Articles by David Sacks
Real-World ViralityDistinctive product designs can make consumer products go viral in the real world. When a product has a unique form factor that stands out and solves a clear need, observers remember it and some will try it themselves, spreading it to more people. Examples include Square's credit card reader, Bird electric scooters, Juul vape pens, and potentially Cafe X robotic coffee shops. Real-world virality depends on a product's ability to spark interest through its design and entice observers to become users, spreading the product through social interactions. Products with viral potential can grow exponentially if they can close the loop by making it easy for new users to adopt.
Tweetstorm: Define Your Category to Win the CategoryIn this tweetstorm, David Sacks discusses the concept of product-market fit and agrees with Christopher Lochhead's point about category design. Sacks highlights that those who define the category usually end up winning it. He gives an example of Yammer, which launched in the "Social Software in the Workplace" category defined by Gartner's Magic Quadrant. Instead of trying to fit into that category, Yammer defined its own category called Enterprise Social Networking (ESN) and focused on key features like ease of use and cloud-based deployment. This category definition helped Yammer gain press attention, establish legitimacy, and secure contracts with Fortune 500 companies. In the end, Yammer's approach of defining its own category contributed to its success and eventual acquisition.
- Simple Math to Set Up a Sales Team
David covers every aspect of setting up a sales team: individual plans, team plans, territories, expansion and renewals, and more. Some of the tips he provides include: • A standard commission rate for SaaS products is 10%. For example, closing a $100,000 ARR deal generates a $10,000 commission. • For an AE hitting quota, their variable pay will equal their base salary, resulting in a 50/50 split between base and variable compensation. • The typical quota for an AE will equal 10 times their base salary. This is known as the "Rule of 10." • Once an AE hits quota, their commission rate should increase to 15% on incremental sales to incentivize exceeding quota. • It typically takes new AEs 4 months to hit productivity. They start with a lower quota and higher guaranteed pay during the ramp period. • A manager's quota should be set at 80% of their team's total quota capacity. Their commission rate depends on their target OTE. • If a team is hitting over 70% of their quota capacity, that indicates the team can hire more AEs. • An AE typically generates around 50% of their own leads. They rely on marketing for the rest. • New territories, quotas, and plans should be rolled out quarterly at Sales Kickoff meetings. • Allowing an AE to keep an account for 12 months after the initial close incentivizes land-and-expand deals for that AE.
- The Cadence: How to Operate a SaaS Startup
David proposes implementing an operating cadence for SaaS startups to bring order to the chaos of rapid growth. The cadence synchronizes the major functions of sales, finance, product and marketing on a quarterly cycle. The sales and finance functions work on one calendar while product and marketing work on another, but snapping these two calendars together creates the overall cadence. Key events like product launches and quarterly closes spaced apart in the quarter provide structure and milestones for the organization. Following this cadence consistently can transform a chaotic startup into an efficient, high performing company.
The Sharp Startup: When PayPal Found Product-Market FitPayPal's path to product/market fit involved listening to customers until they found a niche with extreme product metrics. The PayPal team then focused all of their effort on that niche - servicing eBay sellers.
- Freemium vs Free Trial: Which is Better for SaaS Startups?
David Sacks discusses the pros and cons of two popular models used by SaaS startups: Freemium and Free Trial. While Freemium offers a free basic tier with premium functionality behind a paywall, Free Trials provide full functionality for a limited time, after which users must pay or stop using the product. • Sacks, who has experience with Yammer, a successful viral Freemium model, generally recommends the Free Trial approach due to its ease of implementation and coordination with sales and marketing efforts. Free Trials create built-in urgency and help in measuring ROI and lead value. • Freemium is better suited for viral or networked products that aim to encourage user-generated content, network effects, or bottom-up adoption. Sacks shares the success story of Yammer, which experienced rapid growth through its Freemium model. However, he highlights some drawbacks of Freemium, such as low urgency to buy and the complexity of maintaining a functionality-based paywall. • Sacks advises choosing the model that aligns with factors like user adoption, contribution to network effects, willingness to pay, and the sales process.