Scaling SaaS Companies from VC's View, with Arthur Nobel

Hey everyone, welcome to another episode of SaaS Boss. And today I'd love to introduce my friend here, Arthur Noble. And Arthur is a principal at a company called Knight Capital. And today we're going to talk about scaling SaaS companies.

Welcome to the show, Arthur. Thanks a lot, Nathalie. I'm really looking forward to it. And thanks for hosting me.

Absolutely. So I am big on scaling SaaS companies. And Arthur is actually about to publish his book. Arthur, when is it going to go out?

It's on currently the planning date is the 25th of June. So it's two more weeks of hard work. I know, right? Sounds good.

Well, the gist of the book is basically like how to scale companies across multiple departments, right? Because a lot of founders, the problem of founders is they think that they're lacking leads, they don't have enough traffic and stuff like that. And all of that, they usually think about marketing. Marketing is the problem, why they don't scale, which I am so big on the fact that, well, it's not just that your team can be a growth lever.

Anything can be a growth lever in the company. So, and this is what your book is going to be about. Tell us how, how the idea came to. Yeah.

So I coauthored it with two of the people from our firm and we've all been entrepreneurs basically. And now in the role as investors, we talk with many, many companies, basically what we've really seen is that is that companies sometimes struggle with, with scaling. So we dived a bit into like, why is that? And what we found is there's a lot of content on getting to product market fit.

For instance, like the Lean Startup, like Magnificent Book. There is also a lot of content on maybe this company doing an IPO and the founder reflecting on its journey. But actually, the stage of going from one to 25 million annual recurring revenue is usually what we've seen. There is not so much information on how to navigate across these stages.

And then we looked a bit into that and we found even that there is like a study from Dealroom that mentioned that from the 16% of companies that managed to secure a seed round, only like roughly seven is able to raise like a Series C round. So we feel that at least this is partially explained that founders just lack a framework for scaling. And that was one of the drivers for us to basically write this book. Tell us a little bit about the structure of the book.

You've done a lot of interviews. Just tell us a little bit about that. Yeah. So maybe it's funny, like back in November, I was just brainstorming with one of the people from the team and we felt like, yeah, it's actually great to write this book because there is this gap in the market.

And we felt like we should do it. And, you know, but we don't know when exactly. So finally, I was just speaking with one of the people in the book on LinkedIn and we just had this informal chat and it was like, you know, why not? Let's ask if he actually wants to contribute.

And the person said yes. And that meant like I had a date with the first interview, but also that I really had to kick off this project. So we did in December and January and February, we interviewed like 47. So these are like founders, operators and experts.

For instance, some well-known people, I think are Sean Ellis or Mark Roberts or Nathan Latka. And the SaaS CFO, maybe also well-known for this community. So they all contributed to the book. They shared their insights.

We looked a bit around, okay, how do we structure this? And we looked a lot into Tribe of Mentors from Tim Ferriss, a really great book. It has helped me myself. So we chose this format of like Q&A where it really feels like it's an easy to read book.

And people just get like a really natural perspective from people. Yeah. On scaling a company. I'm not sure if we can go all the way, all the way, like to the gist of the book, but I'm really curious to hear because they're so different.

If you were to count and I don't know if this, if you have something like this, are there like let's say like 10 different uh ways of not not ways but like 10 different departments or 10 different levers like that you found can be pulled or like how really to grow a company one of them is marketing another one is sales another one is operations team performance i don't know something like that yeah so we really wrapped our head around like you know when we were finished like okay so what are all the learnings from this and how can we basically create a framework from that what we try to do is come up with this framework where we basically set the following so you have marketing sales finance so we call this topics or departments of a company and then you have to look into like what are the dimensions on which you can scale and I think this is important we came to view scaling more from an organizational angle rather than saying like do more SEO or do more paid ads.

