Finding Game-Changing Leaders for SaaS Start-Ups

In the fast-paced world of Software-as-a-Service (SaaS), securing the right leadership at various growth stages is paramount to success.

Effective leadership is the cornerstone of a start-up’s growth, ensuring strategic decision-making, resource management, and nurturing a thriving organizational culture.

This piece delves into the criticality of placing the right leaders at various growth stages of SaaS start-ups, emphasizing how their expertise and visionary approach can ignite growth and optimize the prospects of long-term success.

Understanding Unicorns and Centaurs in the SaaS World

In the world of SaaS, success is often encapsulated by the widely used term “unicorn.” This term denotes a privately held start-up that has achieved a valuation of $1 billion or more, ideally within a decade or less.

Unicorns are typically characterized as disruptive technology companies that exhibit rapid growth and possess the potential to make a significant impact on the market. Nevertheless, it is crucial to recognize that the term “unicorn” primarily emphasizes valuation rather than other critical factors like profitability, sustainability, or long-term viability of a company.

The term “centaurs” is a recent addition to the SaaS world, courtesy of BVP. While tech unicorns refer to privately held companies with a valuation of $1 billion or more, BVP suggests “centaurs” as an alternative milestone. Centaurs are companies that achieve $100 million in annual recurring revenue (ARR), a more reliable benchmark to assess startups. In essence, ARR is the yearly recurring software revenue a cloud company can expect at any given moment, and increasing ARR is the primary goal for these businesses (their “North Star metric”).

The Challenging Road to Achieving $100 Million ARR

It is a known fact that hitting $100 million in revenue in less than ten years is hard, and every year hundreds of SaaS companies are founded with this aim. According to Statista, there are approximately 30,000 SaaS companies in the world as of 2023, and 17,000 of these companies are based in the US.

A recent study by Notion Capital analyzed a cohort of SaaS and Cloud companies founded between 2005 and 2022. The main findings are:

• 117,566 SaaS and Cloud Tech companies were founded globally
• 37,327 of those companies founded are (or were) VC-backed; and
• 13,789 of those raised more than $3 million.

From 13,789 SaaS and Cloud companies that all raised more than $3 million, they identified 243 companies that had either achieved $100 million ARR and/or been acquired and/or listed, equivalent to 1.8%. That equates to approximately one in 50.

When they focused on “centaurs” which hit the $100 million ARR, they identified 168 companies, which represents 1.2% of the control group. In sum, 1.2% – approximately one in 100 – achieve $100 million revenue, and a total of 1.8% in total achieve $100 million revenue and/or a billion-dollar outcome. So more than 98% do not. However, this does not mean that 98% of the start-up journeys end in failure. Many achieved great results at smaller scales, but the industry-accepted success stories are rare, and many start-ups get stuck on the way to their North Star journeys.

Building the Right Leadership Team for Growth

When it comes to building a leadership team on this journey, a common mistake that is widely acknowledged is the placement or retention of individuals in inappropriate roles. It is widely understood that the individuals who played a crucial role in building a company from $0 to $10 million may not necessarily be the ideal candidates to lead it from $10 million to $100 million.

Therefore, a series of important questions arises: How can we effectively tackle this issue? How can we strike a balance between the loyalty and experience of our founding team members and the need for fresh perspectives and expertise as we move forward? When does a Founder require a VP of Sales, but should refrain from investing in a CRO and a large sales team? How frequently should reorganization occur? Is it prompted by the next funding round or the launch of a new product? When is it necessary to establish a Customer Success team? What are the consequences of building the Customer Success team slightly later than necessary? What specific skill set should an ideal Marketing leader possess when a company has only two clients and limited resources? When is the right time to introduce a Chief People Officer? Does it coincide with reaching a headcount of 100-150+ employees or with geographical expansion?

All these inquiries, and many more, necessitate thorough discussions, analysis, iteration, and reiteration when making executive hiring decisions within start-ups or scale-ups.

This is precisely the moment when you require a partner like Stanton Chase, someone who comprehends your language, understands your challenges, and can assist you in discovering the transformative leaders within the SaaS realm. With our expertise in executive search and leadership consulting, Stanton Chase can help SaaS start-ups navigate the complexities of building the right leadership team at various stages of growth, ultimately contributing to the company’s success and long-term viability.

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About the Author

As a Director at Stanton Chase South Central, Aylin Oktem brings a wealth of experience in SaaS start-up world. Before moving to the US from the UK, and joining Stanton Chase, Aylin worked for a London based boutique executive search company who specializes in VC funded SaaS start-up companies in the UK and Europe. As their Head of Research & Intelligence, Aylin helped them to grow their team significantly in the last few years while helping their clients find the game changing leaders in the UK and European SaaS space. Before that, she set up a European distribution arm for a US Headquartered SaaS company and advised local government authorities in London on how to optimize procurement, processes and procedures using SaaS based cloud-based services.

Aylin is truly passionate about delivering results for her clients. She is the consummate ‘people person’ and always goes the extra mile to understand client needs to get the job done.

Click here to learn more about Aylin.