Once a start-up goes the venture backed route they are under pressure (cue Queen) to grow. Even in this era of “efficient growth,” the old T2D3 (Triple, Triple, Double, Double, Double) is still a benchmark for SaaS investors leading to increased investment in sales and marketing. The problem? Go-to-market continues to be a black hole for start-up founders.
I fancy myself a sports nerd. I hold an odd amount of sports data in my head even from when I was a kid. I always wanted to be a professional athlete and, unfortunately, that whole talent thing got in the way – but it didn’t stop me from playing and consuming sports.
It’s easy to parlay athletics into a career in sales. It’s a very common practice for companies to hire college athletes for sales jobs out of college. If you listen to any coach they tell players to follow the process don’t chase the outcome. Sales leaders say the same thing: follow the process, the results will come.
I’m currently in year three investing in B2B Vertical SaaS companies with In Revenue Capital and I’ve started to notice another interesting parallel between athletes and start-up founders. Most of them GO BROKE! The failure rate in SaaS is extremely high, the statistics suggest between 70% and 90% eventually fail, 92% within the first three years. Similarly, 78% professional athletes go broke within the first 3 years of retirement. It goes deeper. Youth (inexperience), cutthroat pressure and supporting cast are markers of success (and failure) across both professional athletes and start-up founders.
Getting handed a “bag,” as the kids say, in your 20’s amplifies some natural tendencies. That feeling of invincibility goes through the roof. Young athletes who’ve signed massive contracts often support family and friends, make lavish purchases (houses, cars, boats) and generally assume an unsustainable lifestyle. Especially given the average length of a pro athlete’s career. In the NFL that’s only three years!
The start-up founder is no different. Venture money comes in, often millions of dollars, and it’s a trigger to spend. Remember, growth is the mandate, go to market is a black hole, money goes into their perception of what it takes to grow. I can’t tell you how many times I’ve had a founder tell me, “I just need to turn on sales and marketing.” What does that even mean?!? What it typically looks like is hiring a sales team (something they are often ill equipped to do, read this article from my Partner Justin Gray for more) and turning on the leads! Read that as spending a bunch of money on paid ads and conferences. It’s the equivalent of supporting your “crew” and buying a mansion. The problem? Nothing converts, they burn a ton of cash, and they are left with an unsustainable run rate and looking for a lifeline.
As burn starts to rise, competition increasingly grows and managing an underperforming sales team starts to set in and the pressure mounts. Like our friends in professional sports, performance is the marker of success. What does the coach always say? “Stick to the process.”
Instead, being weighed down by all that comes with “the bag,” they find themselves not doing the things that got them there in the first place. Founders that are looking for a path forward tend to step over the simple things and shift into cut mode. The cuts may slow the burn, but it doesn’t solve the growth problem. This is where simple things can make a huge impact. Things like developing a tight ICP early, a place where you know you will win at a high rate. The perfect fit customer. Setting a go to market proforma around acquiring that ICP in a sustainable way. Getting pragmatic around how you sell and deploy simple systems to track and measure success allows the results to guide the next spend.
The ”cheat code” for all of this is the people you surround yourself with – they can sink the ship or be the buoy. Every pro athlete who beats the statistics will tell you the difference was the people around them. The people telling them to create a financial plan, live responsibly and this doesn’t last forever. The Shaq’s of the world who never spend a dime of their NBA salary, instead invested all of it into cash flowing businesses. Take a look at his empire sometime, it’s truly remarkable.
For the start-up founder, it’s the same story. Every success story is coupled with that mentor, advisor or board member who went the distance with them. That person who had been there before, whose advice bucked the status quo and set them on a differentiated path. Choose wisely.
SaaS and sport share a lot of common ground. We celebrate the victors in a huge way. We call them unicorns, tell their stories and make them millionaires…legends! For every Shaq there are hundreds of kids every year given the bag, most of them fail, worse, they go broke. For every Mark Benioff there are thousands of cautionary tales in SaaS, those whose inexperience led to pressure because they didn’t have the right people in their court to help them find the way out.
