When The Team Revolts


This post is by Jason Lemkin from SaaStr

Start-ups aren’t democracies, no matter what some employees may think.  The CEO is the CEO, and the founders are the founders.

But start-ups also aren’t IBM or Cisco.  Or even, anything like DropBox or Slack or Box or Hubspot, not organizationally at least.

From 1-10 employees, it’s a family.  After 150 or so, somewhere in there, it starts to become a traditional hierarchical structure.

revoltIn between … from 10ish employees to 1X0ish … a start-up is something unique.  Something organic.  A couple of platoons.  An organization that has come together voluntarily to take on a mission, at least in part.  Later, it’s just a job.  Maybe a cool job, but just a job.  But from 10-150, it’s no longer a (squabbling?) family, but for many of your team, it’s more than just the best way to pay the rent.

And in this phase, most likely, at least once — the troops will revolt.

They’ll revolt when you make a senior or mid-level hire that as a group, they simply cannot suffer one day longer.

It’s happened to me, and I think for whatever my faults, I have a pretty high EQ and am a half-decent manager.   So my guess is it will happen to you, too.  In fact, it’s happened with every start-up I’ve ever worked with.

The three times it happened to me:

  • A very senior engineer that we just HAD to have.  In my first start-up, there was one engineer we had no choice about.  He was literally the only person on the planet with the specific scaling experience we needed.  Everyone hated him.  But I forced us to hire him, over my CTO’s strong objection and my VPE’s grudging acknowledgment we had no choice.  It did work — we got the scaling done.  But then, once completed, the team turned on him.  One day at a company meeting, he snidely called out everyone in the meeting (myself included, but that’s part of your founder job, to suck it up).  It was just one burnt bridge too far.  Everyone revolted within 20 minutes of that meeting.  I didn’t know why at the time — but I fired him that day.  It was clear anything else was even worse.  Even without a back-up plan.
  • A senior product lead that engineering wouldn’t work with.  Another time, a rather long time ago, I had a senior product hire that was pretty brilliant.  But not someone that could manage engineering.  Friction between engineering and product is good, if they aren’t the same function (and in SaaS, I don’t believe they should be).  But engineering does have to respect product, at least begrudgingly.  In this case, the product lead was both a bit acerbic and remote.  That made managing engineers by will just too hard.  One day, they simply had enough.  It was clear I’d lose the team.  That day, they had to go.
  • A senior marketing manager that offended everyone culturally.  I think start-up culture is what you make of it.  It’s the people you hire, not the number of Zoom games you play, how often you drink nitro stout together, or even how flat you think your organization is.  And sometimes, you hire someone so far from the values and the culture of the rest of the team, they simply cannot work with him.  This happened to me once.  It was a hire I wasn’t really in favor of, but it was an experiment.  You have to try new things.  The experiment lasted 7 weeks.  The borg completely rejected him.  And one day I walked into work at 8am, and it was clear, the troops had revolted.  By 8:30am, I had to make a change.
  • Plus for Every Start-Up: the classic non-hands-on-enough VP hired too early.  You see this all the time.  Bob is a great VP of Marketing or Sales at Box or Salesforce or Netsuite or wherever.  He comes into your Hot 17 Person Start-up.  And does no actual work himself.  And no one will work with him.

If you notice a theme here, it’s not about competence, not usually.  Incompetent non-management hires are shrugged off by the troops.  They just ignore him or her.

And you have to try things, and take risks, and make stretch hires.  And again, it’s not a democracy.  Not everyone you hire has to be loveable, or even, likable.

So someday, no matter how careful a CEO / founder / hiring manager you are, you’ll hire someone that the troops just … revolt on.

My only suggestion and learning is don’t fight it.  Understand that when you are 500+ employees, people will expect a certain amount of incompetence embedded in the org.  But not in that crucial I’m Doing This To Be Part of Something Special phase.

When you are in that phase, and the troops revolt, you aren’t actually fully in control, even as CEO.  Because if you lose them, you lose everything.  And if you don’t act, they won’t believe in you, that you let this one “horrible” person stay on too long.

When they revolt — they “win”.

Let that employee go, that day.

Or at least, if you totally disagree, think about what I’m saying.  And at least let them go as soon as you can.

(note: an updated SaaStr Classic post)

The post When The Team Revolts appeared first on SaaStr.

How to Succeed as a First-Time VP of Sales. Or Just a First-Time VP in General.


This post is by Jason Lemkin from SaaStr

rookierWe’ve talked a lot on SaaStr about how to hire a Great VP of Sales.  And we’ll keep talking about it — so long as 70% of first-time VPs of Sales don’t make it 1 year.

I wanted to take a moment to explore the flip-side … a guide to why first-time VPs of Sales that finally get their shot — fail.  I’ve seen so many fail, and almost always, for avoidable reasons.  Reason #1 is jumping to Stretch VP of Sales one stage too early.  A great VP of Sales has to have recruited at least 2-3 quota-carrying sales reps before under her to succeed on her own.  So don’t come out of the hatchery too early.

Beyond that, I see a series of other avoidable mistakes that lead to a train wreck as well.

If you can avoid most things on this list — your odds of success go up.  And hopefully it will be a helpful list for CEOs as well.

15 Things Not to Do as a First-Time VP of Sales:

  • Pretending you know how to do something you don’t.  Too many first-time VPs of Sales pretend they’ve done it all.  Do not do this.  If you came up in a 100% in-bound environment, don’t pretend you know how to build an outbound team.  If you were the #1 field rep in your last gig, don’t pretend you understand everything about high velocity, small ACV deals.  It’s OK as a first-time VP of Sales — and a 10th-timer — to be honest about what you are good at, and what you are still learning to be good at.  In fact, it will save your job.
  • Not hiring people better than you.  One of the biggest differences between first-time managers and experienced managers is first timers hire their friends.  And then after that, they hire people that won’t challenge them.  Look — you have your shot.  You are finally VP of Sales at a hot, or pre-hot, or at least interesting SaaS company.  Don’t blow it by hiring yes men and yes women.  Don’t blow it by hiring reps you’ve worked with before, but can’t sell in your current environment.  You need to bring in a few ringers.  But after that, you want to hire folks that were better AEs and SDRs than you ever were.
  • Signing up for an impossible plan.  The best VPs of Sales sign up for an aggressive plan — and insist on being paid when they crush it.  But no great VP of Sales will sign up for a truly impossible plan.  Don’t agree to a plan you mathematically can’t hit.  This never ends well.  You’ll be blamed.  You’ll be fired.
  • Hoping headcount (alone) will drive revenue.  At some point, every SaaS company gets big enough where headcount does drive revenue.  But this is almost never the case before $8m-$10m in ARR or so.  Before then, leads drive revenue.  Too many first-time VPs of Sales hire way too many AEs to hit the plan.  Instead, you should have enough AEs to hit the plan, but also, enough SDRs, enough BDRs, and enough MQLs.
  • Not becoming a demand-gen semi-expert ASAP.  You can’t learn how to be a VP of Marketing just as you are becoming a VP of Sales.  But yet, somehow, you sort of do.  You need to understand where the leads are going to come from — all of them.  Part of this is becoming a demand gen semi-expert, even if you got little exposure here in your last company.  First, if there isn’t one, you need to help the CEO bring in a VP of Marketing or at least Director of Demand Gen ASAP that can help build the funnel.  Talk about this every week in your 1-on-1.  You also need to help the CEO understand what % of this year’s plan will come from SQOs, and what % from MQLs.  Many first-time CEOs don’t know how to do this analysis.  You need to do it as part of your Day 1 plan, and revisit it every 60 days.
  • Hiring B- sales reps to hit the hiring plan.  Hiring is hard.  It is so hard.  It can seem even harder to a first-time VP of Sales.  Aren’t Intercom, Talkdesk, Algolia, Zoom and Slack hiring all the great AEs?  Don’t I have to settle?  No.  You do not.  This is what separates a great VP of Sales from the pack.  She knows how to recruit and find reps that enjoy your stage, your hunt, your job.  The mediocre VPs of Sales tell you that you have to settle.  You don’t have to settle.  You do have to hire differently.  But if you hire nothing but AEs fired by Fancy Logo companies — that just doesn’t work.
  • Not getting a mentor.  Everyone needs a mentor.  And I almost never see a first-time VP of Sales get one.  Tell your CEO you need a budget for 10,000 options and $X00 an hour for a “CRO Mentor” and go get your old boss, or the best VP of Sales you know, to be a paid mentor.  Unpaid mentors are OK but paid ones are 10x better.  Get budget here on Day 1.  No one does this.  You should.
  • Blaming others.  A seasoned VP of Sales that is great just never does this.  You know what — it’s your plan.  If marketing came up short, if customer success screwed up, that’s life.  It’s not meant to be all daisies and unicorns.  If others really are to blame, your job is to help them.  Backfill them.  Get the most out of them.  That’s what true leaders do.  As soon as you start blaming others for your missed quarter — you’re basically out the door.  The buck stops with you.
  • Unrealistic optimism, especially around unlaunched product features.  Sales needs to sell the product we have today.  Warts and all.  If things are tough, and I hear a VP of Sales having crazy confidence we can do better with just this next feature — next quarter — I immediately lose confidence.  Sales is tough.  A feature gap is always an excuse.  The flip side at the VP of Sales level, is excessive confidence around the roadmap as a top revenue driver makes everyone nervous.
  • Talking the Talk.  Don’t talk about things you don’t understand yet.  If you don’t know how to build a true CAC analysis — be clear about that.   If you don’t know what SDR/AE coverage makes sense — be honest.  Throwing around buzzwords you don’t understand doesn’t impress the board.  They know the emperor has no clothes.  It completely undermines confidence in you.
  • Firing the wrong way.  No one wants to fire people.  But great VPs of Sales know when to fire — and when not to.  You fire AEs that waste leads.  That’s instantly accretive, because your Revenue Per Lead almost instantly goes up.  You don’t fire AEs that are still closing at a decent rate just because things aren’t going well.  You have a different root cause issue.  You need a diverse sales team.  There are different ways to close deals.
  • Not hiring management under you that are more experienced than you.  Strech VPs of Sales shouldn’t hire Bigger Stretch Managers under them, except in the most hyper-transactional environments.  Even if you kill it the first 6 months as the only manager, the time will then come when you need to hire Directors of Sales, a VP of Sales Ops, and more under you.  Rookie Error #1 at this stage is hiring other folks that haven’t done it before.  Don’t be insecure.  Be confident in what you’ve accomplished.  If you’ve build an amazing culture, you can hire folks under you with more experience than you.  That’s not a threat.  It’s an enabler.  You have to learn to do this when you hire your first management layer.
  • Carrying a bag too long.  You’ll never be able to hit the plan for 8 AEs under you if you are carrying quota, too.  Don’t carry a bag yourself for more than a quarter.  It’s a trap.  Especially if you are the best AE on the team.
  • Owning more than Sales.  Whatever you do, do not agree to be VP of Sales and Marketing.  Or VP of Sales and Customer Success.  Or VP of Sales and Anything Else.  All it does is increase the odds you fail.  You are a closer.  Now you need to become a recruiter and leader of closers.  This is all you should do.  Anything else, and the odds you fail at both go up 10x.  Minimum.  This is bad for everything.  Even if your CEO is pushing you to own both.  Push back.
  • Being non-transparent.  And/or not signing up for goals and reporting against them.  Don’t play games.  A miss is a miss.  Sign up for an ARR goal that is tough, but can be achieved.  Be honest about each month how much over and under you are.  Transparency builds trust.  Seasoned execs know this.  First-timers try to hide the ball way too often.

