Jul 7, 2017 · 22m · saastr
Josh Stein of DFJ: What Makes a Great SaaS CEO
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this fireside keynote from SaaStr Annual, DFJ venture capitalist Josh Stein and host Jason Lemkin discuss the defining qualities of exceptional SaaS CEOs, offering tactical guidance on developing enterprise leadership, navigating organizational growth breakpoints, and scaling software companies.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Jason holds 45.5% of the talking time here. How this is scored →
Jason as informed peer 3.4 Guest teaching 2.4 Guest disagreement 0.0 Jason pushing back 0.1
speaking balance: gold is Jason, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 6:09 Josh corrects VC of the year award sponsor
In a very low-conflict discussion, Josh's direct correction of Deloitte versus EY represents the episode's highest, albeit mild, friction.
Hardest push from Jason ▶ 17:34 Jason questions hiring a COO at one million ARRJason pushes back on founders attempting to delegate core operational responsibilities too early by dubbing it VP of Sales 2.0.
Biggest teaching moment ▶ 8:10 Josh shares Tom Siebel's management awakeningJosh educates the audience and host on the counterintuitive reality that top executive focus must shift from technical finance to psychology and people management.
Jason holds their own ▶ 17:34 Jason synthesizes founder COO trapsJason brings his own operational experience into the dialogue, sharply diagnosing how inexperienced founders use executive titles as psychological crutches.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Jason as informed peer | Guest teaching | Guest disagreement | Jason pushing back | Why |
|---|---|---|---|---|---|---|
| SaaStr Day 3 Opening and Agenda Overview | 0 | 0 | 0 | 0 | Jason delivers an introductory solo monologue outlining the conference schedule, session themes, and operational logistics. In line with monologue scoring rules, all host and interaction scores are zero. | |
| Introducing Josh Stein and SaaS Market Outlook | 4 | 1 | 0 | 0 | Jason welcomes Josh Stein and highlights his track record, including early bets on Box and Twilio. Josh gently corrects Jason regarding the accounting firm that named him VC of the year in an entirely collegial exchange. | |
| Defining the Great CEO: Vision and People Management | 3 | 4 | 0 | 0 | Jason asks how early investors identify great CEOs before metrics are established. Josh explains the dual importance of transcendent vision and learning people management, sharing an anecdote from Tom Siebel. | |
| Aaron Levie Case Study: The Evolution of an Enterprise Leader | 4 | 3 | 0 | 0 | Jason prompts Josh on Aaron Levie's evolution from a young founder into an enterprise leader. Josh details Levie's deliberate pivot from consumer to enterprise and his intense self-education through reading and mentorship. | |
| Scaling Breakpoints and Company Values at Twilio | 4 | 3 | 0 | 0 | Josh outlines organizational scaling thresholds at 50, 200, and 1,000 employees using Twilio's culture and values as a benchmark. Jason chimes in regarding the difficulty founders face when managing managers for the first time. | |
| Navigating Executive Hires and the COO Role | 5 | 3 | 0 | 1 | Jason challenges the trend of early-stage founders hiring a COO at low ARR, likening it to an abdication of responsibility. Josh validates Jason's observation and articulates why clear division of responsibilities is vital. | |
| Overcoming Founder Self-Doubt and Building Future Skills | 4 | 3 | 0 | 0 | Jason asks how founders should navigate feelings of inadequacy as their companies grow. Josh reframes the issue from innate talent to personal desire and willingness to build upcoming skill sets in advance. |
Statements from this episode (13)
Building a substantial SaaS company takes seven to ten years
“It's seven to 10 years in Sastra often to get to something real and even longer”
Startup leadership fatigue and executive turnover peak at year five
“Year five is where it gets tough. You get tired. And the best CEOs and VPs and teams push through to that sixth year. And the other ones, it's tough. You see a lot of transition in five years. You see a lot of folks handing the reins to other folks.”
Lemkin: Once traction exists, customer success matters above all else
“Once you have something, Like nothing matters but customer success, right? It's getting that net negative churn and building on the customer.”
DFJ became Box's first institutional investor after a TechCrunch party
“Yeah, yeah, first institutional investor. We met him at Mike Earrington's house, actually.”
Founders cannot be taught how to communicate a transcendent vision
“And I think that's, you know, that's not, that's the part I don't think you can necessarily teach. I actually think the other stuff can be learned.”
Stein: Box's business customers churned least and consumed fewest resources
“The best customers, the ones that were paying us the most, that churned the least, ah, that actually were, interestingly, consuming the least resources. From a cost of goods standpoint, were the businesses”
Founders fail as scale-stage CEOs when they refuse to change
“I think the people who often fail, not always, but often fail to make the transition to being a bigger company CEO past that kind of initial founder stage, Is they don't want to change.”
Twilio CEO Jeff Lawson rejected opaque enterprise pricing for 'no shenanigans'
“And we've had talks, like, hey, are we leaving money on the table? Like, you know, And he's like, nope, no shenanigans. Boom. That makes it a very short conversation.”
Startups hit severe organizational breakpoints at 50 and 200 employees
“We think, I always tell people, we see three distinct breakpoints for CEOs. The first is around 40 or 50 people and that's usually where communications break down. You can't just rely on osmosis to get information out in the company anymore. You gotta actually…”
CEOs of 1,000-person companies should have at most ten direct reports
“And then a thousand is really interesting, because at a thousand, like if you're interacting From a reporting relationship with more than, I'd say, six to 10 people, you're really probably doing something wrong. Spending most of your time externally, and then …”
A 'two in a box' shared executive leadership model consistently fails
“What does not work is two in a box where people feel like they have to ask you and this other person to decide and, you know, if you can't find both or they disagree what happens and everyone gets really confused.”
Hiring a COO at $1M ARR is far too early
“And I'd say a million in ARRs too early. I think, you know, 40, 50 people is probably where it might become relevant.”
Scaling to $10M ARR requires simultaneously building the foundation for $20M
“One thing companies always forget is, let's say you're going from five to ten million in revenue, it's not just going from five to 10, it's going from five to 10, and in that year, you're laying the groundwork to go from 10 to 20. And if you're not, you're goi…”