From €10m to €100m ARR in DACH's SaaS Ecosystem - Benchmarks on Commercial Leadership Hiring
We examined how some of the most successful growth stage B2B SaaS scale-ups in DACH evolved their commercial leadership teams.
We took a closer look at the DACH SaaS G2M leadership talent pool to understand current trends and themes. We mainly focused on three areas:
C/VP-level split and timing of leadership hires
Churn rate and tenure of commercial leaders
Typical backgrounds of commercial leaders
The results are interesting.
For example, while everyone is looking to hire commercial leadership that can grow their business from €10-100m, over 70% of these leaders spent less than 2 years with a company and 35% spent less than 1 year with a business. Hardly enough time to 10x revenues.
Here’s what we did:
We analysed 30 of the best investor-backed B2B SaaS businesses HQ-d in Germany (circa 1/3 of all growth-stage B2B SaaS in Germany currently).
We only included businesses that secured between $30m and $100m in funding.
We carefully reviewed >40 C-level and >150 VP-level profiles (we included all iterations of commercial leadership titles).
Below are some of the key highlights we found. If you’d like access to the full report, which includes a few slides on the few companies that managed to pull off quite stable G2M leadership team construction with minimal turnover, then send us an email here: contact@thebigsearch.com
C/VP Split and Timing of Leadership Hires
Of the 30 companies we analysed, 50% had no C-level commercial leadership. In these cases, commercial activities are most-often led by the VP Sales (73%), followed by the company’s Founder/CEO, COO, and VP Operations.
So far so good: most companies have a functional commercial leader. Only rarely, this is owned by the Founders or falls under broader COO remits.
Not surprisingly, most C/VP-level hiring occurs around Series A and B, with VP-level additions being more frequent during the earlier stages. We found that companies that hired a VP Sales at Seed stage had also raised significant seed rounds.
Looked at another way, the first spike in commercial leadership hiring occurs between $20m and $40m in funding. A second spike occurs between $60m and $80m in funding.
The majority of first commercial exec hires (>50%) came either around the $20m funding mark or between $20m and $40m in funding.
The second spike in leadership hiring between the $60m and $80m funding mark was predominantly caused by the German business' first expansion into North America.
Churn Rate and Tenure (Current & Past)
We looked at the churn rate of each company’s commercial leadership in the last 5 years (since 2019). This varied hugely, with some companies experiencing up to 82% turnover - while the average being around 40%. Not surprisingly, we saw that 2019-2021 saw the highest churn rate, so the influence of COVID-19 is not to be understated.
We wondered whether churn was at all correlated with the founding year of the business (more maturity = more stability?), but this wasn’t the case (see below).
A few companies experienced 0% churn in their commercial leadership in the last 5 years. Impressive, albeit these were organisations with small teams of max 3 FTE in the G2M leadership team.
Next, we analysed trends around the tenures of commercial leaders (both past - who had left the business already - and current, who were still with the company). Overall, we saw clear indicators that the exec market in Germany in B2B SaaS has begun to emulate the North American market where the average VP Sales tenure has shrunk to 19 months.
Let’s first look at the tenures of past commercial leaders. Remarkably, of 113 C/VP-level commercial leaders no longer with the business, 82 of 113 (72,6%) were with them for less than 2 years, and 39 of 113 (34,5%) had a tenure of less than one year before switching roles.
Of those 39 who stayed less than one year:
26 were external hires (67%) and 13 (33%) were internal promotions…
…and of those 26, 15 came from larger companies, and 11 came from smaller or similarly-sized organisations…
… only 5 of those 26 external hires were first-time VP-level hires (there were no C-level first-timers).
We then looked at the tenures of current commercial leaders at each company and saw similar numbers: of the 91 people still with their current business, 61 of 91 (67%) have been there for less than 2 years, with 32 of 91 (35%) having tenure of less than one year.
When 67% of the people who don’t make it past the 1-year mark in a commercial role are external hires, it raises a few questions about how well you set up the role, how well you can assess and interview and get to the right hire, or how well you can integrate a new leadership team member into your team.
These seem like obvious points, but too often we hear of founders hiring commercial leaders who don’t match a business’ needs - for e.g. the CRO is too strategic and hands-off in a situation where a start-up is still calibrating with PMF. And, too often, adding new leadership into the business is treated like hiring “just” another employee, when it actually completely changes the dynamic of the leadership team - Team 1. It’s not just about setting the right expectations for the new commercial leader, it’s also about rethinking the existing dynamics in the team. This is arguably the most important C-level hire outside the CEO - so it’s worth spending time to really get things right.
Background of commercial leaders
Particularly in the early growth stage, domain and industry knowledge still play key roles in hiring decisions: previous domain experience in SaaS was present in nearly 60% of the hires (57% for C-level and 59% for VP-level), while industry background (retail, hospitality, etc.) was a major factor for VP-level hiring in vertical SaaS plays (>75%).
Worth noting is that the majority (>60%) of the exec-level turnover took place when profiles did not have previous SaaS experience.
A slight majority (>55%) of all C-level hires came from larger, more established businesses. On VP level, 78 of 160 (49%) commercial executives also joined directly from a larger company.
In those cases, the majority of the hires were "step-up" profiles, graduating to a first-time C-level (>70%) or first-time VP-level (>54%) role. While this signals an appetite for giving more chances to first-time executives - it could also be a cause for the widespread turnover we've already discussed.
Of the companies analysed, 32 of 44 (73%) C-level commercial executives stepped up into C-level responsibilities from a more junior previous role (VP, Director, etc.), while 12 of 44 (27%) moved into the role directly from a previous C-level role.
On VP level, 87 of 160 (54%) executives stepped up into a VP-level role (from e.g. a Director role), 46 of 160 (29%) moved into the role from another VP position, and 27 of 160 (17%) moved into the role from a previously more senior position (e.g. C-level).
There's also a clear trend towards external hires vs. internal promotions. Of the companies analysed, 25 of 44 (57%) C-level commercial executives were external hires, as opposed to internal promotions.
This trend was even more significant at VP level, with 117 of 160 (73%) commercial executives joining as external hires.
As already mentioned above, the turnover amongst external hires was significantly (>65%) higher than with those promoted internally.
Closing remarks
The data illustrates how high churn is a persistent presence amongst the companies we've analyzed and deterrent to building consistency in your GTM and overall leadership team. If you’re finding it hard to get this right, you’re not alone.
You can think about this problem from many different angles:
Is it worth hiring someone, very consciously, for the problem you are facing in the next 6-12 months, knowing that they may not be able to unlock the next phase of growth?
Should you hire a fractional leader to come on-board and wait to hire a full-time leader? If you’re not sure about what exactly you need and how to set someone up for success, it may be better to first test things out.
Are you hiring with intention and deliberation or are you making rash hiring decisions? A headhunter promising a quick win for this role can quickly backfire. It’s worth taking the time to get this right.
Is it worth putting the same resources you are dedicating to hiring a new commercial leader behind enabling someone internally to step into this role?
It’s also clear that individuals with the right background tend to do better: hire people who have done SaaS before.
And, from a candidate perspective: if you’ve recently had shorter stints in your commercial leadership roles … you’re, also, not alone. While recruiters and hiring managers love to see loyalty, the data speaks for itself.
Next, we will look at concrete examples of commercial leaders who bucked those trends and were able to deliver on 8-10xing their businesses. What did they have in common? What resources (team sizes, funding) did they require to get there? Which GTM levers did they most frequently rely on?
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Looking for a commercial leader for your SaaS business?
Let’s talk: contact@thebigsearch.com