So if you really look from a department perspective, and you can of course also take that from a company perspective, we defined six dimensions, which you have to basically plan ahead for, for a department. And these are in our case, like objective, like what is the main function from a department in a given stage? For instance, like if you're early stage company, like HR is focused on recruiting Whereas if you are like a bit later stage you more focused on HR process But that the first The second one is on data Basically what KPIs are important for a department and a company at a certain stage If you're at a product market fit stage or early scaling stage, LTVCAC, lifetime value to acquisition cost ratio, is not so important.

Whereas if you are in a Series B or C stage company, it's super important. So knowing which data you need to gather and what KPIs are important, I think that was an important drive. Then the third one was like, what people do you need and for what roles? We really came to see that people in a Series A type of company are very different from a Series C type of company.

And that's again, again, very different from a seed company. Another lever that we said where you have to really plan ahead is like in terms of documentation. Like, you know, what standardized documentation do you need so that everyone is on the same? If you grow, let's say, from 20 to 100 people, you really see companies getting more and more siloed.

And from there, you see the performance per employee really dwindle. And this is one of the reasons why, for instance, sometimes companies don't make it. And then there is like a fifth one, which I go really quick through. It's like, what processes do you need at a certain stage?

If people think about scaling, I feel it's often perceived like you have to do scaling and there aren't a lot of flavors in it. So identifying like what states MIR are like in this whole scaling continuum, like, you know, do I need to be, have like repeatable processes or do I need to have predictable processes? That's right, et cetera. It's very important to design it.

And the last thing is what type of tooling do you need for a stage? So if you are a customer success department, you might need a gain site when you are in your series C states. But if you're like in series A states, you might do well with Slack, for instance. So that is like very high over like a framework on how we look to how we look to scaling.

And from there, we go a few levels deeper. Right. So the first layer is, how do you call it? So we call it like organizational topics or the department, so to speak.

And then you have the dimensions, the six points of dimensions. Interesting. So departments are, I think you talked about state. Yeah.

So you have first, you have the organizational department, marketing, sales, culture, or even like granular learning and development. Then you have the dimensions on which you have to scale, like objective, KPIs, people, documentation, processes and tooling. Then you have to take into aspect like maturity stages, which are like, for instance, early on everyone recognized this, everything is ad hoc. From there you go through fixing the basics usually.

Then you move into a repeatable process. If everything is repeatable, you want to move to predictable. Predictable is usually at series B. and repeatable is more series A.

And then you want to do things at scale, like with much more people, much more countries, much more industries, and then you do things at scale. And these different maturity stages influence how you design your company for scaling or your marketing department. And then, of course, lastly, it's for founders and operators, very important to decide, but what is actually the trigger point to go from basically fixing the basics to building a repeatable process? And there are different drivers that you can come up with, And that's why we look at.

Sounds good. So I'm actually really interested to talk about those triggers. Tell us a little bit more. So I do think that there are many.

And for the audience who is practicing this themselves, you have to make up what makes sense for your business. However, I do think there are some fixed trigger points. And then I, for instance, think about the number of customers. So if you are in customer success, you can do everything, maybe even in Excel sheets or Google sheets when you have maybe up to 50 customers.

However, if you move up to maybe like 100, you need to, that's a trigger point. Like, wow, it's getting too complex. I need, for instance, more people in my team or I need to really get the tool to manage this properly, et cetera. So that's number of customers.

Then another one I've seen mentioned often is like teams. So let's say if you're around 20 people in your team as a whole organization, you really have to start implementing processes and that usually 20, 30 people. and then like you can grow to usually up to 100 and then you get like a whole new level and that basically brings you to 250 at least that's i've seen and that are like trigger point for an organization then of course you have revenue sometimes like if you are let's say if you cross a 10 million arr mark you have for instance all the different levels of growth for instance you can do acquisitions whereas if you are like in a 2 million arr type of business you can acquire your companies, but it's not very logical usually.

