This episode of the My First Million podcast features an in-depth conversation with Jason Lemkin, the founder of SaaStr, who shares his extensive experience in building, scaling, and selling software companies. Lemkin provides actionable advice on product-market fit, the importance of recurring revenue, and the strategic nuances of scaling a business to a successful exit.
Topics: SaaS, entrepreneurship, venture capital, scaling, product-market fit, business strategy, exit strategy, SaaStr, recurring revenue.
Introduction and Background [00:18]
Shaan Puri: What’s going on, man? How are you?
Jason Lemkin: I’m so excited to be here and talk about all my first millions, talk about the millions I lost, a few learnings on scaling, and whatever you want, Sam. It’s great to be here.
Sam Parr: I love you for many reasons. One of them is like, you’re so catchy and you’re so good at summarizing important things, but explain it in a very simple way, in simple-to-understand ways. But before we get into that, I need to like talk about background because we have to the OG software guys, you are the guy. So like if we talk to like the founders of HubSpot or, I mean, like guys who run multi or tens of billions of dollars companies, they say, “If you want to learn about software, Jason’s the guy.” But we have a bunch of like sometimes 20-year-old kids listening to this, and I want to like give a little background. And so, we don’t, I don’t want to spend too much time on this, but basically, what I know about you is you started a few software companies including EchoSign, which you sold for nine figures. I don’t know the exact amount, but you’ve said nine figures. Then you’ve been investing in startups as a VC for like since 2013, which you said, I think you said you 10x your fund or something like that. Is that right?
Jason Lemkin: That is about that is about right.
Sam Parr: And then what else did you do besides EchoSign before that?
Jason Lemkin: Before that, I had a startup where I made my first million. Between when the internet died for a while, I actually founded a startup making implantable batteries from nanomaterials, which I knew nothing about, which is interesting. And we sold it for 50 million after 12 and a half months. It is kind of an MFM story, and I learned a lot from it.
Sam Parr: What was that company called?
Jason Lemkin: It was called Nanogram Devices, and we did something that was thought to be impossible, and we got bought by our competitor. It was a classic buyout after 12 and a half months when we took away one of their largest customers.
Sam Parr: Did you raise funding?
Jason Lemkin: We did, and it was hard. It was, I’m dating myself, this was one of the crummiest points. We raised 9 million in our seed round and sold 70% of the company in our first round. And that was the deal. That was the deal. That there was no choice, there was no negotiation. It was a different time.
Shaan Puri: And that meant that meant what you what you and the founder, you and your other partners, I don’t know how many you had, had 15 million left over to share after the 50 the 50 million dollar exit.
Jason Lemkin: I’d say it was more like about 10 million or maybe even 8 million to share. So, it was enough. Interesting for the first million, it was just enough to not work for the man. I have worked harder, I worked even harder on the next startup on EchoSign which Adobe bought.
Understanding Economies of Scale [00:42]
Shaan Puri: So EchoSign, was that basically like what DocuSign is now? You guys just sold earlier?
Jason Lemkin: Yeah, a lot of learnings. Yeah, we actually, DocuSign believed, I mean, I’m really dating myself, DocuSign was basically a printer driver company when we started. We were the first web solution. I wrote it all myself in PowerPoint and crappy wireframes and we built it. And we got to a million dollars a month burning 4 million. So we got to 12 million ARR, growing 100% with 110% revenue retention and cash flow positive. So, if we and we sold it in 2011. And 2011 was a long time ago, in internet time and in real time. It was just before we understood the metrics around recurring revenue businesses. And so even my board, my investors, didn’t like they weren’t sure we had a good business. If I said to you today, “Sam, I’ve got a business doing a million bucks a month, growing 100% with 110% revenue retention and profitable,” you would say that’s the that’s the ticket. That’s the ticket. Now, DocuSign was bigger. We had about 36% market share, but we were cash flow positive and growing 100%. So, you know, we only raised 4 million. So when you sell your company to make your second millions, sometimes the second one is is um there’s a certain logic in it and the logic actually in its own way can be stressful, right? It can it can be stressful. It’s a that was a very complicated decision because it made sense on paper, given the the team wanted to do it and part of the team wanted to do it and given how little we’d raised, right? But uh in my gut, I knew it was a emotionally I knew it was the wrong thing to do.
