher. Now, you're big enough, you can hire extra people for every role. Great directors under great VPs. A whole extra team of developers, etc. No one person can bring the org down. And people can take vacations without the world potentially ending while gone. This really is better.
- When you can't be killed. This is often sometime around $1m MRR or so. You're big enough, your brand is well established enough, your management team is in the groove. Even if Google or Salesforce or whomever enters your space, they can't kill you. Even if your #1 competitor does something amazing, they can't kill you. Try to take a pause at this phase, and sign up for another 5-7 years if you can. Take a digital detox holiday. Whatever you need. 'Cause it's finally, finally really just getting good.
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