The Hard Problem of Customer Success
For Founders and VCs, Customer Success is a growth strategy. As SaaS founders run out of unicorn-worthy ideas, innovation is coming in the form of business model, rather than code. Both VCs and Founders have skin in the game, as they seek early growth and solid IRR for investors.
Whats changed? The Old Playbook: Develop an innovative idea to solve an old problem. Be first to market. Ship some code. Hire 30 sales reps. Hit $10m run. See if your revenue is sticking, A lot of times, it did; at least enough to keep VCs happy with overall portfolio performance. If you run this playbook today, you're probably going to have a bad time. Incumbents occupy most spaces, and the ability to ship amazing code quickly means first-to-market isn't as advantageous as it once was. As challengers come, CAC increases, and only those with solid unit economics survive. This leads to... The New Playbook: Develop an idea that solves a problem. Ship code quickly, get your first 100 customers. Make sure its sticky; CAC:LTV should be 3:1 by the time you're at $10m. To hit that number, you need: 1. Solid retention, NRR should be at or over 100% 2. Upmarket Potential. ARPA/ARPU should be increasing at a steady clip, and by $5m you should have some logos that would be recognized on all 7 continents (yes, even the penguins should be in-the-know).
World-Class Customer Success matters as early as $1m ARR. With this in mind, our hard problem: 1. Most Founders benefit from expert Customer Success very early.
2. Expert Customer Success is typically only available from a seasoned vet.
3. Seed/Series A is likely too early to hire a proper VP or CCO.
4. Cash is better spent on product and GTM at this stage (growth still matters) Premise 1 should be apparent.
Premise 2-4 benefit from some expansion. VP Customer Success has expanded to cover many functions. Domain Expertise, Renewal Management, Enablement, Voice of Customer, Client Advocate, Executive Advisor, Team management - the list goes on. Having an A+ player at the wheel ensures you don't lose key logos, and NRR is attractive for later rounds. Someone with experience at all functions, at an early stage, is rare - typically seasoned CCOs or VPs who are uninterested or too expensive.
Even if a founder could find an ideal candidate that was affordable, how would they know? At early stage, a company's DNA is still somewhat unclear. Do you need a product person? Or service delivery? Someone with fundraising experience? And, how will they fit within the existing founder culture? Can there be too many cooks? As a result, early stage companies unknowingly neglect customers. Churn becomes a silent problem and within 1-2 years, you're bailing out a sinking ship.
This provides opportunities for competitors to attack, and distracts founders from what should be early stage focus - product, brand, and growth.
A Fractional VP solves this problem for both investors and founders. Founders have the opportunity to work with an unbiased third party, with experience delivering scalable Customer Success outcomes. Additionally, a Fractional VP can provide executive-level product feedback from a 100% customer-facing role; something typically not possible until $10m or later.
Lastly, hiring a fractional VP for a fraction of the cost ($ and equity) of a traditional VP leads room to invest in other key hires.
This creates a win-win for the founder-VC ecosystem. Improved financial metrics, longer runway, and early brand+product differentiation.