But also, for instance, if you cross a certain level of revenue, you can hire different types of people. Really great people don't want to join, usually early stage startups. They find it too risky. Then of course, the customer segment.

When you decide to serve, for instance, the enterprise segment, you have to, if I take again, like customer success as an example, you have to be very professional from get-go. Whereas if you are serving SME, you can approach it a bit more like, let's trial and error. So I think that an important trigger point And then there is one is the predictability of out And I think that one is very interesting especially if you look from a sales and marketing perspective you get to this point that you feel like okay I know what leads to the X and Y of, for instance, I know how to get like embedded into SQLs, you know, influence my funnel.

And from there, basically, you can start ramping up like, like hiring, start spending much more because you have the belief based on like the metrics and everything that you measure, that you can actually ramp up and that burning cash is not really a problem. Whereas if you don't know that and it's not predictable, it's a very quick way into bankruptcy. Sounds good. So majority of our listeners are going to be mostly early stage, I want to say.

So keeping this in mind, for them to have their eyes on the target that this is where they want to go, what would you say they need to have in place right now or think about right now to put things in place for growth? To understand that correctly, I guess your audience is basically in between the seed stage and the Series A stage? Yes. Great.

So if I just pick a few things, because I could say a lot, but just give a few practical examples. If I look to objectives, I think for HR, it's very important to focus on recruiting, because that's what you're going to need in the next 12 to 18. If you look for finance, you might look into like a controller. That is because you want to start focusing on the reporting for like a Series A.

If you look from a sales perspective, I think it's very important that you show some repeatable processes so that you can indeed like raise your Series A. If I look into, for instance, data, just to give like a few examples, important that you don't put too much weight on certain metrics. So if you are pre-Series A, It's very important to focus, for instance, on the retention, on product metrics, on engagement. And that always keeps being important.

Don't get me wrong. But LTVCock, for instance, like those type of metrics, it's good to measure them. But it's very hard to explain that if you're a two-year-old company to say that you have a lifetime value of six or eight years. So focus more on things that show that you really have product market fit and afterwards go to market fit.

and these all these other metrics usually come a bit later although they shouldn't be like out of the ordinary then in terms of people that's maybe one of the most interesting things that that i've seen is usually in the beginning and then i jump a bit some of the learnings i got is that you initially start with t-shaped people so this means i don't know if you're familiar with that but like very they have a very broad skill set but it's not very deep then once you basically move across stages, the T gets a little bit deeper, but also a little bit less broad.

And then eventually it will become like an I-shaped form, like very deep, but not broad at all. And I think initially in the stages where your listeners are, I feel they should really focus on this trailblazer type of people who have like usually like an entrepreneurial type of background, who have like a very broad skill. But then up to your Series A, you start getting like a few, I would say a bit more senior people in the team will have usually done it before and then from series a you start working more on gradually working more on processes and you start needing like different and it's very important to understand that you don't in the states and if you're in the seed states series a states it's very important to not promise someone who's for instance now doing well in marketing that is definitely going to be the cmo or like it's going to be like the cfo because someone that you need, like at 5 to 10 million AR or 10 million AR plus company is a whole different type of person and you need to need whole different types of skills.

So with the titles that you give, take that into account. So that is one. And of course I can go on and on, but I hope this gives like a bit of a picture on what is important for more early stage type of companies. Totally agree.

I think totally helps shape our vision, what's required. Right. I kind of want to give you open floor so that you can share, probably could be asking many more questions, but like, if you want to just summarize or just share a few more important points that you think our listeners would benefit from, I want to give you open floor to do that. Let me go to that, especially since something I want to share, like you mentioned that, what is the audience of your book, sorry, of your podcast.

So I think what is very important just to define a bit what you need to have in order to raise like a series series a round basically what are usually the entry points because i feel there's also sometimes sometimes some misunderstanding in that so i think if you're like in your seat right very important that like to demonstrate product market fit that you show like minimal size of applicability in terms of sales that you can explain like if you for instance invest 5000 euros that this will lead to x and y in growth and that you have like a certain defined process for that.