A seasoned VP of Sales gets the benefit of the doubt when she starts.

A stretch VP of Sales really doesn’t.

So build trust quickly.  Be honest about what you know, what you don’t.  Get the help you need.  Hustle like there is no tomorrow.  And learn to be the best recruiter on planet Earth.

And be yourself.   Don’t try to copy Some Guy.  Your CEO took a bet on you.  She believes in you.  Not someone acting like a VP of Sales.  You.

(note: an updated SaaStr Classic post)

The post How to Succeed as a First-Time VP of Sales. Or Just a First-Time VP in General. appeared first on SaaStr.

How to Ensure Your First 2 Sales Reps Actually Work Out


This post is by Jason Lemkin from SaaStr

A long-time reader wrote in to ask a question that pretty much everyone asks some variant of:

Screen Shot 2014-08-13 at 2.16.45 PMIf you had to force rank these items in terms of what we should primarily be looking for in these first sales reps, how would you rank them?
– has sold SaaS before (as opposed to selling media/ads, or some other product)
– has sold something of a similar size ticket/ACV (ours is high..$150k-350k ACV)
– has sold something to the same kinds of companies we are going after
– has worked in a startup situation before
Thanks again, have a great weekend.”

These are the right questions.  You can’t have it all, not only in your first reps, but in any of your reps, really.  What do you look for?

Well, later, you can look for a lot of things.  And later, your VP of Sales can do the hiring.

But over dozens of SaaS start-ups that have churned through their first sales reps, I’ve boiled the key criteria down to Just Two.  Here’s all you need to know to qualify your first two sales reps:

  • waitingphone#1 — Would YOU buy from this rep?  Yes, you the founder/CEO.  Later, as you add reps 3-300, you’ll find it takes a village.  And in fact, you’ll find you end up with lots of reps that you wouldn’t personally buy from.  Some are too slick.  Some are too aggressive.  Whatever it is.  And that can work — later.  But not with the first reps.  Because these early leads, they’re so precious.  If you wouldn’t buy from the rep — it will never work.  Because you’ll never trust them.  And when it’s hard, you won’t know why.  But if it’s someone you’d buy from — you’ll know what to do.  Just help.  Be a great “middler” and let her close.  But if you’re second-guessing your first 2 reps, there’s about a 93.4% chance they’ll fail.  There’s just too much uncertainty, and you’ll never let the leads go to a better place.  To a place where they can close at a higher, faster rate.  Don’t let yourself believe sales is some sort of mystery, that some rep you don’t quite believe in somehow knows how to practice.  You know how to sell, at least you know how to sell your product.  You just aren’t great at it.
  • #2 — Does he or she have at least 18-24 months of experience selling SaaS products successfully — on quota?  Later, you can hire all types.  Later, folks that haven’t sold directly before, you can hire them into entry-level roles or SDR roles.  Later, folks that have sold, but not SaaS, you can take some risks there if the rest of the package is strong.  But not in The First Two.  Because the thing is, you don’t know.  You don’t know how to sell SaaS products, not really.  So you simply cannot hire reps that don’t have at least some quota-carrying SaaS experience here.  Later, when you hire a VPS, he or she can mix it up here.

>> So what do you give on then?  The reality is, what you’re probably giving on is The World’s Best, Proven Closers.  You may hire very good reps … but not the absolute top of the pack.  

And that’s OK, in early days.  Because hiring someone that is Good, that You’d Buy From and Trust, That Has Been Trained in SaaS Sales … is going to work.  Better than the world’s best closer that you wouldn’t buy from, that you don’t fully understand.  As long as they are a good closer 50+ hours a week, that’s probably much better than you doing sales part-time — assuming you are still there to help a lot.  Most founders-serving-as-VPs of Sales are great middlers, great demo’ers, but mediocre closers.

You haven’t been trained to ask for the check.  And you don’t like to Hear No.   And you’ll leave (lots) of money on the table just to close the customer.

A good rep, that you trust, that you’d buy from, with at least 18+ months of experience — will do better.  They’ll ask for the check now, this month.  They’re ok hearing No.  And they don’t leave as much money on the table.  They’ll call back the leads you’ll lose patience with.  Many CEOs don’t call back all the leads, not really.  They’ll deal with the headaches of discounting.   Etc. etc.

Boom!  Revenue per lead goes up.  You learn more.  Do this up to $1m ARR, then hire your VPS.

But without #1 and #2 — it’s too risky.  They’ll fail, you won’t trust them or understand them, and you’ll be back to Square One.  You can’t afford that.

Ok now bonus question #3:

  • #3 — Was the last product they had to sell harder to sell than your product?  It’s not critical this be the case.  But if they meet criteria #1 and #2 above, and you’d buy from them … well it sure helps if their last sales job was even harder.  Then it makes even selling your product, which is always hard … that much easier.  E.g., did they successfully sell the #5 vendor in a market?  Or, for example, did they sell a product much more complicated than your product?  Or one with far fewer inbound leads?  If their last sales job was harder, they’ll often struggle.  If their last sales job was easier, they’ll often excel.  It’s like a weight is lifted off them.  And they just fly higher than before.

Finally, note what isn’t in any of the 3 questions above — domain expertise.  Yes, it would be nice to hire someone that knows your industry in theory.  But generally, don’t do it.  Or at least, don’t add points for it.  Domain expertise is a siren that blinds you to whether or not they really have the skills to sell at your start-up.  95 times out of a 100, a rep you would buy from, that has a few years of good experience, that worked somewhere even harder, will work out.  And they pick up the most critical domain expertise within 60 days.