Reverse Engineering Success [00:47]
Shaan Puri: Scott Galloway came out a while ago and and I didn’t get to talk to him about this, but he had this awesome presentation. You and Scott are similar in that you’re you’re just you have beautiful language. That’s what I that’s what I describe these types of people. I’m like, they pick their words beautifully. Scott has this thing. So Scott sold L2. I don’t know how much. I think 1 to 200 million. I forget the exact amount, but nice nice exit. And he was like, “Well, I wanted to have a nine-figure exit and I wanted to do it in this data business because that’s what I knew. And so I worked backwards and I sort of reverse reverse engineer it.” And he said something like he was like, “I you I was like, I knew I needed to have an international presence. I needed to I I knew I needed to charge at least uh 50,000 a year for a service.” And then like he lists all these things and then he spent eight years, however long, building it. And I love that because I love reverse engineering. And what I tell a lot of people, I’m like, they want to create this amazing stuff and I’m like, “Yeah, that’s cool and sometimes that works, but you can actually kind of reverse engineer a bunch of stuff to figure out what’s the rules of the game that I need to play and then you optimize for the rules.” And I wanted to have you on to basically like reverse engineer what it takes to get like either 100 million in revenue or or even 100 million in outcome because I actually think those rules are actually the same. I was like, “Jason, I want to talk about this like reverse engineering thing,” and you like banged out this like five or eight point thing. You said that a lot of startups right now, because they raised money in a zero-interest environment, they’re it’s like 100 grand in revenue per employee. And you said, “No, the new minimum needs to be 300 to 400,000.” Is that right?
Jason Lemkin: It is. If you’re if you’re trying to reverse engineer whether your business model makes sense, like this is one thing to reverse engineer. Certain business models have economies of scale and some don’t. And if you want to go really big, you want a business with economies of scale. And if you step back in the old days of software, the old Adobes, Microsofts, Intuits made a million dollars in revenue per employee. A million dollars, okay? You’d have a bunch of engineers, they’d go they’d go off in their offices, everyone used to have a private office to code. You’d spend two years building a piece of software, a small team, you’d put it on a DVD ROM, that or CD ROM, that cost 50 cents, and then you’d package it up, that cost 50 cents for a dollar, and then someone would sell it for you between $50 and $400. This was a really good business. There were 90% margins and the classic Adobe Microsoft Intuit 50 cents of every dollar went straight to cash flow. 50 cents. We don’t see this anymore in in in companies go public. It was so profitable. So that was a million. And then things just the zerp or whatever you want to call it, it got crazy and we reached a low in 2021 of 100,000 in revenue per employee for all these unicorns, 100,000. So we got only we’re only 10% as efficient as we used to be. Now the pendulum swung back. So we were historically we’re at a million per employee. The low point was 100,000 in revenue per employee.
Going Multi-Product [01:01]
Shaan Puri: And then you have another point here. You say, um, “Going multi-product.” And you say it’s a huge issue of how, when, and where to pick figure out when to go to multi-product. But did you say at like 10 million or in revenue, you want to go what did you say for going multi-product?
Jason Lemkin: By the time you get to 10,000 customers, you better have a second product that, and this isn’t this is the non-obvious thing, that can be bigger than the first. This one took me a while to figure out, to be bigger than the first. For HubSpot, CRM in two years will be bigger than marketing automation and HubSpot for years was a marketing company. In two years, CRM, its sales product will be bigger than its marketing product. It has to be. And you you want to be there by 10,000 customers.
Shaan Puri: This is the same for e-com businesses too. Like they sell a a handful of SKUs and then they reach like uh some type of critical mass and then like, “All right, we need to create more stuff.” So like we made deodorant, now we need to make toothpaste or shampoo or something like that. Um, but the second one has to be bigger. This is the one to think, this is the mistake founders make. If the second what’s easiest, Sam, is to add a product extension. Okay, we sell shampoo in e-commerce, okay? Let’s sell shampoo and conditioner. That’s the easiest thing because our customers already know us. If they bought shampoo, they’ll buy shampoo and conditioner. But the problem is if you if you if it if the second product isn’t bigger than the first and the first one’s still growing, you never catch up. It’s never enough, right? If you’re selling 100 50 million of shampoo and you’re growing 20% a year, you’re adding 10 million a year, right? And you launch shampoo and conditioner and it does a million its first year, it’s great, but it’ll never get there. The second one has to be bigger than the first and this is it’s too it we all default to the easy second product and you actually have to do the harder one.
The Hustle’s Growth Story [01:10]
Shaan Puri: That’s uh interesting. So at the Hustle, so we had, I don’t remember, a million and a half subscribers. I think we were doing a million a month in revenue. And like a media company is basically you build an audience and then you launch multiple businesses to that audience. So whether it’s advertising, conferences, software, whatever. That’s kind of typically how media companies are weird. It’s usually a collection of small businesses and or or different businesses. And um I think we were at a million a month, I forget. I think about that. And I wanted to create a uh uh a subscription service called Trends. And it was like we like and dude, I fucked it up so bad because I charged $300 uh a year, which is so stupid. It should have been $30,000 a year. It should have been way more expensive. I think in the first month we did, I don’t remember exactly, but in the first month we did almost a million in sales and then it was a pain in the ass to continue but by the end, I think when we sold, I think we were at five like maybe 10 months later we were at 5 million a year in sales with it, but it only had like four or five people running it, which so it was profitable. But the mistake I made was the thing of not making it bigger than the first thing. And I so like intimately know that mistake. And it’s really hard because I’m like, “Well, this is like a clear extension, just do this then this.” But it it just because it it’s also like a a psychological thing of like, why pay attention to this thing? Just put money back into the main thing.
