August Pulse - First Hires, Fundraising Challenges, and the Power of Origin Stories - Episode #63

Welcome to Not Another CEO Podcast. I'm your host, David Politis. Every week we talk to inspiring leaders and get the true stories, the ups and downs, the lessons learned, and come away with actionable advice for our own journeys.

Hello everyone. I hope you had a great summer. I am really excited for today's episode. This is a solo episode. I have a lot of stuff I want to share, a lot that's been on my mind. This is the third or fourth of these solo reflection type episodes that I've published since I started Not Another CEO Podcast over a year ago. And every time I put one of these out, I get amazing feedback from listeners. In some cases more feedback than I get for the episodes I do with guests. And one thing that I've heard over and over is that people want me to share more than just what's happening and Not Another CEO. I started these to share that as a way to build in public, to have accountability. But people say, hey, why don't you share what you're seeing in the market more broadly? What are the issues that are facing founders and CEOs? What are the macro dynamics that I'm noticing in my day to day? So I decided I'm going to give it a try. I'm going to start a different format for these. We're going to call these Not Another CEO Pulse episodes going forward. Now, before I get into the first topic, it is important for those that don't know me very well to understand what I do on a day to day basis because that will give you some understanding of why I have, I hope, credibility in what I'm going to share with you. So day to day I all I do is spend time with founders, CEOs, VCs. I probably meet with 10, 20, even 30 CEOs a week, depending on the week. The CEOs range from people I advise officially, companies that I advise, to CEOs that I'm interviewing for the podcast, to founders who are in need of some kind of help that are introduced to me by their VCs to CEOs that are in the founders community that Nick and I run here in New York. So I do feel like I have a really good pulse on what's happening in this particular part of the market. So I'm going to start with a topic that is always relevant. It's something I have been through myself multiple different times and it's something I have just come across over and over and over in the last couple of months for some reason. And it's, it's and I want to share with you what I've learned and what I've heard and hopefully this helps someone who's out there. So what I've been seeing and the conversations I've been having with a lot of early stage first time founders and even multi time founders is about the first set of employees that they hire past the founding team. What is the right profile? This is the question I've been getting from you. What is the right profile for that first founding ae that first founding marketing person, that first founding customer success person. So these are not the founders of the company, but they're the first people in those roles at a company. And the profile I think is very different from the profile that most people go out looking for and assume is the right profile. So I'm going to use a real story, I won't name the names, but this is a real story of a founder I spoke with a couple weeks ago. And this is going to illustrate for you what I have come across over and over and over again. So as a technical founder, he has two other founders, co founders who are also technical and they have a really amazing product in the IT space. And through founder led sales, through the technical founder and CEO, they've gotten themselves to $500,000 in ARR or annual recurring revenue. And they realize it's time to go hire a salesperson, someone who can replicate what they've done. And their investors are telling them this, their network is telling them this. And that's correct, right? At some point the founder has to show that someone else can sell this, not just them. So they start going out, reaching out to people they used to work with, their investors start introducing them to people they post on LinkedIn. They get a bunch of people inbound. And the reality is, is that most of the people being introduced to them and most of the people that they're seeking out and their investors frankly are seeking out are people who have done this before. And they were the top rep at a business doing 100 million of ARR. They were a manager at a competitive company, you know, that public company that competes with this, this new product. They were a sales manager at the, at Google where this particular person worked before and they had worked with the sales manager and the person had a great team that was high performing and, and they end up going out. That's the profile of the people that they're meeting and they end up hiring. Actually the guy hired this person that he knew from Google and brought them in and it was a sales manager and they had to really reach to get this person on board because of course that person's coming from Google, they're making a lot of money. The, the founder was thinking they were going to pay 150, $180,000, maybe 200,000 a year and they had to pay almost 400,000, 350, 375k to get that person. They had to give them a lot of equity. And this person came in and said, I want to be in a startup, I want to have the equity, I want to make all the money on the, I want to be the person to build this team, all this stuff. And they came in from a manager to an individual contributor and they failed. They failed miserably. And frankly when the founder was telling me the profile before they told me that the person failed, I knew that failed. Because that person who comes from the high flying company that everyone knows their name, that has the best products, that has all the support system, those people almost never succeed as the first ae, the first salesperson at a company. It's actually the reps that come from an unknown company with a hard to sell product, with bad management or no management, but somehow still succeed. Those are the people usually that do the best as the founding ae. And it's not just about sales, but it's a good representation and that, that