(note: an updated SaaStr Classic post)

The post How to Ensure Your First 2 Sales Reps Actually Work Out appeared first on SaaStr.

All Your VPs Really Need to Do is Tilt the Curve


This post is by Jason Lemkin from SaaStr

We’ve written a lot on SaaStr on how to increase the odds your first management team is a success.  How to hire a great VP of Sales (tons on that here).  What a great VP of sales really does.  What a great VP of marketing really does (tons on that here).  When to hire her (more here).  How to manage customer success.  How to hire a great VP of product.  All good stuff.

But as I now work with 24+ scaling SaaS companies, all of whom, all of us, who struggle to build a great management team … I’ve learned to distill it all down to one thing.

Yes, VPs are ultimately about building a team.  About recruiting and helping you scale.  About letting you move from micromanager to manager.  About this and that.

And some will be stretch VPs, and some seasoned VPs, and some with start-up experience, and some without, and some generalists, and some specialists.

Sorry to ramble.  But it’s all so much to process.

Let’s distill it to this:

  • You hire a VP to Own a Functional Area.  Sales, Marketing, Product, Engineering, Success, Support.  So you don’t have to.
  • And Their Job is This:  To Inflect The Curve.  To materially improve the metrics of her functional area.  And it needs to happen in one sales cycle, or one product cycle, or one quarter, etc.  Not necessarily tripling sales, or leaders — but more.  More in one cycle. That’s inflecting the curve you already have.

If you hire a VP, and they “owns” sales, but sales do not increase.  That’s a failure.  Even if it feels like you now don’t have to manage as much.

So what’s “inflect the curve”?

  • For sales, it’s increasing revenue growth in one sales cycle — or less.  Because if your new VP of Sales can’t do a better job extracting more dollars from the same leads as you did — what’s the point?  It will never work out.  She has to be at least >a little< better than you, especially if she spends 100% of her time here.  Because you don’t and didn’t.
  • For marketing, it’s increasing leads / opportunities / pipeline in one sales cycle.  Yes, some demand gen efforts take time, no doubt.  But when your VPM joins, like the VPS, she’ll have some raw materials to work with.  A broken Hubspot implementation.  No one using Intercom.  Zero content marketing.  No structured communication with the prospects you do have, no matter how few.  Maybe she can’t directly impact revenue in one sales cycle.  But she sure can increase pipeline, folks.
  • For customer success, it’s at least improving NPS and CSAT in one quarter.  It may take longer than 3 months to see your VP of CS impact upsells and net negative churn (although even there, you should see results in one quarter).  But one thing’s for sure.  If you measure NPS and CSAT on Day 1 of your VP of CS.  And it’s not improved in 90 days.  That’s a total failure.
  • For product and engineering, it’s improved throughput in one quarter.  One release.  Not more.  You have 10 engineers with no real leaders, that sort of self-manage?  How teal.   Hooray.  If a true leader can’t direct those 10 engineers to more efficiently produce product in the next full release.  They never will.

Screen Shot 2016-07-27 at 10.16.19 AM

Now, notice what we didn’t say.  How much.  How big the tilt should be in one sales cycle, one release, one quarter.

I don’t know how much your new VPS can increase Revenue Per Lead in one sales cycle.  How much your VP of CS can improve NPS in one quarter.

I don’t know because the amount of improvement is really situationally dependent.

So what’s actionable here?

  • First, fire that VP, or demote her, or top her if you don’t see the curve titled in one quarter.  Because they never will.  I don’t care how hard they are trying.  How little they had when they came in.  You’re not asking for the impossible.  You’re asking for improvement.  That’s it.  In fact, the worse it all was when they came in … the more screwed up it was … the easier it is for a pro to tilt the curve.  So easy.  Because they know what to do.  Add one great rep.  Fire the one that is wasting leads.  Ask for money faster.  Do more drip marketing.  Whatever it is, the worse things are in a given functional area, the easier they are to improve.
  • Second, learn from that first quarter, that first sales cycle.  Because every VP will be weak somewhere.  The flipside is don’t expect miracles from your VPs.  This is Rookie Error #1.  Expect the curve to be tilted.  And that VP of Sales that is great at inside sales?  They may be mediocre-to-bad at field sales.  That doesn’t mean fire them, or be disappointed, or even — judge them.  Don’t do that.  If they can tilt the curve, then leave them be on what they do best.  And go help backfill where they are weak.  Help there.
  • Third, don’t have insane goals for your VPs, usually.  Trace a path from the tilt they add to the curve.  Even if you have them for yourself.  It’s hard enough to get a true VP.  Someone that can not just turn the wheels, and build the dashboards.  But one that can truly tilt the curve.  If you have one, figure out how well they can possibly do.  And challenge them to do 90% of that as their base plan.  But don’t give them an insane plan.

Expect the impossible from yourself, your co-founders, and the one or two VPs who basically act at that level.  But for the rest.  Maybe … once you already have a little bit of an engine going … then expect a material impact coupled with ownership.  That’s enough.  That lets you focus on the other areas of the company more.

And when the time comes when your VP can’t inflect the curve anymore.  When they are out of ideas, when they’ve taken the ball as far as they can.  Then you know it’s time to find the next level VP that can.

(note: an updated SaaStr Classic post)

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What Order Should You Hire Your Management Team In?


This post is by Jason Lemkin from SaaStr

The other day I was meeting with a great CEO who had raised a modest seed round.  Enough to invest, but not enough to go crazy with.  He’d found several good First VP candidates, in particular, a strong first head of marketing and a strong first head of product.  He asked which to hire first.

The answer was obvious — both!  If you have a few nickels in the bank, and you somehow find a great VP a half stage or even full stage early, just hire her.  Hiring is so hard as it is.  Don’t try to save a few nickels by putting off a VP hire if you actually stumble into a great one earlier than planned.

 

But it’s a good question and I thought it might make sense to set out an Ideal VP Hiring Plan for Most SaaS Companies.  And why.  The chart above illustrates the ideal plan, but let’s dig into the detailed suggestions:

  • You really can and should try to hire your VP of Marketing as Early as $20k in MRR.  This will seem crazy early to many of you. But a great head of demand gen (or maybe growth hacking if you are SMB) should be very accretive at even $20k in MRR.  Imagine you are organically growing 4x, so from say $200k in ARR this year to $800k by the end of the year.  And your first VP of Marketing just increases qualified leads by 25%.  That alone will pay for all her salary.  And set you up for a ton more success, earlier.  Make the hire now.  More on that here and a great video discussion below:

  • You’ll probably be ready for your first VP of Sales by $1m in ARR.  We’ve talked about this a lot on SaaStr, but hiring a true VP of Sales before you have 2 reps hitting quota (and thus a repeatable, if not yet fully repeating process) is too early.  But by $1m in ARR, you should have at least 2 reps hitting quota.  Ideally, have your VP of Sales on board in time to hire reps 3-300.   But asking her to hire the first ones before you’ve proven it out yourself?  Disaster.
  • You’ll probably be ready for your first VP of Customer Success by $2m-$3m in ARR.  The exact timing of this hire is a bit murkier to me than the others, but $2m-$3m ARR is probably a good target.   You can hack customer success in the beginning with an individual contributor or two with some experience and a lot of chutzpah.  Maybe starting with a few individual contributors is even better than a manager, because these days many CS leaders don’t really want to be as hands-on as they used to be.  But you’ll need a manager to scale beyond 2.  You’ll want $500k-$1m in ARR per CSM coverage, and as you come up on $2m-$3m, that’s just not enough coverage with a few CSM you are sort of half-managing yourself.  So try to have your VP in place by then.  And if she’s willing to be super hands-on, sometimes your first VP of CS can even be hire #1 or #2 in CS, too.
  • You probably won’t see it, but you’ll need a VP of Product by $4m-$5m in ARR.  Most first time founders have never worked with a great VP of Product, so they don’t intuitively “get it”.  But trust me.  By the time you havve 20-100 enterprise customers, 50-100+ workflows, 10+ configurations … it’s all just too complicated to do part-time, in your head.  You need someone who spends 50 hours a week planning the roadmap, triaging customer feedback, nudging the engineering team.  You need this, once the product gets complex.  Plan for it.  Once you hire a great one, you’ll see.  It’s a gift.  More on that here.
  • You’ll need a VP of Engineering by $8m-$10m ARR.  Earlier is better.  90% of CTOs and founders struggle to hire engineers 10-100.  They can attract a small, great team under them.  But the burdens of recruiting beyond a pizza box or two, of creating thoughtful deployment processes, of maintaining legacy code, of code reviews, of putting together a DevOps team and a SecOps team and strategy and more … it’s too much.  Someone else should spend half their time hiring, 25% of their time spotting issues, and 25% of their time planning.  And this VPE role often involves zero code commits.  Without a great VP of Engineering, you won’t be able to scale your engineering team.  No matter how great a hacker your CTO is.

