$210k for every employee?

Happy Monday! Today I talk about: a SaaS startup that pays every employee $210k, AI costs, and some funding opportunities if you are early stage SaaS.     - EveD. 

IN REAL LIFE

$210K for every employee, and no sales pipeline...

Outseta posted a truly fascinating and transparent round up of 2022. It was their  6th year in business, and it seems to be their first "big year". But we’ll get to that in a minute. First, I want to discuss their unique approach to hiring and compensation: 

• All their employees make $210k base for full time work

• Staff can choose how many days per week they want to work (1-5), and the remaining time can be spent on other projects/work or to build up equity in Outseta

• Staff can work towards equity, on the same terms as the founders. 

• There is a 50% profit sharing pool

Geoff Roberts, one of the 3 co-founders, says that “This has easily become the most effective recruiting tool I’ve come across in my career—it's helped us build a backlog of crazy talented folks that want to work with us”

So…is paying $210k/yr sustainable? There are certainly challenges - for example, you cannot really hire junior team members. But it seems to be working for Outseta: their MRR increased 4x (!).

The team is intentionally small - 5 people. Geoff only went full time last year. This is a true example of a company not choosing hypergrowth as a goal (so it won’t surprise you to know that they are bootstrapped with not a VC in sight). 

Geoff goes into a lot of detail about what spurred the growth, and I strongly encourage you to read his full blog post.  

Btw, if you are wondering, they spent $35k on marketing, which includes developing side tools (engineering as marketing), paying affiliates and hiring a $1k/m SEO person. These are their non-payroll expenses from the last 6 years:

Outseta is 100% in on product-led growth. Not only do they not have a sales team, they also don’t even have a sales pipeline. They experimented a lot with freemium (8% conversion rate) but quickly changed to free trial (7 days, requires credit card). That change increased their conversion rate to 39%, but off a lower base, obviously. Geoff has a deep dive on that process too.

STRATEGY

AI will add to your costs

Unsurprisingly, ChatGPT is going to start charging soon. (They’re expecting $1b in revenue this year). They are entering a complex investment deal with Microsoft, (which I will discuss if it’s relevant to us and once we know the real facts rather than just the rumours). But…if you are scrambling to figure out how to include AI in your SaaS product, count on the fact that doing so will increase your costs substantially. So keep that in mind when deciding how to implement AI in your free plans. (It’s not guaranteed, as we are still waiting to see what Google launches, but best to not be blindsided)

FUNDING

Not as much "dry powder" as people think 

"Dry powder": un-deployed capital that VCs are "sitting on", waiting to be invested. Apparently, there is a ton of it, since VCs are slow to invest in the current market. I say apparently, because the VC funds are funded by commitments from LPs (their limited partners) who do not hand over the money in one chunk as the fund closes. Instead, when VCs need the cash, there is a "capital call", where LPs are asked to hand over the required funds. But…LPs are somewhat reluctant to do so now. As a result, VCs are not as liquid in their investments as we think they are. Something to keep in mind if you are thinking of raising this year. 

Speaking of raising, if you are early stage this might be of interest: Afore Capital (A VC firm that has a $300m fund) is launching a “common application” (of sorts) for pre-seed founders. How it works: when you apply to their accelerator, you are also automatically submitting your pitch to 30 other VCs. If you get accepted into the accelerator, you get a standardized $1m investment. If not, there are still 30 other VCs who might think you are a better fit for them. Saves time, spreads opportunity. Keep it in mind. 

And if you are early stage, and are looking for funding:

GROWTH TOOLS GUIDE

In about 3 weeks, the first edition of the Growth Tools guide is going live. All NMB subscribers get it in their inbox, free. The goal is for founders and growth teams to learn about new growth tools, new growth opportunities and alternatives to their existing stack. You can't lose out by reading it (on your phone, your desktop or...print it out!). Want to include your growth tool in the guide and be seen by 20,000 founders in 2023? Get in touch [email protected]

Up and to the Right !

 I wrote a book about SaaS growth! You can preview it on Amazon. It's a good read for any SaaS founder or growth team member, who wants to build sustainable growth for their VC- or self funded startup. 

Themes: Acquisition. Retention. Monetization. Growth teams. Channels (looking at: social media, paid ads, sponsorships, events, webinars, community, SEO, personal brands, referrals, affiliates etc). And so much more. Best 10 bucks you'll ever spend. 

See you tomorrow...

Let me know what you want to read here.  Content I'm planning to write this week:

• I'll explain what Outseta actually does

• Tips for effective cold calls

• The importance of transparency in your sales motion

• and more...

Thanks for reading. Find me on Twitter @eved if you want to chat :-)