The Exchanges

Q Ok, let's say it was that. Did they just, so then, now they have to come up with a price of which the employees can use their, what have been their cash comp to basically get awarded those shares? Two questions. Did they use the last funding round price, number one?

A Um, so the answer is yes. But I think that, um, they could have come up with a much lower price, which is something that I did. So at Eloqua, when we were really in trouble after nine, 11, and we had four months of cash left, um, I did something similar, um, where, uh, we, uh, together with the, the, the board, um, Uh, decided on a pretty low price for the stock because it was after nine 11. There was no budgets or whatnot. Um, and, uh, we came up with a pretty arbitrarily low price. I remember it was 10 cents a share, which was a nice round number at the time. Um, and, uh, we're probably valued the company at something like two million dollars. And, um, basically everybody in the company bought stock. That's where I got the idea from. It was my own experience. Everybody in the company bought stock. A number of people's parents and relatives and whatnot all bought, not, not just because they believe in the company, but they want, they want to keep it alive and keep, keep their kids jobs.

AI assessment note: “Um, so the answer is yes. But I think that, um, they could have”

Q Come on, Mark. I thought the VCs are the ones that kicked you out at Eloqua, and you go and raise fifty million. What the hell are you thinking?

A Uh, you know, the software business, the way that it is, is, um, You know, there's a reason why VCs exist, right? And that is, like, software business is a winner-take-all, or at least a winner-take-most type of business. Um, and so, yeah, it's interesting. Like, in early days of the company, I was funding it myself, and after a while, I was just, you know, I, I like getting checks. I don't really love writing Sort of a quarter million in. Uh, and frankly, once we validated the market, like we had, we had, you know, a couple prototypes, we had some early revenue. Um, you know, I raised, uh, I raised a seed round, a small round, like quarter million dollars. Um, and then a year and a half later, I wanted to hire a VP of marketing and we were, we needed to pay him a real salary. Um, and, um, Uh, so I looked to raise another 350 K, like just enough to kind of hire him and pay some other expenses. And that round just kind of went bananas and, and we ended up raising almost four million as a result. And at that point we were just on rails.

AI assessment note: “software business is a winner-take-all, or at least a winner-take-most type of business.”

Q The, the, you know, the economy really started crumbling, at least in the States, really worldwide, obviously, about two, three weeks ago. For a SaaS founder that you're coaching, who had raised a couple million in BC, who is maybe burning 200 grand a month, and they only had maybe a million in the bank, right? So five months of runway. What advice were you giving them a week ago?

A Yeah, no, and that, that is absolutely the case for a number of my, my customer, my, my clients. So the first thing is we need to build strong defense, right? You can't, it's very difficult to innovate and figure out new products and services Or growth until we know that we have an upfront way. Um, and it really depends on the situation. There's, you know, there's one of my clients where, uh, she really wasn't able to let go of people. Um, but she was able to get them to, uh, to work for four day week instead of a five day week. Um, and that was able to save a lot of jobs and is keeping the business running.

AI assessment note: “the first thing is we need to build strong defense, right?”

Q Well, it's lower margin, so they try and outsource it, right? Because their VCs say, we want high margin SaaS only.

A Exactly, right? And maybe that makes sense when you're growing 200% a year and whatever. But right now, it's all about survival. And especially when your customers themselves are letting go of people. There's myriad opportunities to understand how you can add more value. And so the way I'm approaching my, my clients is to, um, spend more time with customers. Obviously you can't go face to face anymore, which is unfortunate because a lot you can learn when you go face to face, but spend more time, especially with senior, senior customers and, you know, understand more in depth. Well, how are they using your software? What other software are they using? What are they using spreadsheets for? What are they using CRM for? Um, and figure out, like, what else you can do? Because there's probably more that you can do. Um, they're already comfortable, you know, buying from you. You're probably, as an enterprise SaaS company, you are a market expert. You're an expert in whatever it is that you do. Um, and so, if you think of yourself more like a services company, and, because now, you know, it doesn't really matter what VCs think. What really matters is getting to cash flow positive and, and getting profitable. Um, that, um, there's lots of opportunities to deliver services. Actually, pretty high margin. You know, 200 dollars an hour plus.

AI assessment note: “Exactly, right? And maybe that makes sense when you're growing 200% a year”

Q Does nine months assume a little growth, no growth, or a churned assumption on top line?

A It, it really depends on the company, right? So, you know, I've got one client where it's, he's going to assume negative growth that he's, Not going to add any new clients and he's going to, uh, customers and he's going to lose a bunch. And, but, but then, you know, actually most of my customers are still selling actually. They're still, they're still growing, still selling. You're probably seeing that with SaaS companies like that. That's, uh, that is, that is continuing. Um, but with assumptions on selling a lot less, um, and, uh, and the churn. So typically what I'd say is that churn, um, is going to go up by 10 points. So if you're used to, 20% churn. I might go up to 30% churn. Um, and your new sales growth is going to be, you know, pretty, pretty anemic in terms of ARR. Um, the way that I've got my companies profitable for when I need to and how I'm coaching my clients is to, uh, cut way back on partners and focus on doing a lot more services in-house. So I think services is really a missed opportunity for a lot of SaaS companies. Um, and, um.

AI assessment note: “churn, um, is going to go up by 10 points. So if you're used to, 20%”

Q get some of the money. And there's a lot of people predicting that this stimulus is going to cause additional social unrest between the poor and the wealthy. And, and I'm curious to get your thoughts on if you believe that does happen. Does that become a storyline in the media? And if so, like how should founders, you know, think about this and communicate it with to their teams?

A There's a lot in there. Um, but, um, yeah, I mean, I do think that anytime the government's coming out and giving a whole bunch of money to some people and not other people, you have the opportunity for, um, for, for unrest and for, um, a lot of, uh, social pressures to come up. I mean, that's been, we've seen that in, in history. Um, I would say that as a founder, if you have an opportunity to get cash from the government at this point, like I try to do it. Um, and you're certainly going to pay enough in taxes over your lifetime. So if this is your one opportunity to get a little bit, then, then, then sure. As long as it's not too onerous and having to fill out a huge amount, number of forms and everything else like that, which I think could take away.

AI assessment note: “I do think that anytime the government's coming out and giving a whole bunch of money”