Are their exceptions here?  Can you skip some of these VPs? Wait longer?

Well.  I’m going to be more dogmatic here than usual and say No, there aren’t a ton of exceptions.  I’ve worked closely with 26+ SaaS start-ups and founded a few.  I’ve made the same mistakes you have, and I’ve lucked into a few great VPs early (marketing, product and sales).  They changed my life, and they’ll change yours.

And if you wait, and make these hires later, you won’t fail.  It’s not fatal.  But it’ll be harder on you, and you’ll scale more slowly than you could.  That combination is a big missed opportunity.  At least try.

And if you find one or two earlier than this, that are great … well, pounce.  There’s always enough to do.  The real answer is hire any Greap VP you can find, even if it seems too early.  The great ones are always accretive.

(note: an updated SaaStr Classic post)

The post What Order Should You Hire Your Management Team In? appeared first on SaaStr.

What Order Should You Hire Your Management Team In?


This post is by Jason Lemkin from SaaStr

The other day I was meeting with a great CEO who had raised a modest seed round.  Enough to invest, but not enough to go crazy with.  He’d found several good First VP candidates, in particular, a strong first head of marketing and a strong first head of product.  He asked which to hire first.

The answer was obvious — both!  If you have a few nickels in the bank, and you somehow find a great VP a half stage or even full stage early, just hire her.  Hiring is so hard as it is.  Don’t try to save a few nickels by putting off a VP hire if you actually stumble into a great one earlier than planned.

 

But it’s a good question and I thought it might make sense to set out an Ideal VP Hiring Plan for Most SaaS Companies.  And why.  The chart above illustrates the ideal plan, but let’s dig into the detailed suggestions:

  • You really can and should try to hire your VP of Marketing as Early as $20k in MRR.  This will seem crazy early to many of you. But a great head of demand gen (or maybe growth hacking if you are SMB) should be very accretive at even $20k in MRR.  Imagine you are organically growing 4x, so from, say, $200k in ARR this year to $800k by the end of the year.  And your first VP of Marketing just increases qualified leads by 25%.  That alone will pay for all her salary.  And set you up for a ton more success, earlier.  Make the hire now.  More on that here and a great video discussion below:

  • You’ll probably be ready for your first VP of Sales by $1m in ARR.  We’ve talked about this a lot on SaaStr, but hiring a true VP of Sales before you have 2 reps hitting quota (and thus a repeatable, if not yet fully repeating process) is too early.  But by $1m in ARR, you should have at least 2 reps hitting quota.  Ideally, have your VP of Sales on board in time to hire reps 3-300.   But asking her to hire the first ones before you’ve proven it out yourself?  Disaster.
  • You’ll probably be ready for your first VP of Customer Success by $2m-$3m in ARR.  The exact timing of this hire is a bit murkier to me than the others, but $2m-$3m ARR is probably a good target.   You can hack customer success in the beginning with an individual contributor or two with some experience and a lot of chutzpah.  Maybe starting with a few individual contributors is even better than a manager, because these days many CS leaders don’t really want to be as hands-on as they used to be.  But you’ll need a manager to scale beyond 2.  You’ll want $500k-$1m in ARR per CSM coverage, and as you come up on $2m-$3m, that’s just not enough coverage with a few CSM you are sort of half-managing yourself.  So try to have your VP in place by then.  And if she’s willing to be super hands-on, sometimes your first VP of CS can even be hire #1 or #2 in CS, too.
  • You probably won’t see it, but you’ll need a VP of Product by $4m-$5m in ARR.  Most first time founders have never worked with a great VP of Product, so they don’t intuitively “get it”.  But trust me.  By the time you have 20-100 enterprise customers, 50-100+ workflows, 10+ configurations … it’s all just too complicated to do part-time, in your head.  You need someone who spends 50 hours a week planning the roadmap, triaging customer feedback, nudging the engineering team.  You need this, once the product gets complex.  Plan for it.  Once you hire a great one, you’ll see.  It’s a gift.  More on that here.
  • You’ll need a VP of Engineering by $8m-$10m ARR.  Earlier is better.  90% of CTOs and founders struggle to hire engineers 10-100.  They can attract a small, great team under them.  But the burdens of recruiting beyond a pizza box or two, of creating thoughtful deployment processes, of maintaining legacy code, of code reviews, of putting together a DevOps team and a SecOps team and strategy and more … it’s too much.  Someone else should spend half their time hiring, 25% of their time spotting issues, and 25% of their time planning.  And this VPE role often involves zero code commits.  Without a great VP of Engineering, you won’t be able to scale your engineering team.  No matter how great a hacker your CTO is.

Are there exceptions here?  Can you skip some of these VPs? Wait longer?

Well.  I’m going to be more dogmatic here than usual and say No, there aren’t a ton of exceptions.  I’ve worked closely with 26+ SaaS start-ups and founded a few.  I’ve made the same mistakes you have, and I’ve lucked into a few great VPs early (marketing, product, and sales).  They changed my life, and they’ll change yours.

And if you wait, and make these hires later, you won’t fail.  It’s not fatal.  But it’ll be harder on you, and you’ll scale more slowly than you could.  That combination is a big missed opportunity.  At least try.

And if you find one or two earlier than this, that are great … well, pounce.  There’s always enough to do.  The real answer is hire any Great VP you can find, even if it seems too early.  The great ones are always accretive.

(note: an updated SaaStr Classic post)

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Eventually. Everyone Has a Sales Team.


This post is by Jason Lemkin from SaaStr

The lure of freemium (like The Force) is strong.   No headaches.  Customers try and buy all on their own.  Like magic.  And.

No salespeople.

Well, that can work.  For a while.  Maybe even forever, if you don’t want to build something really big.  But to Go Big, almost everyone in SaaS at least eventually adds a sales team.

Yes, Twilio started off as self-service.  But to scale it quickly added a very effective sales team:

Yes, Atlassian for a long time had almost no “direct” sales team, well after the IPO. But it always had a very large channel (i.e., resellers) that sold its product into the enterprise, and a lot of internal resources that supported the channel. Those channel salespeople aren’t employees, so yes, leaning so heavily on the channel is less common. But it’s just third party selling instead of first party.

See more of our discussion with Jay Simons, President of Atlassian below on just this topic, from the SaaStrAnnual:

And today, many of its products are now supported by an internal sales team, albeit one that doesn’t discount and more supports deals than negotiates them:

Yes, Slack started off with no “outside” sales team. Now, as it’s gone more and more enterprise, it’s staffed up with a deep and strong one.  Yes, I know Stewart Butterfield said slightly different things on this topic at $10m and $20m ARR.  But that was a long time ago.

Fast forward to today … and the majority of Slack’s growth is in the enteprise.  In big deals.  With, and through, a sales team.  More on that here:

Yes, Dropbox started off with no traditional sales team. Then to sell Dropbox Enterprise, it added several. And Box’s revenues are now 99% through the sales team, from 0–1% when it started as a pure freemium product.

You don’t need 100% sales-driven revenue to Go Big. Hybrid models can be great. Many of Twilio’s bigger customers go through sales, but then a huge amount of the downstream revenue is “automatic” as customers use more. Hence, Twilio has a very high level of sales efficiency (and relatively small headcount). But there’s still a real sales team there. They just only need to directly touch a subset of the total revenue.

It’s just hard to get past $100m ARR without going upmarket a bit, and closing larger deals. It’s the law of large numbers. And larger deals require a human touch. That can be done without sales. But if it’s only done with support and Happiness Officers … you close less revenue. More on the math here: Why You Need 50 Million Active Users for Freemium to Actually Work and why salespeople increase revenue here: Curse of the ‘Middlers’: Why Happiness Officers Can’t Stand In for True Sales Professionals

So convergent evolution says anyone trying to cross $100m in ARR or so will eventually add a true sales team. Maybe on Day 0. Maybe on Day 3650.

Just don’t be totally against it.

(note: an updated SaaStr Classic post)

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Metaview’s new product helps you (and us) hire top talent


This post is by Kate McGinn from Seedcamp

Hiring the right candidate can seem like a herculean endeavor. You glance over hundreds of applications, interview a handful of individuals, and then are expected to choose the ideal fit. Given the speed and complexity of this process, particularly at the interview stage, it is no wonder that hiring frequently suffers from bias and bad decision-making. 

