It’s safe to say that Clari co-founder and CEO Andy Byrne knows what it takes to raise the money needed to build and scale a SaaS company.
Clari, a startup that provides companies with real-time revenue data and AI-powered insights, closed on $225 million in series F funding with Blackstone Growth, Blackstone’s growth equity division, in January. The deal valued Clari at $2.6 billion — a 400% increase in just two years.
It helps, of course, that Byrne’s company, founded in 2012, has the achievements to back up the headcount growth and acquisition strategy it plans to spend the money on. Last year, Clari exceeded its operating plan by 125%, and in the past two years, the amount of revenue that Clari processes for its customers jumped tenfold. Even other major software-as-a-service companies, including cloud monitoring service Datadog and IT security company Zscaler, use Clari to run their revenue processes.
But with a possible recession looming, Byrne knows it’s about to get harder for entrepreneurs to get their SaaS companies to the point that he has. We sat down with Byrne to discuss how he got his company to where it is today, what tips he has for other SaaS founders, and where he sees the industry going in the future.
This interview has been edited for length and clarity.
Congrats on your most recent funding round. How did it come about?
We were not out looking to fundraise at all. Blackstone had seen Clari showing up in a lot of their board meetings, where the CEOs and the CROs were using it to drive more efficiency, more growth, more predictability. And they were just hearing a lot about us from their highest-performing companies. So they started spending more time with us.
And I just liked everything Blackstone had to offer: their scale, their international reach, their access. So we engaged with them.
What can SaaS entrepreneurs expect when it comes to fundraising in the coming months?
It is no longer an entrepreneur’s market. Between supply-chain issues, labor issues, commodities issues, interest rates and, now, geopolitical issues, the deck is stacked against entrepreneurs. For those young, under-30 entrepreneurs who are expecting some sort of incredible valuation, the airplane has just gotten down to earth and almost is doing a crash landing, in terms of what they can expect and the amount that they can raise and at what valuation.
Reset your f-ing expectations. It is going to be tough. It's going to be eye opening. It's going to be, in a lot of cases, brutal. Worry less about valuation and worry more about passion and about your vision and what you want to do. Because it’s not about the money, it’s about realizing your dreams.
"Reset your f-ing expectations. It is going to be tough. It's going to be eye opening."
What should SaaS companies focus on in this climate?
In markets like this, you’re going to want to hunker down, you’re going to want to spend less money, you're going to want to listen very closely to your customers. It’s going to be easier for you to sell more to an existing happy customer than it is to get a net-new customer.
There are all kinds of charts out there right now talking about growth versus free cash flow. When they start talking about free cash flow, that’s not about hiring more sales teams. That’s about taking your existing sales team and getting more out of them. That’s about being really smart and saying, “What’s going to happen in this market is my SMB segment is going to get crashed, but my enterprise segment—the high-end market—is going to get sticky. So, where am I going to invest? Where am I going to divest?” That’s going to start happening.
"You’ve got to really, really, really have a core belief that what you’re building is the right thing, because you’re going to get a lot of rejection in a market like this."
You’re a five-time entrepreneur with over 25 years of experience. Any tried-and-true tips for building and scaling a business?
As a stage-one, early entrepreneur, you need to identify your three to five early adopters. Then love them, live with them and listen to them—the three Ls—and iterate as fast as you can to deliver value to them. You can call them early design partners. Don’t go sell to GE first, because they’ll probably kick the tires faster.
Then you just constantly outperform and over-deliver on their expectations. They’re going to shepherd you through to a purchase order. It might not be a big one, but at least you got a logo and some evidence that people are going to buy. That’s your foundation.
As you move from the three, to the 10, to the 25 [customers], you have to figure out go-to-market fit. You hire your first one or two sales guys. In some regards, you’re experimenting. You have a point of view and a thesis on what’s going to be the focus, what’s going to be the design. You run as fast as you can to see where the experiment fails or succeeds.
Then you can actually start to scale, start hiring even more mature leaders who can bring in small armies and start to build on top of that.
You’ve led Clari through seven rounds of funding and grown the team to more than 500 employees with plans to add another 300 this year. So, what’s your secret?
You’ve got to really, really, really have a core belief that what you’re building is the right thing, because you’re going to get a lot of rejection in a market like this. And I’ve seen my fair share of rejection.
You’ve got to find the other true believers and then show incremental evidence that you're producing something great. Hang with investors who believe in your thesis—not people who want to take a meeting, but people who actually believe in your point of view as well—before you start sharing data with them. Go find like-minded investors who want to build something from scratch and/or scale it in a market that is going to be a hard market to build software companies.
Focus on developing trusted, high-value relationships with customers. Study their way of doing work, and be a dreamer, be an innovator—try to transform what they do to give them more efficiency and provide an [even better] way of running their work life.