happens to be one of the first roles that people end up hiring. So it's, it's, it's a good, it's illustrative of, of all the roles, the first marketing person, the first success person, the first finance person, the, and so you know, you, you just, if you think about it, right it think about those big companies, the high flying, the Google, The Microsoft, Amazon, Nvidia, OpenAI, Datadog, Wiz, those types of companies. When you walk into those companies and you get an email address as a salesperson and you start emailing prospects, you're gonna get responses. People want to speak to those companies. When you email them from unknownstartup.com people that email better be amazing. You better be on top of that prospect every single day, 10 times a day to get that person to listen to what you have to say. If you look at those high flying scaled companies, they have support systems for the account executives that are sales engineers doing the demos and BDRs who are doing the cold calls to generate the leads and marketing that is creating the decks for them and doing all the work to, to do air cover marketing. So leads are coming in and all of that. When you look at the founding ae, At a startup that no one knows, they have none of that. They're having to create their own decks, they're having to do their own demos and there's no scripts for those demos. They're just having to figure it out, they're having to do full stack, they're gonna have to source the leads, close the leads, negotiate all of that. When you look at the companies that are high flying scaled companies, those companies have entire management infrastructure, onboarding, enablement, career pathing, comp plans that are going to stay consistent. You look at the startup, there's nothing, there's none, there's no onboarding, nothing is documented. The comp plan is made up and probably is not going to get paid out because the founder doesn't know how to create a comp plan and it's going to be changed all the time. Think about the these dynamics. So it's not that that person who comes from the high flying company can't be successful as a salesperson, but that's not the right profile to bring in as that founding ae. You need that person who has sourced their own pipeline, who, who, who knows how to figure out the various tools on their own and no one's giving them training. Who, who has sold products that are not fully complete or V1 and, and solve one use case, maybe two, not all the use cases. Someone who's got that high pressure, they, they're used to that, they're used to being that, that person who's to carry the weight for the team. And so for me I think this is really such an important like I it because when you don't get those hires, right? Especially if you have a company of four and you hire a fifth person, it's 20% of the team and you're in a period of time where you usually don't have a lot of cash, you usually don't have a lot of Runway, you don't have that much room for mistakes. And it's hard to let people go, it's hard to part with someone who you brought on to be that first salesperson, that first marketing person, that first success person. So this is really important and I've seen this, I have seen this both by making the wrong hires and the right hires. When I, the first company that I was ever a part of was a company called Vocalocity. And I was in charge of the guy. I was made CEO of the company and I was building the company and I had to find my first salesperson and I went to a college friend of mine Brian Coles, he didn't have any sales, sales experience. I mean he had summer job selling outdoor lighting but he didn't have experience selling a technology product. But if you're, if we're being honest, it was the early days of SaaS. I mean SAS wasn't even a term people were using at the time and no one had heard of the product. We had built a cloud based phone system, a cloud based pbx definitely no one had heard of Vocalocity. And Brian came in and was willing to do literally anything to try anything to get customers. He went to downtown Atlanta and literally knocked on doors for days on end until people would have meetings with him. He stuffed envelopes to send direct mail pieces to companies that were being created in Atlanta. He was doing I don't know how many hundreds of cold calls a day and he figured it out. He, we had no CRM. I remember he had post it notes on his desk for each of the accounts that he was working because we didn't have a CRM and that was how we managed it. But it didn't matter. That's what you do. He took that company to millions in ARR. He built a team of dozens of people underneath him and he ended up building out that, that sales organization and at Better Cloud. The first non engineering person on the team was Taylor Gould. He was our marketing person and he did literally everything under the sun when it came to marketing. Go to market support, everything. In the early days he built the website, he did the demand gen campaigns, he set up the marketing automation tool and then used the automation tool. He was writing the thought leadership content, he was creating videos every day for our newsletter that we had started. He was talking to prospects, he was literally doing anything that wasn't engineering. And he didn't have any experience marketing at a SaaS company. He had experience at an agency, at an ad agency. But he ended up building one of the most efficient marketing engines that I've seen. Got the company to tens of millions of ARR. And it was because he was willing to try. He was willing to do things. He didn't have a playbook, he was willing to wear all the hats he wasn't asking for. When are we going to hire this person? When are we going to hire this supporting person? And in some cases just being naive is good. And so to me I've seen this and I again I think it's an important topic now the next topic that I want to talk about is about not another CEO. And we did something over the Summer that we haven't done yet. And we held small, intimate founder dinners at my apartment. We had two of them over the course of July and August. Each one had about 10 people there, 10 founders, 10 CEOs. And these were amazing, amazing.