Siadhal Magos and Shahriar Tajbakhsh recognized this problem first-hand. While making hiring decisions at Uber and Palantir, respectively, they observed that interviews are the most outcome-defining step in the recruitment process. Yet, they are subject to bias, especially when the employer has not been trained to lead rigorous interviews.

Siadhal Magos (CEO) and Shahriar Tajbakhsh (CTO) joined forces to solve the issues they saw whilst hiring talent at tech giants Uber and Palantir

With this in mind, Siadhal and Shahriar founded Metaview, an Interview Intelligence Platform.

“Interviews are vital when building an exceptional team,” co-founder Siadhal Magos comments. “Being an effective interviewer is a highly-valued skill. But there is so little data available to leaders about these crucial moments.”

Having backed the team in 2019 alongside Fly Ventures and Village Global, we are delighted to see the launch of Metaview’s new product, Interview Metrics. By recording and automatically analysing interviews, the software helps employers access data on the consistency and rigor of their hiring process. Using this unique data, Metaview is able to identify interviews that are inconsistent and lacking rigor, which leave the process overly exposed to bad or biased decisions.

“With this new product, Talent leaders can finally start to understand what is happening in the thousands of hours of interviews taking place in their organization,” Siadhal explains. “Once issues with consistency or rigour have been identified, Metaview automatically starts providing personalized feedback to interviewers to help them get back on track.”

Since our investment, Metaview has recorded, transcribed, and analyzed tens of thousands of hours of interviews. Their current customers include Bulb, AngelList, Careem, Wave, and Stedi.

“The talented team at Metaview using AI to improve interviewing effectiveness is in the sweet spot,” our Venture Partner Stephen Allott explains. “Great people solving valuable problems using leading edge technology and striking the subtle balance between what the human does and what the machine does.”

We are excited about Metaview’s potential to transform hiring from both the applicant’s and employee’s perspective, making interviewing more fair and effective. If you would like to learn more about Interview Metrics and how it works within the Metaview platform, visit metaview.ai/interview-quality.

Metaview’s new product helps you (and us) hire top talent


This post is by Kate McGinn from Seedcamp

Hiring the right candidate can seem like a herculean endeavor. You glance over hundreds of applications, interview a handful of individuals, and then are expected to choose the ideal fit. Given the speed and complexity of this process, particularly at the interview stage, it is no wonder that hiring frequently suffers from bias and bad decision-making. 

Siadhal Magos and Shahriar Tajbakhsh recognized this problem first-hand. While making hiring decisions at Uber and Palantir, respectively, they observed that interviews are the most outcome-defining step in the recruitment process. Yet, they are subject to bias, especially when the employer has not been trained to lead rigorous interviews.

Siadhal Magos (CEO) and Shahriar Tajbakhsh (CTO) joined forces to solve the issues they saw whilst hiring talent at tech giants Uber and Palantir

With this in mind, Siadhal and Shahriar founded Metaview, an Interview Intelligence Platform.

“Interviews are vital when building an exceptional team,” co-founder Siadhal Magos comments. “Being an effective interviewer is a highly-valued skill. But there is so little data available to leaders about these crucial moments.”

Having backed the team in 2019 alongside Fly Ventures and Village Global, we are delighted to see the launch of Metaview’s new product, Interview Metrics. By recording and automatically analysing interviews, the software helps employers access data on the consistency and rigor of their hiring process. Using this unique data, Metaview is able to identify interviews that are inconsistent and lacking rigor, which leave the process overly exposed to bad or biased decisions.

“With this new product, Talent leaders can finally start to understand what is happening in the thousands of hours of interviews taking place in their organization,” Siadhal explains. “Once issues with consistency or rigour have been identified, Metaview automatically starts providing personalized feedback to interviewers to help them get back on track.”

Since our investment, Metaview has recorded, transcribed, and analyzed tens of thousands of hours of interviews. Their current customers include Bulb, AngelList, Careem, Wave, and Stedi.

“The talented team at Metaview using AI to improve interviewing effectiveness is in the sweet spot,” our Venture Partner Stephen Allott explains. “Great people solving valuable problems using leading edge technology and striking the subtle balance between what the human does and what the machine does.”

We are excited about Metaview’s potential to transform hiring from both the applicant’s and employee’s perspective, making interviewing more fair and effective. If you would like to learn more about Interview Metrics and how it works within the Metaview platform, visit metaview.ai/interview-quality.

Now, For the First Time Ever, You Really Can Hire “Bay Area VPs” Anywhere in the World. Carpe Diem.


This post is by Jason Lemkin from SaaStr

One of the biggest challenges in scaling a SaaS company has always been VP and SVP level talent.  Especially, past $10m ARR and beyond.  Outside of the SF Bay Area, and a little bit of NYC and Salt Lake City, the bench talent just isn’t there.  Even today.  It’s an even bigger deal in the enterprise, where the playbook to closing large deals is more critical to have down.  With SMBs, you can hack it a bit more.

It’s still a real issue today.  The companies that create the SVPs you’ll need, especially in Sales and Marketing, are still mostly based in the SF Bay Area. Salesforce, Workday, LinkedIn, etc. are all here.  In fact, 80% of SaaS public companies are still HQ’d here, along with most of their executives:

And while many more junior folks have scattered across the U.S. during Covid, most of the SVPs have stayed put right here in the Bay Area.

But now, for really the first time — they are joining top SaaS companies all across the country, all across Europe, and all across the globe.

Just in the past few weeks, 3 top, brand-name CMOs I know joined $10m+ ARR start-ups HQ’d in Berlin, in Atlanta, and in Colorado.  That never, ever would have before Covid. Because most top talent wants to be close to the CEO.  You would.  It’s just so much easier to excel that way, and so much riskier to be far from the CEO if you’re a top executive.

But now that we’re all running distributed teams, that’s finally changed, for the first time ever in SaaS.  Top execs are looking for new spots in 2021.  And they care a lot, lot less if the company is HQ’d in the Bay Area.

So now’s the time, my friends.  This may or may not last.  As crazy as things are now, we’ll almost certainly see a return to some sort of pre-Covid like normalcy by the second half of 2021.  Offices will reopen, in some form at least.  I do think top CROs, CMOs, VPS, and VPMs based in the Bay Area will now and forever be much more willing to join start-ups based outside of the Bay Area.  But when the world re-opens, the pendulum will likely swing partially back.  Because if the CEO is coming into the office, ideally, you would too.

But for now, if you are beginning to scale, aggressively recruit that Bay Area VP you always wanted to hire.  You probably still have to be “hot” to get the hot VP.  But you don’t really need to be here anymore.  At least, not for now.

The post Now, For the First Time Ever, You Really Can Hire “Bay Area VPs” Anywhere in the World. Carpe Diem. appeared first on SaaStr.

Around Year 5, You’ll Have to Build Your Third Management Team


This post is by Jason Lemkin from SaaStr

For 90% of us, one of the toughest adjustment to being CEOs of SaaS companies is having to constantly recruit.

Once you have Initial Traction at least, you’re going to have to spend at least 20% of your time recruiting.  More on that here.  And really, 50% would be even better.  As soon as you have something in SaaS, you have to stop being an individual contributor as much as practical.  Stop being a functional VP-as-well-as-CEO as soon as you can.  Let it go.  Hire those folks instead, as soon as you can afford it, and have Initial Traction.

But it’s even more than that.  It’s more than just recruiting a management team.  Because once you finally get your first management team in place, some of them will be a mismatch, or just only a good fit for the next year or so, or end up better as directors or team leads, but not VPs, etc.  So you’ll be lucky if half of the management team you build at $1m ARR is there at $8m in ARR.  They may all still work for you — I hope they do.  But many of the VPs you recruit around $1m in ARR just won’t scale, or fit, at $10m in ARR.

And you have to be prepared for that.  You’ll want them all to keep going.  But most of them won’t be able to stretch past the next phase.

So even once you hire your first management team, you can’t really take a break there.  You almost immediately need to be passively recruiting to fill the gaps, to have back-up candidates, or just to be aware of who’s out there.  So if someone stumbles, you can bring in another.

If you are lucky, by the time you have your Management Team 1.5 or 2.0 … it will finally get good.  The first year for each VP is always a learning experience, no matter how well they perform.  Then, in year 2, they’ll build their own team.  And they start to get good at it.  And finally, in Year 3, your VPs get really, really good at what they do.  And really efficient and effective.  They’ll know how to win deals — and how to lose them.  How to steal them.  How to really make the most of every marketing initiative, every customer success trip, even new big and small feature.  Your core VPs just get in a groove by Year 3 and sort of become unstoppable.  With luck, you only need to barely macro-manage them, the best ones.