Hiring a VP of Sales [01:16]
Jason Lemkin: This is an advantage to hiring a VP of Sales, for example. Founders underprice their products, usually. They underprice them. We’re so because we know what’s more is it more important to get the product off the ground to get 100 customers than to optimize pricing? As founders, we’re always going medium or long, right? So we almost always leave money on the table so that we can make people happy and get them going.
Shaan Puri: Dude, I’ve underpriced at everything I’ve done, I’ve underpriced.
Jason Lemkin: Yeah, and and so have I, and so have 80% of founders. Not all, but it’s it’s a I hate this term, but it’s a feature not a bug because as painful as it is, you can fix pricing later, at least for new customers. It’s harder to fix it for grandfathered customers, right? But for new customers, then just double it to 600 and 1200 and 1800. Like it is it’s hard.
Shaan Puri: I think it’s like rooted in like imposter syndrome of like, “I don’t know if this is good enough.” And but then you talk to if you talk to a good salesperson, you’re like, “Dude, like I could like just put a zero behind that. I’ll sell it.” You know what I mean? Like if you talk to a good salesperson can can get it done.
Jason Lemkin: A good one will not rip people off, but a good one will will get the full value for your product in a way as a founder, you almost never can. You you almost never can, right? That’s why a lot of the early classic SaaS or content’s about hiring a VP of Sales because that’s why in in the first quarter, the first 90 days, you should see a lift from a good VP of Sales, at least because they can run this playbook with the same leads, the same customers, the same dynamics for trends or something else. Someone with the confidence to ask 30,000 for trends, knowing it’s cheap compared to Gartner or Forrester or whatever, uh they’ll take that off your plate. If they’re good and you’ll see a 30 to 100% revenue lift from someone that’s great, right? Someone that’s mediocre will rip your customers off and never understand your product and misspell trends and never read it and not know what it is. A mediocre one will actually see a revenue decline from founder-led sales, but a good one will will solve will will solve that piece, right? So, um, I think the other thing, you know, you just didn’t give it enough time either.
Selling the Company [02:03]
Shaan Puri: I sold the company at four and a half years. Um, but that was like I was okay. I don’t regret that at all at all because I wanted to get some financial freedom, um, and I was broke. I I think I paid myself the first two years my salary was 20 grand. The third year, maybe 100 and then the fourth year, I think I paid myself a few hundred thousand dollars, but I was like, I was fucking poor. And so I I was impatient and what you talk about all the time, the worst thing is a tired CEO and I was a tired I was I was tired of being poor, uh basically and that was a huge mistake by the way. Uh pay yourself way more if you can, uh is what I’ve learned.
Jason Lemkin: As soon as you can afford it, pay yourself market is the learning. Yes, the learning always as soon as you can afford it.
Global Expansion [02:13]
Shaan Puri: And you had this other thing on here. You talked about um you want 30% of your revenue to be outside of North America. That’s very intimidating. That’s probably the most intimidating thing here is going global. Um, and at least in my opinion, I think it’s a very intimidating thing.
Jason Lemkin: Obviously, some businesses this doesn’t really work, right? If you’re highly regulated, it can take a long time, for example, right? If you’re very specific. Um, but at scale, at scale, the average public software leader gets about a third of their revenue outside of the US. HubSpot’s now a majority. The majority of HubSpot’s customers, small businesses, are outside of North America, the majority. Um, and so if you so let’s step back in terms of reverse engineering, right? If you there’s a couple things if you don’t lean into them, you’re going to have less revenue than you otherwise would. Um, international and partners are two of them. If you try to only sell direct is an issue too. Um, and so how do you do this? How do you learn how to sell in France, right? In Germany, in Milan, in London? Um, it’s not as complicated as it sounds. Um, what you do is build your business, build your brand, right? Um, be find a niche where you’re one of the top two or three folks. You don’t have to be you don’t have to beat HubSpot everywhere, but find a little segment where you’re better, a little area, and watch who wants to buy you. And if you’re in software, what will happen is Australia, New Zealand, UK, some parts of France and others are very used to buying from US companies. They will find you if you are the best vendor. They will find you. You don’t actually have to find them. Um, now, traditional industries won’t find you, right? It’s going to be tech-focused folks, it’s going to be early adopters, it’s going to be cool kids, but they will find you. And as soon as you cross 5% of your revenue in in an area, then invest in it. Just invest in it. As soon as you see a cluster in England or New Zealand or somewhere you didn’t expect, Chile or Brazil, like support it. Um, and then the cheat code, this sounds obvious, okay? The one one is just support it, like make your product open, right? This the the the the the one that takes work is also um localize your product earlier. Um, and most of your engineers don’t want to do this. They don’t want to localize the product into Spanish, into Portuguese, turn it turn it into 30 languages. Not super complicated engineering task, but 95% of engineers just don’t want to do it for a variety of reasons. So, you know, you can you can get going in the English-ish countries and even in Europe, right? But you’re not going to penetrate a certain areas if you don’t actually localize your product. But that that’s the second cheat code. The first one is just be be welcome to it. You don’t have to go hunt customers in Japan if you have zero, like you don’t have time as founders.