One CEO, at the end of the dinner, we were asking everyone for feedback, live and on the format, on the content. And one CEO spoke up and said he spends all day. He said. He said, I spent all day with a mask on in front of my team, in front of my investors, even in front of my family. But for the last three hours, I've been able to take that mask off and share what's really been on my mind and just be myself in a safe space. And that right there, that makes everything worth it, that is literally what we're trying to build with not another CEO, is a way where people can. Can be seen, CEOs, founders can be seen, can be in a community with each other, can learn from each other. Anyway, it was. It was amazing. We're planning to do many more of these dinners. We have another one coming up next week. And this particular dinner that we held was around the topic. The two dinners that we held were. Was around the topic of fundraising. And before we did the dinner, we asked everyone to submit anonymously the biggest challenge they were facing with fundraising so that we could consolidate all that and then come back with, let's say, some themes that we could talk about at the dinner. And there were four themes that all 20 founders, CEOs, all of them fit into. Four themes, all their challenges. The first one, how to get meetings with investors, seems basic, but actually, when you're going through fundraising for the first time, it is hard. You don't know, how do I get in front of these investors? So that was one. There's not an order, there's just the four theme. So that was one. Number two, how to get investors to understand the space that we're in and how we're different and how big the space is. A lot of investors, you're coming in, it's a new product. They don't know everything about every industry and space. And how do you get them to understand the scale, the differentiation, the space in general? So that was the second one. The third is how do we create FOMO with investors? How do we get investors to want to be in our realm, that they're coming to us, that they're preempting us, and what is required to close around at different stages? So just as an example, it used to be that if you wanted to close a series A, you needed to be at a million dollars of ARR or annual recurring revenue. But now people are saying that may number may be 2 million, 3 million. So people are trying to figure out is there, are there numbers that, that are just like rules of thumb that we should be keeping in mind. And for me, having raised hundreds of millions of dollars in my career and having helped 10 companies at this point raise multiple rounds, I've seen this process over and over and over again. And so I was able to share, but actually around the table, there were also a lot of other founders and CEOs who had just been through a fundraise or had been through one at their last company. And they were able to share their stories, their tactics, things that they've seen work. And really, in a lot of ways, it is an art fundraising, but there is a science element to it. And what I realized listening to everyone and reading the challenges that people are facing is I think I've always known this, but it really clicked in my brain that fundraising is kind of an unfair game that we're playing as founders. We, on the other side of the table is an investor who does this day in, day out. They talk to hundreds of people. They make however many dozens of investments a year as a firm. And we're doing this for the first time, and we're doing it once every couple of years. And we don't know what exactly is happening on the other side of the table. We don't know the, the, the tricks to play, the, the right stories to tell, the right way to build the decks to get the attention of, of the investors. And so Nick and I have decided that we are going to put a lot more effort into sharing the quote unquote secrets of fundraising to try to level the playing field for founders and CEOs. And we have a number of ways that we're planning to do that, whether it's through our content. We're looking at maybe doing some workshops around this. And then we're actually looking at a new version, a new kind of type of the podcast that we're going to try to tell more of the other side of the table so that people understand how to navigate this process. So that was. The dinners were amazing, but it really prompted me to think about the challenges that people are facing and how we can really help and hopefully help people solve that and understand how to, how to do that more effectively. So my last topic today is a little bit more of a personal one. So the last part of the summer, the last 10 days or