And that I think is important. Another thing is important that you can really show that you have a strong position to win in your niche going forward So I think that is really important to raise like a Series A And from Series A onwards it starts getting more about building replicability and basically expanding your market and really scaling. So I think that is something I wanted to share on defining Series A and Series B and what is important. Then something else, give me a moment, something else which I want to want to share which I think is like very relevant for the audience is to think about the trade-off between hiring like newbies and the people who have done it before so what I've seen like more mostly in the early stages that's I mean I've done it myself as well I hired a lot of interns a lot of people who are like first out of school and those those people were great so nothing against or sometimes you even hire let's say some someone who have like corporate experience but all of these people they lack the skill of having done this one two or three times before and what i've consistently seen from the people in in the book is that they said like it's great to have like a few talents in the team but it's very important to to have to get more people in the team who have done it before and who have been basically in the states of 12 to 24 months ahead of so if you're like a series a type of company don't get some i mean it's great if you get someone from slack now but you know honestly you can get much better basically someone from maybe open you know who uh who's now like in this series uh c type of states because they have gone through this the same challenges where you will go through quite soon and they can they can help you with that let me see what else is is relevant for the for the audience that's maybe like a growth framework what i've what i've seen and like once you pass one million arr and you start raising your series A, you have actually lots of options.

And then you get into this paradox of choice, you can do everything. And then, you know, everyone is just always like explaining, like, you know, you have to vote, which I, which I fully agree on. But it's, you know, in order to define your strategy, I thought let's share like a few points, which I see in my daily practice, but also what I what I've learned from a few candidates in the book. And that is a simple growth framework, I haven't invented everything myself, but it's also partially out there.

So I would say if you define your strategy, always start with like a winning aspiration. What is your vision, what you want to achieve? Then define in how you want to win, basically what difference. And then that's basically the center of the model.

You move into where you want to play. And where you want to play, I usually think there are like a couple of options to grow, given the audiences like early stage, I focus only on organic growth and growth that you can do yourself or together with raising capital. And if I would define like a strategy, I would always look at what are the geographies? I mean, right.

And which countries will I go into in the next 12 to 18 months? Then also like industries, where am I now and where am I going? And also look into that for customer segments. Like, am I serving SME and mid-market or enterprise?

What will I do going forward. Also looking into distribution models, like, you know, sales, do you do sales, do you do more marketing focus, are you more product-led growth, are you more channel sales, and map those. And then also, like, in terms of products, do you perceive that you will go basically more deep, or will you go, like, wider? And if you then all write this down, it's like a very simple exercise, of course.

I haven't reinvented the wheel here, but then you start sort of seeing, like, how many different things are you going to do? And what I've really learned and also I think usually what the investors are looking for is that you keep doing the same thing and maybe add a few bets on top of that and also then to evaluate that like where you are do you feel and that you that you actually can continue doing what you already do and that you can raise money for that and and scale that up and what are these one two three bets that you can basically play and that will help you through through your series b and over time once you're in your series B, series C.

You can expand, for instance, to a lot of other countries. You can serve more customer segments. But having this focus and knowing when to do what, I feel is very important to not skill yourself to... Got it.

Thank you so much for all of this information. It was very interesting. I'm sure it took you, I don't know, a month of man hours. So thank you so much for sharing your expertise.

Now, where can people find your book and go ahead and order the book? great yeah thanks for asking so we have a website called leaders of growth.co and people can also go through amazon they can find the link there but they can also go to to amazon and then just type in leaders of growth and if they can find it because we're still a new book you can just add behind like arthur noble and yeah there you will there you will be currently in pre-order mode and yeah i'm looking forward to see the results there you go everyone arthur noble thank you so much for all of this expertise.

Look forward to chatting with you soon. Thank you very much, Nathalie.