Japanese Market Challenges [02:26]
Shaan Puri: Going to Japan is like the worst place ever to go because the culture is so different and there’s been so many failures of Japanese companies wanting to come to America and America to Japanese because the culture is like wildly different. Because I actually looked at uh a one of the ways that I researched cool company ideas is I like to look at Japanese publicly traded companies. There’s this one called uh Uzabase. Have you heard of Uzabase? So Uzabase is uh it’s a media company in Japan. They own three products. One of them was sort of like CB Insights and it was doing 30 or 50 million in revenue. The second one was a news app called NewsPicks, that was doing another 30 million. And then I think they had one more thing. And I remember going and trying to download their app and it was all in Japanese and I couldn’t really figure it out. But I eventually like translated it and I was like, “I’m going to make this app in America and I’m going to do it at the Hustle.” And so I built out this like whole thing and I was going to launch it and everything. And the culture of what they what they were trying to do, it required users to leave feedback and opinions on news, which is like not so common here. And I remember like, “Fuck, why is this Japanese idea not working?” And then I realized I was just like reading Wikipedia or whatever and there’s this whole term to describe the failure of American companies trying to break into Japan because the culture is so different and it scared me like hell to like do anything involving uh Asian cultures because our cultures are so different. I’m like, “I can never crack that.” Whereas Germany, France, it’s like mostly similar, but uh yeah, the whole Japanese thing freaks me out.
Hiring a VP of Sales [02:40]
Jason Lemkin: I’ll give you two examples, but like Salesforce got got had 10% of their revenue in Japan in the early days. 10%. Now, they didn’t if you you can you can Google it, you can watch see what Mark Benioff said. They didn’t plan it. They got dragged into Japan and some of it was through partnerships and others, but my point is that wasn’t on their day zero plan, okay? But it took off there. I was just talking with Howard Lerman who um he’s got a new company called Rome, but he founded Yext and took it up to a billion. Um and they were huge in Japan and we were talking about how I was going to do Japan the next time, but they got dragged into Japan for small businesses. They got dragged in. So, my point is don’t don’t show up to Japan with no traction. Asking asking for a tour in the city, but if you if somehow in your first 100 customers, first 500, you’ve got five in Japan, don’t don’t don’t dismiss them. Don’t be snarky like some folks are. Don’t say it doesn’t matter. In fact, say, “Oh my god, we got five customers for Japan and our product’s not even in Japanese. We’ve got something good here.” Like let’s take a pause and let’s figure out what the heck is going on like Salesforce did and get 10% of our revenue from Japan. That’s how you do it.
Pricing Strategy [02:46]
Shaan Puri: Is there a sweet spot for how much you charge? I think with a lot of people starting out, like what I did, um like well, my business was uh two-prong in that we had users and then we had advertisers. Our advertisers were spending six figures a year, but I had to acquire fucking 4 million subscribers in order to like make it work and it was really hard. Um, yeah, and and so is there like a price point where you’re like, you want your average customer to be paying 50,000 a year?
Jason Lemkin: I think that pricing is over-discussed. And I’ll tell you why. There are we have all now bought 200, at least most businesses have bought over 200 SaaS apps, okay? It’s too many 200 pieces of business software. And we all kind of know what stuff should cost. Like we know what Notion should cost, we know what HubSpot should cost. We’re on Riverside. I don’t know what Riverside is. What do you guys pay? 300 bucks a month, okay? Like okay, let’s say you pay 300 bucks, 400 bucks a month. Now, if someone else has a better version of Riverside and they want 50,000, you’re going to like a month, you’re going to kind of balk, right? But what if someone had something that was better than Riverside, it was 30 bucks a month, it would seem too cheap. Right? It would seem too cheap. So my point is, there are organic price points and what you want to do is anchor around them. Go figure out the couple of products out there that are most similar to yours and charge the exact same way and either charge the same pricing or if you’re nervous, charge a smidge lower. 10% lower, 20% lower. Um, if you charge too much lower, you’re telling the market you’re not as valuable as Riverside, right? Or you’re not as valuable as HubSpot. And you can actually customers will bounce off you if you’re too cheap. If you’re too cheap, they will get confused. Um, so anchor around the comps. If you’re truly 10 times more valuable than Riverside, okay, and Riverside’s very good, we’re using it to record the session. If you’re 10 times more valuable, maybe charge twice as much because you’re telling the market we’re 10 times more valuable than the leader, right? We’re 10 times more valuable. But whatever you do, founders that say there’s no one like us, there’s no comp, try harder. Try harder. It doesn’t have to be the same as you, just it feels the same. It feels a similar amount of value, a similar type of utilization. Do I use it 8 hours a day? Do I use it once a month? Um, do I use it as an API? Is it metered? Is it per seat? Just there’s hundreds of apps like you and if you price similar to similar value apps, you remove friction. You remove friction from the sales process. And that’s what you want to do. Until you’re really big, you and this is why we also underprice as founders, because you want to remove friction. We want every deal to close in the early days, don’t we? We want every deal to close. And so your job as a founder, if you want to scale, if you want to reverse engineer things, your job, because no one else in your company will do this, your job is every day to relentlessly remove friction from your customer acquisition process. Remove friction.