And if you are truly a rocketship, then maybe they stay forever.  One or two of your best VPs may well be there from $1m ARR to IPO and beyond.

But usually, around Year 5, even with your best VPs.  And maybe especially with your best VPs. They’ll get tired.  Burnt out by just giving in their all, 24×7.  Burnt out by constantly having to recruit bigger and bigger team.  Burnt out by seeing the plan double or more every single year.  Last year was hard enough, man.  And in fact, the faster your start-up grows, the more it Never Stops.  And the better the VP, the more she owns not just her job but way above-and-beyond … the higher the odds she burns out around Year 5.

Screen Shot 2016-06-28 at 9.46.41 AM

So when I see job changes on my LinkedIn, in StrictlyVC, wherever around Year 5 … I often know those are the best VPs.  The companies are great.  It’s just those VPs, they gave it all they could for 5 seasons, through every minute of every playoff game.  And they just don’t really have any more to give.  Everything was left on the field.

This is one of the toughest parts of being a CEO, for most of us.  It’s not just that some of our folks need to go off to other start-ups to get that promotion, to make VP, or to even found their own company.  That’s tough.  But you get it.  The tough part is when one of your very, very best lieutenants just needs to hang it up.

It’s going to happen.  In fact, the first time will be just as you get to $8m-$10m in ARR or so.  It’s gonna happen just when it’s finally all working, you hit Initial Scale.   When you finally have a little fat in the system, a few extra nickels in the bank, a real brand.  Just as it’s getting good.  When it’s finally good.  It’s probably time to start recruiting your Third Management Team right around then.

Just expect it.  And those Year 5 Goodbye Parties?  The toughest ones of all.

(note: an updated SaaStr Classic post)

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How do you decide between hiring a VP or Director/Manager of Product Management?


This post is by Jason Lemkin from SaaStr

Hiring too junior a resource to own product is almost always a huge mistake — 9 times out of 10.

You can take a lot of “stretch” risk in sales. Sales breeds leadership.

But what I’ve seen time and time again is “product managers” who haven’t actually owned anything. And who certainly haven’t owned enough.

A VP of Product should be a transformational hire. Someone to take over the hackey way you pick features, drive engineering to get there, and also, to live at the intersection of sales, customer sucess and dev.

A junior hire just hasn’t done it, and can’t command the respect of the team.

A “head” of product that sales, engineering and customer success won’t respect … can’t get the job done.

A “head” of product that hasn’t done at least some of it before won’t command that respect.

You can’t go too junior here.

Better to spend an extra $0Xk a year here, and a few more shares, to get the hire you really need.

View original question on quora

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Growing a Manufacturing Company with a Social Mission


This post is by HBR.org from HBR.org

How Nehemiah Manufacturing turned a social mission to hire convicted felons into a competitive advantage.

To Build Less-Biased AI, Hire a More-Diverse Team


This post is by Michael Li from HBR.org

Technology will always be limited by the perspectives of the people building it.

To Build Less-Biased AI, Hire a More-Diverse Team


This post is by Michael Li from HBR.org

Technology will always be limited by the perspectives of the people building it.

You Can’t Hire a VP That You Don’t Love


This post is by Jason Lemkin from SaaStr

Recently, a good friend of mine running a Hot SaaS Start-up asked me if he should hire a particular VP of Product candidate I knew well.  The team he’d be managing was a big thumbs up on him.  The board was in favor.  And I knew this VP.  This VP is a 10/10.

But … it wasn’t what this CEO was looking for.  He wanted someone different.  It just didn’t click.  Not deep down.

My advice?  Let her go.  Just don’t hire her.  Even if everyone loves this VP … you have to love the VPs you’re with.  Or you’ll never really trust them.  And then, they’ll never really succeed.  It’s just too hard unless everyone really, truly has each others’ backs.

———-

Over the past 18 months or so, I’ve played a little bit of a matchmaker.  I’m no recruiter, but I’ve “placed” probably 20 folks I know in promising SaaS start-ups as VPs or Directors.  The key here is I look not just for the necessary experience (at same ACV, ability to hire a team), but also, a good personality match.  People that would work well together.

Screen Shot 2014-08-11 at 1.10.43 PMAnd I’d say my success rate so far is about 19/20.  19 have gone on to be, at least so far, a real success in as a VP or Director at their Next SaaS Start-up.  But the 1 that failed did shake me a bit.

This was for a VP Sales position for a fast-growing SaaS company at about $4m in ARR.  The company had never had a true VPS before, and clearly, it was time.  No VP of Sales candidate is perfect — if they are, something’s off.  Why would they take the job if it’s exactly what they’ve done before successfully?  But this candidate was good.  He had managed a team of 20 before, hired 8 of them successfully, and 3 of the best ones were ready to join him.  He had sold as a similar ACV and even in the same vertical.  And he clearly cared a lot, and was excited about selling the product.

What he wasn’t, was a Mr. Dashboards.  He couldn’t sell up.  He didn’t schmooze, and he didn’t look Great in a Suit.  And he was relatively young and only been a Director of Sales before.   He wasn’t 100% proven a a VP.  He liked to just deliver.  And the CEO didn’t love him.  Instead, he loved another candidate he couldn’t get.  Another candidate that was smooth as silk, knew the industry cold, and had a proven “VP of Sales” on his resume.

I told the CEO to just hire this VP of Sales candidate.  That at $4m in ARR, it was late already, the logo accounts were there, there were enough leads, enough to build on.  Get it done.  I believed, at a minimum, this VP of Sales would drive revenue per lead up, and more than pay for himself.

And the CEO hired him.  And never loved him.  And within 4 months, the VP of Sales was gone.  They never really hit it off, and everything this VP of Sales did that was “wrong” (and there was plenty, as there always is), was viewed as failing a test.   And I guess … this failure … it was my fault.

Fast forward to today.  Coincidentally-ish, I recently met with this VP of Sales and his new CEO in the next job he took.  Where this VP of Sales is just killing it.  They’ve just crossed $10m in ARR and growing fast.  I asked this second CEO, how the VP of Sales was doing.  Blowing it up, he said.  And importantly — the new CEO loved this VP of Sales.  Just loved him.  One of his best hires ever, he said.

Ok …

So we all know different folks excel in different environments.  But it’s more than that.

SaaS is going into battle together every day.  Wining that next customer.  Saving that big deal.  Building that crazy feature.  Every day, there’s a new drama.

It’s truly a team effort.  The VP of Sales opens and closes.  The VP Marketing feeds the machine. The VP of Customer Success keeps it running and adds fuel to the fire.  The VP Product makes sure the 1,000+ customers get what they need, as impossible as that is.  And the VP Engineering’s job is to make a business process 10x better than it ever was before, just using computers.  This is teamwork.  And it’s really not that silo’d at all.  You’re all working on different parts of the same puzzle — Customers.

Where I don’t see true teamwork, I almost always see eventual failure.  Or at least, underperformance.

As CEO of a SaaS start-up, you really can’t micromanage past Initial Traction ($1.5m in ARR or so) at least.  Before, maybe.  But then, there will just be too much going on.  And you can only let go and delegate to people you trust.

So don’t hire a VP you don’t love.  It’s a little bit like a marriage, perhaps.  No matter what their LinkedIn is, no matter what anyone else says, you have to 100% believe it them on Day 1.  Period.

If not — just press on.

(note: an updated SaaStr Classic post)

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At About $2m in ARR, Every Great Hire Will Be Accretive.


This post is by Jason Lemkin from SaaStr

Recently, I was talking to the CEO of a pretty successful SaaS company doing ~$3m in ARR, growing nicely, in a good space.  Doing just fine.

And he was proud he’d just hired a VP of Sales at a below-market rate.

Dude.  I told him.  That’s a negative.  Because at your size and growth rate, It Just Doesn’t Matter.  If they are any good.  You don’t want to save money on a great hire.  You want to instead, make sure they are accretive.

Because it turns out, once you hit just $2m in ARR, and maybe even much earlier — every great hire will be accretive.  Will make you more money than you pay them in cash.  I guarantee it, in fact.

