Jul 1, 2015 · 23m · 20vc
20 VC 050: Starting, Building and Selling in SaaS with the King of SaaS, Jason Lemkin, Managing Director @ Storm Ventures
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In the 50th episode of The 20 Minute VC, host Harry Stebbings interviews Storm Ventures Managing Director Jason Lemkin on the mechanics of building, scaling, and investing in high-growth SaaS startups. Drawing from his experience founding EchoSign and SaaStr, Lemkin shares tactical insights on founder dynamics, valuation metrics, M&A timing, and go-to-market playbooks.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 23.3% of the talking time here. How this is scored →
Harry as informed peer 4.2 Guest teaching 5.0 Guest disagreement 2.7 Harry pushing back 2.8
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 16:28 Rejecting Sales Innovation Premise
Lemkin directly rejects Stebbings' premise about SaaS customer acquisition innovation, arguing that sales playbooks are standardized and innovation belongs solely in product.
Hardest push from Harry ▶ 7:20 Calling Out Exit InconsistencyStebbings immediately challenges Lemkin after he advises founders never to sell at $1M MRR, pointing out that Lemkin did exactly that with EcoSign.
Biggest teaching moment ▶ 10:50 Redefining TAM and Market PotentialLemkin educates Stebbings on how disruptive SaaS companies like Slack expand market size beyond historical TAM, warning that evaluating SaaS by past market data is a sucker bet.
Harry holds his own ▶ 11:55 Citing the SaaS 40% RuleStebbings demonstrates solid SaaS financial acumen by citing the 40% rule to test whether Lemkin's investment criteria align with standard industry benchmark metrics.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Welcome and Interview Opening Remarks | 2 | 3 | 1 | 0 | Stebbings opens with standard biographical questions about Lemkin's career and SaaStr blog. Lemkin explains his VC recycling background and how corporate social media restrictions led to his posting on Quora. | |
| Scaling SaaStr to One Million Monthly Views | 4 | 5 | 2 | 6 | Stebbings presses Lemkin on why he sold EcoSign right after Lemkin strongly advised founders never to sell at initial scale. Lemkin acknowledges the contradiction, explaining the post-2008 economic climate and smaller market context at the time. | |
| Evaluating SaaS Valuations and Unprecedented Growth Trajectories | 6 | 6 | 4 | 5 | Stebbings demonstrates financial fluency by raising SaaS valuation concerns and invoking the rule of 40%. Lemkin reframes TAM calculations around Slack and dismisses the 40% rule as overly clever rules-of-thumb meant to excuse slow growth. | |
| Identifying Exceptional SaaS Founders and Investment Diligence | 5 | 5 | 1 | 2 | Stebbings guides the conversation into founder selection and diligence workflows. Lemkin explains his method of evaluating founders who are better than him and doing thorough pre-meeting diligence. | |
| Unicorn Ambitions and Standardizing the SaaS Go-To-Market Playbook | 5 | 6 | 5 | 3 | Lemkin rejects Stebbings' premise that SaaS startups are innovating in go-to-market strategies, asserting that sales playbooks are standardized. Stebbings probes on contract values and unit economics across enterprise versus low ACV models. | |
| Quickfire Round: Book Recommendations, Industry Predictions, and Resources | 3 | 5 | 3 | 1 | Stebbings conducts a quickfire question round covering predictions and resources. Lemkin gives candid assessments of Apple Music and uses Shel Silverstein's Lafcadio to explain market creation philosophy to founders. |
Statements from this episode (18)
Lemkin prepared 100 SaaStr blog posts before leaving Adobe
“And then the day I left Adobe was the day of the first blog post on SaaS. I already had a hundred in the queue, so.”
Lemkin: SaaS valuation multiples doubled between 2011 and mid-2015
“Multiples were about half of what they are today”
Lemkin: SaaS startups reaching $10M ARR cannot be killed
“Once you hit what I call initial scale, when the business, it's usually around a million a month in recurring revenue, or maybe ten million a year, 800 K a month in recurring revenue. Once you hit that, you can't be killed in SaaS. You cannot die. You cannot b…”
Lemkin: $1M MRR is the worst time to sell a SaaS startup
“While operationally that may be a good time to sell, that's when I sold it, basically a million a month in revenue, it's the worst time to sell. So never sell at that point unless it's twice the maximum amount of money you would ever want.”
Lemkin: Slack hit $24M run rate one year after monetizing
“Slack just hit a twenty-four million run rate, basically one year after monetizing.”
Lemkin: Zenefits will reach $100M revenue in 24 months
“Zenefits will go one to a hundred million in revenue in 24 months.”
Lemkin: Record SaaS valuation premiums are justified by unprecedented growth
“I think you always have to pay the, we always paid a premium for the best, and when the best grows faster than ever, we should pay the highest premium of all time.”
Lemkin predicts Slack will surpass HipChat within six months
“Slack is going to be bigger than HipChat or its entire competitive landscape in six months.”
Lemkin: $1M revenue at 15% monthly growth signals massive ARR potential
“I define a market by its current growth rate. I believe that if you can, I believe that if you can hit a million in revenue, and I invest before that, but if you can hit a million in revenue growing 15% month over month, you're inherently at a nine feet. You c…”
Lemkin: The 40% rule in SaaS exists to justify slow growth
“I think it's I think it's fine, but I think it's too clever. I think it's trying to justify slow growth, medium growth, high growth businesses and different burn rates.”
Lemkin: His only investment with an inferior CEO was his worst performer
“I've made eight institutional investments and 12 as a seed investor, 20. Only one of them was the CEO not as good as me, and it's my worst investment.”
Lemkin limits his schedule to one founder pitch meeting per week
“By the time I actually meet, I only do one founder meeting a week.”
Lemkin: VCs cannot make money unless founders pursue unicorn valuations
“To make any money as a VC, even just as a partner in a hundred eighty million dollar fund, which is not huge, If you're not at least going for a unicorn, no matter what ends up happening, I can't make any money, so I'm out.”
Lemkin's SaaS investment thesis focuses on hiring VPs and standardized playbooks
“My investment thesis on all my investments is I'll help you find great VPs for these roles, sales, marketing, customer success, and even products sometimes, and then we'll just run the playbook. We're just going to run the same playbook.”
Lemkin invested in Algolia at $5K MRR before Accel's $18M round
“I did, I invested in a search as a service company called Algolia about a year ago that Excel just put eighteen million into, and I did it, and I did a session with the CEO at Heavybit a couple weeks ago, and I invested I think at like five KMR, so pretty earl…”
Lemkin: One enterprise customer signals repeatable SaaS growth, not an outlier
“If you have one, I'll bet that you can get 10 and then a hundred. As a founder, this is a bet that I'll make that other VCs won't. I will bet that one is not an outlier, that one is the future. But if it's zero, I'm not sure I'll take the bet.”