Churn and Retention [03:02]
Shaan Puri: The last point you have is uh the the most challenging. It’s uh getting to net net revenue retention of 100%. Yes. And we’ve you you’re I don’t know how you would describe yourself. I think of you as you’re a you’re a CEO founder type, but I think that you have an edge on sales and operations. The churn part, I think, and this is maybe me being naive, I think that’s mostly product. Maybe it’s it relates to who you sell to and how you position it, but it’s like product. And it’s the hardest part is like figuring out how do I make something that integrates in someone’s workflow or how do I make something that’s so essential to someone’s life that they not only do they not want to get rid of it, they’re going to tell their co-workers and their co-workers are also going to have to start using it. It’s so freaking hard and I think it’s part art, part science. But you said that you have to have 100% net revenue retention. The good news is is that a lot of the big boys sucked at first. I think Brian Halligan, I think he told me that they were churning out something like at one point like 5 to 10% or maybe even more per month and he was like, “It was horrible.” And it took us four or five years to figure it out. But what do you have to say about churn and retention? How do you how do you make it good?
Jason Lemkin: If you want to reverse engineer things to your point, you need to really honestly have a path from at a product level so that you can eventually get to that 100%, right? And you can stage it. So, I don’t know if HubSpot’s if HubSpot really was churning 5% or more in the early days. Let’s say its revenue retention was more like 50% in the beginning, okay? I think he told me there was like a quarter or two where it was like uh existential crisis bad where it was like, you know, it was something like that. I think they were like year four where it was like, this is not going to work if we don’t figure this out. Yeah. Well, I know from when I talked to him, it was 75% from him to rest at like 30 million in revenue, which is kind of late. It’s they still hadn’t totally figured out until they went multi-product and a bit into the mid-size of of SMB. But the point is like, on the one hand, yeah, their VCs were critical, blah, blah, blah, blah. But they did have a plan to get there. They had a plan to get there. They were going to a little bit upmarket, a little bit upmarket, not a lot, just a little bit into bigger small businesses and to have more than one product to add value. And in fact, it’s interesting, HubSpot nominally has raised prices, but the the average customer today pays 11,000, the average customer two years ago paid 11,000, the average customer four years ago paid 10,000, okay? So what HubSpot has done, which a lot of folks don’t do, they get it wrong, and this is why HubSpot is one of the reasons it’s so successful, is they’re adding more value for the same dollar. They’re adding more value each year for the same dollar. That’s software is supposed to be a service, SaaS, software as a service, we forgot about it. In 2023 and late 2022, it became soft SaaS became software as a rip-off. Everyone got massive price increases for no benefit, right? Some folks will grumble about HubSpot, it has rage prices, but overall, the prices haven’t gone up that much and now they have five times the amount of software that’s 50 times more powerful, right? It’s like 250 times better than when Brian started. And that’s what you’ve got to aspire to as a founder. The flip side is, here’s the like, if you have a high churn business and HubSpot started there, a lot of folks start in high churn business, be honest, build a spreadsheet. I know you and I talked a little bit about this in the hustle in the early days because you had high churn as a media business. It’s inherent to a media. You had high subscriber churn, okay? You were stressed about this. I actually wrongly, wrongly challenged you to be less stressed because I thought you were you were a great founder and would figure it out. But you got to put it in a spreadsheet and say, “Look, if you have churn north of 3% a month, 3, 4, 5, and that is endemic to certain models, look at what gravity does to you around when you get to double-digit millions. When you get to 10 million, 15 million, 20 million, usually gravity weighs you down because you’re losing so many customers each month, it almost becomes impossible to replace that leaky bucket. So we we the hustle was a daily newsletter. We sent an email six days a week. We were at one point, I’m trying to remember, we were at 1.7 million subscribers. We lost uh 50,000 subscriber or no, maybe it was 40,000 subscribers per month and we were adding like 4,000 a day or something like that. It was insane. Can you imagine that? Losing 40,000 people and we’re like, “How are we going to fix this?” And eventually we did, but I know that like companies like, I don’t know what the hustle is at now. I I assume I think they’re close to 3 million subscribers and the churn is really low. Uh Morning Brew is at like four and a half million subscribers. And you want to know all the newsletters do that people don’t talk about. So we grew organically to 100,000 subscribers. I imagine many do too. And once you then you do paid marketing to get to many millions and then you get a name after four or five years and then you quit advertising or you spend very little and you’re just like, “We’re just going to stay at 3.5 million, 3 million subscribers and we’re going to launch more newsletters.” That’s the name of the the newsletter. That’s how you get to 100 million in revenue for newsletters. It’s the exact same thing as software, which is you go multi-product. But except unlike subscri- uh uh software, the churn is outrageous. And but thankfully, the market size is like 30 million people. But it’s it’s like crazy high the churn for newsletters. But that that ties to the point of being very self-aware about this, right? And that