Let me explain the math.  Let’s assume you are at $2m ARR, to make the math simple:

  • You hire a Great VP of Sales.  Accretive in 90-120 Days.  For say $300k OTE.  A great VP of Sales, within one year, can easily close 20-50% more business than you would have without him or her.  Even just 20%, the bottom end of the range … is $400,000 in additional revenue ($2m x 20%).
  • You hire a Great VP of Marketing.  Accretive in 90-180 Days.  Let’s say you’re at $2m ARR again, growing 80% YoY.  And you don’t have a great VP of Marketing yet.  Well, make that hire, and you really don’t think you can get another 20-30% improvement from your existing lead flow?  By properly communicating and marketing to them?  By doing better webinars, better city tours, better whatever?  Of course she or he can.  Another 20% is again … an additional $400,000 in revenue.  Even just a 10% improvement in your lead-to-revenue performance, even just another 10% in true qualified leads … will more than pay for the hire.
  • Every Great Sales Rep is Accretive at $2m in ARR.  In Just 2 Sales Cycles.   Even just at $1.5m-$2m, there’s enough momentum in the business, enough repeatability, that a great rep can really have an almost instant impact.  Take his or her leads, and make 20%-30% more out of them than a mid-pack or mediocre rep (and maybe more.  The best reps often can yield 50-100% more than the mid-packers from a given set of leads).  So that incremental Great Rep takes his or her say 500 leads a year, and instead of turning them into $350,000 like the last guy … she turns them into $500,000.  Again, more than pays for herself.  And fast.  And that’s just first year ACV.
  • Every Great Engineer is Accretive at $2m in ARR.  In Just One Full Release Cycle.  You think engineers are cost centers, at least from a financial model perspective?  Not if you are selling into the enterprise.  What you’ll learn is that if you can get one more Needed-it-to-Close-the-Big-Deal feature every 3-6 months … that great engineer will pay for herself.  You need to lose a few five or six figure deals to a feature gap to get this, to see it.  But once you do, it will become crystal clear.  If you just had that one extra great engineer, you would have closed Google.  More than pays for herself, again.
  • Great Customer Success Managers Can Be Accretive Managing Just $800k-$1m in Existing ARR Within 9-12 Months.  A lot of mature SaaS companies use the metric of ~$2m in ARR per customer success rep.  But if you get a great team — you can hire a lot more aggressively than that.  A mediocre CSM might say retain 100% of your mid-market revenue on a net-of-churn basis.  But a great one might, by really creating true customer success, with upgrades, can get that same customer base to renew at 110-120% of last year’s ACV.  That incremental 10% … pays for the CSM right there (10% of $1m = $100k).  And that’s just one year’s worth of ACV.  If that customer lasts 3-5 years, and you see Second Order revenue from it … the ROI will be very, very high.  Even with a great CSM managing as little as $800k in ACV, he or she can be very accretive.  A great one.
  • Picking Up the Phone Can Be Accretive in 90 Days.  It’s even true in customer support.  No one picks up the phone.  It’s too expensive.  They want to do email tickets.  Which customers hate, 9 times out of 10.  They want someone to answer the da*n phone.  Imagine you save just 10 customers over the course of a year at a $4k ACV by picking up the phone.  That’s less than one saved customer a month.  And voila! — you’ve more than paid for an extra customer support rep right there.

I didn’t figure this out until $4m in ARR.  Once we got there, I saw all of this.  I told every manager at EchoSign to hire everyone they wanted.  No headcount limits.  No budgets.  Only so long as they were truly Great.  And hence, accretive.

Because I waited until $4m in ARR, with hindsight, I wasted a lot of time from $1.5m to $4m in ARR.  Because we should have just hired every single employee that was Great, no matter if it seemed expensive on paper.

This only works if you have 12+ months in cash.  Because these accretive employees need time to close their deals, build their features, launch their campaigns.  So don’t make all these hires if you have < 9 months of cash in the bank and are too worried about money.

And this only works if the hires are truly great.  That extra rep, if she or he is mediocre, is mid-pack … may play a role in your org.  But she’ll just be taking leads from another theoretical or existing hire, she won’t be increasing revenue per lead.  The mediocre, incremental rep or engineer or CSM isn’t accretive.

But at $2m ARR, maybe even $1.5m ARR or even less if you have a repeatable process … everyone great is accretive.  If you meet one — hire him or her.  That day.  And just pay market.  Don’t quibble over salary for the great ones.  Because it doesn’t matter really, what you pay — if he or she is a profit center.

(note: an updated SaaStr Classic post)

 

Image from here

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By The Time You Give Them a Raise, They’re Already Out The Door


This post is by Jason Lemkin from SaaStr

There’s an endless amount written on the internet about hiring “Rockstars”.  Finding them, not settling, and all that.  That you need to spend 20%+ of time recruiting (I said that myself here).  That the #1 most important thing you can do is put together a great team.  Which is absolutely true.

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But the #2 most important thing you can do is retain your team.  And I don’t see enough talk about that.  Today, frictional unemployment for experienced SaaS or any internet engineers, salespeople, marketing stars, and other leads is … about 9.0%.  Negative, near as I can tell.  If you’re great in SaaS, just email me.  I can get you 3-4 job offers by the end of the month.

I did many things wrong as a CEO in both my start-ups.  But one thing at least quantitatively I did well was retain the team (at least before SaaStr).  I tried to copy my old boss, whose motto was Zero Voluntary Attrition.  In my first start-up, not a single person left.  In my second, I only lost one person that I really wanted to keep.  A few of the early folks who were absolutely terrific, needed to do the next thing after we hit Traction, after several years of the very early-stage grind.  You will lose some pure start-up people once things scale up.  But after that, I lost no one that we needed to keep but one.

Now I’m not saying it was all roses.  Some of them could barely stand me at times.  Others needed to find a way to change or modify their roles.  And — importantly — a number of the best folks on the team almost left.  Really, really close.

So what are some tips and tricks here?  Let me add a few thoughts:

#1:  By The Time You Give Them a Raise, It’s Too Late.  They’re Already Out the Door.   You have to get comp right, as best you can, all the time.  These days, anyone good is going to get a 10-20% (or higher) raise to move — and maybe a bonus on top of that.

The thing is — you can’t counter.  It’s too late by that point.  Once they tell you they have another offer … they’re already out the door.  A raise won’t do it, at least not for the good ones.

#2.  Always Pay Market or Above As Soon As You Can Afford It.  At Least to the Great Ones.  The other night I was at an event with a number of other CEO founders.  One CEO told me the story of how he lost a top up-and-coming engineer, who was making a five-figure salary … to a real boooooring company that doubled their salary.  That boring company had to.  How else can a boring company steal a star engineer from a hot start-up?  Lots of money.

My point here is this engineer should not have had a five-figure salary, even if it made sense in historical context (joined as a very junior person, consistent with prior salary).  Pay market, or above, as soon as you can.  It’s a sign of respect.  And most of the best ones won’t ask.  They’ll just eventually get frustrated and leave.

#3.  It’s Probably Not Too Late When They Interview.  So Be Paranoid.  And Intervene.  There are some very tell-tell signs of someone interviewing.  Out of the office at weird hours.  Talking on their mobile phone on the sidewalk – and moving away from you if you approach them to say Hi.   Sick out-of-the-blue one day, healthy at work the next.  Signs of frustration in their posts on Facebook, in new connections on LinkedIn.

Now by the time they take another job, it really is too late.  Even if a raise would work then, which it won’t … the relationship is gone at that point anyway.

But it isn’t necessarily too late when they start to interview.  It may be, in its own way, a plea of exasperation as much as anything else.  If you can fix that issue, and you want to fix that issue — you can keep him/her more times than not.

#4.  Find a Growth Path for Everyone, Especially the Great Ones.  You have to find a growth path for the great ones.  They join a start-up to grow, to learn, to do new things.  If they can’t grow, they die a little every day.  It’s your job to understand the career path for at least your first 50 employees.  Know it.  And do whatever you can, within the boundaries of reality, to help them achieve it.  (But bear in mind that the good-but-not-great ones may not really want a growth path.  Or at least, may not want the stress and hard work associated with it.  So this really only works for those that really want to grow.)

#5.  Talk to People.  For Real.  Get Real Feedback.  At least Once a Quarter.  I know you probably hate annual reviews and the like.  I agree.  They are generally pretty wasteful in a start-up.  But you do need to do something different here.  You need to meet 1-on-1, in a unstructured way, with all your best people beyond your direct reports — at least once a quarter.  Quietly.  And ask them what’s frustrating them about their job.  What they want to be doing — but aren’t getting to do.  Be friendly — but blunt.  You need to learn.  Get it out of them.  And definitely do weekly 1-on-1’s with your direct reports.  You just gotta do ’em.  More on that here.

You may think you know if you have drinks together, or go see movies together, or whatever, that you know.   But you don’t.  Even if people complain in that context, it will be general complaints.  You won’t learn, or know, what your top people need to find their growth path at your company.  Where they feel stalled out and frustrated.  You have to ask.

Just some ideas.

