• Causal Engines

SaaS structures come down to one critical relationship

Updated: Feb 9

SaaS companies are often structured very differently. From Salesforce to Veeva to Atlassian, the internal hierarchies, departments, and organizational distributions look radically unique based on their business model. We figured it was worth digging into.

We looked into the distribution of employees across 3 archetypal companies: Paycom, Twilio, and Atlassian.

Above, you can see that Paycom clearly has a higher % of people dedicated to sales vs. Atlassian which has a higher % dedicated to engineering. We find that there is an essential factor within a business model that determines this structure.

It comes down to one point: the relationship between product and distribution.

To explain this, let’s simplify things. Generally speaking, SaaS companies fall into the category of being either product-led or sales-led.

Product-led companies are propelled by user satisfaction. These businesses are typically dependent on engineers, often having over 75% of employees in this role. This strategy emphasizes enhancing user experience which can integrate in-house customer success teams so that churn remains exceptionally low. These businesses still do sales, but they do so differently. The majority of their sales come from SEO, books, word of mouth, and simply positive PR. This is implemented purposefully with CEO’s publishing their own pieces and naturally from having a high-quality product. These channels are the focal sales force that complements the occasional enterprise sales team. We see a lot of this in Atlassian’s focus on community-led growth and Twilio’s early day focus on developer adoption.

However, sales-led companies are different.

They are dependent on a robust sales team. The organizational structure of these firms commonly have 50% of employees in sales and 10-25% in engineering. Rather than spending time and money on developing a flawless and complete product, these businesses deliver the critical features that customers want and bring the firepower to sell into high paying businesses. Think Salesforce and Paycom.

Sometimes you get a hybrid where product-led organizations transition to selling further up the enterprise. You can see this in Twilio. From the workforce data on LinkedIn, it seems like Twilio is in the middle of building a heavy sales effort. They are almost two companies in one: product-led and sales-led, supporting each other on the way up.

While the structure is a result of the business model, it is important to note that these structures can have large and differing implications for compensation. Engineers are likely to be paid large fixed salaries with potential for equity whereas salespeople have lower fixed sums and win off commission. However, in the right sales-led companies, rainmakers might be more valued.

There is no right or wrong when it comes to operational models. Most SaaS businesses fall within the product-led to sales-led spectrum, usually encompassing a hybrid of these companies. What’s more important is understanding your desired business outcome and the customers you serve, which can provide clarity in leveraging your structure to achieve the set goals.

This article is a collaboration between Archit Bhise and Sebastian Duluc.