churn, so you you churned out, you had like, you’re churning out, I I’m getting that math wrong. I think you were churning out about 30% of your growth each month, right? In that in that phase, right? Uh it was uh four so if we sent an email to a million people and uh if we had a million subscribers in one month and we sent six times a week times four, that’s 24 times uh a month, we would lose roughly four and a half percent of the million. So Okay, that’s that 3 to 5% churn we talked about, right? And on the way up, it’s sort of okay because the hustle is exploding and there’s viral elements and it’s great. But eventually gravity, that’s the gravity. You got to be honest about gravity and come up with a strategy to address it, right? For small businesses. So that that math just it it’s you know, and and you I think you would echo this. Around 10 million in revenue, you need so much growth to overcome that churn, right? You need like epic epic. Like you can’t even it’s not even what your gut says as a founder. You need so you need double-digit growth per month. Here’s the insight. You need double-digit growth per month to overcome that churn at scale, right? You need double-digit. And that gets hard. Well, and you and you you need to understand which business that you’re in. So you’re in the conference business now. I was in the conference business, sorta. I think my conference business was doing over the handful of years, I think we probably did 3 million in revenue. You do 30 million in one year. So we’re not the same ballpark. But what I learned with the conference business is it sucks. It sucks hard. Uh and for some reason, I still love it. And same with media. I freaking love it, but it’s way harder, I think. And why are you in the conference business if you’re supposed to know all this great stuff about software? Because software seems like we only we all work the same amount of hours per per week. Like it just seems like it just start a software company. Why start a conference business where you’re you’re in kind of an uphill battle? It’s a good question. I mean, the um Do you guys do you guys make a profit on 30 million? Yeah, we do, but you have but we’ve got to so SAS annual is our big flagship event and so we get 12,000 people in the Bay Area. Now it’s every September. It costs $10 million to turn the lights on. That’s a stressor. It costs $10 million to turn the lights on. Okay, before you make a dollar, okay? So $1,000 a an attendee is your cost. Yeah, about $1,000 per attendee is the full the honest fully burdened cost, about 1,000. We do we do one in Europe in June for 3,500. That’s much cheaper. Um, that’ll be about $300 to turn the lights uh well, $300 per attendee, but it’s still like a million and a half to $2 million to turn the lights on, okay? 2 million and a half and 10 million. What’s the average price? So you’ve got to get over that and then you’ve got to pay people, right? And then you’ve got other expenses. So until you cross if if it’s funny, I get it is a terrible business. So we talk about this now. I literally had a VC managing 500 million in revenue, making millions and millions a year just in fees with a good track record, call me the other day saying they wanted to build a conference business because investing is so hard. It’s like, dude, you can still get you still get paid if there is a natural disaster or like a rainstorm. That was like my whole thing. I’m like, “Dude, I’m working I’m working so hard for this freaking conference and if it rains, attendance is down. Like it just sucks. Like one or two one or two days of like some crazy weather or something can like change things. Terrible. Um, the reason we did it was on accident. We we built this community around content, right? So we built content and then it’s a community and then yeah, we got some newsletters and some podcasts. They’re not quite at your scale, but they have some scale. Um, and then we just did meetups and just so many people came to the meetups in the beginning. You’ve done I mean this is a long time ago. Like this sounds small today, but our first meetup in 2013, we had 800 people come and these were great CEOs. Great CEOs, right? CEOs that now are are have gone public or have nine-figure businesses and they all came and that what I I didn’t know it would be a business, but I knew we had product market fit. So I wanted to build then I did another meetup and then the other meetup had a thousand and we had to turn people away. And then then we did a one-day event just to do it. I didn’t it wasn’t a business. I outsourced the first two years. I never even looked at a financial statement. The the first two years I had a partner, he kept all the profit or the revenue. I just drove the engagement, right? In the content. Um, and so this by the second year we had 3,000 people. And there was demand. So the real reason I got into the business and wasn’t because I wanted to, because after the second year, he quit. My partner quit and didn’t want to do it anymore because it was too much work. So I quit. I had no ability to do this. I had no team. I had no blueprint. I didn’t know how the revenue or the finances worked and I had to learn for the third year from scratch. And so it wasn’t intentional. Um, I felt like the a community wanted this, that there was demand, organic demand and um, but yeah, it is a terrible business. Once it got once it got, now you can do the math in your head, right? Once it got over 15 million in revenue, it finally generated actual profits, right? But that’s a lot of years. Not fake 15, not pretending you’re at 15, not not claiming revenue that’s not real, but you got to really just get over 15 to clear the nut. But they um, so a lot of trade show businesses um on the high end can sell for 15 times earnings. Um, but a lot of them can go for eight or 10 if it’s like a B2B uh trade show. There’s a bunch of companies. Yeah, or more. A handful. A handful. A handful. Yeah, the best ones can go for 20 times if it if