Because there’s absolutely, positively, nothing worse in the pre-Scale days than losing a rockstar employee that you could have kept.  It just kills you.  Later, when you have 100, 200+ employees, $20-$30m+ in ARR … well … you sort of can swap people out, at some level.   Including maybe even you.  Everyone should be redundant at that scale or you’ve failed as CEO.   But until then, every key player is critical.

If nothing else – address retaining your top troops at least as seriously as you do recruiting them.  And whatever you do, don’t ignore the ones that don’t complain.

—————–

And on that note, don’t just take it from me.  Take it from Don Draper.  Don’t let it happen to you.

 

(note: an updated SaaStr Classic post)

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Be Careful Hiring “Dualies” — Folks That Are a VP of More Than One Thing


This post is by Jason Lemkin from SaaStr

I don’t know about you, but I’ve had to recruit a lot of types of folks over the years where my domain knowledge was limited.  I’ve had to recruit Ph.Ds. from various domains including particle physics.  Front-end, mid-end, back-end engineers of all sorts and types.  Sales managers back when I never managed sales.  Internet marketers when I didn’t know how to internet market.

You get the picture.  Anyhow the one thing I learned, beyond getting help screening and hiring for these positions from domain experts, is to look for Flags.  For signs the prospective hire just won’t work out, no matter how strong they might look on paper.

And I’ve learned again and again, including quite recently, there are 4 types of hires to just avoid:

  • CEOs.  If someone puts “CEO” on their LinkedIn as a prior job at some 1 or 2 person company you’ve never heard of, then generally, be wary of hiring them.  Why join a start-up?  Well reason #1 is personal and career advancement.  It’s hard to advance going from ahem a self-titled “CEO” to Director of Something.  These folks generally just struggle to successfully re-enter a formal work hierarchy.  Just pass here, nine times out of ten at least.  {Note: if you were a CEO of your own little company or small business, then just don’t put that on your resume.  Just Write Owner.  Or Principal.  Or GM.  Or Partner.  Anything but CEO 🙂  Note 2:  it can make sense to make an exception for a ex-CEO of a real start-up that didn’t make it, for a role they were great at before then.  If they’ve truly realized that’s the right path for them, for now.}
  • Architects.  OK, I know many great developers are architects.  And I do think there’s definitely room for one architect in your start-up:  one to step up as your CTO or VPE.   The problem is, beyond that, it’s an awkward title which suggests an awkward hire, for a start-up at least.  An architect is often someone that wants to be more than an individual contributor, indeed is and thinks they are better than an individual contributor — but often doesn’t want to be a real manager.  Doesn’t want to be a Director or a VP.  Do you really have room for this in your start-up?  Probably just that one, at least for a while.  If you hire an architect as an individual contributor developer … that never seems to work out.  This can change for companies with 60-100+ developers.  At that point, VPEs need them to scale.  But.  Not for start-ups.
  • Game Developers / Folks That Have Only Done B2C.  This isn’t personal. But I’ve learned in SaaS at least, consumer folks usually don’t work out moving over to B2B, especially enterprise B2B. Folks from consumer internet are used to users, not customers.  But at least sometimes, they sort of get it if they were at least sort of close to consumers-as-customers. But engineers and others from gaming companies … they just are so far from SaaS customers, it just doesn’t seem to work.  They are often super smart (lots of maths here).  They build games.  Millions use them.  If the game is cool, they win.  No need to talk to anyone, or make anyone happy — directly.  They seem to hate working at SaaS companies in the end, and just leave, and go back to gaming or something very consumer-y.
  • Dualies.This is tip #01.  The ex-VP of Sales and Marketing.  The ex-VP of Sales and Business Development.  The ex==-VP of Product and Engineering.  Yes, the areas are adjacent.  But, no.  Sales and Marketing are different, with different goals, different metrics, and different deliverables.  You can’t be fish and fowl.  And you can’t do both right, at least not in a start-up.  You need the best of the best in Sales, Marketing, Client Success, Biz Dev, Product, Engineering.  Not a VP doing a mediocre job of both.   Pass on the Dualies, unless it was just a single stint in an otherwise string of Singlies.
  • And Be Wary of Folks That Want to Become Dualies Next.  A real VP of Sales doesn’t want to be a VP of Sales & Success next.  Not really.  What they want is an even bigger win.  A VP of Sales that wants to be VP of More Than Sales is someone that’s sort of done … doing sales.

Ok there are many exceptions.  But in my experience, for over a decade of senior-level hiring, these 4 types never work out, for start-ups at least …

Don’t do it.  Especially, most especially, the dualies as VPs.

They just don’t want to do the one single job you need them to do.

(note: an updated Classic SaaStr post)

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5 Tips To Improve the Odds When You Hire VPs Who Were Fired or Quit


This post is by Jason Lemkin from SaaStr

As you scale up in SaaS, one thing I can almost guarantee is that you are going to hire some VPs who were either fired or quit their last role.  Especially in Bay Area-centric startups.  There’s so much change and turn-over in the Bay Area especially that many of your top candidates will have had some significant bumps in their transitions from their last role.

There are lots of reasons for this:

  • All your hires can’t either be (x) folks you magically poach from other companies and (y) folks who magically are leaving another great gig at the perfect time to join you.
  • And more importantly, change happens at start-ups as they scale.  VPs that do a great job at $1m in ARR rarely are the perfect leader at $100m ARR.  So many of the very best VP candidates are folks who turn over in high growth start-ups.
  • Passionate stretch candidates do quit when they are “topped”.  I.e., when a boss is brought in above them.  And sometimes, those folks can be the perfect candidates for your stage and company.
  • And finally, VPs make mistakes.  They join start-ups out of passion and belief.  But often, they don’t really have all the data and metrics, or even really know what they are getting themselves into. Sometimes they join impossible situations.

So you’ll end up hiring VPs who went through a significant transition at their last gig, sometimes an involuntary one.  That can be great.  Just a few thoughts of things to look for:

  • Be wary of candidates that bad mouth their last CEO.  It can be tough to hold your tongue.  But I’ve generally found that candidates who bash their prior boss in an interview tend to do it again at their next gig.  Even best case, they tend to be less loyal and less reliable.  The best VPs really do hold their tongue here.  They are good managers, and they know there is no upside here.
  • Be wary of candidates that take no accountability for what happened.  If the last role didn’t work out, the best VPs are honest about why.  They share their mistakes and learnings.  The ones that don’t, often lack the self-awareness and maturity to succeed in the next gig.
  • Be very wary of VPs that don’t have anyone to bring with them.  If a transition happened for the “right” reasons, often, some of her team will want to come with her on the next journey.  If a VP candidate has no one she can point to that will join her from the last role, that’s a flag.  In fact, personally, I’ve never seen a VP work out that didn’t have a few folks to bring with them.
  • Be wary of VPs that did odd things after a traditional role.  I know some folks will challenge this, but if a VP went off and did something very different — be wary.  Exploring new roles and ideas is great.  But if they were a CEO for a long time, or took a very different functional role (e.g., in customer success when they were in sales) … usually their heart really isn’t into it.  Not always.  But usually in my experiences.  Definitely give these folks a shot.  Just double check they really want it for the right reasons.
  • Be wary of too big a chip of the shoulder.  We all have a chip on our shoulders.  It’s what drives us in part to be great founders and startup executives.  But too big of a chip can blind you to what it really takes to go big the next time.  It’s hard to quantify this, but you can feel it.  When the candidate has too much scar tissue, too much of an edge.  Again, some chip on the shoulder is good.  But a huge one tends to create teamwork and aligment issues in your VPs.
  • One exception to the 2 year rule is fine.  More than one — just be cautious.  A candidate that stayed 2 years at her last gig and then transitioned out?  There usually are few issues there.  Someone that left after 6-12 months — and more than once?  Do more homework to really understand why.  So much changes in start-ups.  If a candidate had success for 2+ years, that’s often equivalent to infinity.  That’s usually enough in my book.  But shorter gigs are still a flag, even in the high velocity world of 2018+.  This may not be fair, but I’ve still found it to be pretty true.  Especially at the VP level.  You really don’t get the full benefit of a VP until year 2 anyway, once she’s not just figured it out, but build and honed her team.

Finally, if you just aren’t sure … have your most trusted outside advisor interview the VP candidate.  Her insights may not be 100% accurate.  But usually it’s a great way to get a quick read if you have any concerns on these 5 potential flags.

You’re still going to hire VPs with some of these flags.  Just go into it being clear about the issues, and where you’re going to need to backfill and help her/him succeed.

(note: an update version of a SaaStr Classic post)

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