so, my family and I spent in Greece. It was my father's 75th birthday, and he organized a trip for our whole family. Him, my mother, my sister, her family, me, my family, all of us, to go to where he's from in Greece, his hometown, which is called Volos. And we spent these 10 days getting to see where he grew up. I had been there, my sister had been there, but our spouses had not, and the grandkids had not been there. And so my father took us around and showed us everything. Where his childhood home was, where his father's store was, the synagogue that he got bar mitzvahed in, where he would play with his friends, where he'd go swimming. I mean, he showed us really all around. And as we were going through the town, he was telling stories, specifically to the grandchildren, about all of this. How his family survived the Holocaust by fleeing and hiding in the mountains near his town. To the. The earthquake that hit Volos. And when. When he was 5, 6 years old and demolished most of the town, including part of his house and his father's store. And to the fact that his mother, my grandmother, had never finished school. She. She. She had to leave in third grade to help her family with stuff. To how he had never left the country until he was 18 years old, but has now managed to travel to 80 countries and so much more. And it. It was definitely the most important family trip we've taken and will ever take, probably. And I could see with the grandkids, my kids, my sister's kids, I could see that for them, something clicked in their brain as he was telling these stories and showing the photos and taking us around where they started to understand where our family comes from, our origin, and what had to happen across these generations for them to be where they are today. And, you know, they're. My kids are 11 and 9. And for them, I feel like it set a new foundation for them and a new appreciation for what we have and how hard you have to work to get there. And so I look at that, and as I was reflecting on the plane coming back from Greece, I was reflecting, and I thought to myself, it's not just powerful for families to tell these origin stories, it's powerful for companies. I've seen it firsthand myself. I used to do this at Better Cloud. When anyone would start at the company, whether it was an individual or as a group, I would walk through the founding story. And more than the founding story, I would walk through the big challenges that we had faced over the years, the near death experiences that we had faced and how we overcame those and the people on the teams that did that. And I think that that goes such a long way with people because when people join a company and it's hundreds of employees and tens of millions of revenue and has raised all this money, it's easy to just come in and say, wow, this is great, I'm getting paid well, there's all this infrastructure, we have all these customers, we've raised all this money, we have all this revenue. But when you understand what it took to get there, I think it also allows you to imagine what's possible going forward. And so as a founder CEO, when you need to motivate your team, when you need to point to them and say, we're going to take that hill, which seems impossible for them to understand, that you've taken two, three, four hills before that got you to that place that gives people a sense of understanding, energy, motivation, that I think if they don't understand the origins, if that's not put in front of them in a very explicit way, if it's not told by the founder, then it's hard for people to really understand that and it's hard to expect them to be as mission driven as the early employees or as the founders. And so it's something that I thought a lot about at the end of this trip that we took because I think, I think it's important for people to understand the origin stories of companies. So, so with that, this was definitely longer than I expected, but I hope that everyone enjoyed this first Pulse episode. And I'm always open to feedback, I always want to hear from you. So please, please, please share the feedback with me. And we have a lot coming up. We have a lot of things that we have some amazing articles coming out for the substack crazy episodes, crazy guests that we have on the podcast, and some big announcements about what we're going to be doing with the community. So please stay tuned and again, thank you for your support. I feel the love when I get all the feedback in the comments. So thank you very much. That's a wrap for this week's episode of Not Another CEO Podcast. Thanks for joining. For show notes and more, please visit Not Another ceopodcast. Com. We'll see you next week.