it’s been around for 40 years and it’s an annuity at that point. And uh for some reason, it’s always British companies. A lot of British companies buy trade shows. So there’s Informa, there’s uh Euromoney, there’s a bunch of them. Would you ever sell Yeah, Hive, they bought my friend Ryan Dice’s company, I believe. The Traffic Summit. Uh would you uh what could you sell SaaStr for and would you do it? We’ve had two folks that have approached us to buy SaaStr over the years. I wouldn’t say we’ve ever had like a a term sheet to to to be on the table. Um, the learning from that is it’s really been based on comps. I know we talk about EBITDA and blah blah blah blah, but it’s really been based on comps, right? And ShopTalk was bought for 150 million at about our size, probably under uh they got a good deal and Money 2020 sold for a good deal. It sold for 100 million when it was only doing 10 million in revenue. But both were like iconic. Dude, let’s talk about that. Let’s talk about that. Uh the guy who started those companies in is in Hampton. I’ve got to know him. That guy is amazing. Um what what Off the charts. And then he sold he sold another company for 30 million. But listen, these guys started a Google these guys started a tech company, I believe, like a payment company. They sold it to Google for $100 million. They went and started a conference. It kicked ass. They sold it for something like 50 or 100. I forget the price. They sold Money 2020 for 100 million and now it’s doing 100 million. Then they did it again with ShopTalk, which is like a trade show for D2C. Now, I forget what’s the other founder’s name? There’s a it’s a white guy and an Indian guy. The white guy has a new one name um it’s called Health. Okay, that I don’t know. That I don’t know. I I know O’Neal, I know O’Neal a little bit. I know O’Neal a little bit, but yeah. H L T H. You got to look at this because here’s what these guys do. They it’s the website is all the same. Yeah. Um it’s like the same avatars for and it’s like the same graphic design and they just Oh yeah, it looks just like ShopTalk or Money 2020. It’s the same thing again and again. They do the same thing and he’s and he’s done this like four times. I think this is their fourth time that they’ve created a new trade show. I see it now. I should have known it. I see it now, yeah. Have you So, I think this is significantly larger than ShopTalk and Money 20. And so Health is like a it’s they do these trade shows where they get all it’s what a trade show basically is, what a lot of people don’t realize, it’s basically a marketplace that lasts for three days. And so you get a combination of buyers and sellers and you hope that you create some type of transaction. And what he does is he charges people, so you can go for free, but you have to offer up a 30 minutes of your time to be pitched, I believe, to set up a meeting. Um or you could pay money to set up a meeting with a Yeah, they’re they’re 800 bucks per per 10-minute meeting now at ShopTalk. So I don’t know what they are at Health. They’re $800 for a quick meeting. And these guys pick a variety of niches where they’re like, “All right, there’s a bunch of buyers and sellers in this market.” And they scale up these trade shows faster than anyone I’ve ever seen. I think and a lot of people don’t know this, they they run other companies. I the the guy I’m referring to, I’ll find out his name. He is he’s also on the board of a uh of a large private equity firm. Like these guys are killers and for some reason they pick trade shows as their main thing, which boggles it boggled everyone’s mind. It was like, “Why would a bunch of tech guys who can like make their money in significantly easier ways start a freaking trade show?” They’ve knocked it out the park. It’s it’s like a gem of a business to study. They are gems. I will say I I only know O’Neal a little bit, the other co-founder of these multiple companies, Money 2020 and ShopTalk, but it is interesting in terms of convergent evolution that he got into it by accident, too. How so? They built Money 2020 to support their Fintech. They didn’t build Money 2020 originally to be a standalone business. They built it to support their startup, like many of us do events to support our companies, right? Jonathan Weiner is the guy. Yeah, okay, I don’t know him. I know the other one. And it took off. It took it took off. Money 2020 took off. Then ShopTalk was a that they did was was a heat-seeking missile, right? They like it was this was totally tactical and they even gave up on a lot of things and just did these these um paid meetings, right? They just did it and going back to the conversation, how do you get into something? Sometimes you you plan it out on a whiteboard and sometimes they like these guys for these these that it found them. It found them and then they then they leaned into it and it became X-rich. But I know I I don’t know Jonathan, but I do know O’Neal a little bit. I remember talking with him the last time I saw him in person and he’s like, “Man, this is a hard business.” So you think and he built he like us, he or like me, he built a software business um and uh it is it is hard. I don’t know. I would just caution folks, like anything, everything’s harder than it looks to get into. I would just caution folks that there aren’t there aren’t a lot of shortcuts and you need I’m sure that the HLTH is wildly successful, but you got to be it’s like this is one of these businesses where if you’re not in the top two, you’re worthless. You’re worthless. You have no value at all. Nothing. Because they are marketplaces. Why are you going to go why are you going to go to the fourth tier event in an industry? And in fact, most of them died at in 2020. Most of the fourth tier stuff died. It it sort of stumbled around uh when we all worked together in in the office and in the Bay Area, but most of them never came back. Only the best ones really came back after after lockdown. Let me ask you one last question. Um you are an investor. Yes. So you’ve you’ve raised money for your own startups and now your latest one’s bootstrapped and you’re an investor. You’ve deployed tens or hundreds of millions of dollars into companies. I have a theory. I think that if you are if your if your if building wealth in a five or 10 period is your number one or number two priority for starting a company, Yes. You should basically raise no money or very little money and you should not raise venture capital. Do you agree or disagree with that? If your goal is to get the first points on the board to make your first millions? Yeah, I think what you call it, you use the word shekels a lot or nickels. If you want to get a few nickels. No, your first it’s a lot. If you want to get the money to not work for the man where we started this conversation, listen, all this stuff’s harder than it looks. It’s all hard as we know. But if you want to have an exit for 10 to 30 million dollars, 10 to 50 million dollars, which is still harder than it looks statistically, right? But north of 10, then yeah, you want to raise only a fraction of that. Don’t raise that much. So if you raise, here’s a simple way to think about it. If you raise a couple million dollars, which is hard, like it’s not it it looks easy on the internet, it’s hard. But if you raise a couple million dollars, you’ve lost no optionality. The only thing you’ve suffered is some dilution. The only thing you’ve suffered is some dilution. After a couple million, the game changes. After a couple million, the game changes. And so yeah, I I I think there’s something to be said for raising nothing, but most people raise nothing because they can’t raise anything. I think there’s even more to be said if you can of being one and done. Anywhere from half a million to 2 million, whatever you can close together, and you use it to not to pay yourself, that’s that’s what losers do. You use it to hire a few good people to derisk this investment, to accelerate this investment. You use it to hire a few good people and get it off the ground. Most of us need a little help. Like some folks just literally they can do it on their own. They’re two great engineers, they don’t need any help. They can go do it on their own. Most of us are not those people. Especially if you’re a a business person, it’s harder to do it on your own, right? Unless you build something on WordPress or or tools, it’s hard to do on your own. You need a little bit of money, but stop there. You you not only do you maintain control and have less dilution, but then any exit works. Then any exit works. Once you raise more than 10 million, um, it can be worth it, but if you raise more than 10 million, here’s and this goes to your point. This people don’t get this in in today’s world. If you raise more than 10 million, you’re signing up for a billion dollar exit. And anything less than that is a disappointment. It just might not even work out. Like there’s so many variables. You may run out of money, you might not get. People, once you start raising $10 million, you get addicted to burning more money, too. There’s lots of issues that that creep out from that. But you got to commit to a billion. If you don’t see a billion dollar, if you don’t feel it in your bones, then don’t raise double-digit millions. Just don’t do it. It’s not it’s not generally not worth it. Find a way to do it with less and um and everyone will be chill if you raise single-digit millions or less and sell for whatever. Everyone will be chill. Everyone will be chill. They’re not chill once you get to the double-digit millions. It it it ain’t it ain’t chill for a long list of reasons. People start expecting a lot and too many folks these days think that um venture capital is free. It has no cost. Um the the social contract between investors and founders has broken down the last three years. It has broken down. Um I I literally just suffered my worst investing loss ever. I’m 10x lifetime. I suffered my worst investing loss ever. Worst loss ever. 5 million of not all of my capital, some of it’s mine. 5 million out of 200. Okay, so it’s not going to change the pace, but I’ve never lost this much money. And you know what the founder said? I tried hard. What do you care? It’s not really your money. What do you care? It’s not really your money. What do you say to that? What do you care? I could honestly, Sam, I could I had to bring in a friend to deal with him. I couldn’t talk to him again. I spent years of my life helping him. I helped him raise all his money. I put him in all of our SaaS events for free. I promoted him constantly for years and then he says, “What do you care? It’s not your money.” I remember when I I took a little bit of Angel money and I and I remember thinking like, “I am like a stewardship a steward of this cap.” I was like, “I have to die to get a return.” That’s how I felt though, but kids don’t feel that way these days. I was like, “It’s my life’s mission now.” I have just like, because to take someone’s hard-earned money, I felt so much stress. I felt stress. I remember when I hired someone who had a kid, I was like, “Oh, I have a kid now.” And then I remember feeling the stress when I took someone’s money. I’m like, “This person just trusted me with $25,000. I better go hungry or die in order to get a return from them because if they if someone loses my money, I’m going to want to beat them up.” You know what I mean? I was like, “It’s like a big deal.” Like this is someone’s mortgage that I I just took from them. I better make this get a good return. Jason, I appreciate you doing this, man. Uh what are you where do people find you on Twitter? You’re you’re a Twitter guy now instead of Quora, even though you got famous on Quora. So, Quora was great for five years and now it’s non-existent. Um but uh yeah, you can find me on Twitter at JasonLK or honestly, uh if you’re a businessy person, find me on LinkedIn. Dude, thanks for doing this. You’re the man. I appreciate you. Um and that’s the pod.